City & County attempting to make up for lack of State-$s but lawyers struggle

For the second time they’ve cancelled a scheduled Joint City/County Workshop of elected officials for ‘Discussion of proposed agreements regarding Downtown Hotel Project.’ Reason: a legal consultant advised against the draft MOU. We haven’t discovered the nature of the legal problems which torpedoed the draft agreements. We filed a Public Information Act request at the City for a copy of the outside legal counsel’s report that we hear caused officials to decide they had to call off presentation of the plan.

Today the City Attorney Saundra Nickols wrote us saying “The City has one document responsive to your request.” That is the outside legal counsel’s advice on the draft MOU. But Nickols writes: “This document was prepared by the City’s outside legal counsel for the City and is subject to the attorney-client privilege and is therefore protected from disclosure by GP 4-391 as privileged or confidential records.”

Behind closed doors City and County officials have been struggling with how to provide some $20 million of financial support for the Plamondon hotel project that the State government has fled from. For political reasons the scheme has to appear to represent no burden or risk to City or County taxpayers. ‘Appear to’ is the operative verb because in fact any funds raised for the hotel project could be used for more conventional City or County purposes — such as stormwater, roads, police buildings etc — so given finite local borrowing capacity it has to be a burden in fact. Similarly there has to be risk in City and County support. Construction in a flood plain with two centuries of industrial waste disposal on site has inherent risk, as does the paid-parking underground garage. Any hotel venture involves risk but this more so than most because of the burden of meeting City requirements that it incorporate non-paying meeting space, car parking and luxury facilities beyond what investors would fund on their own. City and County governments cannot sponsor a venture like this and then cleverly deploy words to banish real risk.

Tax increment financing (TIF) is likely involved, officials say. 

TIF fundamentally flawed

TIF debt logic rests on the misleading proposition that a commercial venture in a new building, a new hotel in this case, will likely generate an increase (or ‘increment’) in City tax revenues at that site, and that the new revenue stream in the years ahead will be a sound basis for new City borrowing to subsidize the project. But TIFs are actually unsound because (1) the new hotel business will likely attract some of its custom from established hotel businesses nearby so there will be at least a partial decrease or tax ’decrement’ nearby offsetting the increment at the new hotel (2) businesses generating increments in City and County revenue also tend to require increases in local government services in return for their taxes. So combining the offsets (1) and (2) little or no net tax increment is actually generated in the real world, and there is no solid basis for TIF financing. 

TIF is a smiley-face con.

In 2015 local elected officials were sold on the downtown Frederick project with the quiet assurance that the State would be carrying the bulk of the risk. Its promoters spoke confidently of how the State government via grants would help buy the land and pay for consultants while the Maryland Stadium Authority would put up most of the risk capital.  After the MSA gave the project the thumbs down, City officials placed their faith in MEDCO (Maryland Economic Development COrporation.)  But it, too, wanted nothing to do with the Frederick hotel. For several years the project was advanced in Annapolis not by going through the regular appropriations processes following full county delegation consideration but by shady closed door partisan deals in the legislature. The City got some grants awarded but then was unable to draw on them through failing to file the paperwork on time. Further deals in Annapolis were in the end thwarted by Governor Hogan and Senator Michael Hough. 

Proceeding without state funds puts local taxpayers at more risk if the City and County put up money.  The last project financing plan from December 2018 headed ‘Downtown Frederick Public Infrastructure Budget’ was for the project to use a total of $22.25m of public funds, of which the City and County would together put up $11.75m and the State $10.5m. If the project isn’t changed substantially local taxpayers will now be up for almost twice as much — in order to make up for the State’s withdrawal. 

Biggest public sector cost in  the December 2018 project budget is the underground parking — $16.15m. Located down in the Carroll Creek floodplain with centuries of industrial waste fill the construction of this is the riskiest part of the whole project. It makes no sense as car parking at nearly $70,000 per parking space (versus $15,000 to $20,000/space in a regular above-ground parking garage). The roof of the underground parking deck presents Plamondon with a dry ground-level ‘podium’ or platform engineered to carry the five story hotel above. The public ‘car parking’ so-called is really the public funding of Plamondon’s hotel foundations. 

The whole rationale for City sponsorship and public funding of the Plamondon hotel in 2015 was the claim that without public funds there would never be a hotel built downtown. That justification has been scuttled by the hotel now being built on the Visitation Academy site just two blocks away from Plamondon’s site without any City or County sponsorship or funds. 

2019.10.23

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Boondoggle Team effort to gin up state funding flops — 3 letters & UPDATES

A push for a special meeting of the Frederick County Delegation to pressure Governor Hogan to provide state funds for the City’s decade-old downtown hotel project has flopped. Four Delegates led by vice-chair State Senator Michael Hough have said they won’t participate in a meeting proposed by Delegation chair Carol Krimm. 

