City releases new hotel MOU, sets M&B Workshop for May 23

The City has released a revised draft Memorandum of Understanding (MOU) for the development of the downtown hotel and conference center (DHCC) with developer Plamondon, and scheduled a public Workshop of the Mayor & Board of Aldermen (BOA) for May 23. A project capital budget in the document puts the overall cost of the project at $80.4m split between the developer $62.9m, and $17.5m the public sector (City, County and State.) That’s a 78%, 22% percentage split. 

This is an enlarged developer share as compared to the last published capital budget dated March 1, 2017 which put the overall project cost at $84m split developer $53m (63%), leaving governments with $31m (37%). The public sector cost is down $13.5m or nearly 44% on the $31m quoted 14 months ago. The developer contribution has increased $9.9m or nearly 19% from the previous $53m.

Project Capital Budget, Appendix B of MOU

City and County costs remain pretty much unchanged but the project budget now assumes a much lower State contribution $5.25m versus $16m previously. Even the $5.25m is in doubt since Governor Hogan has said the State will not proceed with the project, and with the support of Comptroller Peter Franchot and state Treasurer Nancy Kopp he has the power to withhold even appropriated funds at the Board of Public Works. 

Under the new project budget the public sector spends $11.55m on ‘site improvement’ the major component being the basement parking garage of the complex. Land purchase is $3.67m plus a new $527k for a total $4.19m. Off-site improvements carried by the public are given $400k  for Carroll Creek park enhancement, undergrounding of Carroll St power lines, and repaving of Patrick and Carroll Streets adjacent to the development. Also project management $614k, architecture & engineering $408k, financial, legal and accounting $77k, early costs $250k.

Spent $565k to date

According to a separate table (Appendix C, p1) the City has spent thru’ the end of April 2018 $564,800 on the project — mostly on consultants and lobbyists. It has received grants of about $91,000 from the City parking fund, and a DHCD grant, reimbursements from the Chamber of Commerce and Plamondon.

Upsized slightly

The latest hotel and conference center size is about midway between the original larger size of the MOU (December 2015) and the downsized project announced a year ago (May 2017.) Hotel guestrooms are now 199, conference  center 22,000sf, parking garage 160 spaces. All are qualified with a (+/-) so these numbers are not firm yet. 

The hotel complex will be 162,000sf  split between guest rooms of 94,000sf and public and meeting spaces of 68,000sf. The parking covers some 58,000sf.

Plamondon will, the exec-summary says, spend some $55m on building the hotel and conference center and $7m on renovation of the Trolley building. Plamondon gets to build the whole complex, the City paying Plamondon for building the foundations and the City basement parking garage.

Parking issues

If the parking garage costs $11.55m as described by the exec-summary then at 160 parking spaces it is costing around $72k/space. That compares with the city estimate of $23k/space at Parking Deck 6, a the 650-space $15m above ground structure designed to go immediately west of the County Education Building at South and East streets. Parking expert Donald Shoup has a table showing an average cost per space to build of $24k above and $34k underground. (http://shoup.bol.ucla.edu/HighCost.pdf) So the plan to spend nearly $12m on the 160 space parking garage will involve a capital cost for the City’s Hotel parking deck about three times the normal per-space capital cost. Other parking decks will have to ‘carry’ this expensive underground garage since it is most unlikely they will be able to levy charges three times as high at the hotel.

Geology also makes the garage the riskiest part of the construction — it’s a floodplain with centuries of fill dumped there. The garage has to be built to carry the load of the hotel and conference center atop it. 

A City planning issue is that according to normal rules 250 parking spaces are needed, not the proposed 160. Also such parking is supposed to be dedicated to the building’s clients, not publicly available. Later in the exec-summary there’s an indication the Mayor & Board will be asked to approve adding a second level to the underground garage. That could add perhaps $10m to costs, and take the public sector costs back up toward the $31m of March 2017.

Land lease at 2% and declining

As under the present MOU the City proposes to buy the land for the developer. Plamondon gets a 99 year lease and pays a ground rent starting at around $80k, a low 2% on its value. The rent increases only 1.25% a year well below the recent rate of inflation.

The schedule

Appendix F has a ‘Milestone Schedule’ and this is consistent with earlier ones. Detailed design and permitting is about a year off, June 30, 2019. Financial close is set for Sept 30, 2019.

The start of construction is about a year and a half away, late 2019. 

Construction  takes about 15 months, all of 2020 plus the first quarter of 2021. So there’s an opening  scheduled forMarch 31, 2021, 34 months off. Toward the end of Mayor O’Connor’s first term.

Of course that’s pretty much what the City said early in Mayor McClement’s first term. In 2010 the City hotel was due to open around the end of his first term, perhaps 2014.

City documents are here:

http://cityoffrederick.granicus.com/MetaViewer.php?view_id=12&event_id=3189&meta_id=87122

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