Mayor & Board of Aldermen are the culpable ones — they tolerate mismanagement and misstatements about cost

The Mayor & Board of Aldermen exhibit no curiosity about the costs or value of their pet hotel project. City project manager Griffin said last summer the $121m cost estimate by consultant Forella ($94m without Parking Deck 6) was inflated due to “incorrect assumptions.” This after $30,000 of taxpayer-$s had been spent on Forella’s costing of the project.

Two issues: (1) What kind of a project manager lets a consultant complete his work based on ‘incorrect assumptions.’ Doesn’t a minimally competent project manager settle on the assumptions he wants used at the beginning of the consultant’s work? (2) It isn’t even clear from the followup by Forella, an add-on to his contract what assumptions were changed in order to beat the estimated total cost down from $94m to $84m, the latest official number.

Mayor & Board of Aldermen

The drama over these huge new cost estimates occurred secretly in January-February 2016 between Griffin, Forella and the MSA as the publicly known cost estimates of the project (without PD6) were around $70m. The figure of $69.8m was used in the official ‘Budget — Sources & Uses Matrix’ document that was put out as the most authoritative cost estimate available.

Only in May 2016, many weeks after state funding was discussed in the general assembly in Annapolis as a $70m project was a City 2-Pager released by Griffin (at the GOP Club meeting at the Red Horse Inn) with the $84m cost made official.

The Mayor and Board of Aldermen if they were doing their job would have held a hearing on hotel project costs when news broke of numbers like $84m, $94m, $121m. Instead they seemed to circle the wagons, fearful that to even ask questions about Griffin’s delayed candor on costs might help critics of the project.

Thirdly for all its detail of costs the Forella report treated the hotel and conference center as one indivisible building complex. If the City was sincere about treating the conference center as a ‘public facility ‘ distinct from the hotel as a private business then Forella would have been asked to cost them separately. He did break out the separate cost of the car parking (PD6), but the hotel and CC were treated as one. Project apologists have been able to spin the tale that whatever is put on taxpayers for upfront subsidy goes for supposed ‘public facilities’ because there is no independent cost breakout of the CC cost versus the hotel.

Fourth: given that there is still in December 2016 no known plan for onsite parking beyond 100 vehicles and another 250 spaces are needed, and the site means it has to be ‘structured’ (built into the basement of the building) the $84m is almost certainly an underestimate.

Finally, this is a rotten, wasteful project at any of these costs ($70m, $84m, $94m, $121m) given that the city’s own consultant MuniCap values the finished complex at $29m. The $29m valuation was derived from capitalization of the project’s net cash flows discounted to present value.

Have the Mayor & Board of Aldermen ever asked questions about the $29m valuation of the project, or why anyone in their right mind would want to spend tens of millions more to build something their own consultant says will be worth only $29m.

(First published in Friends of Frederick County Downtown Marriott Watch Facebook page)

2016.12.16

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