Rick Weldon

Krimm proposed the special Delegation meeting on state funding of the hotel in response to a letter from the Chamber of Commerce’s president/CEO Rick Weldon writing on behalf of what he calls the Downtown Hotel Team. Weldon addressed a letter to Krimm asking her “to convene the Delegation for a special meeting” the purpose of which would be to hold a vote to ask Governor Hogan to schedule a Board of Public Works (BPW) vote to release $5 million of State funds appropriated by the General Assembly. (Copy of letter downloadable below)

Weldon said his hotel ‘Team’ needs “a dispositive and conclusive vote on which to take the logical next step in our advocacy efforts,” adding: “A definitive vote, including all of the current members (of the County Delegation) would allow the team to make a formal petition to the Board of Public Works to hold the vote on the $5m already allocated to the (hotel) project.”

The letter to Krimm on Frederick County Chamber of Commerces letterhead begins: “Dear Delegate Krimm, On behalf of the Downtown Hotel Team, I’m writing to you…” The letter is undated but was apparently sent on or about June 10. It is signed by Weldon and concludes: “On behalf of the following partners, we respectfully request that you schedule the vote as soon as practicable. We stand ready to assist with the logistics to facilitate the meeting, just let us know what you need.” 

The boondoggle bros listed

Under Weldon’s signature and credentials is a list of the ‘Hotel Team Members’ on whose behalf he purports to write.

It lists:

— Frederick County Government: County Executive Jan Gardner/Helen Propheter

— City of Frederick: Mayor Michael O’Connor/Richard Griffin

— Visit Frederick: John Fieseler

— Downtown Frederick Partnership: Kara Norman

— Plamondon Hospitality Partners: Pete Plamondon Jr

None of these signed the letter (UPDATE FOLLOWS) but by all indications Weldon spoke for them. Mayor O’Connor said earlier in the year he did not want state funding to be taken to the full Frederick County delegation. ADDITION: A spokesman for Mayor O’Connor said Wednesday he was fully aware of the letter and supported the effort to get the Delegation to vote. Delegation chair Krimm’s plan earlier this year was to work exclusively with Democrat officials in Annapolis, avoiding public debate, and bypassing Republicans. (The county delegation is split equally with four Democrats led by Krimm and four Republicans led by Hough.)

Senator Michael Hough in a letter June 12 (Download a copy below) tells Del. Krimm he doesn’t agree to a special delegation meeting because the legislative process for this year is completed and it is up to the executive branch to do what it does. During the legislative session, Hough writes, hotel funding proponents chose not to have a hearing or vote of the full delegation: “I have long told proponents of the project to follow the regular process (of) holding a delegation hearing before any funding is inserted into the budget…. Hearings are held prior to votes, not afterwards.”

No precedent for pressuring BPW

Hough writes Krimm that legislators “have never met to instruct the Governor on what should be on the BPW agenda.” He notes that Delegates were silent on the recent BPW meeting on toll lanes on 270 and the Beltway. 

Sen. Hough says his basic objection to state funding continues to be about “taxpayer dollars being used to fund a private hotel.” 

“Half the delegation is clearly on the record in opposition to current state funding in the budget for the downtown hotel,” Hough writes to Krimm. He notes that four members of the delegation (himself, Del. Dan Cox, Del. Barrie Ciliberti and Del. Jesse Pippy — the four Republicans) signed a letter March 19 to Governor Hogan asking him not to fund the City hotel project. (Download copy of letter below)

The Republicans in their letter to the Governor March 19 express “our strong opposition” to Democrat delegates’ maneuvers involving $6.5 million for the downtown hotel and conference center. 

This comprised a ‘pre-authorization’ for FY2021 of $1.5m gotten into the capital budget, and a ‘repurposing’ in HB1347 of $5 million of grant funds in the 2016 and 2017 capital budgets which the City failed to draw on. (The City has repeatedly failed to meet deadlines that it proposed itself when applying for state grants for the hotel.)

In the last legislative session the action on these two items totaling $6.5m for the downtown hotel was taken in the General Assembly, they write “without any prior public notice, hearing or discussion… and without any public knowledge of the facts…” The measures were never brought up or discussed at regular meetings of the whole County delegation, the Governor was told.

In conclusion, the four wrote Gov Hogan: “These proposals do not have the majority support or vote of the Frederick County Delegation.”

A vote would only show a dispositive divide

A “dispositive vote” in Weldon’s words would almost certainly show a delegation split equally between those supporting state funding for the City hotel and those opposed.

It is unclear what happens next. We’ve asked the Mayor, the County Executive and delegation chair C. Krimm, and will update the report with anything they care to say.

ADDITION: Rick Weldon told us Wednesday evening: “I was pretty confident that I understood how four GOP delegation members would react, but actually having them react was necessary to make a decision about how or whether to move forward once and for all. Let’s just say that I think we have what we need now to make that determination. These things are not accidental or unintentional.”

The Weldon Whopper

Rick Weldon’s Hotel Team letter to Carol Krimm peddles the misleading claim the project has been cleaned up by cutting earlier taxpayer subsidies toward the hotel and conference center: “All public monies will be used to construct public facilities.” 

