|By John M. Spidaliere, Lancaster New Era, Pa.|
Knight Ridder/Tribune Business News
Dec. 17, 2004 - With the financial package wrapped up and the architects starting pre-construction designs, city and county officials are dreaming of golden shovels.
Pencil in mid- to late summer 2005 for a groundbreaking for the $129 million downtown convention center and hotel on Penn Square.
From here, said Mayor Charlie Smithgall, summing up the hopes of city and county leaders, "Success is the only option."
Success now depends on the Lancaster City Redevelopment Authority.
The Lancaster County Convention Center Authority and its private industry partner, Penn Square Partners, are counting on the Redevelopment Authority to buy the former Watt & Shand department store and serve as nominal owner of the hotel for 20 years.
With the Redevelopment Authority at its side, the Convention Center Authority and Penn Square Partners can borrow the additional remaining $36 million it needs to build the project.
The project is expected to be the keystone of downtown revitalization.
During a meeting of the Convention Center Authority Thursday, project planners presented the financial plan that explains how they'll pay to build the 412,079-square-foot building.
The Convention Center Authority brings $47 million to the project: $40 million in borrowed dollars, $5 million from the hotel tax, and $2.4 million in cash and investment income.
Penn Square Partners brings $35 million: $10 million in private investment from the businesses that make up the partnership, $1.3 million in interest earnings, and $24 million in lease payments.
Enter the Redevelopment Authority.
It will issue two bonds, which in addition to another $12 million promised by Gov. Ed Rendell, will make up the remainder needed for the project.
The first bond is a $12 million bond made possible by Act 23, a state law that allows a project using state funding to reinvest sales tax generated by the project to pay off that debt.
The Redevelopment Authority will likely use those dollars to buy the Watt & Shand building from Penn Square Partners.
Nevin Cooley, president of Penn Square General Corp., the primary partner of Penn Square Partners, said the building will be sold for a fair market value. The building's 2005 assessed value is $1.24 million.
The second bond would be for $24 million.
Under the financial agreement, the Redevelopment Authority will issue the bond and hold the title to the bricks and mortar of the hotel tower for 20 years.
During that time, Penn Square Partners will build and operate the hotel, pay the bills, absorb any losses or gains, and pay the debt on the bond.
When the debt is paid, Penn Square Partners will then take title of the hotel tower.
The City of Lancaster would be asked to guarantee the bond.
"We'll do what we have to do," said Smithgall.
That leaves just the $12 million gap which the governor has promised to fill.
Redevelopment Authority vice chairman Matt Parido said the authority is ready to do its part.
"We are certainly on board to do whatever we can to make the project happen," he said.
The state already gave a $15 million grant for the convention center side of the project.
But, because the hotel and Watt & Shand building would be owned by the Redevelopment Authority it would be non-taxable.
To make up for that, Penn Square Partners will make in-lieu of taxes contributions to both the city and school district, said Cooley.
Both the city and district get $100,000 each, every year for 20 years, until Penn Square Partners takes ownership of the hotel tower, he said. After that, they'll get the full tax value.
Additionally, Cooley said if the hotel reaches a 12 percent profit margin, which he projected it should by 2010, the city would get an additional 10 percent and the school district would get 20 percent.
Not a bad deal, said Smithgall.
"This gets it done. You've seen the economic development that spun off the ballpark? This is going to be greater," said the mayor.
The convention center side of the project will pay neither city nor school taxes because it is owned by a government authority.
From here, Copper Carry, the Atlanta-based architects designing the center and hotel will begin new, more detailed drawings.
Those are due in about three months. They will map out the building in greater detail, down to where to lay the plumbing and place the electric sockets.
After those designs are completed, the architect will begin drafting construction blue prints.
"At the end of the day," added David Hixson, executive director of the Convention Center Authority, this project "is about people."
The project is expected to employ nearly 600 people during construction, and 300 full time staff when it opens in 2007.
"Think about the 100,000 people that will come here each year," said Hixson. "This project is all about opportunity. We're standing at the doorstep."
Penn Square Partners includes general partner Penn Square General Corp., a High Industries affiliate, and limited partners Fulton Bank and Lancaster Newspapers Inc., publisher of the New Era.
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