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Penn Square Partner's Fleecing of Taxpayers

The unreported changes that give more and more money to the PSP

December 29, 2004

Editor's Note: I challenged former county commissioner Paul Thibault to a debate over the merits of the public/private convention center in April 2004. (Click here to read) He has been strangely silent. I also challenged the newspaper to push for a debate. Silence. I now expand this challenge that I will debate anyone - any commissioner - any convention authority member - anyone - anywhere - anytime. IF this project is so good, then there should be people lined up to prove me wrong! These are the facts that supporters don't want you to know about! Email this page to everyone you know and let's get the truth out.

Here is this story as a printable 5 page document to give to your non-computer savvy friends/relatives! (right click and save to computer - 395k)

It happened less that a few weeks ago, yet no one in the local-establishment-media wrote a story about it. On Saturday December 18, 2004, a Washington DC Convention Center was imploded.(look at the tip of the Washington Monument showing at the picture on the right) Less than 16 years after it was built - they began building the $524 million replacement. Was it worn out? No. It was outdated and there was no expanding it - it had to be replaced. At the time it was opened in 1983, the Washington DC convention Center was the 4th largest in the United States. And what about the replacement? The new convention center lost 35.9 million dollars in 2003! (right now they are considering a hotel on the old convention center site with a "public" contribution between $422 to $684 million!)

More and more communities are building or creating bigger and bigger convention centers, while fewer and fewer conventions are being held. As more convention centers are created, existing centers begin to compete for fewer and fewer customers by offering greater and greater incentives. How much loss can convention centers sustain? As a number of communities have invested more than 1/2 billion dollars of tax dollars, the stakes couldn't be higher. However, unlike the normal marketplace, convention centers are not likely to go "out of business". Communities continue to pour money into bigger and bigger centers hoping to "win" enough business to justify the multi-million expenditures.

The Penn Square Partners Shell Game
What about Lancaster's own convention center/hotel project? The only thing constant about the project and the details in the last 5 years is that the Penn Square Partners (PSP), led by Dale High, have continually grabbed for more and more money. The Penn square Partners include Fulton Bank, High Industries and Lancaster Newspapers. This 5thEstate.com exclusive story will show exactly how much in public monies the partners are guaranteed to receive. The dollar amount far exceeds any supposed "investment" the PSP are making in the project and will also guarantee that the PSP risks nothing while the public risks everything.

All the information published is in the public record - including the newspaper - but than you didn't expect the propaganda arm of the Penn Square Partners to remind their readers of how much this project has changed do you?

Let's read what the Lancaster New Era wrote in August 19, 1999 about the convention center project when they were trying to convince the public that the hotel/motel tax and the resulting convention center were a great deal:

increase proposed "Officials estimate the total cost at $30 million, which includes $20 million to build the convention center, $7 million to add 300 spaces to the King Street Parking Garage and about $3 million in miscellaneous costs."

And in 1999 what did they say about that "private" hotel? The hotel was to be built for a cost of $45 million.

How much is that "private" hotel costing now? Supposedly it's going to cost 35.3 million dollars. We say supposedly because these figures are coming from the Penn Square Partners with no documentation that they are even investing that amount!

The public's cost in this project has INCREASED over 312% while the Penn Square Partner's cost has DECREASED by over 21%!

Here are the numbers:

	Public $	"Private" $
1999	30	45
2004	93.65	35.3
% Change	+312.17%	-21.56%
Figures in Millions of dollars

Penn Square Partners's Broken Promises
going going gone! It was only last month that project supporters were touting the garage that was going to built and isn't it wonderful? From the beginning the project was suppose to have a garage built so why is it a big deal now? Project supporters are hoping that these puff piece stories like the garage distract you from what's really going on with this project - the fleecing of Lancaster County by the Penn Square Partners.

Meanwhile, the entire convention center authority, the entire Lancaster City school board, the entire city council, the entire Lancaster County board of commissioners remain silent about the great changes in the scope of the project, the risks of the project and the PSP's broken promises.

Take for instance the help that the school board is going to get. Remember that they have backed this project from the beginning? Why? Because it was going to give them lots of money. As recently as August of 2001,the "private" hotel was going to throw $400,000 at the school district! (Just think how many consultants they could hire with that kind of $!)