That whopper is contradicted by the terms of the June 2018 Amended and Restated MOU, the current contract between the City and Plamondon. 

That 2018 MOU provides that public monies will be used for purchase of the hotel site and for site preparation including archeological studies, demolition, historic mitigation, clearing of the site, any hazardous materials remediation of the soil, all the utilities, road works, sidewalks, landscaping, and creekside work. This is all work specific to the development of the hotel.

Project development costs pre-May 2017 are shared 67% developer, 33% City, and from May 2017 on 78.2% developer, 21.8% City, the MOU provides.

The gold-plated garage down under

But the biggest subsidy for the developer is the City’s commitment to fund the parking garage underneath and the engineered podium or platform above. The parking garage will provide the parking spaces on-site which are required by City code to be provided by the developer. And the podium indicates that all this will be engineered to constitute the foundations of the hotel. The public is asked to fund all the difficult work down in the flood plain. The Hotel Team’s developer gets to build on top of the publicly funded ‘podium’ shown diagrammatically in the thick horizontal line.

Whether the parking garage is $11.55m for a single level and 160 parking spaces or $16.15m for 2 levels and 234 spaces it works out at around $70,000 per parking space (versus $25,000 or so in a structured deck) 

$70k/parking space makes no sense as a City parking garage.

Plus it’s relevant that the hotel site is just a block away from the seven-level East All Saints Parking Deck, a garage that is normally two-thirds empty. If the city wanted to build car parking for the sake of car parkers rather than to build the hotel’s foundations, they’d be eying North Market Street (perhaps the Carmack Jay site) not the hotel’s east side for more parking. 

COMMENT: A poorly located and gold-plated underground garage with an engineered podium atop is not a ‘public facility’ worth the name. It’s a political contrivance to dress up a boondoggle. 

DOWNLOAD LETTERS CITED

P Sam 2019.06.18

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The governor’s take on the downtown hotel — it’s a boondoggle LETTER FREDERICK NEWS-POST

Your May 5 report (“Clock ticking on future funding for downtown hotel”) says that Mayor Michael O’Connor has not gotten to sit down with Gov. Larry Hogan to put the case for state funding of the downtown hotel project. The case against state funding has been put to the governor by a number of people. I for one have spoken twice with Gov. Hogan against taxpayer money for the hotel and followed up with written submissions and documentation via staff. This material has been copied to several departmental heads. The Office of Legislative Audits has received a formal complaint about the project, arguing that it deserves investigation of unethical and possible criminal activity associated with the city’s procurement of a developer.

So state officials are well aware of major irregularities in the city procurement. Frederick’s previous mayor, Randy McClement, chose as chairman of the city’s hotel advisory committee Mark Gaver, subsequently revealed as a major con man, convicted in U.S. District Court in Baltimore of $50 million in fraud, and now serving a 17-year term in jail. Convict Gaver set the pattern followed throughout the term of the McClement mayoralty for this city-controlled body, doing city business, operating behind closed doors without public notice or agenda or recorded votes. This was in flagrant violation of the State Open Meetings Act and the city’s own code requirement for competitive procurement. Documented with emails and consultant invoice time sheets are the fact that behind closed doors the city hotel advisory committee (1) dumped the competition-friendly, publicly announced and consultant-recommended two-stage procurement (site to be chosen first, open bidding by developers second) in favor of a single-stage bring-your-site procurement that limited competition to two (2) the single-stage procurement was a suggestion of the winning developer (3) city-funded consultants billed thousands of dollars helping one of the two supposed competitors (the winner) contrary to the terms of their engagement (4) the official RFP was a piece of theater since the winning proposal was received before the RFP was issued, and (5) the scoring of the two proposals was grossly biased.

In short, it was a corrupt fix worthy of the city of Chicago.

State officials have documentation on the fraudulent nature of the purported “competitive procurement” of the site and the developer. Many hundreds of hours of unpaid investigative activity, interviews, public information act requests, advocacy and analysis lay behind the case put to the state to withhold taxpayer support for the project. (See http://frederickhotelboondoggle.us/2019/03/submission-made-to-state-office-of-legislative-audits-and-board-of-public-works/.)

Gov. Hogan told me on the second occasion I spoke to him: “I know about this project. It is not going to get any state funds.” My guess is that he’d tell Mayor O’Connor the same thing.

Peter Samuel

Frederick

see in Frederick News-Post

https://www.fredericknewspost.com/opinion/letter_to_editor/the-governor-s-take-on-the-downtown-hotel-it-s/article_b1f21600-a2bd-586b-aa77-0762d4c13d94.html

NOTE: The first sentence lost a verb! It should have read as published here: “Your May 5 report… says…

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HB1347 reviving $5m of state grants for hotel passes General Assembly in last minute crush of bills

Hotel boondoggle boosters have won another round in the battle for state funding in the last minute crush of bills at the end of the General Assembly session  in Annapolis. They managed to keep grants of $1 million and $4 million in HB1347, the bill titled Prior Authorizations of State Debt — Alterations.

