DH&CC cost up $14m or 20% to $84m, Mayor says MOU, HPC or PC could kill project – news from GOP Club

The Downtown Hotel & Conference Center will cost $84m according to a new City 2-pager just released. In February the official estimate was $69.8m. The 20% increase in estimated cost is split between developer Plamondon’s contribution (‘hotel and amenities’) and that planned to be covered by the public sector (state, county and city.) The publication dated May 2016 says the Plamondon’s responsibility is “currently estimated at $53 million.” The Plamondons have gone out for design-build quotes for the hotel and the new cost estimates reflect the D-B quotes, officials say.

The City’s “Preliminary Revised Budget — Sources and Uses Matrix” of February 4 showed private facilities at $44.12m so the new $53m is a 20.1% increase. The same Matrix showed the public sector contributions as City $3.52m, County $6.1m, State $16.09 for a total of $25.71m, the whole project being $69.82m. The February 2-pager gave no estimate of private sector costs and it already had the public sector cost advanced to $31m, a discrepancy from the Matrix of the same month.

Other news at the Republican Club meeting May 12 was Mayor McClement’s sober tone in the first address to the meeting. He dwelled on his determination to contain citizens’ tax rates, saying this has been his major aim in two terms of office. The DH&CC project was needed for the City to compete with nearby areas in offering amenities to attract and keep business and visitors. He thought it had strong public support. The project was getting what he called “seed money” from the City, but beyond that the arrangements being made would have shield the City from any further costs.

The DH&CC project would also have to proceed through the City’s review processes in the normal way. If it is blocked at any point that will be the end of the project mayor McClement said: “If it reaches a roadblock in the Planning Commission or the Historic Preservation Commission, it will stop. We won’t (attempt to) go around… It will not be done at any cost.”

I had a good conversation with the Mayor before the meeting started. He told me it’s agreed that the City-Plamondon deal (or ‘MOU’) of December last year will be the basis for the four-party talks for a master agreement between the City, County, Stadium Authority and Plamondon. He said the agreement has to make clear that City taxpayers won’t be responsible for any costs or losses at the hotel complex. Asked when the new agreement might be finished, he said ideally they’d have it by July 1, the date on which $1 million of state grant can begin to flow. But he said it may not meet that date.

I got the impression he sees the project as facing serious problems which may, or may not, be able to be overcome. And although he still wants it very much to come to fruition, he is mentally prepared to call it off — declare it dead — if it it gets too battered in either the 4-party talks, the Historic Preservation Committee or the Planning Commission. He is resigned to it moving slowly. He said in his talk that he’d rather get the project right than move it along too quickly.

“Government is slow,” he said.

In his talk Richard Griffin, the City staffer leading the DH&CC project, countered the critics argument that design of the buildings had been left too late in the process. Design work is at least $3 million, he said and it did not make sense to spend that until it was clear the project can be financed. He also went over the selection of Plamondon again, saying they were selected in large part because of their hotel experience and the depth of their ’team.’ Left out of discussion was the site proposed by Plamondon which by most assessments is far more difficult than the Wormald Galleria site (direct access from I-70, no historic buildings, no contamination, a large underused parking garage right adjacent.)

In answer to a question Griffin said the DH&CC is no longer linked to Parking Deck 6. All the parking – to be City funded – will be located on-site.

John Fieseler, head of the Tourism Council and the Visitor Center like the Mayor and Griffin spoke a lot about the need for the conference center – speaking enthusiastically of the many events that would be staged there that presently get diverted to other better equipped cities, or are not held at all. In answer to the point that they were making the case for it being a viable self-financing project, Fieseler said: “Conference centers don’t make money.” They are justified he said by the spoinoff benefits elsewhere in the local economy.

Fieseler said he supported the idea of other smaller hotels. The empty ex-Board of Education building on East Chruch street would be ideal for a ‘boutique hotel’ he said.

Notes on Republican Club meeting on DH&CC at Red Horse Steak House May 12:

Perhaps 30 in attendance. Speakers: Mayor McClement, R Griffin, John Fieseler. Prominent attendees: Shelley Aloi, Billy Shreve, Jill King, Tony Chmelik that I recognized.

