There has been quite a flurry in Winchester Hall in recent days over a draft Letter of Credit to the DH&CC from the Frederick County Chamber of Commerce supposedly guaranteeing the Plamondon investment of $53m on condition that Plamondon desists from lobbying for further special privileges and forgoes early use of bankruptcy laws to get out ahead of personal losses.
The four page letter in MS Word format is obviously written by a lawyer. It is in proper financial legalese with DRAFT in red but otherwise ready to be signed by the principals of the Chamber of Commerce, Elizabeth Cromwell, the developer Peter Plamondon, and Randy McClement, Mayor City of Frederick.
As BACKGROUND the Letter of Credit states: “The MOU contemplates that Developer will provide Fifty-Three Million Dollars ($53,000,000) in private financing for the development of the proposed Downtown Hotel & Conference Center. Issuer (Chamber of Commerce) has the utmost faith and confidence in Developer’s ability to provide said private financing and that Developer will not attempt to avoid providing the financing by: (i) seeking the protection of the bankruptcy laws; or (ii) engaging in political, lobbying, public relations or campaign finance activities to influence the Other Parties to reduce Developer’s obligations by amending the MOU. Issuer desires to demonstrate its confidence to the taxpayers of the City, County & State by issuing this Letter of Credit. Issuer wishes to assure all concerned that public statements made on its behalf in support of the MOU are sincere and not made for political, lobbying or public relations purposes. Applicant requests Issuer to issue this
Letter of Credit to induce the Other Parties to make the MOU.”
The rest is boilerplate.
Another very similar style document, obviously a ‘twin’ to the Letter of Credit, proposes that the developer Pete Plamondon provide a personal Guaranty. It’s essence:
“§2. Background. – Developer (Plamondon Hospitality Partners) desires for the BOCC to make the MOU. Guarantor (Pete Plamondon Jr) has the utmost faith and confidence that Developer will perform all of its obligations of payment and performance under the MOU. Guarantor desires to demonstrate his confidence to the taxpayers of the City, County & State by making this Guaranty. §3. Guaranty. – Guarantor hereby absolutely, unconditionally and irrevocably guarantees the full, prompt and punctual payment (whether at stated maturity, upon acceleration or otherwise) and performance of the Guaranteed Obligations. Guarantor understands, agrees and confirms that the Other Parties may enforce this Guaranty without proceeding against Developer, against any security for the MOU or against any other guarantor(s) covering the MOU. Guarantor agrees that if, for any reason, Developer shall fail or be unable to pay punctually and fully, any of the sums owed under the MOU, Guarantor shall pay such sums owed to the Other Parties as the case may be, in full immediately upon demand. Guarantor agrees that one or more successive actions may be brought against Guarantor, as often as the Other Parties deem advisable, until all of the Guaranteed Obligations are paid and performed in full. This Guaranty constitutes a guarantee of payment and not of collection.”
This one is a personal Guaranty by Pete Plamondon Jr the principal of Plamondon Hospitality Partners that he will guarantee and give priority to sustaining the DH&CC. One of the criticisms of the way the deal is structured is that a bunch of government entities will do $31m of the financing and provide the land and that the Plamondons will hardly have to commit any real equity, and so have little incentive to operate the facility for the long haul.
Carrie Larson introduced the Personal Guaranty at the Mayor & Board workshop on the five party MOU October 5. Her point of course is that the supporters of the hotel project who say it is so important should make a financial commitment themselves — putting their money where their mouth is, as the saying goes.
Strong differences in county government
The County is engaged in a passionate debate over County Executive Jan Gardner’s collaboration with the City on the hotel project. The last vote increasing the county hotel room tax from 3% to 5% — needed to generate a revenue stream to pledge against downtown hotel loans — was a razor thin 4 to 3 victory for hotel boosters.
Tuesday evening Oct 18 in the County Council meeting Kirby Delauter spoke in favor of hotel advocates like the chamber of Commerce putting money into a Letter of Credit of the kind being distributed, but said it smacked of desperation.
“This just tells me everybody is stretching to make this thing work. We went to the Stadium Authority, we’ve gone to MEDCO which has a negative net worth of $228m. They financed the Chesapeake Bay Hotel Conference Center which is $167m in the red. They financed and built Rocky Gap for $57m and went bankrupt and was sold… and it is about a $45m write-off to the taxpayer.
“Taxpayer money going down a rat hole”
“Now we want to get involved in a downtown hotel and if that is not bad enough (laughing) we are going to the Chamber of Commerce to put up letters of credit for a developer for a project that in my opinion is the biggest disaster since we backed the nursing homes.”
“I would ask anyone who is going to vote for this, and I think there’s four people that will, I say put up your one percent. If you believe in it put up a letter of credit for 1%.
“If not, don’t take my money and the taxpayers money and throw it down a rat hole because that is exactly where it its going to go.”
NOTE: the two documents were prepared and circulated by downtown hotel skeptics to illustrate what they thought the hotel people should do. They were not documents reflecting any initiative by the Chamber of Commerce or by Pete Plamondon.
copies of the two documents circulating in MS Word files: