There is no new budget for hotel — the Mayor is winging it

Frederick City Mayor Randy McClement is naturally a low-key guy, normally not given to public displays of enthusiasm. But when he spoke about the new design for the downtown hotel May 18 he seemed genuinely enthused saying to the Delaplaine Center crowd of supporters that he was “proud to be able to stand here and tell you that no public dollars will go into the construction or operation of the hotel or conference center.”

For years he and other local officials argued that the conference center absolutely had to be publicly funded. There was no way any investor would fund the conference center, because… well, conference centers don’t generate profits. But since Frederick’s major employers all agreed a conference center was a vital need to attract more business to Frederick it could be regarded as ‘public infrastructure’ and should be publicly funded.

By the official ‘one pager’ project summary of just a couple of months ago (March 1, 2017)

Project budget as of the City’s ‘One Pager’ summary March 1, 2017. This is now obsolete but no revised budget has been written to date

the conference center (CC) was to cost $8.3m in public money. City responsibility for the capital cost of the CC was a major part of the hotel-associated ‘public infrastructure’ of  Plamondon’s bid in response to the City’s 2014 RFP (request for proposals). And it was written into the December 2015 contract or MOU between the City and Plamondon resulting from the City’s acceptance of Plamondon’s bid.

But that’s all history.

Now in mid-2017 the Mayor and his hotel team say the hotel has been redesigned and downsized and Plamondon will take on the capital cost of the conference center as well as the hotel.

If the old MOU allocation of cost is out the window because the hotel was smaller (180 vs 207 rooms, CC 20,000sf vs 24,000) in a new lower layout then you would think there must be a new set of costings. And given the manner of the announcement, you would think that it must be the culmination of intense negotiations with the developer on a new sharing of revised costs.

The day after the announcement we asked City spokesman Patti Mullins and hotel project manager Richard Griffin for the revised set of project cost estimates and allocation of costs between public and private ‘partners.’ We cited a table of  the March 1 (see nearby) that was now obsolete and asked for the revised one.

The City declined to simply answer and turned it into a Public Information Act request. We then expanded the request to “copies of correspondence, memoranda, (Draft) MOU and emails between the City and Plamondon companies detailing the discussion and terms of Plamondon’s commitment to fund the conference center associated with the downtown hotel as announced by the Mayor May 18, 2017.” This filing was given the official number 2017-05-19-073.

Mullins initially said that a revised version of the ‘One pager’ with a new Project Budget Estimates table would be released “within hours” but it never arrived. Two weeks later we got the City’s formal response to the PIA request.

We  thought they might invoke ‘deliberative privilege’ to deny us copies of the correspondence, emails, memoranda etc on the new deal with Plamondon. That’s the proposition that when a City action is not finalized it is entitled to withhold documents while the deal is still being deliberated or considered.

But no. Rather we were told “The City does no have any documents, emails, or memoranda responsive to that request.”

“There are no documents or records”

So the Plamondon-City deal under which Plamondon takes over financing of  the $8 million conference center must be based on conversation only, assuming the response to the PIA is truthful…. and we assume it is truthful. It must be only a ‘handshake agreement’ an agreement in principle that the developer will now fund the hotel and the conference center with the details still to be worked out.

The Mayor was winging it when he made his ‘proud’ announcement at the May 18 meeting. If there are no documents or correspondence then there is simply an agreement-in-principle. Spoken words and probably an understanding that ‘we’ll-work-out-the-details-later’ based on the promise to the developer that ‘you’ll-be-made-whole’ for assuming the CC cost.

Most of the design changes of May 18 downsize the project and offer some savings in cost. The room number is down from 207 to 180, or 13%. The conference center is down from about 24,000sf to about 20,000sf or 17%. On the other hand the layout is more complicated with four wings rather than three and a four storey cap. Our guess is the hotel cost is probably down somewhat less than 10% on the $53m previously estimated, so about $47m or $48m.That assumes the same cost of foundations.

