A front page article on the Lancaster convention center appeared today in the Intelligencer Journal / New Era that displayed the type of crafty slant and superficial reporting that readers have come to expect when it comes to the downtown project, with a few exceptions.
In the article, “Officials pursue two plans to make convention center solvent,” it is reported:
A year ago, a consultant sounded the alarm that interest rates on those bonds could jump from 5.57 percent to 8 percent when the debt was restructured, with the increased cost raising the threat of default and the possible closure of the center.”
It took a consultant to point out what some governmental officials, the hotel industry and NewsLanc have been warning about for years. This very outcome was foreseen in the PKF Feasibility Study of May, 2006.
The article reports:
[Commissioner Scott]Martin said his goal remains having the bank reduce its financing fee by 60 basis points. That would save the center authority $380,000 annually.”
Is the writer talking about a 60 basis points reduction from the current 5.57 percent from the 8 percent that is about to take place?
To show just how crazy high even a 5.57 percent interest rate is in this market, apartment complexes can be refinanced today at say 3.6 percent and homes at an even lower rate.
The article continues: “‘The convention center has brought an awful lot of business to the county and the city,’ [Lancaster mayor Richard Gray] said.”
Really? Where are the new businesses?
The article says:
A shortfall in the tax revenue, which has been blamed on the recent recession, created the center’s financing crisis.”
Again, the PKF Feasibility Study, ordered by former County Commissioners Shellenberger and Henderson, accurately predicted what has occurred. That report was prepared two years prior to the late 2008 economic meltdown.
The article continues:
Almost a year ago, the Lancaster Alliance was joined by representatives of the Lancaster Chamber of Commerce & Industry, the Economic Development Company of Lancaster County and the James Street Improvement District in calling for a solution.”
These organizations, which include the private sponsors of the project, have long been the chief backers of the project. Having extorted a 5% room rental and excise tax from the struggling hotel industry, they now propose to gouge even more.
More from the article:
Last week, the Redevelopment Authority, which owns the attached Lancaster Marriott at Penn Square hotel, voted to approve the use of half of its $200,000 annual rent it receives from hotel developers Penn Square Partners toward marketing the center.”
This is money that was originally promised to the School District of Lancaster in lieu of taxes, but never remitted.
The initial proposal was to place a smaller convention center, adequate for local needs, at the site of the Brunswick Hotel. This plan was to bring the hotel back to its initial Hilton standards and revive Lancaster Square East, all at a cost of under $50 million.
Instead, today we have a blighted Lancaster Square East and the city of Lancaster is at a loss as to what to do about it. Its Chief Planner, Randy Patterson, won’t even discuss the matter.
Had the convention center been built according to its original plan, an economically restored Brunswick would be paying real estate taxes, thus generating $500,000 or more in tax revenue a year for the school district, city and county. In contrast, the Marriott Hotel, technically owned by the city, but operated for profit by the private Penn Square Partners, is tax exempt.
One-half of Penn Square Partners is Lancaster Newspapers, Inc.
The City is staring at the possibility of a closed Convention Center. As a result, the Marriott Hotel could become insolvent. In that case, the city of Lancaster could find itself fully on the hook for about $40 million in Marriott Hotel debt, which it has fully guaranteed.
It isn’t a pretty picture. If anything, the terms of the Scott Martin proposal are too generous to Penn Square Partners. Penn Square Partners should have gotten behind the Martin Proposal instead of dragging its feet.
But now, it may be too late.