The bill has the two hotel boondoggle grants along with about two dozen other projects, most a renewal past grants which otherwise would be forfeited under normal use-it-or-lose-it conditions.

The grants for the City-sponsored downtown Frederick hotel are now available to be drawn on through June 1, 2026 — an extraordinary admission of the glacial progress of this project. And notwithstanding that the site contains historic buildings and archeology deemed “of unusual importance” by City preservation staff HB1347 provides that “this grant is not subject to review by the Maryland Historical Trust” — which normally acts as the state’s regulatory agency in such cases. 

The City is required by HB1347 to “provide evidence that a matching fund will be provided” to the State grants and it has to do that by June 1, 2021.

Board of Public Works is still a major obstacle

The City is still in an uphill battle to actually draw on the funds because the project has to face the scrutiny of the Board of Public Works (BPW) which comprises Governor Hogan, Treasurer Nancy Kopp and Comptroller Peter Franchot.  Governor Hogan has told opponents of the City project (including me on two occasions) that he appreciates it is problem-ridden and has stated flatly: “It won’t get any state funds.”

As self-described, the mission of the BPW “may be summed up as protecting and enhancing the State’s fiscal integrity by ensuring that significant State expenditures are necessary and appropriate, fiscally responsible, fair, and lawful.”  https://bpw.maryland.gov/Pages/about-bpw.aspx

The taxpayer-subsidized hotel in downtown Frederick fails the requirements of the BPW on every score:

“necessary”: rationale for taxpayer funding until 2018 was that higher costs downtown meant that no hotel would be built without it. In 2018 investors announced their intention to convert the Visitation Academy, just two blocks away, to a hotel WITHOUT any taxpayer subsidy.

“appropriate”: taxpayer support for construction of a hotel is not appropriate since the a hotel is a private business undertaking

“fiscally responsible”: it is not fiscally responsible to build the foundations of a hotel in the form of a City parking garage at a capital cost of $69,000 per parking space where the normal capital expense is about $15,000 per parking space

“fair”: it is not fair to taxpayers to use taxpayer money on behalf of a private business and it is not fair to its competitors who raise all their own capital

“lawful”: several laws were flouted in City sponsorship of this hotel: seven years of violations of the state Open Meetings Act by the City’s Downtown Hotel Advisory Committee (DHAC), the City’s misuse of City consultants to assist Plamondon in preparing his submission, the conduct of a flagrantly unfair procurement which violated the City’s purchasing code, the fake competition and biased scoring of the procurement.

So on all five counts the BPW should refuse to release the $5m and any other State money for the hotel finagled through the General Assembly in closed door meetings. 

But it is a blow to have the General Assembly support such an undeserving project! Its supporters sneaky tactics worked. They avoided any public discussion by dealing entirely behind closed doors — going around the County delegation, avoiding the committee appropriations process and relying on the rush of end-of-legislative session busyness to get it through.

Danielle Gaines of Maryland Matters provides a sense of the atmosphere in which HB1347 was passed:

“While hundreds of bills will zoom across the desks of the presiding officers of the House and Senate on Monday as the legislature wraps up its 90-day session, much of the serious work of tying up loose ends will be happening off the floors, in hurried huddles of six senators and six delegates – plus any number of observers – negotiating last-day conference committee reports. About a dozen conference committees have been formed in the last several days of session. Others are certainly likely on the final day… (Maryland Matters 2019.04.08)

https://www.marylandmatters.org/2019/04/08/five-conference-committees-to-watch-on-sine-die/

The grants can be read within HB1347 here on pages 8-9 and 13:

https://legiscan.com/MD/text/HB1347/2019

in pdf form:

https://legiscan.com/MD/text/HB1347/id/1984322/Maryland-2019-HB1347-Enrolled.pdf

2019.04.09

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Plamondon walks away from Downtown Hotel, says City’s inability to gain promised funding makes project ’non-viable’

Pete Plamondon Jr announced today his company is exercising its option to withdraw from its partnership with the City to build a downtown hotel and conference center in Frederick. He said that City officials had “gone the extra mile” in their efforts to gain the necessary public funding “but at the end of the day they have been unsuccessful in assembling the necessary public funds.”

Plamondon said he had submitted a Notice of Termination in accordance with the Amended MOU of June 21, 2018. This anticipated the possibility of the joint project being terminated by either party: “Prior to Financial Closing, either Party may terminate this MOU for any reason or no reason…” see MOUv2 at page 13, IX. (e) Termination. There is a 30 days notice period so the MOU is officially voided April 30.

Mayor Michael O’Connor said the Plamondon company’s withdrawal from the project was “disappointing but understandable.” At the end of the legislative session the City’s quest for $10.5 million of state funds had come to nothing, and the County delegation was split. In an attempt to avoid contentious argument among the delegation Delegation Chair Carol Krimm decided not to put hotel funding on the delegation agenda and privately approached Democratic appropriators asking them for $1.5 million. Again to no avail. The City also faces opposition to state funding from the Hogan Administration, which has the final say at the Board of Public Works which comprises the Governor, the Treasurer and the state Comptroller.

