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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Hotel bombs out in 2019 session — no delegation vote on seeking State-$s as legislative session winds down

The Downtown Hotel project looks most unlikely to get any state funding this legislative session in Annapolis. Both the Hogan administration and State legislative leaders said the project needed the full support of the Frederick County delegation before they would even consider it for State funding. 

Yet Delegate Carol Krimm and other hotel proponents have made no move to have the Hotel discussed or put to a vote at a Delegation meeting this year. They know the opponents of the project led by Senator Michael Hough are as strongly opposed as ever to state funding. Delegation meetings are held every Friday morning in Annapolis when the General Assembly is in session. 

A Hough staffer told us today: “They didn’t ever put state aid for the Hotel on the Delegation meeting agenda. It was not put up for discussion. And we’ve had the last Delegation meeting this year. The only way they could get money now is to bypass the Delegation and persuade Gov Hogan to completely change his mind. We don’t see that happening. So the Hotel looks like it’s without state funds for at least another year.”

Mayor O’Connor said January 15 in  answer to a question from me that the Hotel project was “on hold” pending the outcome of efforts to get State funding in the legislative session. If the legislative session is concluding without funding having been obtained, then the City has to decide what to do.

1. Wait another year, and try yet again?

2. Try to reshape the project so it can proceed without state support, putting the whole public sector cost onto City and County taxpayers?

3. Acknowledge the project as a mistake.

‘Infrastructure’ gimmickry went nowhere

One of the dumbest moves this year was an effort to rebrand the hotel project as ‘public infrastructure’ emphasizing the proposal to use state money for a City parking garage, and omitting all reference to the hotel. See the Department of Economic Development’s letter. During Frederick Day in Annapolis the project was described as “Downtown Public Infrastructure to build more public parking” — a reference to the $16.15 million 234 car-space parking structure proposed to be built underneath the DH&CC. Simple arithmetic exposes the absurdity of this as a City Parking garage: $16,150,000/234 = $69,000 per car parking space.

Walker Parking consultants told the City that new parking spaces must cost $15,900 or less in order to be financially viable. Three quarters of the spending ($12 million) would constitute public subsidy of the foundations of the hotel because spending $16.15 million on a mere 234-car garage is absurd.  Why should the State support such extravagance? 

The City has financed and built six above-ground parking garages without any State support. Building the seventh parking garage underneath the hotel would be just another waste of money on behalf of the hotel. Calling it ‘public infrastructure’ fools no one.  2019.02.27

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State delegates misled on terms of hotel deal (letter to Del. Krimm)


Delegate Krimm: Richard Griffin wrote a misleading answer to your request for details of the terms under which the hotel operator will be leasing the podium roof of the parking structure (email January 16, 2019 17:06 EST). He encouraged you to share his answer with other delegates, so I am copying them.

Mr Griffin’s answer suggests the hotel operator is paying a ground lease specifically for the podium roof.  The payment Mr Griffin quotes is a Ground Lease related to the purchase price of the land and is solely intended to recompense the City for the purchase of the land. He quotes from Appendix D of the Amended and Restated MOU of July 2, 2018 which is almost identical to the Ground Lease terms in the MOU of December 23, 2015 at page 6, 10. Special Agreements (B) Ground Lease. 

Back in 2015 when the Ground Lease was written there was no podium roof. Then the idea was for the public sector to buy the land, carry a large share of soft costs, and pay all construction and fit-out cost of the conference center portion of the project. The basement level parking (a single level) along with foundations was to be financed by the hotel developer and operated by the hotel for hotel guests. 

The idea of having the City finance and operate the basement parking only arose in 2017 many months after the terms of the Ground Lease were settled. Only in May 2017 did Mayor McClement announce the new arrangements (reflected in the July 2, 2018 Amended & Restated MOU) under which Plamondon would take full responsibility for the costs of the conference center in return for the City taking on the financing of the basement parking and providing a podium on which Plamondon could build his hotel and conference center.

