The Frederick Hotel Boondoggle involves state, county and city taxpayers gifting some $31 million to a hotel developer to build an $84 million hotel complex to a design specified by a City appointed committee on a downtown site selected by the City. It is a classic case of crony capitalism benefitting an inside businessman at the expense of less politically well connected competitors.
The official narrative was that selection of the favored developer began in February 2014 with the issuance of a request for proposals (RFP) and that two were received by the May deadline, and scored by an impartial selection committee. In fact the favored developer’s proposal was submitted months before the RFP was issued and was discussed and shaped along with the RFP itself. The supposed competing proposal was treated in cursory fashion and the scoring of the proposals was absurdly biased in favor of development on a poorer site with greater public infrastructure requirements, and a need to demolish historic buildings.
The Downtown Hotel & Conference Center (DH&CC) project in Frederick is a case study in How-Not-To-Build-A-Hotel. Eight years have passed since a City decision to sponsor a hotel, financing is still uncertain, and no plans have even been submitted for permitting. In the past three years the estimated project cost has increased 89% ($45m to $84m) and the public sector cost has almost tripled (from ‘$10-12m’ to $31m).
The City-sponsored hotel is promoted with shameless hyperbole about its potential for promoting adjacent redevelopment of blighted areas, and attracting a new class of big spenders to enrich local business and provide jobs. Worst has been the deterrent effect of City sponsorship on the provision of viable self-financed lodging. The prospect of a favored developer getting tens of millions of public money scares away competitive entrepreneurial investments in lodging. Potential competitors with the City boondoggle are told they aren’t wanted. They might upset a City-coddled monopoly.
Frederick’s model should be the state capital Annapolis which has allowed investor-financed lodging to evolve as competitive businesses without heavy-handed municipal or state sponsorship. By letting hotel investors respond to market demand Annapolis has a bunch of hotels in its historic downtown offering a rich range of choices for visitors — all developed without governmental sponsorship or massive taxpayer support. Frederick by contrast has a handful of bed and breakfast and Airbnb places in its downtown, and endures year after year of political demagoguery about the City-sponsored hotel complex. 2016.09.27