State delegates misled on terms of hotel deal (letter to Del. Krimm)

Delegate Krimm: Richard Griffin wrote a misleading answer to your request for details of the terms under which the hotel operator will be leasing the podium roof of the parking structure (email January 16, 2019 17:06 EST). He encouraged you to share his answer with other delegates, so I am copying them.

Mr Griffin’s answer suggests the hotel operator is paying a ground lease specifically for the podium roof.  The payment Mr Griffin quotes is a Ground Lease related to the purchase price of the land and is solely intended to recompense the City for the purchase of the land. He quotes from Appendix D of the Amended and Restated MOU of July 2, 2018 which is almost identical to the Ground Lease terms in the MOU of December 23, 2015 at page 6, 10. Special Agreements (B) Ground Lease. 

Back in 2015 when the Ground Lease was written there was no podium roof. Then the idea was for the public sector to buy the land, carry a large share of soft costs, and pay all construction and fit-out cost of the conference center portion of the project. The basement level parking (a single level) along with foundations was to be financed by the hotel developer and operated by the hotel for hotel guests. 

The idea of having the City finance and operate the basement parking only arose in 2017 many months after the terms of the Ground Lease were settled. Only in May 2017 did Mayor McClement announce the new arrangements (reflected in the July 2, 2018 Amended & Restated MOU) under which Plamondon would take full responsibility for the costs of the conference center in return for the City taking on the financing of the basement parking and providing a podium on which Plamondon could build his hotel and conference center.

Contrary to Mr Griffin’s email the present terms do not ask the hotelier to make any payment at all for the use of the City-financed podium roof or for the foundations and structure that are engineered to support it. This giveaway is substantial. At $16.15 million for 234 parking spaces, each space is costing $69,000. The most thorough survey of underground parking costs in cities across America suggests $48,000/space (Rider Levett Bucknall quoted in Donald Shoup’s book on Parking updated by Turner Construction Cost Index) times 234 spaces = $11.2m. On this basis nearly $5m ($16.15m minus $11.2m) of the construction cost appears to be surplus cost attributable to foundations and podium beyond the cost attributable to the underground parking alone. 

Even underground parking itself as represented by $48,000/space makes no sense in Frederick. According to the revenue and cost estimates in the Walker Parking Consultants 2015 study for the City a 234 space parking garage would only break even and cover debt service if it costs $15,900 or less per parking space to build. That is, in order to have no negative impact on the City Parking Fund, the Sub-hotel City parking garage should cost 234x$15,900m = $3,720,000 or less. By this measure in spending $16.15m — the amount for which the City gets no financial return —  the podium giveaway is $16.15 minus $3.72m or $12.43m.

To reiterate: the present agreement between the City and Plamondon only proposes a ground lease arrangement for the proposed $3.4m land purchase of the Frederick News-Post site. It gives away the expensive podium free of charge to the favored developer.

Unfortunately the Griffin email is just the latest in a long list of false and misleading statements made in the eight year long effort to justify this disgraceful boondoggle hotel.

Peter Samuel 2019.02.03

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