Parking gets more expensive. The new design expands the basement parking garage from about 110 car spaces to 160 (with about 20 spaces at grade.) That 45% increase in capacity probably raises the cost of the basement parking at least a third, say 35%. Applied to $9.6m that’s an increase of $3.4m in cost to $13m. Cost per parking space built in the new larger underground garage is $81,000 at $13m, versus $87,000 before for the smaller garage.

Very high-cost ‘parking’ over $81k/space vs $34k/space national average

These are very high costs. The leading academic on parking, Donald Shoup of UCLA cites a survey of 12 underground parking costs showing construction costs per parking space as ranging between $26k in Denver and $48k in Honolulu with the average $34k. Washington DC costs are $29k, New York is $35k, Chicago $36k. (Above ground costs are about 30% lower for an average of $24k/space with parking spaces generally 18’x9’ or 165sf with a similar amount per space required for aisles, ramps etc and a total of 330sf/space.)

SOURCE: Parking Issues and Policies, Transport and Sustainability 2014 Chapter 5, p90 Table 1 results of construction costs survey by Rider Levett Buchnall, http://shoup.bol.ucla.edu/HighCost.pdf  Also the City’s Executive Summary to the MOU with Plamondon 2015/12/03 p4 says: “Structure(d) Parking costs $25k to $30k per space.”

The cost of the DH&CC’s parking at $81k to $87k/parking space is well over double $34k, the national norm, according to which a 160 space underground deck of parking should be about $5.5m, not $13m.

What is going on here?

New design downsizes, conference center the lower portion at front

Is this just another measure of the profligate waste of this City sponsored project? Maybe in part. But it also seems likely that some of the construction costs of the hotel and CC are being quietly loaded onto the cost of the City parking garage.

Under the new design the City parking garage covers the bulk of the site and therefore provides the columns and a heavy duty platform on top of which is built the great bulk of the hotel and CC.

By building the parking garage under the hotel complex the City is taking on the cost of providing foundations for virtually the whole of the hotel & CC. And it is also assuming the risk of paying for work in marshy ground — what used to be the creek bed.  Such foundation work is always something of a gamble because until you drive piles you don’t know how deep they will need to go, or how many will be needed to provide the bearing for the weight of the huge structure above, in this case the basement parking deck plus the 150k sf hotel complex on top.

Therefore it appears that the quid pro quo for Plamondon building the conference center is that the City  takes on more expensive foundation work in its underground parking deck — relieving Plamondon  of the expense of building his own foundations.

There may be more changes in obligations that for the moment are under the table. City officials may be agreeing to take on more of the ‘soft costs’ — the consultants, the architects, the lobbyists, the financial analysts, traffic engineers etc. We won’t know until we have the revised project budget with the sources and uses of funds.

Raw political spin for the state Board of Public Works

All we know is that apparently the City and Plamondon have agreed to dump the December 2015 MOU  without having detailed any replacement contract. With no financial accounts underpinning it this is raw politics, the politics being that Governor Hogan is the major obstacle to the release of $16 million of appropriated funds. And Governor Hogan has made clear he doesn’t like the state involved in funding a conference center to be operated by a local hotel business.

Board of Public Works comprises Treasurer Nancy Copp, Gov Hogan and Comptroller Peter Franchot

The Governor’s Board of Public Works can say Yes or No to release of the state’s contribution to the hotel as appropriated by the General Assembly in April.

The City wants to give the arrangement with Plamondon a facelift to make it look more to the Governor’s taste, even though you can bet that the underlying cost sharing will remain much the same.

It proposes to say to the Governor in effect: “It is all different now. We’ve managed to find a way to get the developer to pay for the whole thing, the conference center as well as the hotel, so you don’t need to worry about this thing being a boondoggle. You are only being asked to approve pristine public infrastructure funding.”

P Sam 2017.06.12

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