Mayor O’Connor was quoted in the Frederick News-Post previously: “This is the last session we’re going to go through this process. We will find out what we are going to get in the budget this year. We don’t intend to go after it after this year.”

The Downtown Hotel project was associated most with Mayor Randy McClement who launched it soon after he was first elected in 2009 and championed it during his two four year terms of office 2009 to 2017. The present Mayor and Board of Aldermen who came into office 15 months ago have continued to vote for the project and to give it lip service. But they have been noticeably cooler about the project than previous local elected officials.

Mayor O’Connor terminated the City-appointed chair of the Downtown Hotel Advisory Committee (DHAC) March 3, 2018, and said that he was appointing no replacement. And three weeks later (FNP 2018.03.24) he spoke about the lax management of the project saying: “what’s often been frustrating for me as I watched this from the perspective of the Board of Aldermen is, I’m not really sure someone is actually the quarterback of this project. Is it being driven by the mayor’s office, is it being driven by the major employers’ group with the Chamber of Commerce, is it being driven by tourism, is it being driven by Plamondon Hospitality Partners?…”

Pete Plamondon told reporters he appreciated the hard work and commitment of City officials and of the Downtown Hotel Advisory Committee which looked after the City’s interests. The DHAC had shown “great flexibility” in their handling of the procurement and a “willingness to work closely with the Plamondon team from the very beginning.”

“Our proposal was recognized early in the process as best-value for the City, well before the RFP was issued. It was a very cooperative relationship throughout the ten years we worked this project. It was our suggestion to the Hotel Team that they expedite the procurement by limiting bidders to those who already had a site. That greatly expedited the procurement and ensured two good competitors — Ed Wormald and ourselves.

“I felt a bad for Ed,” Plamondon said. “He really wasn’t in the race.”

The DHAC already had their proposal and the consultants Jones Lang LaSalle had helped them hone their submission more precisely to the City’s requirements.

“But Ed deserves everyone’s gratitude. The City and the County have very little borrowing capacity. As our lobbyist in Annapolis said: It was vital to present the appearance of competition in order for us to have the chance to crack open the rich state treasury.”

Mayor O’Connor said: “We almost did it. Several times the planets seems to be aligned. But we got only dribs and drabs, half a million here, three-quarters there, $5 million promised for a future year…..It never quite came together in a way that would allow us to do a financial close and award contracts, and build.”

Both the Mayor and Plamondon said the project suffered from bad luck. They cited the fact that Mark Gaver, the City’s first chairman of the Hotel advisory team turned out to be engaged in a $50 million fraud and went off to federal prison for 17 years. It was bad luck too that plans to get the Maryland Stadium Authority to sponsor the project never materialized. Maryland Economic Development Corp also declined to get involved int he Frederik project.

Both are rather Baltimore-focussed organizations, O’Connor said.

As for the Visitation Academy hotel and condos being built without public funds, department of Economic Development Richard Griffin said the City could claim some credit for this. The buzz generated by the City/Plamondon project attracted investors and focussed attention on the potential of hotels downtown. Visitation was a “great knock-on project that wouldn’t have occurred without the City’s work with Plamondon,” he claimed, adding: “Good things often happen in unexpected ways.”

2019.04.01

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HB 1347 Please delete $5 million in grants for boondoggle hotel — an appeal to Senate and House appropriators

Dear State Senator/Delegate: 

Please delete the $1 million and $4 million grants for the Frederick downtown hotel in HB 1347 (pages 8 and 12.) see  https://legiscan.com/MD/text/HB1347/2019

The State of Maryland should not disgrace itself with support for this project. It is a corrupt, wasteful boondoggle whose first City ’point man’ Mark Gaver was last year convicted of $50 million of fraud and is now serving a 17 year jail sentence. Gaver was the first chairman of the City’s Downtown Hotel Advisory Committee (DHAC) notorious for its flouting over eight years of the State Open Meetings Act and for its corrupt behind-closed-doors procurement on behalf of City cronies. 

A detailed complaint about this project has been submitted to the Office of Legislative Audits and the Board of Public Works, available in pdf form at this link:

http://frederickhotelboondoggle.us/wp-content/uploads/2019/03/DowntownFrederickHotelOLABPWsubmission20190318.pdf

There’s also gross mismanagement. The first expenditure of taxpayer money was in 2009. Nine years later, a score of consultants, report after report, meeting after meeting, and millions spent, they haven’t produced even a site plan capable of meeting City codes. Earlier state grants have been forfeited for failure to meet deadlines for documentation. One grant the subject of proud press releases at the time was actually forgotten by the City!

