$250,000 state grant for hotel from 2012 was forgotten by the City

A $250,000 grant the State awarded to the City of Frederick for its Downtown Hotel back in 2012 was forgotten and never drawn on by City officials. Kimberly Langkam director of Capital Grants at the state’s Department of General Services emailed Frederick Delegate Carol Krimm two weeks ago (January 15) under the Subject “12-032 Downtown Frederick Hotel & Conference Center” this: “The 2012 – $250,000 grant for the above referenced project, the funds are still available and have not been reverted.” (‘Reverted’ is bureaucrat-speak for unused grant money being taken back.)

Krimm passed the news of finding the missing quarter million to the City’s Hotel project manager Richard Griffin, who minutes later emailed back to Krimm: “Excelente. That is outstanding.”

The emails were released in response to Public information Act requests.

The City’s request for the hotel grant and its award by the State legislature was well publicized at the time. It began as a request for $1 million from the state.

Richard Griffin speaks at a Mayor & Board meeting

Under the headline “Frederick asks state to pitch in $1m for hotel” then Patti Borda at the Frederick News-Post reported: “McClement’s office asked the state earlier this month to include $1 million in the fiscal 2013 state budget for the project. That money would be used to help the city cover the cost of placing a right-to-purchase option on a property, as well as architectural, engineering and project management expenses, said Josh Russin, McClement’s executive assistant.” That was December 30, 2011.

March 22, 2012 the Frederick News-Post under the headline “City sets stage for downtown hotel site” reported: “The Maryland General Assembly is considering two bills that could provide some funding. One is sponsored by Sens. David Brinkley and Ron Young and Delegate Galen Clagett to pay $250,000 for the hotel planning and design costs. Clagett also sponsored a bill to increase the hotel tax from 3 percent to 5 percent, with proceeds to pay off the debt for the county’s visitor center and proposed hotel site acquisition.”

Apparently the General Assembly leadership and the Frederick County hotel advocates reached a deal that instead of $1 million the hotel would get $250,000 conditional on a matching $250,000 being provided by the City.

In June there was another reference to the quarter million grant in the backgrounding to a report on Mayor McClement’s comments on a forthcoming feasibility study: “During the 2012 session of the Maryland General Assembly, lawmakers set aside $250,000 for the first stages of the building effort, and the city had to make an equal match. McClement said none of that combined half a million dollars will be used for the hotel if the stadium authority’s study finds the market will not support a hotel conference center downtown right now. If the stadium authority comes back with a negative recommendation, McClement said the state will keep its $250,000 and the city will redirect the funds to other things. If the authority returns a positive recommendation, the $500,000 could be used for site study and engineering on prospective sites, McClement said.” (FNP 2012.06.03)

Delegate Carol Krimm

Of course the Crossroads/HGS feasibility study that came out in July 2012 was interpreted, at least, as being favorable to the hotel project. It could be argued it was not in fact very favorable: the projections were couched with reservations and it stated that “some public participation’ (taxpayer support) would probably be necessary to attract private investment. But few advanced that negative interpretation at the time, and the project lumbered on.

The Mayor’s Hotel Advisory Committee had no hotel expertise. It comprised local Frederick worthies, business people mostly lobbying for a hotel, but most knowing nothing more about a hotel than anyone who has traveled and frequently stays in a hotel. Next priority was hiring help for the Mayor’s Hotel Advisory Committee (HAC) by way of expert consultants. The Jones Lang LaSalle crew was gotten “on board.”

But these $175 to $250/hour billers required serious six-figure funding.

July 27, 2012 Jen Bondeson in the Frederick News-Post under the headline “Downtown Frederick hotel project may get more public funding” reported: “Frederick officials want more money to work with as they attempt to secure and prepare a spot for a long-envisioned downtown hotel and conference center. The Board of Aldermen agreed Wednesday to ask the Maryland Department of Housing and Community Development for a $250,000 Smart Growth Impact Fund grant, which could be used for many different costs, such as acquiring an option to buy the property, site design and analysis, architectural costs and ground work. The city already has $500,000 for the first stage of the project, after setting aside $250,000 in its budget and being awarded a matching bond bill by the 2012 Maryland General Assembly.”

There at the end is the 12-032 grant that is apparently now being rediscovered. That Smart Growth Impact Fund grant from the Department of Housing and Community Development was not obtained for 2013, but the Department awarded the Frederick hotel $350,000 in 2014. That grant and another $500,000 obtained in 2016 were forfeited as the City missed two use-it-or-lose-it deadlines, the first after a one year extension.

Given the City’s record of receiving state grants, then failing to draw on them, it remains something of a mystery just how the City has paid its bills for hotel consulting, since we’ve frequently been told the money was coming from the State.

Disappearing costs
Another mystery is just how the City has apparently ‘disappeared’ some of the ‘soft costs’ (financial consultants, lawyers, engineers, architects etc) in its presentation of the project budget and sources and uses of funds. 2015 through 2017 these ‘soft costs’ were stated as $8.3 million, about a quarter of the total public funding and 10% of the overall project. The $8.3m was broken down in the May 2016 One-pager to Design/Inspect(ion) $1.4m, MSA Mgt (Management) fee $0.4m, Contingency $1.4m, Financial/Legal $2.1m, FFE/IT/PreOp $2.7m.

Now according to the December 27, 2018 One-Pager the soft costs total is $1.5m. Where have $6.8m of earlier soft costs gone? We’ve asked but so far go no explanation as to how 82% (6.8/8.3) of these have disappeared.

May 18, 2017 Mayor McClement announced that the public private partnership was being abandoned in favor of a condominium style arrangement. No longer would the City build and fit the conference center and gift it to the Plamondon company, merely claiming free use of them a set number of days a year. Instead the project would be divided vertically condo-style. Plamondon would build and operate the hotel and conference center complex entirely on his own nickel. The City would present him with an engineered podium or huge concrete slab atop its underground parking garage on which to build his hotel complex — saving him the expense of foundations. The City also buys the land.

FFE (fittings, furnishings and equipment) and IT for the conference center is no longer on the City tab. But there are almost certainly corresponding costs for the parking garage. Similarly the MSA management fee is out because the MSA (Maryland Stadium Authority) decided against getting in with the City on the hotel. But someone else will be managing the project for the City and charging management fees. Design, financial/legal, and contingency costs remain and probably should increase. The city will now be fully responsible for the difficult foundation work.

Reducing soft costs $8.3m to $1.5m remains a mystery. Have some of the costs already incurred been shifted out of the hotel account and put on the City’s general fund expenses? The City seems to have made a real mess of tapping State funds. Maybe the City has been paying it all. Stay tuned.

PSam 2019.02.01

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