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Newspaper Digs Up Answers to Questions for
 Proposed $55.9 million Convention Hotel
 in Lancaster, PA

By John M. Spidaliere, Lancaster New Era, Pa.
Knight Ridder/Tribune Business News

Apr. 7, 2005 - The Lancaster County Commissioners say they want answers to key questions about the proposed downtown convention center hotel.

They say they are having a tough time learning details of the project: Specific construction costs. The exact size of the project.

The number of jobs it will create. The quality of the rooms.

And, perhaps most importantly, they say, they are not getting a clear answer about the risk county taxpayers face if the project fails.

For weeks, Commissioners Molly Henderson and Dick Shellenberger have complained that the hotel developer, Penn Square Partners, has failed to answer their questions.

Even as late as this morning, Shellenberger said he still doesn't have the answers to his questions.

"I'm concerned how we're going to spend this money," he said.

"Where the breakdown is on construction."

But executives of Penn Square Partners say the commissioners, in fact, have the answers.

They say they have given the commissioners lengthy documents that provide detailed answers to all those questions and others.

Thirty-three pages of detailed construction costs, compiled by the builder, Reynolds Construction, were hand-delivered to the commissioners in December, they say.

A spreadsheet summary of the costs, as well as answers to the commissioners' questions, was provided in a separate report, prepared in cooperation with convention center officials. It is posted on the commissioners' own Web site.

The answer to the commissioners' key risk question can be found in bond documents filed with county officials in 2003, they say.

The answer: It's tourists, not local taxpayers, who pay for construction.

In order to allow county residents to judge for themselves whether or not the commissioners' questions have been answered adequately, the New Era is publishing below both the most-often asked questions and summaries of the hotel developer's answers.

Where possible, the names and locations of the publicly available documents also are listed.

For this story, some questions were provided by the commissioners and Howard Kelin, their legal adviser. Other questions came from citizens at a public hearing a week ago.

The answers were drawn from the county Web site, from documents provided to the commissioners from the developers, and from other publicly available reports issued by convention center/hotel consultants and contractors.

QUESTION: Please provide a detailed list of all estimated hotel construction costs.

ANSWER: The hotel and its share of shared convention center space will cost an estimated $55.9 million, according to a spreadsheet cost summary given to the commissioners.

The $55.9 million figure includes hard construction costs, as well as permit costs, fees, insurance costs and other contingencies.

Far more detailed construction cost estimates can be found in a Nov. 23, 2004, report prepared by Reynolds Construction, the project construction manager, in cooperation with High Construction, the project master developer.

That report's 33-page pricing list provides the costs for everything from toilet seats to plumbing to steel. It was approved at a Dec. 16 meeting of the Lancaster County Convention Center Authority, a session attended by all three county commissioners.

The following day, copies of the report were hand-delivered to the commissioners, according to Penn Square Partners and Commissioner Pete Shaub.

Shellenberger admitted this morning that he had a copy of the pricing document, but cannot recall reading it.

"I gotta look for that," he said. "Evidently, I must have a copy of it. It is all in a pile here."

The report appears to give exhaustive detail on hotel and convention center costs.

It contains five pages on concrete estimates, for instance, a $15.4 million expense.

Masonry will cost $2 million, including bricks and labor, the report says.

Doors and windows -- listed by type and style in four pages -- are projected to cost $4.3 million.

When the project goes out for bid, the construction companies that win the bids will provide as part of their bid proposals even more detailed cost figures.

Since the current cost estimates are public documents, they should be available to the public both at the convention center offices and the commissioner offices.

Q: Do current cost projections take into consideration cost escalation likely to occur between now and the time contractors submit bids?

A: Yes, according to answers provided by convention center authority representatives.

"The cost projections were prepared by seasoned professionals who factored in cost escalations," the authority said on page 39 of its answers.

"If the construction bids exceed the construction budget, the project team will value engineer any and all areas of the project," said the report.

Q: In the past, project developers have said the project will create 250 jobs. Other times the number 207 has been presented.

How many jobs will there be?

A: The convention center and hotel will be staffed by 207 employees in 2009, the first year the hotel is expected to break even, according to a staffing report prepared for the commissioners by Interstate Hotels, the company that will manage the facility.

David Hixson, executive director of the Lancaster County Convention Center Authority, emailed that report to Kelin on March 14.

The estimate of 250 jobs -- and others as high as 577 jobs -- were rough estimates made in early stages of the project.

The "Interstate Staffing Report" is available to the public at the authority's office, on the 11th floor of the Griest Building.

Q: Are county taxpayers liable to pay $60 million if the convention center/hotel fails?

A: Only if the hotel industry in Lancaster County collapses to half its current volume.

Tourists, not county residents, pay a hotel room tax that is designated specifically to pay off the construction bonds.

The hotel tax collected $3.5 million in 2004. Eighty percent of that, or $2.5 million, goes to the convention center authority for debt payments and operational costs.

But, as a backup, the County Commissioners agreed in 2003 to guarantee payment of half the bonds, worth $20 million, in the event that the hotel tax failed to produce sufficient funds.

For county taxpayers to have to pay off the debt, there would have to be a reduction in hotel stays in the county by 50 percent, according to Tom Beckett of Fairmount Capital Advisors, the convention center authority's financial advisor.

The $60 million figure combines all principle and interest payments over 40 years, a worst-case scenario, he said.

County taxpayers would be responsible for that amount -- at a rate of $1.5 million a year over 40 years -- only if the hotel industry collapsed before the hotel/convention center opens in 2007.

Beckett said the commissioners have had bond guarantee documents since 2003 showing that hotel visitors, not property owners, pay the construction debt.

The bond guarantee documents are available for public inspection in the commissioners' office and convention center authority office.

Q: How big will the convention center and the hotel be? And how large is the common space that will be shared by the hotel and center?

A: The hotel will be 190,901 square feet. The convention center will be 205,785 square feet.

The shared common space inside the Watt & Shand building will be 12,744 square feet.

The estimates are provided in the "Convention Center Answers" document on the county Web site.

Q: How much will the individual partners that make up Penn Square Partners make from the hotel?

A: Penn Square Partners is comprised of general partner Penn Square General Corp., a High Industries affiliate, and limited partners Fulton Bank and Lancaster Newspapers, publisher of the New Era.

Documents that detail the percent ownership within the partnership are on file at High Industries offices, but Fitzgerald said the information is private and not available to the public.

The partnership is willing to make public its financial records, including receipts, expenditures and profits.

Q: Will the hotel have a four-star rating? Why does Penn Square Partners always say "full service" rather than four-star?

A: Penn Square Partners President Nevin Cooley said travel groups, such as the American Automobile Association, determine hotel ratings. Developers and builders do not.

While the developers intend to build an upscale, full-service hotel, he says, they cannot predict how many "stars" or "diamonds" it will receive from rating groups.

Cooley said he has provided that answer to the commissioners on several occasions, most recently during a March 24 meeting with Shellenberger.

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To see more of the Lancaster New Era, or to subscribe to the newspaper, go to http://www.lancasteronline.com/newera.

Copyright (c) 2005, Lancaster New Era, Pa.

Distributed by Knight Ridder/Tribune Business News. For information on republishing this content, contact us at (800) 661-2511 (U.S.), (213) 237-4914 (worldwide), fax (213) 237-6515, or e-mail reprints@krtinfo.com.

 
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