In February of this year, the partners were saying they were going to give AT LEAST $200,000 to the school. By December of this year, the partners were comparing what the school gets now to what the generous PSP will do! They are bragging about giving $100,000 - meanwhile - no one save 5thEstate.com - points out that the broken promises of the partners when they said they would give $400,000 in 1999!

Penn Square Partners' $83,745,430 Pay Off
We have shown how this project has changed dramatically - increasing the expenses for the public - while the Penn Square Partners have DECREASED their expenses. But this is just the cost of building. Don't forget the "soft" money that is being thrown PSP's way. This is where the REAL money is. This is where the PSP make certain that they make money one way or another. It's not a matter of IF they make money just how much! When you see the PSP partners talk about getting a mortgage, remember that the authority, either the Convention Center Authority or the City Redevelopment Authority has given the partners sweet-heart-deal after sweet-heart-deal.

That means that while the PSP have guaranteed revenue and profit, the public has guaranteed defects! That's right, if EVERYTHING goes right, this project will lose $1,000,000 every year. (the supporters tell us that!) Keep in mind that everything has to go right for this project to ONLY lose $1,000,000! If the project loses more money than that, there are not a lot of options. The county commissioners can raise about $1,000,000 more by raising the hotel/motel tax, but after that? It comes from the county treasury!

Here is the PSP's $83,745,430 twenty year take from the taxpayers:

$7,250,000 Redevelopment Authority "Loan" - Here is a direct state give-away to the Penn Square Partners. (PSP) We have loan in quotes because there is no interest and no payment due for 20 years. Will they have to pay it back? Not if the project "goes well"!

$5,000,000 Tax Increment Financing - Remember how this project is supposed to help the city and the city schools? This dollar amount came from them.

$1,000,000 City investment - These are the Penn Square Partner's words - not 5thEstate.com's. Unlike every business that wants to start in the city, the PSP will NOT pay for a building permit fee. Just you little people pay that fee!

$17,100,000 Shared Management These figures come from Penn Square Partner on September 12, 2001. Rather than have a division in labor, PSP can have these public/private employees working for them. So how can the public know they are not subsidizing the "private" hotel? The PSP will make certain of that!

$3,000,000 W & S building - Penn Square Partners wants the City Redevelopment Authority to buy the Watt & Shand Building. In other words, PSP will own NO land and the public will owe everything! PSP paid $1.25 million for the property in 1998. It was recently appraised for $1.5 million and they are going to sale it for $4.5 million!

$3,872,500 Fees given to High for "Developing" Convention Center - Dale High gets 5 cents of every dollar spent to build the convention center! That's right, the more money it costs, the more money Dale gets. The convention center is estimated to cost $50,800,000. (We are hoping that Dale doesn't get a cut of the $26.65 million for the "shared" space!)

??? Fees given to High for other "services"-More deals between the "public" and the "private" hotel are expected any time!

$2,700,000 20 YR Contract for concession in Convention Center - Believe it or not, Dale High gets 95% of all profits for every hotdog and coke sold in OUR Convention Center. Most contracts like this give 20% to the convention center - not this one! This is a low-ball estimate of what this 20 year contract is worth in terms of profits. (this was awarded as a no-compete contract to Dale)

$26,650,000 Savings on "shared" space - With the exception of the actual hotel rooms, YOU the taxpayer are building the Penn Square Partner's "Private" Hotel and charging them $100 a year for the 99 year lease! This means that tax dollars will build the hotel lobby, kitchens, ball rooms, meeting rooms, storage, restauraunts etc for the PSP's EXCLUSIVE use.

$19,172,930 20 YR Interest Savings on "shared" space (6% interest rate) - Since YOU the taxpayer are building ALL hotel areas (except the hotel rooms), in addition to the $26.65 million savings, the Penn Square Partners also save on the interests on all of that money. (we did not give them credit for the $100 a year they MUST pay to lease this multi-million dollar space but you can give them $2,000 credit if you want!)

$83,745,430 Penn Square Partner's 20 year Public Take

- $35,300,000 Subtract Amount for "Private" Hotel Cost This amount of "investement" come from Penn Square Partners. No proof or documentation has been given to demonstrate they are actually spending this amount of money.

