October 17, 2006
Dear Friends:
The Commissioners’ May 21 convention center e-mail forced the Authority and Penn Square Partners to admit that the hotel/convention center construction bids were about $25 million, or 30%, over budget, instead of the 15% claimed by PSP-partner Lancaster Newspapers. This e-mail was followed shortly afterwards by a “gag” lawsuit filed by PSP and the Authority seeking to prevent the Commissioners from revealing this sort of information. The Judge did not issue the “gag” order.
I am, again, releasing to you information about the complicated and still incomplete financing of the hotel/cc which PSP, partner Lancaster Newspapers, will not print. I encourage you to pass this information along to your friends, family and business associates. This information was revealed in the County’s investigation of the lawsuit filed by PSP against the Commissioners. You may wish to read the County’s brief in the lawsuit at the Lancaster County web-site which reveals that balancing the proposal’s budget requires almost $7 million in approvals not yet received plus other funds not yet finalized totaling $38.3 million.
Even more importantly, from the County taxpayer perspective, the hotel/cc project planners are proposing to increase the Convention Center’s Hotel Tax Revenue Bonds from $40 million to $54 million. After months and months of trumpeting the claim as fact that the County’s risk will not increase, the proposal to bridge the gap is to massively increase the LCCCA bond, funded by County hotel taxes and partially guaranteed by the County. The gap is caused in large part by the fact that High Construction’s $37 million general trades bid far exceeds the estimates by master developer High Associates.
Making matters worse, the Authority has refused to agree that payments on the County-guaranteed debt will have first priority on hotel tax revenues, which will vastly increase the County’s risk. This failure, and the failure to require a certification from the Convention Center Authority that enough money is committed to actually build the proposed project, will also violate the Trust Indenture, the Guaranty Ordinance and other 2003 promises, as the Board of Commissioners warned in May of this year.
Based on the court testimony of the LCCCA’s financial advisor, and the revenue projections of PKF Consulting, the increased debt service will require the taking of hotel tax revenues now dedicated to the Pa. Dutch Visitor’s Bureau. The Bureau will then be unable to market the Convention Center as now planned, resulting in reduced convention center income and a further call on the County guaranty.
Despite the bid overruns, despite the lack of committed loans to build the proposal, PSP and the Authority have proceeded to begin demolition of historic buildings. This despite the fact that the bid overruns resulted in the sixth announced “death” of the hotel/convention center proposal by Penn Square Partners. Previous “deaths” occurred in 2001, 2003, 2004 (twice), 2005 and 2006.
Who is at risk for the additional borrowing? The City and County taxpayers are at risk because of the City and County guaranties. The latest sources and uses have increased the unconditional City guaranty of the sales tax bond from $12 million to $13.6 million.
I will continue to explain what is happening to the City, the County and the public as a result of the ever-increasing publicly guaranteed loans. The “gag” lawsuit filed against the Commissioners is unprecedented in the history of the United States. Never has a newspaper, a supposed defender of our First Amendment rights, filed a lawsuit to gag public officials from speaking about a public project. Why has the newspaper done so?
You may recall that the serious concerns of the County Commissioners about the hotel/convention center proposal began when PSP refused to answer the “57 Questions” in early 2005. One of those questions was the ownership percentage of the Lancaster Newspapers. For the following year, the Lancaster Newspapers claimed over and over that all questions had been answered.
Recently, PSP was forced to answer that question for the first time ever in legal discovery proceedings. The Lancaster Newspapers was revealed to be a 44% owner of the hotel project, equal with High Industries. This illustrates two things, first, that the Lancaster Newspapers were not forthcoming in claiming that all the “57 questions” were answered and, second, why the Lancaster Newspapers attack those who question the proposal.
The newspapers’ drum beat against those who reveal the facts increases daily. I intend to continue to fulfill my duty to you.
Respectfully,
Dick Shellenberger
