DHCC: a new look needed by a new Administration

Mayor & Aldermen:  The new City administration should take a thorough and critical look at the management of the downtown hotel and conference center (DHCC) project — a very troubled and troubling project. Eight years ago one of Randy McClement’s earliest acts as mayor was to form the downtown Hotel Advisory Committee (HAC.) The AP Feb 3, 2010: “Frederick Mayor Randy McClement has appointed a local businessman (Mark Gaver) to lead a public-private effort to establish a downtown hotel and conference center.” Mayor McClement said the $45m hotel would open “by 2014.” (Gazette Feb 11, 2010) 

In his first State of the City report Mayor McClement said that open government would rank among the most important obligations of his administration: “We’ve started (on) the path of transparency” he was quoted (FNP July 16, 2010.)

former Mayor McClement

The expectation was the hotel could be designed, permitted and built in one mayoral term.

Look where this project is now.

After two mayoral terms the City sponsored hotel isn’t yet fully designed or permitted or funded, let alone under construction. No one can venture a guess as to when, if ever, it might open.

And what of Mayor McClement’s commitment to transparency?

Mark Gaver the man selected to chair the Mayor’s Hotel Advisory Committee (HAC) in 2018 faces federal charges of fraud and money laundering to the tune of $50 million. His 40 or 50 Frederick employees are long since laid off, all his businesses wound up by angry bankers and other cheated creditors. In less than two years the man the City chose to lead the hotel project was gone. But Gaver left behind a behind-closed-doors mode of operation which has characterized the management of the City hotel project ever since. The guiding principle for the City’s conduct of the hotel project has been “The public don’t need to know, transparency be damned.”

Most City sponsored committees and commissions do operate according to the transparency principles of open government with meetings notified and open to the public. And an alderman is usually assigned as a liaison and observer to each of the City’s committees, so it has at least one elected official accountable to the people. Not so the HAC which comprised entirely non-accountable unelected officials or special interests.

Mayor Michael O’Connor

Despite being staffed by City officers, despite meetings in City Hall, despite meetings called and the agenda set by City staff, despite City funding of consultants, despite its City sponsorship, the HAC flouted state law, the Open Meetings Act. In an unprincipled defense of this at the state’s Open Meetings Compliance Board the City Attorney claimed that then HAC has really been run by the Chamber of Commerce all along. The City Attorney told the State board that the City entrusted development of the hotel project to an outside lobby group!?!

Hopefully the new City administration will put an immediate end to these disgraceful closed door operations and take responsibility for the HAC, and provide some accountability by appointing an alderman as liaison.

Ten questions

The new administration also needs to ask some tough questions about why the HAC under Mayor McClement operated in the dark. It should establish a three person committee of inquiry, two of the three members being new aldermen to answer questions such as:

Q1. Why did the HAC decide against the pro-competition JLL recommendation that the

Ald Kelly Russell

site be selected first, followed by an open-to-all procurement of a hotel developer? Why was the Mayor and Board of Alderman not informed of this recommendation by the highly paid consultant, and presented with the reasons the HAC decided to reject that recommendation?

Q2. Why did the HAC fail to disclose that the winning proposal (by Plamondon) was received in late 2013 and was being analyzed by City consultants JLL simultaneously with them drafting the Request for Proposals which was not issued until early 2014?

Q3. Why was the HAC allowed to flout City purchasing rules under which all communication between bidders and officials between the issue of the RFP and the submission of final bids must be in writing and through the City Purchasing Office?

Q4. Why did the scoring criteria produced by the HAC give so little weight to accessibility, visibility and handling of visitor traffic — characteristics of the site normally considered of great importance for a hotel?

Q5. How did the scorers at the HAC come to give more points for historic preservation to the site requiring removal of a historic tannery building found to be of “unusual historic importance” than to the site requiring no demolition of a historic building?

Ald Roger Wilson

Q6. How can the HAC justify spending the overwhelming amount of consultant time (over 90% as measured by billed hours on timesheets of JLL invoices) on the Plamondon proposal while giving only cursory attention to the competing proposal from Wormald?

The state of the project in 2018

It’s time for some realism about the state of this project after eight years of City sponsorship.

