State funding for downtown hotel still uncertain, Board of Public Works has final say

There was a celebratory mood at the Delaplaine Center meeting room last Thursday (5.18) after the City’s hotel team gathered with about sixty supporters to see revised plans, hear the latest news and restoke enthusiasm for this protracted project. Senator Ron Young got a special round of applause for having brought home the pork, or as Mayor McClement put it more elegantly, for having “secured the state’s financing of the project.”

Governor Hogan’s budget of course had zeroed out state funds for the

Gov Hogan, David Brinkley right – Balt Sun pic

hotel but the Governor doesn’t have the numbers in the General Assembly.  $15 million in new state grants (in addition to $1 million received earlier) was appropriated or pre-authorized in the state budget in April despite the Governor and 5 to 3 opposition from the Frederick County delegation. So there was indeed cause for celebration among those who have no qualms about putting state taxpayers on the hook for a City-selected hotel developer.

Money appropriated is usually dispensed but its receipt by the City for the hotel project is not fully assured. Hurdles remain, not least Governor Hogan and the three person Board of Public Works which he chairs.

The Frederick News-Post reported:

BPW comprises Gov Hogan, Treasurer Nancy Kopp, Comptroller Peter Franchot

“The money is not a sure thing yet, as the state Board of Public Works (Board) still has to release the funds. (Mayor) McClement said Thursday that he is working out a schedule to determine when the board will hear the request. Republican lawmakers have opposed state funding for the project and have said they will try to keep the money from being released.”

The Board’s webpage cites Alan M. Wilner’s 1984 history of the institution says: “The Board of Public Works is the highest administrative body in the Maryland state government. Consisting of the governor, the comptroller, and the treasurer, it now derives its ultimate authority from the state Constitution and is responsible for the expenditure of all capital appropriations…”

Rendering of 180 room design looking west, Delaplaine Center is over the canal on the left

The Board says its mission can be summed up as “protecting and enhancing the State’s fiscal integrity by ensuring that significant State expenditures are necessary and appropriate, fiscally responsible, fair, and lawful.”

Strong challenges can be mounted to the downtown hotel project on all four criteria.

1. “necessary and appropriate”

Most hotels are built without public funds let alone $31m out of $84m or 37% of the capital cost. The City has said repeatedly that public funds are needed for the conference center portion of the project. This was being said as recently as April when the General Assembly was being lobbied. The General Assembly appropriated the $15m of state funds on the understanding it would help build a conference center. Factsheets describing the project showed $8.3 million of $31m going to conference center construction.

However just days ago, May 18, Mayor McClement  announced no public funding is now needed for the conference center, and that this 20,000 square foot facility will be fully financed by the hotel developer. In Annapolis itself it was never found necessary or appropriate for hotels to be granted public funds, and the state capital has a good range of different lodging options, about seven right in its historic downtown.

2. “fiscally responsible”

Based on the costs and revenues of comparable hotels the City’s lead financial consultant Municap found that the downtown Frederick hotel would be valued in the market at around $30 million on opening. Yet to create something worth $30 million the City of Frederick proposes that the developer, the City, the County and the State spend some $84 million. It would be fiscal irresponsibility of a high order for the State to help fund such an obviously over-costly and wasteful project.

3. “fair”

The whole project has been unfair from the beginning. It was unfair to select a single hotel developer to receive massive upfront public subsidies and favorable terms on land, taxes and other City support. It was unfair

Mayor McClement, State Delegate Carol Krimm, County Exec Jan Gardner, County President Bud Otis, hotelier Pete Plamondon with model

of the City to specify the features of the hotel and the sites that would be considered. It was unfair when the winning bidder had his detailed proposal lodged with the City before the official Request for Proposals was even issued, and when according to the time-sheets obtained by Public Information Act the second bidder’s proposal was given cursory attention. The scoring sheets for the two proposals, when belatedly released suggested real unfairness in the scoring. It is unfair to the ten or so other hotels in a highly competitive hotel business  in Frederick for one hotel to get public funds on this scale when all the others are required to finance themselves with privately provided capital. It is unfair to visitors for eight years to pass since City  government decided to sponsor a publicly funded hotel casting a pall over entrepreneurial lodging facilities six or seven of which could long be built and operating by now, absent the threat of a state-subsidized behemoth. It is unfair to taxpayers to ask them to support a facility most will never use.

4. “lawful”

The hotel project is located in a historic district and on a site containing two buildings found individually to be eligible for the National Register of Historic Places. One of the two is proposed for preservation as part of the project, but the second, the Birely Tannery building is proposed for

Elizabeth Hughes, director Maryland Historical Trust

complete demolition to make space for car parking and the conference center. The State Historic Preservation Officer and director of the Maryland Historical Trust, Elizabeth Hughes has found this building to be of historic importance as the only tannery building in the state remaining from the nineteenth century, and called for a consultative process required by law under which the Maryland Historical Trust will consider adverse effects of the hotel project on the historic property.

The Maryland Historical Trust Act of 1985 as amended Sections 5A-325 and 326 in State law says of non-state capital projects financed with general obligation bonds: “(2) Before the Board of Public Works may prove the use of bond proceeds for the project, the Department of Budget and Management or another State unit responsible for the project shall consult with the (Maryland Historical) Trust to determine whether the project will adversely affect any property listed in or eligible to be listed in the Historic Register.”

The Board has to “approve expenditure of all general obligation bond

Members of the Board of Public Works laugh at the idea of state funds for the hotel boondoggle in Frederick… well perhaps it was something else they found amusing

funds” and to oversee procurement policy for all contracts over $200,000. The $15m in new grants appropriated by the General Assembly for the downtown hotel in Frederick are proposed to be made from general obligation bonds so the hotel project falls squarely within the responsibility of the Board.

Since the hotel project proposes the National Register of Historic Places-eligible Birely Tannery for full demolition this historic property is threatened with the ultimate in “adverse effects.” And since the Maryland Historical has not yet considered or determined an acceptable plan to avoid or mitigate those adverse effects, it would be a contravention of Maryland law for the Board of Public Works to allow any funds to flow to the City of Frederick for the City sponsored hotel at this point.

CONCLUSION: It is not necessary or appropriate, it would not be fiscally responsible, it would not be fair, and it would not be legal for the State board of Public Works to allow more State funds to flow to this project.

PSam 2017.05.22

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