1 1 THE COURT OF COMMON PLEAS LANCASTER COUNTY, PENNSYLVANIA 2 CIVIL _____________________________________ 3 PENN SQUARE GENERAL CORPORATION, : THE GENERAL PARTNERS OF PENN SQUARE : 4 PARTNERS, a Pennsylvania Limited : Partnership, and THE REDEVELOPMENT : 5 AUTHORITY OF THE CITY OF LANCASTER, : Plaintiffs : 6 : vs : 7 : COUNTY OF LANCASTER, : 8 BOARD OF County commissioners OR : THE COUNTY OF LANCASTER, : 9 MOLLY HENDERSON, Commissioner, and, : RICHARD SHELLENBERGER, Commissioner, : 10 Defendants : _____________________________________ No. CI-06-05555 11 LANCASTER COUNTY CONVENTION CENTER : AUTHORITY, : 12 Plaintiff, : : 13 vs : : 14 COUNTY OF LANCASTER, : BOARD OF COUNTY OF COMMISSIONERS OF : 15 THE COUNTY OF LANCASTER, and : MOLLY HENDERSON, Commissioner and : 16 RICHARD SHELLENBERGER, Commissioner, : Defendants : 17 _____________________________________ 18 19 PERMANENT INJUNCTION VOLUME II 20 21 Before: HON. JOSEPH C. MADENSPACHER, JUDGE 22 Date : Friday, September 29, 2006 23 Place : Courtroom No. 2 50 North Duke Street 24 Lancaster, Pennsylvania 25 2 1 APPEARANCES: 2 JOHN C. FENNINGHAM, ESQUIRE GREGORY S. BERKE, ESQUIRE 3 FENNINGHAM, STEVENS & DEMPSTER, LLP Five Neshaminy Interplex, Suite 315 4 Trevose, PA 19053 For - Lancaster County Convention Center Auth 5 ANDREW W. STEPHENSON, ESQUIRE 6 HOLLAND & KNIGHT, LLP 2099 Pennsylvania Avenue, NW 7 Suite 100 Washington, DC 20036 8 For - Lancaster County Convention Center Authority 9 DAVID H. PITTINSKY, ESQUIRE JOHN C. GRUGAN, ESQUIRE 10 BALLARD SPAHR ANDREWS & INGERSOLL, LLP 1735 Market Street, 51st Fl. 11 Philadelphia, PA 19103 For - Penn Square General Corporation 12 HOWARD L. KELIN, ESQUIRE 13 KEGEL KELIN ALMY & GRIMM, LLP 24 North Lime Street 14 Lancaster, PA 17602 For - County of Lancaster 15 P R O C E E D I N G S 9:00 a.m. 16 THE COURT: All right. Mr. Kelin, are you 17 ready? 18 MR. KELIN: Thank you, Your Honor. 19 First, by way of housekeeping, I did bring a 20 corrected version of Exhibit 51, which are the tax 21 revenue totals. If you remember, they weren't two-sided 22 yesterday and there's been a correct version put in your 23 book and counsel's. 24 THE COURT: These are the ones you did 25 yourself? 3 1 MR. KELIN: No, these I had my secretary do. 2 THE COURT: You started off yesterday doing it 3 yourself. 4 MR. KELIN: That's right. 5 THE COURT: That was our mistake here. 6 MR. KELIN: I put it in the hands of a 7 professional. 8 THE COURT: Okay. Thank you. 9 MR. KELIN: Thank you, Your Honor. 10 By way of just an opening statement, there are 11 three requirements that plaintiffs must meet to obtain a 12 permanent injunction. 13 One is that they must show a clear right to 14 relief that they're seeking. 15 Second, that they have an injury that cannot be 16 compensated by damages. 17 And third, that greater harm would result from 18 denying the injunction than granting the injunction. 19 Now, as Your Honor noted yesterday during the 20 cross examination of Mr. Rauch, the county's primary 21 position in this case is that plaintiffs don't have a 22 clear right to relief because of the disconnection 23 between the requirements of Ordinance 73, and the 24 language that's in the trust indenture. And it's not 25 just that they don't match word for word, they don't 4 1 even match thought for thought. 2 What the plaintiffs are really asking this 3 Court to do is to modify the requirements of Ordinance 4 73. And, of course, the Court doesn't have 5 authorization to change legislation, only the 6 legislative body can do that. 7 And if there's one thing I think everyone here 8 can agree upon, is that the current Board of 9 Commissioners is not going to amend Section 7 (B) of 10 Ordinance 73. So I'm not going to elaborate on our 11 position there at this time. I think it's clear from 12 the cross examination, I will address, of course, in the 13 brief we submit next Friday and oral argument the 14 following Tuesday. 15 I'll also address then our position on Lobolito 16 and why that means plaintiffs don't have a clear right 17 to relief. 18 Again, I think the Court understands from our 19 cross examination our position. Mr. Rauch acknowledged 20 yesterday that you understood from the Authority's 21 counsel that it was imperative from the Authority's 22 perspective this deal had to close by December 15th. 23 We'll include that in our Lobolito argument. 