EDITOR’S NOTE: This is a re-write of the thirty-third in the series. It contains much more information and analysis.
By Christiaan Hart-Nibbrig
On December 17, 2004, on the front page, bylined by its lead convention center beat reporter, Dave Pidgeon, the Intelligencer Journal ran an article entitled: “City to Purchase Watt & Shand.”
In the article, Pidgeon quotes city officials and Penn Square Partners (PSP) president, Nevin Cooley, outlining in detail the Partners’ plan to sell the former Watt & Shand building to the city of Lancaster, through its Redevelopment Authority (RACL). By selling the building to RACL, leasing it back with a favorable option to buy in forty years, the Partners would remove it from the tax rolls (since a public entity would own it.) Below are excerpts from the December 17, 2004, Intelligencer Journal article:
“According to the plan, Penn Square Partners would lease the hotel from the Redevelopment Authority while overseeing business operations of the upscale 300-room Marriot Hotel, proposed for a site next to the convention center.
“…After 20 years, Penn Square Partners, the Redevelopment Authority and the convention center authority would assume joint ownership and operation of the hotel.
“…If the Redevelopment Authority buys the properties, the city would receive a bond for $12 million – the projected income of sales taxes and personal income taxes over a 20-year period – via Act 23, Cooley said.
“… The Redevelopment Authority would then pursue a second bond worth $24 million, which local and regional banks have pledged to give it. Penn Square Partners would insure the bond, and the money would be used for construction.
“Each of the city’s debt payments toward its $36 million in bonds would be covered by Penn Square Partners hotel lease payments.”
Meanwhile, during the months of January, February, and the first weeks of March, 2005, the Partners and city officials, especially Mayor Charlie Smithgall, were aggressively pressuring the School District of Lancaster board members to pass a Tax Increment Financing (TIF) proposal that would take the building off the tax rolls, but would leave them with the title to the building.
A TIF is a designation that a particular area is “blighted” and, with the approval of the local school board, county commissioners, and city council, an applicant like PSP is qualified to pay an agreed upon amount to each of the three governmental bodies (the school board gets the biggest cut) in lieu of property taxes. A TIF would also allow PSP to retain title ownership of the building.
Mike Winterstein, a member of the school board at the time, recalls the pressure put on his board to pass PSP’s TIF proposal, with the threat of no taxes if RACL owned the property versus some taxes if they approved the TIF.
During this period, Winterstein, recalls a conversation with Mayor Smithgall. “Charlie was trying to get me to pass the TIF, but at one point he said, ‘Hey, if you don’t pass it the city will just buy the building and you will get nothing.’ It was like what we did didn’t matter. They definitely had a “Plan B.'”
“They [Smithgall and Penn Square Partners] thought they could steamroller over us,” Winterstein told NewsLanc. “There was no doubt they thought we’d bow to their demands.”
Nevertheless, the school board, unlike the mayor, city council, and convention center authority board, rejected the Partners. In a stunning rebuke, the board, on March 15, 2005, voted 5-1 to turn down the Partners’ TIF proposal.
Here is where it gets strange. Immediately after its defeat, the Partners and their prominent supporters, who had publicly given the impression that the TIF was absolutely vital to going forward with the project essentially, pronounced the project dead.
In their own words:
Nevin Cooley, President of Penn Square Partners:
“We made it clear that this is our best offer. There is nothing more that we can do. If I could have offered something different, I would have. …We can’t go forward and the community and the taxing authority will continue to have a building that is empty and deteriorating and not generating anything in new taxes.”
Senator Gib Armstrong:
“We made the best efforts we can. If the school board wants the downtown to sit the way it is, that’s their decision…If they want to keep the downtown like it is, fine. You can only do so much. It’s ironic that the people that would probably benefit the most – the school district – are the ones to kill it.”
Tom Baldridge, Chair of Lancaster Campaign, President of Lancaster Chamber of Commerce:
“I think this is a blow that will be particularly difficult to overcome.”
John M. Buckwalter, chairman of Lancaster Newspapers Inc., one of three companies which make up the Penn Square Partners:
“We are very disappointed. Over the past seven years, we have made our best efforts to bring the Watt & Shand building back to life. It appears that we cannot proceed under the conditions as set by the school board. So the project very well at this juncture could die.”
