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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City wants $10.5m from State for sub-Plamondon parking garage — it’s a $800k/yr loser

The City’s latest ‘One-Pager’ is pitching for $10,500,000 from the state budget to support construction of an enlarged $16.15 million two-level 234 car-spaces parking garage to be located underneath Plamondon’s proposed 199-room Marriott Hotel. Let’s dub it the Sub-Plamondon  (S-P) Garage. The City document dated Dec 27, 2018 now puts total public funding for the hotel at $22.25m with the county and city putting up the remaining $11.75m between them. No County, City split is specified. 

In May last year (2018) in an Amended & Restated MOU with Plamondon the City was building a single-level parking garage with 160 spaces to cost $11,554,000. That was $72,200 per parking space. The two-level basement garage now proposed at $16.15m is only slightly lower cost per parking space at $69,000. By contrast as recently as 2015 the project involved construction of Parking Deck #6 (PD6), an elevated structure to cost $16m for 650 spaces: $24,600/space. (Forella Group LLC, a Fairfax VA costing specialist put the likely cost much higher at $27,734,000 or $42,670/space in a report in January 2016. It was that cost estimate which caused PD6 to be dropped from the hotel project.)

Walker projected Parking Deck 6 as a financial flop

The May 2015 study of City parking and the impact of the hotel by Walker Parking Consultants found that Parking Deck 6 wasn’t financially viable even at the then estimated cost of $13m. Parking revenues were put at $1,263/car space/year generating revenue of $821,000 stabilized from the fourth year of operation (the first three years would be worse.) Against that $821,000 revenue operating costs would be $272,000 for net operating income of $548,000. But debt service on the $13m capital (assuming 20 year municipal bond financing at 3%) comes to $874,000, so the stabilized result is $326,000 in the red. (The $1,263 of revenue and $372 operating costs per parking space cited by Walker were based mainly on the performance existing five parking garages.)

$878,000 annual loss in prospect for S-P Garage, or maybe $792,000

With only 234 spaces and the City’s average parking deck system revenue per space of $1,263 the revenue of the Sub-Plamondon (S-P) Garage would be $295,000. With operating expenses of $372/space they come to $87,000 a year producing a net operating income of $208,000. But annual debt service would be over $1,086,000 for an annual loss of about $878,000.

Sub-Plamondon Garage is worse — a near $800k to $900k a year loser

Now maybe the S-P Garage can command a parking fee premium (we chose 18%) over the other garages and generate revenue of $1,500/space giving a gross of $351,000 a year. And maybe operating costs can be reduced by a third to $250/space to $58,500. Net operating income goes from $208,000 up to $293,000. But the killer is still the debt service of $1,085,000 so the S-P Garage is still in the red to the tune of $792,000/year. 

For reference: the S-P Garage’s prospective annual deficit of around $800k to $900k will compare with a current profit or surplus of $235,000 estimated to be made by the City’s overall parking operations. That goes into the general fund.  (p36 of City of Frederick, Annual Budget Report FY2018)

So the S-P Garage for which the City is now seeking County and State support is a huge loser, and its construction as a parking garage is sheer waste. Who would build a structure for $16.15 million that by all normal financial calculations you know will lose of the order of $800,000 a year?

A 234 car garage only makes financial sense in Frederick if it costs $3,720,000 or less, according to the City’s last parking study $-numbers. That is the amount whose debt service will be covered by an operating income of $250,000/year ($250k/0.0672). It follows that of the $16,150,000 proposed to be spent on the S-P Garage only 23% is really justifiable or attributable to parking (3720/16,150), while 77% or $12.43 million is boondoggle money that is taxpayer subsidy for the building to be constructed above. 

Conclusions seem clear:

(1) Frederick cannot justify underground parking financially.

(2) This underground parking garage we’ve called the S-P Garage is not really about providing public parking. It is about providing expensive foundations and a ‘podium’ for the crony developer selected by the City in the corrupt closed-door machinations of the Hotel Advisory Committee to be a recipient of taxpayer largesse. About three-quarters of the $16.15 million proposed to be spent is a big, wasteful, undeserved and unjust giveaway of taxpayer money.

In April 2018 City parking manager Steve Johnson told the Mayor & Board he proposed commissioning a new parking study on “the need for parking decks, the best places to put them, alternative parking options, how to accommodate future vehicles and whether modern technology such as circulators would be a good fit for the city.” (FNP 2018-04-17) No mention of assessing the impact of the S-P Garage on the City Parking Fund!

