Some surprised to learn of Marriott tax exemption

Lately, NewsLanc has been hearing from local citizens who had only learned of the Marriott Hotel’s tax-exempt status in the wake of the recent grand opening. One reader commented, “Did I miss something? I thought the tax revenues were the big selling point.” Indeed, those who met the tax exemption announcement with surprise did miss something: This legal arrangement has been essentially in the bag since 2005.

In the late 90s, the Watt & Shand building had rested vacant for several years, and was becoming a dim monolith on the southeast corner of Penn Square. Around this time, a proposal was put forward to renovate the historic structure into a new Lancaster branch of the Harrisburg Area Community College (HACC). This proposal, of course, did not ultimately come to pass. And ironically, one prominent criticism—from City Hall on down—was that this operation would have to be exempt from real estate tax.

Flash forward to the Spring of 2005: The Penn Square Partners (PSP), owners of the Watt & Shand property, were aggressively pursuing plans to develop the space into a luxury hotel in accordance with the Convention Center Authority’s approaching project next door. That March, the PSP approached the School District of Lancaster Board, requesting special tax breaks to ease the cost of construction. The PSP stressed to the SDoL Board that their compliance with this financing plan would make or break the project.

Despite immense pressure from a number of public figures in support of the project, the School Board did not approve the PSP’s financing plan, instead endorsing a plan of its own, which would allow for some tax exemption, but required higher rates and stronger guarantees of compensation. The PSP rejected SDoL’s plan as financially impossible, and, days later, declared the project “dead.”

Even as workers began scraping promotional Marriott signs from windows of the Watt & Shand, then-Mayor Charlie Smithgall worked relentlessly to find a solution that would save the project, which had already lined up millions of dollars in State-level grants.

Within weeks, Smithgall offered his solution: The Redevelopment Authority of the City of Lancaster (RACL) would buy the Watt & Shand, more or less eliminating the property from local tax rolls and bypassing opposition from the School District. The PSP could then lease the property from the City, which would also share considerable responsibility for much of the PSP’s construction debt. The next month, City Council approved the measure, establishing an arrangement that has remained largely intact.*

On the day of the Convention Center/Marriott June 2009 opening, the Lancaster County Property Assessment Office deemed the Marriott Hotel tax exempt. This announcement—which could not technically occur until the facility opened for business—was little more than a formality, only confirming what City Council had assumed four years ago in approving the leasing arrangement with PSP.

*Editor’s note: The above is the sequence of events as reported in the local print media. Whether the decision to shift ownership from PSP to RACL had been made beforehand and whether the “scraping” of “promotional Marriott signs” was disingenuously intended to create greater public support are matters to be explored in the Convention Center Series at a later date.

Updated: July 1, 2009 — 11:03 am