The economic naivety of the pro-hotel county councillors – letter

fredcogovMs Fitzwater, Ms Keegan-Ayer, Mr Donald: On Tuesday evening you took me back a few years to my first salaried job when I gave classes in economics 101 to undergraduates. The vote in favor of that five-party MOU was I guess fore-ordained but the most distressing aspect was to listen to you of the majority express such naivety about the economics of subsidizing the Hotel.

countycouncilGiven the financial support you propose, as county officials your job is to consider the implications of this project for the County. In your remarks you all focussed myopically on the supposed economic positives at the hotel project site, neglecting totally to think of anything affected outside of the area of 200 East Patrick Street.

Money being spent at the project business is in large part money not being spent elsewhere. There are only so many conferences, so many weddings, so many restaurant meals people can afford. We may attract the odd conference away from one in Bethesda or Hunt Valley or Gettysburg, but so too they will get some at our expense. A wedding at the DH&CC is probably a wedding less at Ceresville Manor or one of scores of other wedding/event establishments around Frederick. A meal at the Trolley House Grill at 200 E Patrick is one less meal at the Wine Kitchen or the Tasting Room.

A few visitors might come to Frederick only because of the new downtown hotel, but — seriously — not many. A Marriott, big deal!

Most who come to the proposed Marriott downtown would have come to Frederick anyway and would have patronized another of the city’s dozen or so hotels. So most of the DH&CC patronage will be at the expense of other businesses, not getting state, county or city taxpayer-$s.

The City’s consultants were not very bullish about the chances for attracting eventswinchesterhall2cwd and conferences from outside the county. Pinnacle 2013 said a smaller conference center would be adequate for our needs, 12,000sf.

Spending on the 200 East Patrick DH&CC hotel rooms and spending at in-house restaurants and at the conference center will only be net positives for the county economy to the extent that they not offset by corresponding spending reductions at other county lodging, eating and meeting/event establishments. Also to the extent that public money is not being wasted on fostering an unproductive enterprise, as indicated in valuations of the DH&CC on opening at about half its prospective cost.  The same of course goes for jobs and tax revenue.

What is the point of saying the DH&CC TIF (tax increment financing) will pay for servicing its bonds if in promoting this hotel you do so at the expense of the business of others, all of which will then pay less in taxes. There will be tax decrements offsetting those tax increments. It is the net of increments and decrements that determines the county fiscal condition. Same for spending and jobs.

Hotel promoters such as the City’s Richard Griffin constantly cite forecasts for the project — spending, jobs, tax revenues from the DH&CC operations. He and his consultants simply avoid consideration of any offsetting effects off-project, elsewhere in the the city or the county. I guess it is because an honest ‘netting out’ would spoil the happy-talk story. The full picture would handicap their ‘sell.’

This City project unfortunately casts a shadow over the downtown and over competing hotels — deterring productive, self-financing, right-sized hotel developments. Seven years have now passed since the City project was initiated in which time a number of proposals for hotels have been waved away by City officials as a threat to their precious City-sponsored project.  And what has been achieved?

So appalling is the City’s project management of the DH&CC that after seven years:

— it has chosen an unsuitable site with historic buildings setting itself up for a major fight with preservationists that hasn’t even begun

— a site too small for the planned building so it is now scrambling to buy the Eagles site next door

— done a sham ‘competitive’ procurement that is a disgrace to the City’s reputation for openness and fair play

— done a switch and bait on the County, sucking it in with the bait of a free 300+ parking spaces in Parking Deck 6, now dumped in the switch

— been abandoned by one state agency, the MSA, and is dredging the bottom recruiting MEDCO the champion of loser conference center hotels

— seen project costs rise in three years from $45m to $84m, required upfront public funding from $12m to $31m

— still has no parking plan and no traffic impact study

I hope you’ll be sufficiently openminded to reconsider your positions in the not too distant future.

Peter Samuel  2016.10.27

NOTE: this is a somewhat revised version of a letter emailed to the County Councillors this morning.

REFERENCE: public officials making decisions on issues like the City Hotel wouldfee benefit from an online course in basic economic principles like this from the Foundation for Economic Education:

http://courses.fee.org/courses/economic-principles/

2016.10.28

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