The City’s latest ‘One-Pager’ (two pages) and the latest Capital Budget and Sources & Uses of Funds:

https://www.cityoffrederick.com/DocumentCenter/View/11916/Downtown-Hotel-at-Carrol-Creek-OnePage-updated-12-27-2018

http://www.cityoffrederick.com/DocumentCenter/View/11917/Downtown-Infrastructure-Sources-and-Uses-Budget-11-20-18

PSam 2019.01.30

 ADDITION: Hotel project advocate Donald Burgess writes me: “Your analysis is flawed.The debt service by the city will not be on $16.2 million of city debt. You forgot to subtract the $10.5 million grant from the state.  So instead of your debt estimate for the city of $1,085,000 per year, it is actually $382,000. Subtracting operating income of $293,000 that makes $89,000 per year loss, not $792,000. Only a $700,000 mistake.”

Comment: There is no $10.5m grant from the state. Of course if the State were to make a $10.5m grant for the project then of course there would be no City debt service on that amount. And of course it would have no impact on the Parking Fund if everything else worked out, a big if… But my point is that the City and the City’s shills are being misleading suggesting they are simply seeking ‘Public Infrastructure’ now. Here is the way the Frederick County Capital Budget Requests FY2020 submitted to the State is couched:

Capital Project 1 – City of Frederick Public Infrastructure $10,500,000 

“The City of Frederick and Frederick County request shared investment in public infrastructure to support continued economic development along the Carroll Creek Linear Park and the revitalization of the east side of the City. 

“The city, county and state have made a series of intentional investments over the past two decades to revitalize the downtown core of the City of Frederick. These investments include the flood control project and linear park along Carroll Creek, the extension of East St. to a new interchange at I-70, a new Tourism Visitor Center and improvements along the East St. corridor. These investments have spurred over $150 million in private investment along Carroll Creek including new buildings, infill development, and historic renovation. While providing an obvious recreational and cultural resource, Carroll Creek Park also serves as an economic development catalyst. This investment has resulted in added jobs and vibrancy to the historic City of Frederick. 

“To continue this economic development success, there is a need to expand public parking and other public infrastructure to support new business development along Carroll Creek including a private sector investment in the Downtown Hotel at Carroll Creek as well as redevelopment on the east side of the City of Frederick…”

This $10.5m is described as for parking and street improvements. Left unsaid is that it represents a highly uneconomic and wasteful way of providing car parking. Parking should pay its way in parking fees, and that has been the principle we’ve followed with the Frederick City parking garages until now. As my comment indicates hardly a quarter of the investment in the S-P Garage stands to be covered by parking fees. The rest represents money squandered on the Plamondon hotel’s foundations and on its ‘podium.’ The state money would go to support not ‘public infrastructure’ but a boondoggle project whose procurement was a disgraceful, corrupt racket from start to finish. It is this misbehavior in the city of Frederick that our representatives now ask the state to underwrite.  PSam 2019-01-31

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“No state support for the Downtown Frederick Hotel” — letter to Frederick County delegates to Annapolis FULL TEXT


Dear Frederick County Legislator: We urge you to advocate and vote against any state support for the City-sponsored hotel in downtown Frederick. This project has ten counts against it, summarized below. 

1. Bad start:This project was launched under the chairmanship of then superstar local businessman and philanthropist Mark Ian Gaver, since revealed as having lived the high life by embezzling over seven years some $50 million from a local bank. Gaver was the first chairman of the City’s Downtown Hotel Advisory Committee (DHAC) appointed to that position by Mayor Randy McClement and described as the City’s ‘point man’ for its hotel. Gaver set the DHAC on the path of meeting behind closed doors to conceal its operations from scrutiny. With its chairman appointed by the Mayor, meeting at the call of City staff, and housed on City premises, charged with spearheading a City project, and given the services of City-funded consultants, the DHAC as a City body was clearly required by State law to give notice of its meetings, to meet in open session and publish its agenda and minutes of meetings. But it didn’t follow the law because it was engaged in extracting tens of millions of taxpayer dollars for one of its own. Having received the detailed Plamondon hotel proposal and agreed in principle to help get public funds to cover a good portion of the capital cost they realized the only way to get State dollars was to contrive the appearance of a competitive procurement. (Emails contain indiscreet words to this effect attributed to the City’s lobbyist in Annapolis.)