Richard Griffin distributed copies of a new 2-pager on the project with similar color renderings of the proposed hotel complex. Titled as before Downtown Frederick Hotel & Conference Center, dated May 2016 it is mostly a reiteration of past versions. The DH&CC is “a critical catalytic economic development project” and “top priority for Frederick’s major employers…” (Snaky comment: Who’d have thought construction of this lodging & meeting place was more important to the big businesses of the region than sales, profitability, market share, industrial peace, avoidance of corporate scandal etc.

Then we have this: “The Project will be privately owned and operated, and the developer is solely responsible for ongoing operations of the hotel and its amenities. The City and its public partners are responsible for funding public infrastructure, including parking, land, and meeting space.”

Are parking, and and meeting space “amenities” of the hotel. If funding of the meeting space is s public sector responsibility as stated, then in line with HB1474 that the City supported earlier this year the City accepts responsibility for operating costs and losses.

But the very next sentence disowns responsibility: “No general City or County taxpayer dollars will be used, and there will be no ongoing operational subsidies from the state or local governments.” Maybe this means ‘ungeneral’ taxpayer dollars will be used – the hotel tax, tax increments, tax concessions etc. And how is this to be reconciled with the state’s insistence that the City ane County take responsibility, and that the 4-party agreement maximize the contributions of local government.

Benefits to the local community, the 2-pager says, are the familiar 280 jobs, $9m payrolls, $25.8m of annual spending, $1.5m extra state tax revenue, $745k extra city and county property tax revenues. These are attributed in a footnote to “a recent market demand analysis by the Maryland Stadium Authority…” That’s a stretch. It is a Crossroads study FOR the Maryland Stadium Authority not a study BY it, and the study is dated July 2012, which is not very recent. Plus there remain the big problems of (1) where the implied big spenders of $300/night are coming from? ($500 with trickle-down effect.) The presentation always leaves ambiguous whether these are claimed as gross or net numbers, the net trying to take account of offsetting reductions in spending through patrons spending less elsewhere as they spent more at the DH&CC. Given that the large majority of visitors are making day trips from the Baltimore/WashingtonDC/Northern Virginia metro area the net impact is likely to be far less, likely barely discernible.

CC gross 24,000sf, net 14,000sf!!!!

The description spells out the conference center as 14,000sf of rentable meeting space of two ballrooms but 24,000 gross square feet. 10,000sf of unrentable space seems a lot for bathroom, etc. 40%???? Transgender anticipated?

Cost increases of 20%

Biggest news out of the 2-pager distributed at the GOP Club is on the second page which states that Plamondon will be responsible for funding the hotel and its amenities, “currently estimated at $53 million.” This is not described as an increase, but V3.3 Preliminary Revised Budget Sources and Uses Matrix, dated February 4 gives the developers cost as $44,120,241. It looks like cost is up about $8.9m or 20.1%.

Public project costs are said to total $31m. The February 4 budget document has City $3.5m, County $6.1m, State $16.1m which sums to $25.7m, suggesting the May figure is up $5.3m also about 20%.

The public project costs are itemized:

Land $3.4m

Parking $9.6m

Conf Center $8.3m

Off-site improves $1.4m

Design/Inspect $1.7m

MSA fee $0.4m

Finance/legal $2.1m

FFE/IT/PreOp $2.7m

Contingency $1.4m

Land has stayed about the same, parking has crept up just a little from $9.44m to $9.6m. The conference center construction cost was put at $4.507,113 in February. Now at $8.3m it is up $3.8m or 84%.

Off-site improvements are up from $1,025k to the $1.4m, $375k, a 37% hike.

Furniture, fixtures and equipment (FFE) and pre-operating expenses are way up from $1.42m to $2.7m, almost double.

But finance & legal is down from $2.96m to $2.1m, off 30%.

Design and inspection goes from $926k to $1.7m, also near double.

Next steps are listed as:

— a 4-party funding MOU with MSA, county, Plamondon and City

— approval of legal and financing proposals

— Maryland Historical Trust Agreement approval

— design work for development approvals (City)

— construction

A projected Timeline Forward chart shows Historic Preservation and Planning Commission approvals starting this year and going to early 2017, Financing and legal approvals from mid-2016 thru early 2018, and construction starting early 2018 and going well into 2019 for a grand opening in about the third quarter.

P Samuel 2016-05-15

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