Consider also in HB 1347 two extraordinary ’notwithstanding’ clauses in the text of the Frederick hotel grants. One provides June 1, 2026 as the new deadline for the City of Frederick. That says it all. They think they need seven more years to get their act together!  Another notwithstanding clause shields the chosen hotel site from review by the Maryland Historical Trust even though it contains two buildings deemed of ‘unusual’ historic importance — including the only surviving 19th century leather tannery works in the state.

This project is so contentious, it is reported, that the grants were not even brought up for open discussion at the meetings of the Frederick County Delegation of the General Assembly. As always the hotel project was advanced into HB 1347 behind closed doors.

Please, in the name of honest government and prudent spending of taxpayer money, put an end to all State support for this crony hotel project in downtown Frederick. It is disgusting and ridiculous.

Peter Samuel

text of email 2019.03.30

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$5 million for hotel sneaked into a ‘prior authorizations’ bill HB1347 (corrected)

Hotel boondoggle supporters in the General Assembly have managed to sneak $5 million into HB1347, a small bill which is separate from the main budget bill. NOTE: This is a correction. Yesterday we reported a provision early in the bill for a $1 million grant, overlooking a grant for $4 million later in the bill.

Here is the relevant text:

HB1347 Bill Title: Prior Authorizations of State Debt — Alterations

Under Miscellaneous Grant Programs it reads 

Downtown Frederick [Hotel and Conference Center] PUBLIC PARKING AND INFRASTRUCTURE. Provide a grant of $1,000,000 to the Mayor and Board of Aldermen of the City of Frederick for the acquisition, planning, design, construction, repair, renovation, and reconstruction, INCLUDING PUBLIC UTILITY, ROAD, STREETSCAPE, AND PARK IMPROVEMENTS of the [Downtown Frederick Hotel and Conference Center] DOWNTOWN FREDERICK PUBLIC PARKING GARAGE NEAR THE SOUTHEAST CORNER OF EAST PATRICK STREET AND SOUTH CARROLL STREET, located in Frederick County. Notwithstanding any other provision of law, this grant is not subject to review by the Maryland Historical Trust. NOTWITHSTANDING SECTION 1(5) OF THIS ACT, THE GRANTEE HAS UNTIL JUNE 1, 2021, TO PRESENT EVIDENCE THAT A MATCHING FUND WILL BE PROVIDED. NOTWITHSTANDING SECTION 1 (7) OF THIS ACT, THIS GRANT MAY NOT TERMINATE BEFORE JUNE 1, 2026 (Frederick County)………$1,000,000

You can read it about midway through this 

https://legiscan.com/MD/text/HB1347/2019

The second grant of $4 million is phrased identically except for the larger amount of money proposed.

My comment: First it supports an unnecessary, wasteful, corrupt crony project that after nine years of putzing around still doesn’t even have a site plan that comes near to meeting City code, let alone traffic studies, an independent up-to-date feasibility analysis, detailed design or engineering. 

Second, the bill misrepresents the purpose of the project by calling it “Public Parking and Infrastructure.” The parking works out at $69,000 per parking space which is about four times the normal cost of structured parking. Such gold-plated parking would never be built as a normal City parking garage. What is being financed by taxpayers is the foundations of the crony-developer’s hotel. By taking a difficult floodplain site with a century of industrial dumping the City is taking on the cost and risks of hazmat handling, archeological digs and deep foundation piles and underground construction, presenting the crony-developer with an engineered platform for his hotel.

Third, the site has been described by the City Historic Preservation Commission as being of “unusual historic importance” and it makes a mockery of our downtown historic district to have a special provision exempting the boondoggle from normal review by MHT, the state historic preservation review body. 

Fourth, these grants sneakily bypassed the normal budget appropriations process. Plus they even bypassed discussion at the regular Frederick County delegation meetings on Friday mornings when the General Assembly is in session. Apparently, the boondoggle supporters in the state delegation went the backroom route because they were fearful that if they stuck to normal channels and were open to public comment a bunch of people would show up and talk about the waste and corruption behind the project. 

Fifth, contrary to normal use-it-or-lose-it provisions in state grants according to HB1347 the money for the boondoggle is to be available until mid-2026. Seven years!!!! That shows how much confidence the project’s own supporters have in the ability of City Government to push this project ahead in a timely fashion.  

If the City needs until June 2026 to get to a financial close when it can draw on the state’s million bucks the Hotel would not open until 2028 or 2029. And it was back in 2009 that the first City money was spent on this project. With this record of epic mismanagement by the City we must realistically expect sub-standard work, cost over-runs, corrupt contracting, and mis-spending. (Edits Thursday 18:40)

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Submission made to state Office of Legislative Audits and Board of Public Works

COPY OF COVER NOTE: Supporters of the City-sponsored Downtown Frederick Hotel project sought another $10.5 million in the 2019 legislative session in Annapolis and were apparently unsuccessful in getting new State aid this year. But they have declared their intention to continue seeking funds. One avenue is an effort to revive an old bond bill grant of $5 million and a $250,000 DHCD grant made in earlier year but forfeited or forgotten. The Board of Public Works and DHCD will likely be asked to approve release of these $5.25m of state funds. I believe state officials should consider the following evidence that this project is corrupt, wasteful, unfair and unnecessary. I am hopeful you will conclude it is undeserving of a single dollar of state funds.

