The project started out modestly enough.
In 1999, a $75 million convention center and hotel was conceived for downtown Lancaster, Pennsylvania, a city of about 50,000 in a county with a population of approximately 500,000.
Private investment would cover $40 million. The rest would be absorbed by a state grant of $15 million and a $20 million bond supported by a hotel room tax levied against every hotel and motel in the county.
Today the project, which hasn’t begun construction, has mutated into a $175 million behemoth, of which only $11 million is private investment, less than the private investors will make on side deals with the Convention Center Authority. A subsidiary of the general partner, for example, was the sole bidder for a $37.1 million general trades construction contract.
The Lancaster project is administered by a seven-person joint city/county-appointed authority, which has spent more than $17 million to date–including more than $6.5 million to a single law firm.
The administration of the project has prompted public demands for greater disclosure and a call by three members of the authority board for a district attorney investigation of expenditures.
One of the three board members to call for the investigation is business owner Laura Douglas. She said, “Quite simply, the Convention Center Authority is the worst-run organization I have ever encountered, let alone been a part of. It is very clear to me that this authority has no regard for the source of its revenues, the taxpayer. I have absolutely no confidence at all in this authority’s ability to build this project and keep it within budget, much less run the facility after the fact.”
The project is touted by sponsor Penn Square Partners as a way to revive a moribund city economy. According to the group, the convention center/hotel promises to attract tourist and investment dollars into the city.
Penn Square Partners includes the formidable union of the area’s largest industrial firm (High Industries), biggest bank (Fulton Bank), and monopoly newspapers (Lancaster Newspapers, Inc.).
Newspapers at Center
The role of project partner Lancaster Newspapers, Inc. (LNP), a 44 percent project owner, has been pivotal.
LNP publishes two dailies and a Sunday paper and has been run by the same family since the mid-nineteenth century. Critics of the project accuse all three Lancaster newspapers of using their news and editorial pages to cheer for the project and report events selectively and with bias.
The newspapers have further been accused of using their monopoly position to attack two of the authority’s three sitting county commissioners, Chairman Dick Shellenberger, a Republican, and Molly Henderson, a Democrat.
On November 26, Sunday News Editor Marv Adams wrote, “Commissioner Shellenberger cries that the newspapers have not ‘objectively’ explained his questioning of ‘the taxpayers’ liability’ in the convention center-hotel project, because Lancaster Newspapers is involved.
“Maybe that’s because neither he nor Commissioner Henderson seem able to grasp the math themselves,” Adams continued, “even when we’ve given them the space to say it in their own words. Maybe that’s because the project risk is minimal, not in the tens of millions they conjure up to scare folks.”
Commissioners Stand Firm
Shellenberger and Henderson, elected after the previous board entered into the county bond guarantee agreement, have challenged the viability of the project and the validity of the county’s portion of the $40 million bond.
They also have expressed concerns that a project failure will lead to pressure for a county bailout at taxpayer expense.
“My job is to protect the taxpayers of Lancaster County,” said Shellenberger, “and I believe this project is too risky. And I cannot, and will not, support that, no matter what they write about me.”
Even the market studies commissioned by developers Penn Square Partners suggest Lancaster’s relatively weak position in the convention center market.
Those studies point out the local airport provides service only to Pittsburgh and has only three flights per day. The city lies 20 miles off the Pennsylvania Turnpike and is not served by any through interstate highway.
The convention center would be located in the most congested part of downtown Lancaster, and visitors arriving by automobile would have to wend their way through a maze of difficult-to-navigate city streets. The studies also noted a paucity of downtown attractions.
Bond Guarantees Opposed
A poll sponsored by the local Fox television affiliate and conducted by national pollster Opinion Dynamics, Inc. showed a local public about evenly divided about building a convention center.
But when county residents were asked if they support taxpayer guarantees of the project bonds, 78 percent of county residents with an opinion said they were opposed.
The Lancaster Newspapers never published the results. A private citizen took out an advertisement in the newspapers showing the results.
The project has provoked significant organized opposition, street protests, flier campaigns, opposition Web sites, and unruly public meetings. Some landmark buildings have already been demolished to make way for the project.
Court Appeals Pending
The outcome may hinge on two legal appeals pending in Harrisburg. One is before the Commonwealth Court, and the other is before the state supreme court. The county government is taking the lead in both suits opposing the financing on the project, and a local businesswoman also has intervened.
Pending before the Pennsylvania Supreme Court is a challenge to a $20 million state grant for the project, citing the Uniformity Clause of the Pennsylvania Constitution.
The county is arguing that Act 42 of 2006, which modified requirements in a state grant program under Act 23, creates a non-uniform means of taxation because it gives municipalities (including Lancaster) “unfettered discretion to abate or waive taxes on projects funded by Act 23 grants,” according to Howard Kelin, special counsel for the county.
“We are currently completing the briefing process,” Kelin said. “Oral argument has not been scheduled.”
Pending before the Commonwealth Court is an appeal of Judge Joseph Madenspacher’s October 23, 2006 decision upholding the validity of the county’s construction bond.
The county commissioners are challenging the county’s guarantee on a $40 million construction bond, arguing that documents prepared in 2003 by the authority’s bond counsel and reviewed by the county’s special counsel are badly flawed.
Board to Change
The endgame could be determined by the county commissioners, who will appoint a fourth member of the Convention Center Authority board to a four-year term in September 2007.
The city currently holds a four to three majority on the board. Every two years the majority alternates. In September the county will take the majority.
It may be a new chairman who will have the last word.
Christiaan A. Hart Nibbrig ([email protected]) is news editor of NewsLanc.com, which has been documenting the convention center fight.