24 Today you'll hear testimony regarding the third 25 element that plaintiffs must meet to obtain permanent 5 1 injunction, and that is greater injury resulting from 2 denying the injunction than from granting the 3 injunction. 4 Now, the Pennsylvania Supreme Court just a 5 couple of months ago in the Kuznik decision elaborated 6 on that element and gave a pretty expansive 7 interpretation of that requirement; in fact, overruling 8 a Commonwealth court decision that had construed the 9 requirement much more narrowly. And the testimony 10 you'll hear this morning by Craig Ebersole, County 11 Treasurer, is in line with what the Supreme Court found 12 in the Kuznik decision to be the kind of chaos and harm 13 that would arise from the granting of an injunction. 14 In fact, Mr. Ebersole is really going to be 15 buttressing some of the comments that Mr. Beckett had 16 made in cross examination where he acknowledged that if 17 the Authority's projections of its operating loss are 18 too low and the actual operating loss is higher, they 19 have a pretty narrow margin for error right now. And if 20 the losses are higher than they projected, this 21 community is going to have to make some very tough 22 decisions. What do you do about a new expensive public 23 building that can't pay its expenses? Do you shut it 24 down or do you have a tax increase? Either the hotel 25 occupancy or from the general fund of the county. 6 1 Those are going to be tough decisions. 2 Mr. Ebersole is going to give his perspective on the 3 kind of chaos and harm in the words of the Supreme Court 4 that would result from that. At least that's what he 5 testified to in his deposition. 6 Now, Mr. Pittinsky told you he questioned -- he 7 thinks he's going to get Mr. Ebersole to change what he 8 said in his deposition. I guess we'll see. But that's 9 what I understand Mr. Ebersole is going to testify. 10 THE COURT: We'll find out if that's what he 11 does. 12 MR. KELIN: Thank you, Your Honor. I call 13 Craig Ebersole to the stand. 14 CRAIG EBERSOLE, Called as a witness, being duly sworn or affirmed, was 15 examined and testified as follows: 16 DIRECT EXAMINATION 17 BY MR. KELIN: 18 Q. Good morning, Mr. Ebersole. 19 A. Good morning. 20 Q. You are the treasurer for the County of 21 Lancaster? 22 A. Yes, sir. 23 Q. Since when? 24 A. January 2004. 25 Q. Prior to that, did you have any occupation 7 1 involving finance? 2 A. Yes. I spent almost 10 years at Morgan Stanley 3 and Western Bankers. 4 Q. And what are your duties and responsibilities 5 as treasurer of the County of Lancaster? 6 A. To receive, deposit, and invest moneys coming 7 to the County of Lancaster. 8 Q. Does that include hotel tax revenues? 9 A. Yes, it does. 10 Q. Would you please turn to Exhibit 51. And 11 there's been prior testimony that Exhibit 51 consists of 12 reports issued by the Treasurer's Office identifying 13 receipts of taxes on hotel occupants. 14 Is that a correct description of this? 15 A. Yes, it is. 16 Q. All right. And you signed these documents 17 starting with the one dated February 10, 2004, covering 18 the year 2003, correct? 19 A. That is correct. 20 Q. And your predecessor as treasurer signed the 21 earlier ones, correct? 22 A. Gregory Sahd, yes. 23 Q. If you look at the first sheet, please, and 24 just going through the top column where it describes the 25 taxes, the 1.1 percent excise tax, do you see that? 8 1 A. Yes. 2 Q. Who gets those revenues? 3 A. The Pennsylvania Dutch Visitors' Bureau. 4 Q. And the 3.9 percent room rental tax, those are 5 split, correct? 6 A. Yes, they are. 7 Q. How? 8 A. Eighty percent of the 3.9 percent is sent to 9 the Lancaster County Convention Center Authority and the 10 remaining 20 percent of the 3.9 percent is sent to the 11 Pennsylvania Dutch Visitors' Bureau. 12 Q. So the column that identifies the 80 percent of 13 3.9 percent on these sheets, the amount under there goes 14 to the Authority, correct? 15 A. That is correct. 16 Q. And the difference between the column just to 17 the left showing the total 3.9 and the 80 percent 18 column, that difference goes to the Visitors' Bureau, 19 correct? 20 A. That is correct. That is their 20 percent. 