My standing? I’m a citizen and taxpayer of Frederick, Maryland and live and own a home downtown. I’m retired after a journalism career in Australia, New York City, Washington DC and locally as a newspaper and magazine reporter, pundit and specialist journalist-publisher (I founded Toll Roads News.) I’m all in favor of new hotels downtown but believe they should be fully financed by competitive private enterprise — as now proposed at the old Visitation Academy site. The more closely I examined the long saga of a City-sponsored Plamondon hotel project here in Frederick the more obvious it was to me that it was a corrupt, wasteful, unfair and unnecessary boondoggle that citizens of conscience must speak out against.

I have written at my website http://www.frederickhotelboondoggle.us and worked with the Friends of Frederick County Marriott Hotel Watch Facebook page group to expose the flagrant wrongdoing associated with the City hotel project. The attached pdf is a submission to the Office of Legislative Audits suggesting the Frederick project should be investigated. Meanwhile I urge the Board of Public Works to freeze any funds appropriated by the General Assembly.

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Mayor says last shot at state hotel $s, public hearings bypassed again in backroom deals

Mayor Michael O’Connor is tiring of the City’s repeated panhandling in Annapolis on behalf of the downtown hotel boondoggle. A Frederick News-Post (FNP) report this morning (link at the bottom) quotes the Mayor as saying: “This is the last session we’re going to go through this process. We will find out what we are going to get in the budget this year. We don’t intend to go after it after this year.”

If state money is not obtained this year, then the hotel “will move forward without the extra funds,” the FNP reports. State money is not essential for the project to “move forward,” the Mayor is in effect saying.

That is a strong argument against state funding! 

Why should the State fund a project which the City says can move forward whether or not it gets State funds?

The News-Post report also details how Delegate Carol Krimm bypassed any discussion at the Delegation or through the normal appropriations committee budgetary process, thereby avoiding any public hearings. 

Senator Michael Hough (R – Frederick & Carroll) said: “It’s the same backroom deals to get this through… Millions of dollars are being appropriated for the downtown hotel without any public hearing in Annapolis.”

Hotel proponents know the project is so rotten it cannot withstand public scrutiny! 

Put it up for a public hearing and be guaranteed a bunch of citizens will show up or write pointing out to legislators the City’s corrupt and fake competed procurement, the City’s flouting of the Open Meetings Act by the behind-closed-doors meetings of the Downtown Hotel Advisory Committee, the incompetence involved in the City getting grants for the project yet never being capable of actually drawing on those grants, the scathing comments on the project by the Maryland Stadium Authority and the Maryland Department of Economic Development, the out-of-date market studies, the exorbitant per-parking space costs, the constant changes in the project, the fact that just two blocks away at the Visitation Academy a hotel is planned without any City sponsorship or public subsidies, etc etc. Plus as Rick Weldon of the Chamber of Commerce points out the downtown hotel boosters have been at this for a long, long time. He says it’s 12 years!

But the good news is that Mayor O’Connor recognizes the need to end the annual panhandling in Annapolis on behalf of this lemon of a project after this legislative session is done.

$16.5m?

The FNP reports that taxpayer costs (state, county and city) “are set to cover $16.5 million of public infrastructure, including land and on-site public parking and off-site road, utility, streetscape and creek area improvements.”

The News-Post doesn’t source this $16.5m or note that it is below other official estimates.  The latest City One-Pager (so-called) dated December 27, 2018 refers to “Public funds totaling $22.25 million” and shows $11.75m of that contributed by City and County taxpayers, and $10.5m from State grants. 

A single page table Downtown Frederick Public Infrastructure Budget details the categories of spending $22.25m:

Land $4.2m

Parking/podium $16.15m

Off-site works $0.4m

That is $20.75m

The rest of the $22.25m is $1.5m of ‘soft costs’ made up of preliminary development cost of $250k, architecture & engineering $408k, financial, franchise, legal & accounting (Is lobbying in here?) $77k, project management $767k, pre-opening costs $3k (the opening party?)

$16.5m, if it’s a real $#, is a welcome reduction in public commitment. But it will buy less than the $22.25m officially quoted. 

Where are the $5.75m savings?

Eagles property not bought $527k?

Reduce underground car parking from two levels (234 spaces) $16.15m to one level and (160 spaces) $11.6m? $4.6m saved?

We’re now at $5.13m saved, still $620k to go. If the parking garage is only one level then perhaps the architecture and engineering isn’t $408k? And the project management can be squeezed below $767k. And maybe Plamondon will shoulder the $3,000 ‘pre-opening’ (party) cost?

It remains a question whether the project so squeezed is permitable by the City Planning Commission. Without the Eagles land there is no street access to the parking garage beyond a single lane easement. A 2-way driveway ramp is twice the size of the easement.