+ + $48,445,430 + + After Hotel Cost - Money in the Penn Square Partners' pockets! This is NOT counting the money the PSP's "private" hotel can make, while the PUBLIC convention center is losing over $1,000,000 every year (that $1 million++ loss is if everything goes right! If things do not go well for the convention center, it could lose multi-millions EVERY year. Meanwhile, the Penn Square Partners are not only assured of NOT losing money, but the public have will have put almost $48 million in the PSP's pockets besides buying the hotel for them!)

This is the largest, single, direct case of corporate welfare in the history of Lancaster County. No other project comes close! The welfare to the PSP amounts to almost $350,000 EVERY month for the next 20 years!

Penn Square Partners Feb 2004 presentation

Convention Center's "Business Plan" - their words - not ours!

An "Oldie" Cartoon

$7,250,000	Redevelopment Authority "Loan" - Here is a direct state give-away to the Penn Square Partners. (PSP) We have loan in quotes because there is no interest and no payment due for 20 years. Will they have to pay it back? Not if the project "goes well"!
$5,000,000	Tax Increment Financing - Remember how this project is supposed to help the city and the city schools? This dollar amount came from them.
$1,000,000	City investment - These are the Penn Square Partner's words - not 5thEstate.com's. Unlike every business that wants to start in the city, the PSP will NOT pay for a building permit fee. Just you little people pay that fee!
$17,100,000	Shared Management These figures come from Penn Square Partner on September 12, 2001. Rather than have a division in labor, PSP can have these public/private employees working for them. So how can the public know they are not subsidizing the "private" hotel? The PSP will make certain of that!
$3,000,000	W & S building - Penn Square Partners wants the City Redevelopment Authority to buy the Watt & Shand Building. In other words, PSP will own NO land and the public will owe everything! PSP paid $1.25 million for the property in 1998. It was recently appraised for $1.5 million and they are going to sale it for $4.5 million!
$3,872,500	Fees given to High for "Developing" Convention Center - Dale High gets 5 cents of every dollar spent to build the convention center! That's right, the more money it costs, the more money Dale gets. The convention center is estimated to cost $50,800,000. (We are hoping that Dale doesn't get a cut of the $26.65 million for the "shared" space!)
???	Fees given to High for other "services"-More deals between the "public" and the "private" hotel are expected any time!
$2,700,000	20 YR Contract for concession in Convention Center - Believe it or not, Dale High gets 95% of all profits for every hotdog and coke sold in OUR Convention Center. Most contracts like this give 20% to the convention center - not this one! This is a low-ball estimate of what this 20 year contract is worth in terms of profits. (this was awarded as a no-compete contract to Dale)
$26,650,000	Savings on "shared" space - With the exception of the actual hotel rooms, YOU the taxpayer are building the Penn Square Partner's "Private" Hotel and charging them $100 a year for the 99 year lease! This means that tax dollars will build the hotel lobby, kitchens, ball rooms, meeting rooms, storage, restauraunts etc for the PSP's EXCLUSIVE use.
$19,172,930	20 YR Interest Savings on "shared" space (6% interest rate) - Since YOU the taxpayer are building ALL hotel areas (except the hotel rooms), in addition to the $26.65 million savings, the Penn Square Partners also save on the interests on all of that money. (we did not give them credit for the $100 a year they MUST pay to lease this multi-million dollar space but you can give them $2,000 credit if you want!)
$83,745,430	Penn Square Partner's 20 year Public Take
- $35,300,000	Subtract Amount for "Private" Hotel Cost This amount of "investement" come from Penn Square Partners. No proof or documentation has been given to demonstrate they are actually spending this amount of money.
+ + $48,445,430 + +	After Hotel Cost - Money in the Penn Square Partners' pockets! This is NOT counting the money the PSP's "private" hotel can make, while the PUBLIC convention center is losing over $1,000,000 every year (that $1 million++ loss is if everything goes right! If things do not go well for the convention center, it could lose multi-millions EVERY year. Meanwhile, the Penn Square Partners are not only assured of NOT losing money, but the public have will have put almost $48 million in the PSP's pockets besides buying the hotel for them!)