21 Q. Are there circumstances under which you as 22 treasurer are directed to divert the Visitor Bureau's 20 23 percent to the Convention Center Authority? 24 A. Yes. 25 Q. What are those circumstances? 9 1 A. If the bonds, notes, used to finance the 2 construction of the convention center are in default and 3 upon going in default, then the 20 percent is diverted 4 to the Convention Center Authority. 5 Q. Are there any other circumstances where that -- 6 such a diversion can occur? 7 A. Not that I'm aware of. 8 Q. Now, if you would look at -- I'll represent to 9 you that Mr. Beckett testified yesterday, that on 10 average, the increase in the revenues of the 3.9 percent 11 hotel tax since it started have been about, on average, 12 2.84 percent annually. 13 Are you comfortable with that? 14 A. I'm comfortable at 2.8 to 2.85 range, yes. 15 Q. If you would look at the last sheet of this 16 exhibit. This reflects year-to-date for 2006, correct? 17 A. Correct. 18 Q. Okay. Have you compared the period of January 19 through July of 2006 revenues with the period -- the 20 same period January, July of 2005 revenues? 21 A. Yes, I have. 22 Q. And has there been an increase from one year to 23 the other? 24 A. Year over year it's been an increase of about 25 one and a half percent. 10 1 Q. So there's been an increase but about half of 2 the kind of increase there had been in prior -- on 3 average over the history of the tax; is that correct? 4 A. Correct. 5 Q. Now, as treasurer, have you become familiar 6 with plans of the Convention Center Authority to sell 7 bonds to help pay for construction of the convention 8 center? 9 A. Yes. 10 Q. Now, you were not here for Mr. Beckett's 11 testimony yesterday, correct? 12 A. That is correct. 13 Q. I'll explain to you, he testified to the 14 following items: 15 That the current plan is for the Authority to 16 sell $54 million of bonds, consisting of 40 million tax 17 exempt bonds to replace the current bond held by 18 Citizens Bank and an additional $14 million tax exempt 19 bond. 20 He also testified that he expects debt service 21 on the $54 million bonds to be on average about $3 22 million a year and that he expects the plan will be that 23 that $3 million a year debt service will be prioritized; 24 that is, there will be a requirement that the Authority 25 use its tax revenues to pay that debt service before it 11 1 pays other operating expenses. 2 Now, based on what I have told you about 3 Mr. Beckett's testimony, and your other knowledge about 4 the project, do you have any concerns about what the 5 construction and operation of this project may cause 6 harm to Lancaster County? 7 A. It would depend on whether or not those bonds 8 are prioritized. 9 Q. Okay. 10 A. What -- what the concern would be created -- 11 Q. Okay. Are you saying you'd have concerns that 12 they'd be different, depending on prioritization or not? 13 A. That is correct. 14 Q. First, let's look at the situation if the bonds 15 are prioritized as Mr. Beckett has said he hopes to 16 accomplish. 17 What would your concern be under that scenario? 18 A. If the bonds are prioritized and if he is 19 correct in his assumption that the debt service will be 20 about $3 million per year, it would be -- over the last 21 five years, the -- the revenues from the hotel tax have 22 averaged about 2.95. So it would be very close as to 23 whether or not the hotel tax would cover it. 24 But assuming he's correct, that the hotel tax 25 would cover the $3 million, it would still leave the 12 1 operating loss, which PKF -- PKF's study indicates is 2 somewhere in the area of $1.4 million a year for the 3 next 38 years. 4 Q. Okay. Would you please turn to -- 5 MR. FENNINGHAM: Excuse me. Objection, Your 6 Honor, and move to strike that testimony. There's no 7 evidence of the PKF study in the record and there's no 8 supporting foundation. 9 THE COURT: It's not in the record at this 10 particular point, is it? 11 MR. KELIN: I was just about to direct him to 12 that with my next question, Your Honor. 13 THE COURT: All right. I'll overrule the 14 objection subject to foundation. 15 BY MR. KELIN: 16 Q. Would you please turn to Exhibit 52 in the 17 small notebook. Is this the PKF study to which you've 18 just referred? 