Ted Darcus, Chairman, Lancaster County Convention Center Authority
“They [school board] just killed this project.”
S. Dale High, CEO and President of High Industries, parent company of High Associates, General Partner of Penn Square Partners:
“We have listened, responded to and accommodated our community through the long seven-year period since we purchased the Watt & Shand Building, when no other buyer would have it.
Next, and most pointedly, he abruptly and unequivocally pulls out of the project. “We have stopped all work on our portion of this project, effective this morning,” he states.
High subsequently ordered the ‘Coming soon’ signs taken down from the former Watt & Shand building.
But what about the RACL purchase of the building, as previously reported on the front page of the Intel in December of 2004?
Here is where it gets even weirder.
After the school board rejected a ‘sweetened’ TIF deal in late March, 2005, the Intelligencer Journal – the same Lancaster Newspaper that reported the earlier RACL buyout in December, 2004 – reported breathlessly on March 29, 2005, again on the front page, “City to buy W&S building: $6.8 million deal revives hotel plan”:
“Two state legislators [Rep. Mike Sturla and Sen. Armstrong] and city leaders spent Easter weekend forging the new plan, which they unveiled during a series of meetings Monday.
‘The entire project is too important to this city to let go,’ Lancaster Mayor Charlie Smithgall said. ‘I’m afraid someone (else) won’t do this project for another 10 years.'” [emphasis added]
Question One: What was the real purpose behind the Lancaster Newspapers publishing the December, 2004 article outlining the RACL purchase of the former Watt & Shand building?
Question Two: Why did the sponsors — including Dale High — effectively pronounce the project dead after the TIF defeat, when they had already expressed support in December for the RACL buyout and used it privately as a caudle to sway school board members?
Question Three: What made the Sponsors again reverse their direction and adopt the RACL plan, outlined in December?
Question Four: Why did Lancaster Newspapers treat the March 28 plan as “new,” and just formed the previous weekend, when the details were published in its own paper just three months earlier?
NewsLanc, despite repeated attempts over the years, has not be able to receive comments from project sponsors to our questions. So, after speaking with various sources, here is what we surmise from the puzzling series of events:
– Lancaster Newspapers published the December, 2004 article as leverage for its lobbying efforts with the school board.
– The Partners preferred the TIF over the RACL buyout, but could use RACL as a bludgeon to pressure the school board into accepting its TIF proposal. ‘Either take what we are offering, or we are going to take the RACL deal and you get nothing,’ is essentially the argument used by PSP to the school board.
– High and his subordinates threw tantrums, and pronounced the project muerte, because he, and they, were rebuked. High, the boss of bosses, was angry and personally affronted that the board rejected his proposal — after he made a personal and very public appeal to them — so he pitched a fit, took his ball, and went home.
– High and the Partners changed their minds when they realized they still had an empty building, and had sunk several million dollars into architectural plans and other expenses related to it. They decided to accept the RACL plan after all, which reimbursed every cent they had invested, gave them a cushy lease deal, and enabled them to own the building for a virtual song after the mortgage debt had been paid off.
– The reason Lancaster Newspapers ran the March 28 article touting the miraculous last minute plan by Armstrong, Sturla, Smithgall and other sponsors was to allow the rich, powerful, and bruised, Dale High, who had publicly walked away from the project, to ‘save face.’ High could re-coup his costs into the building, get hotel off the tax rolls, and still look like he was doing a mitzvah for his community.
Perhaps no other chapter in this long and often bizarre saga illustrates the sinister role the Lancaster Newspapers played. Despite past decades of competent and solid local reporting serving its community (and also subsequent years), Lancaster Newspapers, undoubtedly influenced by its large stake in the project, used its immense power to propagandize and bias itself on behalf of the interests of the private sponsors of the project.
It is a stain on the proud Steinman name. And it is a shame, not just for them but for the project and the greater Lancaster community.
And they made good on their threats. The School District of Lancaster receives no taxes from the “private” hotel; in fact, it receives no benefit whatsoever from the entire project, in spite of the hotel owner’s previously well-publicized promise of $400,000 or more a year.
Meanwhile, there is no written evidence anywhere in Lancaster City’s budget that it receives any funds at all directly or indirectly from the project. Lancaster City taxpayers are stuck paying for police, fire, traffic control, and all other public services required to operate the “integrated facility” (the description used by the hotel management).
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