County proposes $2.52m for land for the Plamondon Downtown Hotel — county council vote Tuesday Feb1 

Tuesday evening Feb 1st at their 5:30pm meeting Frederick County Council will vote Yes or No on a proposal to give the City of Frederick $2.52 million to help it with a $3.7m purchase of land for the Plamondon company’s downtown hotel and conference center (DHCC). Anyone who’d like to submit public comment can email: councilmembers@frederickcountymd.gov  Or you can speak online at https://FrederickCountyMD.gov/CouncilMeetings, or by calling 855-925-2801 code 8365, to leave a voicemail message or to enter into a queue for live public comment during the meeting.

County documentation on the proposal is here:

https://www.frederickcountymd.gov/DocumentCenter/View/335757/125—FY-2022-Supplemental-Budget-for-Frederick-Citys-Economic-Development-Project—L-Depies

https://www.frederickcountymd.gov/ArchiveCenter/ViewFile/Item/13075

The issue was discussed at a County Workshop last Tuesday Jan 25. If you have the patience, there’s FCG TV video of the County Council Workshop meeting with the item starting at the 2:55:30 point in a long 4+ hour meeting:

https://frederick.granicus.com/ViewPublisher.php?view_id=10

I’ve followed the project and have a hard drive full of material on it going back to 2015 some of which is posted at an old website of mine

http://frederickhotelboondoggle.us/

I do have opinions! But I do my best to also report facts accurately and fairly. My position: I quite like the general idea and I’m not opposed to the project except in so far as it is attempting to get tens of millions of taxpayer-$s and that it has got tied up in endless politicking, deceptions and shenanigans. So-called ‘deadlines’ for a start have been missed one after another, the site remaining an empty eyesore, while there is year after year of talk and closed door wheeling and dealing. Some oppose the whole idea of a hotel there. I don’t. I think it’s a legitimate commercial venture, and — in my view — should be given permits to proceed if it is goes through the City permitting process with officials behaving neutrally (they don’t), and if it can raise the full $100m or so it needs from investors and banks. However Mr Plamondon has always wanted City/County sponsorship to drum up taxpayer subsidies to minimize his own investment. To mind that’s just wrong. The $2.52m now up for vote at the County Council is just one of scores of attempts to provide taxpayer support. The latest shenanigans is to disguise the extent of public sector support by using City parking fund money to build the difficult floodplain foundations for the hotel in the form of a extravagant $21m underground parking garage right under the planned Plamondon hotel structure and touting the parking garage as a project independent of the hotel! –see Comment #2 below

Here are my own public comments:

Public comment on ‘FY2022 Supplemental Budget’ move for $2.52m for Downtown Hotel land

How about a County escrow account for the hotel land? Comment#1

County Councillors:  Although quite long the Council Workshop discussion of County assistance for buying land for the Downtown Hotel/Conference Center (DHCC) involved no explanation of why $2.52 million is proposed to be paid to the City now. The City itself is not committing money to the purchase of land at this point. All the agreements (MOUs) between the City and PHP provide for a comprehensive financial close at which the City will pay for and take title to the land, provide PHP with a lease of the land, along with PHP taking project capital funds from its investors and lenders and signing contracts for construction with a builder. Given that PHP still has to produce detailed plans and get City permits it will be working hard to meet the present Dec 31, 2023 deadline. This project has a record of some four missed deadlines (mid-2018, end-2019, mid-2020, mid-2021) since the City announced PHP as its hotel partner in August 2014. Another extension beyond the 10th anniversary seems quite likely. So the City’s ‘need’ for the $2.52m is two years or more away.

If a majority of the Council want to commit a spare $2.52m to the City’s acquisition of land for the DHCC, why not say in an MOU with the City that the County pledges the $2.52m as its contribution at the time of the DHCC financial close, and meanwhile place the money in a County escrow account? No one has explained, or discussed, the rationale for the County money going out to sit in a City escrow account. 

Public comment #2 

Misleading omission of $21.5m parking garage — public/private split is 25/75

County Councillors: The Workshop discussion Jan 25 heard not a word mentioned about the most expensive and problematic portion of the overall DHCC project — the ‘Public Podium/Garage’ (Garage) on top of which the hotel building is supposed to sit. Workshop participants and listeners Jan 25 heard the City project being described as $75 million, $70m being the privately funded hotel & meeting space, $5m being the public funding — a 6/94 percentage public/private split.

Pasted Graphic.png

The major public cost lies underneath the Plamondon building, where according to the City-PHP MOU the City will fully fund an underground parking garage including needed foundations, walls and columns and a structural platform or ‘podium’ above the parking to physically support the hotel above it. Cost was put (by consultant Walker Parking) at $16,151,057 ($16.15m in 2015 $s) for 234 parking spaces, or $69,000/space. Construction cost inflation since 2015 is 33 percent so the cost now is probably $21.5m or $92,000 per parking space. This compares with an above-ground parking deck cost of about $30,000 per space on which City parking charges are based.

This podium/garage will be contentious and difficult to fund. In 2019 the City proposed to fund the $16.15m garage with $5.65m City parking funds and a $10.5m state grant — the latter hope not fact. Presently there is no known City plan for funding what is now a $21.5m podium/ parking garage under the DHCC. 

As for the public/private cost split: public cost is $5m for land + extras and the $21.5m City garage works for a total public cost $26.5m. Private cost is $78m: $70m for the hotel and the $8m for renovation of the Trolley building. The whole project is now $104.5m for a 25/75 split — very different from the 6/94 split presented at the County Workshop.