19 A. Yes, sir. 20 Q. Would you please turn to page Roman two, which 21 is the executive summary -- page 11? 22 A. Yes. 23 Q. And this chart is entitled, proposed convention 24 center representative year of operation. Is this what 25 you were referring to when you were talking about the 13 1 PKF study and its conclusions for a typical year? 2 A. Yes, it is. 3 Q. Would you look at the bottom line where it says 4 net operating income after reserve? 5 MR. FENNINGHAM: Objection, Your Honor. 6 THE COURT: What's the basis of the objection 7 now? 8 MR. FENNINGHAM: There's no foundation for the 9 study. The witness can testify that he relied on this, 10 but there's no credibility or weight to be given to the 11 study itself. 12 THE COURT: It is a weight issue then is what 13 it is; is that correct? 14 MR. FENNINGHAM: Yes, Your Honor. 15 THE COURT: Since it's just a weight issue, I 16 can give it whatever weight I wish. Is that your 17 position, Mr. Kelin? 18 MR. KELIN: Yes, I would agree, just as they 19 didn't have any witnesses come in from the Johnson firm 20 or from PricewaterhouseCoopers or any of the other 21 studies they've relied on. 22 It goes to the weight of the evidence, Your 23 Honor. I agree. 24 MR. FENNINGHAM: Those studies that Mr. Kelin 25 refers to were only relied upon in his cross 14 1 examination. 2 THE COURT: I still believe it's a weight 3 issue. Overruled. 4 BY MR. KELIN: 5 Q. Do you see the line item, net operating income 6 after reserves, and then it's stated in 2006 dollars and 7 there's an operating loss projected of $1, 400,000 -- 8 405,000? 9 A. Yes, I do. 10 Q. Okay. Is that what you were referring to in 11 your testimony? 12 A. Yes, it is. 13 Q. Okay. Can you just please then continue now 14 that we've identified that, what your concern is? 15 A. As I said, there were different concerns 16 depending on whether the -- the bonds were -- were 17 prioritized. 18 Q. And we're talking about now if they are 19 prioritized? 20 A. Yes. 21 Q. Please continue. 22 A. If they are prioritized, the historical revenue 23 from the hotel tax will be very close to -- to meeting 24 the annual debt service. 25 But outside of that, PKF has indicated an 15 1 operating loss on an annualized basis of $1.4 million 2 and I believe it's -- it's around a 38-year bond life. 3 If the bonds are not prioritized -- 4 Q. Well, let me just -- before we go to that, let 5 me ask for some clarification. 6 The total -- we've got Mr. Beckett's $3 million 7 debt service. 8 A. Yes. 9 Q. And then you have an operating loss, correct? 10 A. That is correct. 11 Q. And PKF says -- projects 1. 4 million, correct? 12 A. Correct. The -- 13 Q. So what's the total amount of tax revenues then 14 that would have to be generated to the Authority for it 15 to meet both its debt service and its operating loss, 16 assuming the accuracy of Mr. Beckett's projection of 17 debt service and PKF's projection of operating loss? 18 A. $4.405 million. 19 Q. Okay. Annually? 20 A. Every year for the next 38 years. 21 Q. Now, Mr. Beckett testified that he expects 22 continued growth in the hotel tax revenues into the 23 future, including some additional growth to the extent 24 that the Marriott hotel would attract people staying in 25 hotels who otherwise wouldn't be coming to Lancaster. 16 1 Do you have a view as to whether that is likely 2 to occur, this increase in growth? 3 A. I would anticipate that there would be some 4 increase in growth to specifically attend conventions 5 there, but the -- there have been hotels coming on-line 6 in the last five years that the tax has been in place 7 and -- and yet annualized growth has -- has only been 8 two and a half percent or basically that of inflation. 9 Q. Would you expect in any reasonable near time 10 frame for tax revenues to go -- that go to the Authority 11 to reach $4.1 million? 12 A. I would not anticipate that. It would be -- 13 that would be phenomenal growth. 14 Q. I'm sorry. I should have said $4.4 million. 15 That would be even more phenomenal? 16 A. Either one would be phenomenal growth. 17 Q. And by phenomenal, what do you mean? Do you 18 mean great or do you mean hard to believe? 