Contrary to Mr Griffin’s email the present terms do not ask the hotelier to make any payment at all for the use of the City-financed podium roof or for the foundations and structure that are engineered to support it. This giveaway is substantial. At $16.15 million for 234 parking spaces, each space is costing $69,000. The most thorough survey of underground parking costs in cities across America suggests $48,000/space (Rider Levett Bucknall quoted in Donald Shoup’s book on Parking updated by Turner Construction Cost Index) times 234 spaces = $11.2m. On this basis nearly $5m ($16.15m minus $11.2m) of the construction cost appears to be surplus cost attributable to foundations and podium beyond the cost attributable to the underground parking alone. 

Even underground parking itself as represented by $48,000/space makes no sense in Frederick. According to the revenue and cost estimates in the Walker Parking Consultants 2015 study for the City a 234 space parking garage would only break even and cover debt service if it costs $15,900 or less per parking space to build. That is, in order to have no negative impact on the City Parking Fund, the Sub-hotel City parking garage should cost 234x$15,900m = $3,720,000 or less. By this measure in spending $16.15m — the amount for which the City gets no financial return —  the podium giveaway is $16.15 minus $3.72m or $12.43m.

To reiterate: the present agreement between the City and Plamondon only proposes a ground lease arrangement for the proposed $3.4m land purchase of the Frederick News-Post site. It gives away the expensive podium free of charge to the favored developer.

Unfortunately the Griffin email is just the latest in a long list of false and misleading statements made in the eight year long effort to justify this disgraceful boondoggle hotel.

Peter Samuel 2019.02.03

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$250,000 state grant for hotel from 2012 was forgotten by the City

A $250,000 grant the State awarded to the City of Frederick for its Downtown Hotel back in 2012 was forgotten and never drawn on by City officials. Kimberly Langkam director of Capital Grants at the state’s Department of General Services emailed Frederick Delegate Carol Krimm two weeks ago (January 15) under the Subject “12-032 Downtown Frederick Hotel & Conference Center” this: “The 2012 – $250,000 grant for the above referenced project, the funds are still available and have not been reverted.” (‘Reverted’ is bureaucrat-speak for unused grant money being taken back.)

Krimm passed the news of finding the missing quarter million to the City’s Hotel project manager Richard Griffin, who minutes later emailed back to Krimm: “Excelente. That is outstanding.”

The emails were released in response to Public information Act requests.

The City’s request for the hotel grant and its award by the State legislature was well publicized at the time. It began as a request for $1 million from the state.

Richard Griffin speaks at a Mayor & Board meeting

Under the headline “Frederick asks state to pitch in $1m for hotel” then Patti Borda at the Frederick News-Post reported: “McClement’s office asked the state earlier this month to include $1 million in the fiscal 2013 state budget for the project. That money would be used to help the city cover the cost of placing a right-to-purchase option on a property, as well as architectural, engineering and project management expenses, said Josh Russin, McClement’s executive assistant.” That was December 30, 2011.

March 22, 2012 the Frederick News-Post under the headline “City sets stage for downtown hotel site” reported: “The Maryland General Assembly is considering two bills that could provide some funding. One is sponsored by Sens. David Brinkley and Ron Young and Delegate Galen Clagett to pay $250,000 for the hotel planning and design costs. Clagett also sponsored a bill to increase the hotel tax from 3 percent to 5 percent, with proceeds to pay off the debt for the county’s visitor center and proposed hotel site acquisition.”

Apparently the General Assembly leadership and the Frederick County hotel advocates reached a deal that instead of $1 million the hotel would get $250,000 conditional on a matching $250,000 being provided by the City.

In June there was another reference to the quarter million grant in the backgrounding to a report on Mayor McClement’s comments on a forthcoming feasibility study: “During the 2012 session of the Maryland General Assembly, lawmakers set aside $250,000 for the first stages of the building effort, and the city had to make an equal match. McClement said none of that combined half a million dollars will be used for the hotel if the stadium authority’s study finds the market will not support a hotel conference center downtown right now. If the stadium authority comes back with a negative recommendation, McClement said the state will keep its $250,000 and the city will redirect the funds to other things. If the authority returns a positive recommendation, the $500,000 could be used for site study and engineering on prospective sites, McClement said.” (FNP 2012.06.03)

Delegate Carol Krimm

Of course the Crossroads/HGS feasibility study that came out in July 2012 was interpreted, at least, as being favorable to the hotel project. It could be argued it was not in fact very favorable: the projections were couched with reservations and it stated that “some public participation’ (taxpayer support) would probably be necessary to attract private investment. But few advanced that negative interpretation at the time, and the project lumbered on.