Given the lack of any City plan for funding the underground works, the County would be wise to keep any contribution in a County escrow account.

Public comment #3 

County $2.52m an “investment” that will “pay back in 3 or 4 years” — Harcum hokum.   

County Councillors: the Workshop last Tuesday began with a claim by County staffer Rick Harcum that the proposed County transfer to the City should be seen as an ‘investment’ that ‘will pay back in three or four years.’  This is ridiculous on four counts. 

1. City officials and Pete Plamondon have both said they will be hard-pressed to meet the Dec 31, 2023 deadline for a comprehensive financial close. They have 23 months’ work completing design, getting permits and financing and a construction contract. After 30 months construction they put 2026 as their hoped-for opening year. So on the most optimistic schedule and the City-PHP team actually meeting a deadline (they missed the last four), it will be close to five years before the first hotel rental and property taxes on the DHCC will flow. During construction the site will be City owned and off the tax rolls. Pay back in ‘three or four years’?  Harcum hokum!

2. If and when the DHCC does open no one can predict even roughly its net effect on County revenues. The uncertainties are huge. Not just about the state of the hotel and meetings business generally, or how much revenue will the DHCC pull in, but from where? To the extent the DHCC satisfies local needs it will pull business away from competing local lodging and local meeting places who will then pay correspondingly less county hotel taxes — which the Harcum figuring fails to account for. Taxes from a wedding at the DHCC will most likely be netted out against taxes not incurred via less wedding catering at Ceresville or Morningside or established hotels.  Mr Harcum’s myopic calculations depend on the notion that people will have fancy weddings and generate lodging revenues for the county only if the DHCC opens. That they aren’t able to stage a big wedding bash, and generate taxes for the county, without the DHCC.

Hopefully the DHCC would also attract other visitor and meeting business away from, say, Montgomery Co and reduce the hotel and other taxes paid in neighboring counties to the benefit of our County coffers. But how significant that will be is anyone’s guess.

3. No extra demand on County services? The notion that a County grant for the DHCC is an ‘investment’ that will be ‘paid off’ by the new tax revenue it generates is deeply rooted in the myopia of the consultant cult of impactology — in which the practitioner is bewitched by ‘impacts’ you find helpful (extra revenues) and turns a blind eye to any less helpful ‘impacts’ such as additional demands for  road maintenance, police, schools for the kids of DHCC workers, trash handling etc. The ‘happy talk’ of the consultant impactologists conjures up a dreamworld of new jobs and new visitor-spenders, follow-on small biz startups nearby, all producing a tax revenue bonanza for that quick municipal ‘payback.’ That’s fantasy. The real world is a much messier mix of some new revenues, to be sure, but impossible to forecast, accompanied by pressure for expansion of government services to cope with the effects of the new development. The extra-$s for FCPS, for DPW, the Sheriff’s Office, etc will be swallowing up the DHCC’s new tax revenues. There will usually be no net-$s to pay anything back.

4. The cult of impactology is opportunistically embraced or shunned. Some of the very same people who act blind to the outgoings side of the County ledger when it’s a luxury hotel like the DHCC are often quite hardheaded when someone wants to build a bunch of new houses or an industrial park. With hardscrabble stuff like that there’s a much greater willingness to consider how much extra demand each project will put on County services — there are ‘adequate public facilities’ rules under which the investors in the housing or industrial estate only get their permit if they help cover the projected costs to local government of the additional burden their project might place on it. No discounts, then, for any positive impacts they might also have on County revenues. No talk, then, of taxpayers paying for their foundation works or expensive car parking or buying them their land.

I guess there’s something about the sheer novelty of getting a large luxury hotel for the first time. And perhaps an imagined hobnobbing at DHCC events in stylish splendor? But does that justify conferring on the luxury hotel builder favors that you’d never dream of giving to a developer of housing or less glamorous commerce. You’d never fall — I hope — for the snake oil talk of a three year payback from a regular developer and write them a check on County taxpayers for $2.52m.

Peter Samuel 2022.01.31

Public comment #4 on ‘FY2022 Supplemental Budget’ move for $2.52m for Downtown Hotel land

Does this move of $2.52m to the City comply with the County’s ‘Investment Policy’ as filed with the State of Maryland?

County Councillors: there was much talk of this proposal as an ‘investment’ of County funds. I wonder if you have considered whether the transfer of $2.52m of surplus funds to the City complies with the County’s official ‘Investment Policy’: https://www.frederickcountymd.gov/DocumentCenter/View/279664/

This states: “It is the policy of Frederick County (“County”) to invest funds not needed for immediate expenditures (operating funds) in a manner that will provide the maximum safety of principal, while meeting the daily cash flow needs of the County. The manner in which they are invested will conform to all State of Maryland and Frederick County statutes governing the investment of public funds…

Under Objectives it mentions A. Safety. OK you think the City is a safe custodian of the funds.  But B. Liquidity states: “The investment portfolio shall remain sufficiently liquid to meet all operating requirements that may reasonably be anticipated. However, since all possible cash demands cannot be anticipated, the portfolio should consist largely of securities with active secondary or resale markets. Alternatively, a portion of the portfolio may be placed in money market mutual funds or local government investment pools which offer same-day liquidity for short-term funds.”

It doesn’t seem to me that the draft agreement (MOU) with the City provides any mechanism for the County to get back the $2.52m if it should need the funds for its own purposes. As an investment it clearly fails the Liquidity test and therefore doesn’t comply with County Investment Policy. 

To proceed seems to risk legal and political troubles.

Peter Samuel 

2022.02.01

This entry was posted in Uncategorized. Bookmark the permalink.