19 A. It would require either many, many, many more 20 motels being built which -- which would not cannibalize 21 existing motels or -- or a huge rate in room night 22 charges. It would be a Disney World-type of growth. 23 Q. And as county treasurer, do you have any basis 24 to expect that type of growth? 25 A. No, I don't. 17 1 Q. Is PKF the only entity that's projecting 2 operating losses for the Convention Center Authority? 3 A. No, they are not. 4 Q. Is anyone that you're aware of not projecting 5 operating losses for the Convention Center Authority? 6 A. Not that I'm aware of. 7 Q. Is there a difference in the extent of 8 projected losses? 9 A. There is a difference in the extent of 10 projected losses. The Johnson memo indicates a loss of 11 about a million dollars a year, I believe. 12 Q. Well, I'll represent to you, Mr. Beckett 13 testified yesterday that's what he would look for, also, 14 about a million dollars a year. 15 Does that make you comfortable or do you still 16 have concerns if the loss would be a million dollars a 17 year? 18 A. Well the Johnson report, if I recall correctly, 19 had a gross food and beverage number of about 20 $1,295,000, which I believe would only result in about 21 $65,000 a year in revenue to the convention center and 22 -- and really create an additional $300,000 gap, which 23 would be added to the $1.1 million and -- and the total 24 would be 1.3 based on their information. 25 Q. Okay. Well, let's -- if I can direct you to 18 1 the large notebook with exhibits from the preliminary 2 injunction hearing. If you would go to tab 18. 3 And if you would turn to the fifth sheet from 4 the back on tab 18. 5 MR. KELIN: May I approach, Your Honor, just to 6 make sure the witness has the right page? 7 THE COURT: Yes, you may. 8 BY MR. KELIN: 9 Q. I addressed this yesterday with Mr. Beckett, 10 and he identified this as some analysis that had been 11 done as part of the answers to the 57 questions. 12 Did you review this at that time? 13 A. I did read the answers to the 57 questions, 14 yes. 15 Q. And if you look about a third of the way from 16 the bottom of the waterfall projection and if you see 17 food and beverage and you look at the right-hand column 18 of what Mr. Beckett called the stabilized year, he's got 19 projected revenues of $378,121. 20 Do you see that? 21 A. Yes, I do. 22 Q. Is that what you were referring to in your 23 testimony as Mr. Beckett's projection? 24 A. Yes. 25 Q. And you had said that the -- the Johnson report 19 1 had a different projection. Would you look at Exhibit 2 53 in the small notebook, which is the draft memo by the 3 Johnson firm; is that correct? 4 A. Yes. 5 Q. All right. If you would turn to table 10, and 6 if you'd look at the top line item, under operating 7 revenue, where it says food and beverage, gross, and 8 then if you go to the fifth year, the stabilized year, 9 it says the gross is about $1.3 million? 10 A. Correct. 11 Q. Okay. And you said you believe that -- you 12 just testified you believe that will generate about 13 $65,000 of revenue to the Convention Center Authority, 14 correct? 15 A. $65,000 will be generated based on 1.295. 16 Q. And how did -- why do you use that? What did 17 you use to derive that number? 18 A. Knowledge that the food and beverage agreement 19 is a five percent commission on gross. 20 MR. KELIN: Your Honor, if I may, I want to 21 give the witness -- give the Court, I've already given 22 it to opposing counsel, a copy of the food and beverage 23 agreement. 24 THE COURT: All right. 25 BY MR. KELIN: 20 1 Q. Mr. Ebersole, can you please identify Exhibit 2 63? 3 A. Exhibit 63 is a disclaimer regarding the -- 4 the -- the website followed by what appears to be the 5 executive summary of the food and beverage agreement, 6 followed by the food and beverage agreement itself. 7 Q. And have you read the entire food and beverage 8 agreement, as well as the executive summary? 9 A. I have read the entire thing. 10 Q. Would you look first at the executive summary, 11 the first page under the heading key provisions, if you 12 come down to the bottom where it says payments to 13 Authority. Do you see that? 14 A. Yes, I do. 15 Q. Okay. Based on your reading of the entire 16 agreement, is the information in the summary, do you 17 believe, accurate with respect to what's contained in 18 the agreement itself? 