2. Competitive procurement avoided:City consultants JLL proposed a competitive procurement method by which a site would be selected first, then in a second stage there would be open competition among hotel developers to develop the City-selected site. However, without any Board of Aldermen sign-off, and contrary to the consultant JLL recommendation, the DHAC adopted a single stage procurement under which only developers with control (ownership or contract-to-buy) over one of four sites chosen by the DHAC could bid for the lucrative City sponsorship. Only two of the four sites were really in play because a third was committed to offices and the fourth was the US Postal Service’s active downtown post office. The developer-brings-his-site procurement method arose out of a Plamondon draft. An item in an invoice for Jan 15, 2014 reads: “Coordinate with Pl regarding drafting hotel RFP.”  The unannounced winner was involved in writing the terms of the supposed ‘competed’ procurement!

3. Winner selected before RFP issued:  Plamondon had his proposal submitted to the DHAC by December 2013, many weeks before the Request for Proposals was issued mid-February 2014.  Invoice timesheets show that City consultants JLL who were hired to conduct the procurement under the direction of the DHAC put in about 100 hours with the Plamondon company before and during the supposed competitive procurement. By contrast the timesheets show only token attention was given to the ‘competitor’ Wormald. Many of the JLL hours dealing with Plamondon were between the issuance of the RFP and the Due Date for Submissions. This was in violation of City Purchasing Offices rules which after the RFP is issued confine lawful communications to written questions and answers to be made available to all bidders.

4. Scoring of two proposals fixed:Scoring of the two bidders by the DHAC was heavily biased to favor the pre-selected winner. Just one example: important attributes of a potential hotel site are its visual prominence and easy access for visitors, deserving at least 10 points of 100. But the outsider right on the gateway East Street would have scored something like 8/10 points to perhaps 2/10 points for the pre-selected winner. So that attribute was given just 2.5 points. Other examples of bias in the scoring can be cited. In short, the City DHAC committed a fraudulent ‘competed procurement’ and the announced winner was improperly selected to be the recipient of tens of millions of taxpayer dollars.

5. No need to use wrecking ball on historic tannery: The project requires removal of the Birely Tannery, Maryland’s last remaining historic leather tannery deemed by historic designators to be of “unusual historic importance.” Other sites nearby lack historic buildings. The State’s regulator Maryland Historical Trust wrote a scathing review of the quality of archeological survey work done for the City and the developer. It has not signed off on the project. 

6. Site wrong:Eight years after the project was launched City officials recognize that the heavily landlocked site has insufficient street frontage for vehicular access and seek to buy neighboring properties to be rolled into the site selected by Plamondon. Even though City taxpayers will pay for and own the land, the developer is being allowed by the City to conduct negotiations to buy it. A site plan submitted on the existing site was the subject of a scathing list of questions from City permitting staff.

7. County hotel tax misused for Plamondon’s benefit: In the Fall of 2016 at the behest of Plamondon advocates the County established a Hotel Development Incentive Program to be funded with a 60 percent hike in the county hotel-room tax and administered by the Tourism Council, a trade group. Beneficiaries are allowed to devote up to 85% of their hotel tax revenue to debt service on the capital invested in their hotel, remitting only 15% to the County for normal hotel tax revenue purposes such as visitor services and tourist promotion. The Program is written so that the sole eligible beneficiary is Plamondon.  

8. Gross mismanagement:The project has been managed with extraordinary ineptitude. Deadline after deadline has been missed. Studies done at considerable expense are now obsolete. Two state agencies, Maryland Stadium Authority and the Maryland Economic Development Corporation (MEDCO) each examined the City hotel project and found no justification for supporting it. The Department of Housing and Community Development made two grants to the City of Frederick to support the project but neither could be drawn on because the City failed to meet its contract commitments to the state on time. The Department declined further extensions, so the City forfeited State grant money.

9. Wordplay does not change fact that huge taxpayer subsidy remains:The project no longer involves a subsidy, City advocates say, because they have split the project into two parts — an underground City parking garage, providing on top a podium or platform on which the developer will build the hotel and conference center. The City as well as buying land, doing all the necessary roadworks and landscaping will now assume all costs and risks of excavation and the hotel’s foundation work in the old creek bed, the site of two centuries of crude industrial processing. The City will pay all the cost of the parking garage. If it were not for the hotel project the City would never build an underground parking garage in this difficult creekside location. Costs per parking space will be much higher than at the City’s other garages. A subsidy to the hotel by another name — a parking garage for the hotel — is still a hotel subsidy.

