Article “Debt hangs over convention center authority,” explains: … “To build the convention center on Penn Square, the authority issued bonds totaling just under $64 million. Little of the principal has been repaid; and the effective interest rate the authority is paying increased after the authority restructured its bond agreements last year. It amended the terms of interest rate swaps that were designed to synthetically fix the authority’s interest rate on its two bond issues (3.67 percent on the $40 million in bonds issued in 2003; 3.57 percent on the $23.9 million in bonds issued in 2007).
“In addition to this, the authority pays an ‘applicable spread’ — essentially, additional interest — which rose on March 1. In effect, Molloy said, the authority needs to show the bank that it is less of an investment risk. ‘The No. 1 way to decrease that [interest] cost is if the tax went up,’ if Lancaster County Commissioners increased the hotel room revenue tax from its current 3.9 percent to 5 percent, Molloy said.
“Prior to March 1, the spread was 195 basis points, or 1.95 percent, on the 2003 bonds, and 125 basis points, 1.25 percent, on the 2007 bonds. On March 1 the spread rose to 175 basis points for the 2003 bonds and 190 basis points on the 2007 bonds…”
WATCHDOG: 1) Raising the Hotel Room Sales Tax would be inflicting additional harm on the county wide hospitality industry. 2) Both the reporter of this article and this editor are grateful to Kevin Molloy for describing in detail the mechanics behind the Convention Center debt predicament. 3) If there is to be a deficit, we have to agree with NewsLanc contributors that Penn Square Partner (PSP), consisting of the Lancaster Newspapers and the High Group, should do the decent thing by volunteering to make up the difference.
PSP created the problem; they (especially High) have enriched themselves at the public expense; now it is time for them to bear the responsibility.
3 wags of the tail to the Watchdog!!!!!!!
The Number 1 way to decrease that interest cost would be for PENN SQUARE PARTNERS to do the decent thing by volunteering to make up the difference.
If not…then the County Commissioners should REQUIRE them to do so.
Any other solution is patently UNFAIR and UNACCEPTABLE to County and City Taxpayers, as well as the hotel industry.