The following exchange between a viewer who closely monitored the evolution of the Convention Center Project and investigative reporter Jim Sneddon both sheds light on the forces driving the project and the depth of Sneddon's research.
The issue contended is at what point in time was the future sale of the Watt & Shand building from Penn Square Partners to Redevelopment Agency of the City of Lancaster (RACL) under consideration. (Later in the series, NewsLanc will address the propriety of the sale price.)
LETTER re LCCCA series:
From Sneddon's report: "A number of things were happening at this time. Significant progress had been made in 2004 to get the Convention Center moving toward construction. Among items that remained, however, was a revision of the contract between Penn Square Partners and the Authority because of the new role of the Redevelopment Authority of the City of Lancaster as the owner of the land and new hotel. That was necessary in order to gain additional state funds and grants for the project."
RACL wasn't even mentioned as a potential owner of the Watt & Shand property until March 28, 2005. Title to the property was transferred on January 31, 2006.
The reason for RACL owning the property, building the hotel, and "leasing" it back to Penn Square Partners in exchange for payments on a $24 million bond over 20 years is because of S. Dale High's demand that the hotel not be obligated for paying ANY property taxes for at least 20 years. I have no evidence that the hotel received any additional state funds or grants because of RACL's ownership of the building.
RESPONSE by reporter Jim Sneddon:
While I stand in awe of and recognize [the letter writer's] expertise and long history with this project, I have to disagree with him. I do not write that these things happened, but they were "items that remained."
What has transpired repeatedly with these folks is that they hold non-public meetings and little discussion of those meetings occur in the public Authority meetings. And that discussion is often not until they have all of their ducks in a row, allowing the board to unanimously approve things with little or no discussion.
I cannot find the March 28, 2005 reference, but I can assure you that RACL discussions were happening far earlier than this date. Note that I write:
"Among items that remained, however, was a revision of the contract between Penn Square Partners and the Authority because of the new role of the RACL as the owner of the land and the new hotel. That was necessary in order to gain additional state funds and grants for the project."
First there are snippets of public references of Chris Cicconi of Stevens & Lee meeting for years with Penn Square Partners over various kinds of negotiations and agreements.
As early as the June 2, 2004 Authority meeting, Cicconi states:
"…that the main issues remaining, including additional state funding, the transfer of Watt & Shand to RACL … shared space costs and over runs, implementation of PSP financing plan, taxability of new public funds as well as others. …"
I believe there were ongoing meetings and negotiations about this during the summer, if not earlier. At the August 11, 2004 meeting we find:
Tom Smithgall states in his report that there were "lots of meetings held and more ongoing." They traveled to Atlanta for some of those meetings.
David Hixson states "...we continue to work on a business deal and structure for the convention center hotel project."
Then on August 27, 2004 Jones Lang LaSalle and Kauffman & Canoles are hired. Obviously there had to be significant prior discussion about this with Penn Square Partners because they initiated the discussion to hire these two firms and share the $30,000 cost. Why did they do this? I suspect Penn Square Partners [PSP] wanted to nail down some things before they went public with them.
Hixson states: "The thought process was to bring business advisors on board to help us to strengthen the mutual operations between the two parties and also some of the processes that we have associated with our partnership."
We do know from expense documents that the "secret" meetings with the consultants occurred between Sept. 1 and 4 and it appears they took place at Franklin and Marshall. There is nothing stated publicly about these meetings. The scheduled October 2004 meeting of the board did not occur. Then there was a report, given to someone, on Oct. 25, but as I wrote in my story there is no evidence of any "legal, public meeting" of the board.
We do find out, however, in the Nov. 11, 2004 meeting that there have been numerous meetings with PSP and others. Some of those meetings related to additional state funding grants through the newly passed ACT 23 and the need to find additional funding for the hotel side of the project.
Hixson states: "As for the $22 million funding gap, in mid-August, after the state budget was approved and after we had begun schematic designs, Sen. Armstrong convened a meeting in the Mayor's conference room and that meeting was attended by Sen. Armstrong, Rep. Sturla, Mayor Smithgall, the County Commissioners and representatives from the Governor’s office as well as representatives from both PSP and the Authority. Armstrong and Sturla encouraged the two owners to look at that process by utilizing a tool that was part of the Economic Stimulus Package approved last spring, and specifically it was SB 10 which now ACT 23." (Any discussion of ACT 23 funds would have had to focus on RACL owning the property and hotel.)
Armstrong then spoke of the other $12 million needed: "I can assure you that I have these commitments as of today … we have identified $6 million from the Governor and I have two commitments for $3 million each."
Then at the Dec. 16, 2004 meeting there is the first public mention of RACL being involved. Hixson tells the board: "Look at the critical partners that we have here. Up front I could call these the contractual partners, the Authority, PSP and now some of you will hear for the first time our proposal to include RACL in this project to make this project a reality. Under this structure the ownership of the hotel tower will lie with RACL and that includes the Watt & Shand. As required by ACT 23, RACL owns the building in title only." (Various other topics in relation to this are discussed.)
Then the board unanimously approves this motion:
"Authorize the Executive Director to negotiate modifications to the existing contracts with PSP and High Associates and enter into any new contracts required to implement the core deal structure …" ( I can assure you there have also been behind the scenes meetings and discussions before this ever became public before the Board.)
Nevin Cooley states at the same meeting: "In the spring of this year we came before the county commissioners and explained that we had a $22 million gap in our total funding plan and that we were going to be seeking additional state support in the form of grants. … this creative use of RACL allows our community to access $22 million of additional state funding. It took a lot of time and meetings to get to that point."
Some of the confusion between myself and [the letter writer] is that ACT 23 funds, which amount to state sales taxes collected at the hotel and personal income taxes by the employees are to be retuned in the form of "grants."
I hope this explains the background of my writing. As is the case with having to condense things that happened over several years, it is impossible to provide this kind of background in an article of approximately 1,000 words.