The Mayor’s Hotel Advisory Committee had no hotel expertise. It comprised local Frederick worthies, business people mostly lobbying for a hotel, but most knowing nothing more about a hotel than anyone who has traveled and frequently stays in a hotel. Next priority was hiring help for the Mayor’s Hotel Advisory Committee (HAC) by way of expert consultants. The Jones Lang LaSalle crew was gotten “on board.”

JLL
But these $175 to $250/hour billers required serious six-figure funding.

July 27, 2012 Jen Bondeson in the Frederick News-Post under the headline “Downtown Frederick hotel project may get more public funding” reported: “Frederick officials want more money to work with as they attempt to secure and prepare a spot for a long-envisioned downtown hotel and conference center. The Board of Aldermen agreed Wednesday to ask the Maryland Department of Housing and Community Development for a $250,000 Smart Growth Impact Fund grant, which could be used for many different costs, such as acquiring an option to buy the property, site design and analysis, architectural costs and ground work. The city already has $500,000 for the first stage of the project, after setting aside $250,000 in its budget and being awarded a matching bond bill by the 2012 Maryland General Assembly.”

There at the end is the 12-032 grant that is apparently now being rediscovered. That Smart Growth Impact Fund grant from the Department of Housing and Community Development was not obtained for 2013, but the Department awarded the Frederick hotel $350,000 in 2014. That grant and another $500,000 obtained in 2016 were forfeited as the City missed two use-it-or-lose-it deadlines, the first after a one year extension.

Given the City’s record of receiving state grants, then failing to draw on them, it remains something of a mystery just how the City has paid its bills for hotel consulting, since we’ve frequently been told the money was coming from the State.

Disappearing costs
Another mystery is just how the City has apparently ‘disappeared’ some of the ‘soft costs’ (financial consultants, lawyers, engineers, architects etc) in its presentation of the project budget and sources and uses of funds. 2015 through 2017 these ‘soft costs’ were stated as $8.3 million, about a quarter of the total public funding and 10% of the overall project. The $8.3m was broken down in the May 2016 One-pager to Design/Inspect(ion) $1.4m, MSA Mgt (Management) fee $0.4m, Contingency $1.4m, Financial/Legal $2.1m, FFE/IT/PreOp $2.7m.

Now according to the December 27, 2018 One-Pager the soft costs total is $1.5m. Where have $6.8m of earlier soft costs gone? We’ve asked but so far go no explanation as to how 82% (6.8/8.3) of these have disappeared.

May 18, 2017 Mayor McClement announced that the public private partnership was being abandoned in favor of a condominium style arrangement. No longer would the City build and fit the conference center and gift it to the Plamondon company, merely claiming free use of them a set number of days a year. Instead the project would be divided vertically condo-style. Plamondon would build and operate the hotel and conference center complex entirely on his own nickel. The City would present him with an engineered podium or huge concrete slab atop its underground parking garage on which to build his hotel complex — saving him the expense of foundations. The City also buys the land.

FFE (fittings, furnishings and equipment) and IT for the conference center is no longer on the City tab. But there are almost certainly corresponding costs for the parking garage. Similarly the MSA management fee is out because the MSA (Maryland Stadium Authority) decided against getting in with the City on the hotel. But someone else will be managing the project for the City and charging management fees. Design, financial/legal, and contingency costs remain and probably should increase. The city will now be fully responsible for the difficult foundation work.

Reducing soft costs $8.3m to $1.5m remains a mystery. Have some of the costs already incurred been shifted out of the hotel account and put on the City’s general fund expenses? The City seems to have made a real mess of tapping State funds. Maybe the City has been paying it all. Stay tuned.

PSam 2019.02.01

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