Q7. Cost: the last official estimated cost we have from the City of the overall project cost is $84m (Two-pager March 1, 2017). That’s nearly a doubling of the $45m given as the cost in the first years of the project (2010 thru’ 2013.) Public sector cost has all out tripled — from ‘$10m to $12m’ 2010 to 2013) to $31m.  The last time we had these official $-numbers was March 2017 (Two pager dated 2017/03/01) A few weeks later (2017.05.17) the Mayor announced significant changes to the project — a smaller and presumably less expensive hotel and conference center and a larger, more expensive parking garage underneath it. Plus, the Mayor claimed, the developer would take over the full costs of building the conference center. That cost was last put at $8.3m. But the City and the HAC

Ald Donna Kuzemchak

remained silent for the rest of 2017 as to the effect of these changes in the project on  its costs. The McClement administration never updated its cost estimates. The new administration should produce updated estimates of the costs of the project and detail how the costs are currently proposed to be split between the developer, the City, County and State.

Q8. The project has changed a lot since the request for proposals (RFP) in February 2014. As just mentioned the size of the major components of the project was apparently reduced in size last May (rooms 207 to about 180), and the conference center 20% smaller. The parking proposed has changed several times — once Deck 6 with 600 parking spaces was part of the project until it was costed at some $34m, then it was dumped. Instead there were 120 underground, now it’s 160. When the project was put out for procurement there was no mention of the City buying the land for the hotel. Indeed the RFP explicitly ruled out City provision of the  land. But without official explanation the land quietly became ‘infrastructure’ and a responsibility of the taxpayers. So in the MOU the City committed to doing what it had ruled out doing in the RFP. All this without any amendment to the legally governing Memorandum of Understanding of December 2015!

Q9.  And what a questionable site it is — complicated for visitors to find and access, requiring a most irregular Patrick St entrance with multiple driveways way too close to the Court St traffic lights, no way to get delivery trucks and trash collection in and out, expensive archeological and historic mitigation work needed including demolition of the tannery building declared to be of unusual historical importance, expensive and risky

Ald Derek Shackleford

foundation conditions. And too small for the hotel they are trying to build there while conforming to height limits. The City’s consultants have been adamant that the old-FNP site needs to be enlarged by buying some adjacent property for the hotel complex to work properly. And in HAC meeting after HAC meeting extra land has been discussed. But no progress has been made in buying extra land adjacent to the FNP site. The result is the preliminary site plan showing a two-way East Patrick St driveway of 20 to 24 feet width located on a 10 foot easement — an absurdity. Plus no feasible method for deliveries of supplies or pickup of trash. Will the trucks have to double-park on City streets? Dumpsters on the sidewalk?

Q10. The viability of the project is very much in question, and needs to be clarified because lots of taxpayers money is on the line – $30 million approximately of upfront money. Also, regardless of what any legal documents say about there being no public liability for future losses, the history of City sponsorship of the project and its location on City-owned land mean the City will ’own’ the project politically. When faced with the prospect of the hotel closing future City governments will almost certainly provide annual ’support’ rather than owning an empty building.

Despite the importance of the project’s financial viability the only published analyses of the market for the facility go back to January 2010 (Pinnacle/OPX) and July 2012 (Crossroads/HGS.) The first relies on data from 2009, the second makes use of the same data with limited updating of the materials in the earlier study. What we know of expert analysis is based on data that is six to nine years old. The market of today is very different from that of 2009 to 2012.

Ald Ben MacShane

In response to public complaints that the hotel market data is obsolete the City’s hotel developer Pete Plamondon told the Historic Preservation Commission last year that he had commissioned and received an update of the demand studies. But he declines to release them since he regards them as proprietary. That’s not good enough. A developer asking for $30 million of public funding who cites a study in justification of his claim on the taxpayers should be required by the City to release that study.  You should ensure this study is released.

State grants

The General Assembly has appropriated state bond funds for the City hotel project but they are still held pending approval by the state Board of Public Works. Comprising the Governor the state Treasurer and the Comptroller, the Board’s statutory obligation is to ensure that state grant monies will only flow to projects whose procurement has been competitively conducted in accordance with procurement law and without fraud, waste, or abuse. That is a high hurdle for the DHCC to clear given the sleazy history of the project.

Governor says no to project

Governor Hogan has expressed his opposition to the Frederick hotel project. Given the deeply flawed nature of the procurement, the major cost inflation and waste, and the general mismanagement of the project the Board of Public Works seems almost certain to withhold state funds. The new Mayor & Board should be prepared to recognize the likelihood that no more state money will be forthcoming and that the project will be $16 million short.

The whole project deserves reconsideration.

Peter Samuel

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