10. Subsidy not needed:Original rationale for the subsidy was that private enterprise would never invest in a hotel in downtown Frederick without substantial City, County and State subsidies. Now within two blocks of the City/Plamondon site at the empty Visitation Academy investors are building a hotel downtown without any special City or other support. The purported rationale for taxpayer support of the Plamondon downtown hotel has disappeared.

Solid evidence available for each charge:None of us have any personal stake in this matter beyond that of taxpayers generally. We all accept the need for hotels in downtown Frederick and favor even-handed regulatory and zoning changes to facilitate self-supporting investor financed projects. We are not political partisans. The corrupt cronyism that has permeated this City sponsored project, that the state is being asked to support, is unacceptable to people of all political persuasions. 

We ask you to take this letter seriously because standing behind each of the ten points the drafters have solid evidence — see frederickhotelboondoggle.us  

Please do not support this disgraceful project.

Signed

Jane Weir, Peter Samuel and 25 other signatories

2019-01-28


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Wordplay used to give cover to the same old subsidy scheme

State Delegate Karen Lewis Young is quoted in the Frederick News-Post (2019-01-19) as saying that the proposed new scheme at the downtown hotel should be called a Public Infrastructure Project. Del Lewis Young told the newspaper she thinks the change of funding “warrants a new conversation.”

Everything about this City hotel happens in very slow motion! 

It was 32 months ago back on May 18, 2017 at the Delaplaine Center when Plamondon released some revised plans for his hotel and conference center, that Mayor Randy McClement made a big play of a new scheme for dividing responsibility for capital costs. Instead of city, county and state taxpayers being up for some 30 percent of the costs of the whole project taxpayer money would be focussed on land, basement car parking, road modifications, and landscaping. The publicly funded basement car park would form a structural platform or ‘podium’ on which developer Plamondon would build his hotel and conference center, now to be fully financed by him. 

It has never been clear how this is a better deal for taxpayers. Building a basement parking garage in this difficult creekside ground, below the level of the creek canal, is a very risky and costly way of providing parking spaces. The City would never propose this purely for parking cars. It would build an above-ground parking deck because that is the more economical way of providing parking. Per parking space costs underground nationally run an average $41,000 versus $25,000 above ground like the City’s five existing decked garages. (NOTE: The cost of the sub-Plamondon parking is closer to $70,000/car-space!)

If the ‘infrastructure’ being funded by the City for the Plamondon hotel was going to pay its way for the City, if the basement parking garage was a good investment returning sufficient revenue to support the capital cost then of course no state dollars would be needed. Good investments can be funded in the capital markets. They don’t have to go begging to Annapolis.

The new scheme subsidizes the project by using public dollars to buy the land and public dollars to do all the difficult underground foundation work rather than subsidizing 30 percent of the whole project. It’s still a heavily taxpayer subsidized project.

In order to be sure the costs were properly allocated it should be divided into two separately bid building contracts — the publicly built  portion down in the creekbed bid out by the City, with Plamondon to get his own bids for his construction on top of the City-built podium. But the proposal is still to build the project with a single design-build contract above and below the podium. That ensures it will never be clear how much the garage and podium is costing versus the hotel and conference center on top of it.  With one umbrella contract the builder doesn’t care how costs are allocated between the two parties. 

Cost sharing between taxpayers and the developer will be an arbitrary political decision.

What Del Lewis Young wants to call ‘public infrastructure’ is what the hotel and conference center needs. It is not money that would be spent on such work if there wasn’t a deal to put the City-sponsored hotel on top.  Plamondon is being saved tens of millions of dollars that he’d have to find without the City sponsorship. 

He is given a special favor. Engineered platforms above the level of the canal normally get built by developers. So the downtown hotel remains a heavily subsidized project, and it remains unfair to competitors who get no such taxpayer largesse. 

The change of May 18, 2017 was pure wordplay, PR. Unchanged is the fact that taxpayers are being asked to heavily subsidize the project.

To paraphrase Greater Greater Washington on a proposed stadium subsidy: A hotel subsidy by another name is still a hotel subsidy.

Also unchanged is that the selection of Plamondon was a dirty insider deal. Unchanged is the fact that there was a supposed ’competed procurement’ conducted purely for PR/political appearances that was fakery and fraud.

