For the Lancaster County Convention Center, desperate times may call for desperate measures in the not-so-distant future. But, according to convention center authority executive director Kevin Molloy, it will not be the authority itself who has to make that call. At the March 18 meeting of the authority’s finance and audit committee, Molloy told NewsLanc that, should the need arise for the center to requisition visitors’ bureau funds, that transaction would be pursued by M&T Bank.
With hotel room sales tax revenue falling short as much as $700,000 for 2010 and energy costs potentially exceeding budget projections by $300,000, the Lancaster County Convention Center faces a budget shortage of up to $1 million this year.
In accordance with the “mechanic” set in place by the center’s trust indenture with M&T Bank, Molloy said, “The hotel tax is a function of the revenue for the financing of this building that goes from the County to the trustee—and they manage that mechanic….The funds that go from the hotel tax to M&T is all up to the trustee. If there is a default, the trustee then would write to the County.”
If fund reserves are not maintained at a level set forth in the trust indenture, Molly explained, “there are certain mechanics that kick into place. One of which is the mechanic in which they can divert the funds that go to the PA Dutch Convention and Visitors’ Bureau.”
Later, Molloy explained his persistent use of a particular term: “I keep using the phrase ‘mechanic’ because it’s nothing emotional. It’s not the elected officials at the County, or the board members here, or the folks over at the CVB. It’s a mechanic.”
This “mechanical” nature of this arrangement, however, does not inherently rule out the possibility of the County intervening with a hotel room tax increase, were the PDCVB to be denied its dwindling funds.
Molloy also stressed that the there are other factors in play that could help minimize the center’s growing losses. Regarding the additional $300,000 in energy costs, Molloy noted that the LCCCA has sought to find savings through analyzing its gas and electricity use and has begun investigating new energy-saving initiatives, such as the installation of high-efficiency lights or even solar panels.
“I’m not here tonight to tell you that we have that worked out. But we are working on those things,” he said.
The LCCCA has also seen considerable savings in its monthly LIBOR payments, Molloy said: “We pay 66% of LIBOR, and that has been as much as $108,000 a month. It’s been as low as $1,200 a month….The great news is that the last twelve months have been the best twelve months that [one] could have, looking at that expense. It’s been somewhere around $2,200 a month. That’s fantastic.”
Molloy continued, “Every month there are two variables that come into the office: What does the hotel tax look like? What does the LIBOR look like? So I get your point about that one being bad, but the good news is that with the LIBOR numbers so low, it’s been great.”
Excellent article. This information should have been available to the public BEFORE work began on the convention center.