Plus a 200-room hotel normally needs to provide a parking space for each guest room (and that provides nothing for conference/event attendees.) And the per-parking space cost of the garage already very high at $69k/space ($16.15m/234) for two levels gets even higher with just one level ($11.55m/160 = $72k/space.) 

We’ve asked the City about the $16.5m cost the FNP reported. And we’ll update/edit this when and if they clarify.

FNP report by Samantha Hogan:

https://www.fredericknewspost.com/news/education/funding/house-passes-budget-and-considers-million-for-downtown-hotel/article_1f895949-0bb6-5687-a755-5d34a1f3f1c8.html

UPDATE 11:19: Mayor O’Connor has responded to our question: “When we are fully aware of all of the sources of funds available for the project, we will be able to make the determination you are seeking. The program as currently conceived seeks $10.5 million in state funding along with $11.75 (million) committed from City and County sources. We have $5.0 million authorized at the state already, awaiting Board of Public Works approval. If some portion of the additional $5.5 (million) we are seeking is not realized, we will work with the partners, with funding in the project, to determine the next steps.”

So the City seems to think it has $11.75m City and County funding and $5 million of state funding which is $16.75m.  Maybe someone lost $250k in the arithmetic, and that’s the source for the $16.5m?

If the City also gets the $1.5m that Del C Krimm says she has got in backroom meetings with state appropriations legislators then there’s a total of $18.25m. That assumes the Board of Public Works releases $5m the Governor has previously said won’t be released.  And that the Governor goes along with the $1.5m extra that was never approved (or even discussed) by the Frederick County delegation.

So the battle goes on! 

At least there’s an end in sight if the Mayor sticks by his promise to work from what’s gotten this year and not go back again next year. That’s heartening!

2019.03.15

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Hotel “not funded” in 2020 State budget, FNP confirms

The City-sponsored hotel downtown missed out on funding in the short 2019 legislative session when the budget for the following fiscal year is hashed out. Reported here February 27 (see link at end) and on the FoFC Downtown Marriott Watch Facebook page, the news is confirmed in the Frederick News-Post (FNP) today.

Samantha Hogan reports: “Hogan’s proposed $46.6 billion budget invests in education and transportation, while putting aside 6.5 percent of state revenue in a Rainy Day Fund. Highlights of the budget include a 10 percent increase in local transportation aid driven by highway user revenue formulas, a $6.9 billion statewide investment in education and multiple capital investments in roads around Frederick County. One item that is not funded, however, is the proposed hotel and conference center in downtown Frederick.”

Casting this as just the Governor’s budget is somewhat misleading. As detailed in the Maryland Reporter while based heavily on a budget proposed by Governor Hogan January 17th, the budget now being reported is close to the final budget of the General Assembly.  In the seven weeks since the Governor’s budget was released the state House and Senate have been working intensely on it. Reports from Annapolis are that the legislators are close to an agreed budget for submission to the Governor for his signature.  The key House Appropriations Committee, for example, is due to report Friday, March 8.

Normally money for the hotel would be included in local projects supported by ‘bond bills.’ For this budget that category is nailed down without funds for the hotel. Total for the whole state for local bond bills was agreed at $15 million, showing how unreal was the $10.5m being sought by the City of Frederick for the hotel. 

FNP: “Delegate Carol Krimm (D-District 3A), the county delegation’s chairwoman, said that she was disappointed by the lack of money for the hotel and conference center in the governor’s budget, but that she would continue to support the project and work to secure funding for it.”

Truth is that veteran hotel supporters on the delegation (Krimm and the Youngs) knew the hotel was near impossible to fund. So it wasn’t even discussed at any of the Friday meetings of the Frederick delegation. 

Did they even try?

Contrary to the FNP reporting they didn’t seriously try to get state funding.

Mayor Michael O’Connor is quoted: “Our plan is to continue to work with the delegation to do what we can do to secure the funds we need to get the project completed… Five million dollars has already been allocated by the General Assembly, and we need to work through the process to get that money through the Board of Public Works to get that approved.”

The $5m “allocated by the General Assembly” is a previous year’s appropriation which was never drawn on by the City because it cannot get its act together on the hotel. It doesn’t even have an adequate site and is still mulling purchase of the Eagles club site next door. As presently designed the parking garage has no real estate for an access roadway because of the lack of frontage on East Patrick St. No progress is being made on mitigation needed by the state historical trust for the demolition of the Birely Tannery.

Architectural and engineering g design and other studies are on hold pending state funding.

State officials have indicated they consider the $5 million mentioned by the Mayor to be a grant forfeited by the City of Frederick through the project not being taken to the State Board of Public Works in the year in which it was granted.  And Governor Hogan has said flatly: “No state funds will go to the hotel project.”  

Our previous report

http://frederickhotelboondoggle.us/2019/02/hotel-bombs-out-in-2019-session-no-delegation-vote-on-seeking-state-s-as-legislative-session-winds-down/

2019.03.06

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