2019-01-22 

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Ten points about the boondoggle

1. Project launched by a big time crook Mark Gaver now serving 17 years jail after being convicted in US Court on $50 million of money laundering and bank fraud. Gaver was the first chairman of the Downtown Hotel Advisory Committee (DHAC) appointed to that position by Mayor Randy McClement and described as the City’s ‘point man’ for its hotel. Part of the Ole Boy Frederick mafia, Conman Gaver set the DHAC on the path of meeting behind closed doors to conceal its machinations from scrutiny. This was clearly a violation of the state’s Open Meetings Act.

2. With its chairman appointed by the Mayor, meeting at the call of City staff, and housed on City premises, charged with spearheading a City project, and given the services of City-funded consultants, the DHAC as a City body was required by State law to give notice of its meetings, to meet in open session and publish its agenda and minutes of meetings. But it couldn’t meet in public because it was engaged in extracting tens of millions of taxpayer dollars for one of its own. It received the detailed Plamondon hotel proposal and agreed to the City shouldering much of the cost, then realized the only way to get State dollars was to contrive the appearance of a competitive procurement. Emails contain indiscreet words to this effect attributed to the City’s lobbyist in Annapolis.

3. Consultants JLL proposed a competitive procurement method by which a site would be selected first, then in a second stage there would be open competition among hotel developers to develop the City-selected site. This two-stage competitive procedure was presented publicly to a meeting of the Mayor and Board of Aldermen. However months later behind closed doors the DHAC dumped that format for a single stage procurement under which only developers with control (ownership or contract to buy) over one of four sites* chosen by the DHAC could bid for the lucrative City sponsorship. In one communication the new draft procurement method is referred to as a Plamondon draft. The winner wrote the terms of the supposedly competed procurement.

* Only two of the four eligible sites were free for a hotel, a third being already committed to office use, the fourth being the US Postal Service’s still active main Post Office..

4. Invoice timesheets show that City consultants hired to conduct the procurement put in 100 hours with the Plamondon company before and during the supposed competitive procurement. This was in flagrant violation of City Purchasing Offices rules which confine lawful communications to written questions and answers to be made available to all bidders.

5. Scoring of the two bidders by the shady DHAC was heavily biased to favor the pre-selected winner. In short, the City DHAC committed a fraudulent ‘competed procurement’ and Plamondon was improperly selected to be the recipient of tens of millions of taxpayer dollars.

6. The project requires removal of the Birely Tannery, Maryland’s last remaining historic leather tannery deemed to be of “unusual historic importance.” Other sites nearby lack historic buildings. The State’s regulator Maryland Historical Trust wrote a scathing review of the quality of archeological survey work done for the City and the developer. It has not signed off on the project, and is apparently being bypassed.

7. Eight years after the project was launched City officials recognize that the heavily landlocked site has insufficient street frontage for vehicular access and seek to buy neighboring properties. Even though City taxpayers will pay for and own the land, the developer is conducting negotiations to buy it. A site plan submitted for the existing site was the subject of a scathing list of questions from City permitting staff.

8. The project has been managed with extraordinary ineptitude. Deadline after deadline has been missed. Studies done at considerable expense are now obsolete. Two state agencies, Maryland Stadium Authority and the Maryland Economic Development Corporation (MEDCO) each examined the City hotel project and found no justification for supporting it. The Department of Housing and Community Development made two grants to the City of Frederick to support the hotel project but neither could be drawn on because the City failed to meet contract commitments on time. The Department declined further extensions, so the City forfeited State grant money.

9. The project no longer involves a subsidy, City advocates say, because they have split the project into two parts — a City parking garage below street level providing on top a podium or platform on which the developer will build the hotel and conference center. The City as well as buying land, doing all the necessary roadworks and landscaping will now assume all costs and risks of excavation and foundation work in the old creek bed, the site of two centuries of crude industrial processing. The City will pay all the cost of the parking garage. If it were not for the hotel project the City would never build a one story basement parking garage in this difficult creekside location. Costs per parking space will be much higher than at the City’s other garages. A subsidy to the hotel by another name — a parking garage for the hotel — is still a hotel subsidy.

10. Original rationale for the subsidy was that private enterprise would never invest in a hotel without City, County and State subsidies. Now within two blocks of the City/Plamondon site at the empty Visitation Academy building  investors are building a hotel and condos without any City or other government support.  The purported rationale for taxpayer support has disappeared.

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