19 A. Yes, I do. 20 Q. Okay. Can you explain to the Court what you 21 understand to be the terms of payment to the Authority 22 under this agreement? 23 A. My understanding would be that Penn Square 24 Partners is required to pay the Authority, meaning the 25 Lancaster County Convention Center Authority, five 21 1 percent of gross revenues generated by Penn Square 2 Partners for providing the catering services to the 3 convention center up to 7.3 million in gross, with such 4 amount to increase three percent and a revenue threshold 5 of 7.3 million 6 Q. Okay. And is there a higher commission paid to 7 the Authority if gross revenues exceed 7.3 million. 8 A. They do receive 10 percent if gross sales 9 exceed 7.3. 10 Q. But if they never exceed 7.3, the commission 11 remains at five percent of gross; is that your 12 understanding? 13 A. That is my understanding. 14 Q. All right. Looking at Mr. Beckett's number, 15 from his projection of $378,000 of revenue to the 16 Authority, what's the total amount of the revenue that 17 Penn Square Partners would need to realize for the 18 Authority, in sales on food and beverage, to generate 19 that sort of five percent commission? 20 A. About seven and a half million dollars in 21 sales. 22 Q. And that's about -- that's over $6 million 23 higher than CH Johnson projected in its stabilized year, 24 correct? 25 A. That is correct. 22 1 Q. And CH Johnson's numbers, as I said, would be 2 about $65,000 a year commission to the Authority, 3 correct? 4 A. Based on their number of 1.295. 5 Q. And is that what you meant by the $300,000 6 difference in Mr. Beckett's analysis as compared to the 7 Johnson analysis with regard to food and beverage 8 commission? 9 A. Yes. Yes. 10 Q. All right. So how does that -- does that 11 concern you with respect to Mr. Beckett's testimony that 12 he was already counting on needing a million dollars to 13 cover operating losses based on his projections? 14 A. Yes, it does. 15 Q. Why is that? 16 A. Well, the latest report from PKF, which is this 17 calendar year, indicates a loss, as we noted earlier, of 18 about $1.4 million. 19 If -- if Mr. Beckett testified that he 20 predicted a loss, an operating loss on-going of a 21 million dollars, but there is an additional $300,000 22 gap, if you will, in the food and beverage, then his 23 number really becomes a 1.3, which is very close to the 24 latest study we have saying 1.4, and all of that is over 25 and above the debt service of $3 million, which creates 23 1 risk. Risk that has not been truly defined and has not 2 been assigned. 3 Q. What do you mean by that? 4 A. No -- I'm not aware of anyone, any entity, 5 any -- anyone, any organization, who has stepped up to 6 the plate and said, if there is an operating loss of 1.3 7 million or 1.4 million or -- or north of that, for the 8 next 38 years, that we will cover that operating loss. 9 That would be out there for the -- the -- as long as 10 that debt service is out there, the 3 million will have 11 to go to that. 12 And so the operating loss will be over and 13 above, and somewhere, somehow, that money will have to 14 be found or the facility goes dark. 15 Q. Now, Mr. Beckett testified that if that occurs, 16 there would have to be, you know, decisions made in the 17 community about what to do, including the possibility of 18 a tax increase, either increasing the hotel room rental 19 tax or an increase of the general county tax to have the 20 moneys come from the general fund or, I think he said, a 21 zillion other options. 22 Do those kind of decisions cause you concern as 23 county treasurer? 24 A. Well, I would concur with him that -- that when 25 this occurs, as -- as opposed to if, tough decisions 24 1 would have to be made. 2 But I would much prefer to see that prior to 3 erecting all of this and doing all of this and then -- 4 and hoping that it works out down the road, that going 5 into it, if -- if -- if Beckett's number's at a million 6 and PKF is at 1.4, and -- and I merely choose to put the 7 $300,000 food gap on to Beckett's number yet, whether 8 it's 1.3 or $1.4 million, if we can agree on that, 9 and -- and it will be -- you know, one of the -- one of 10 the first things that's been agreed upon by everybody, 11 it would be refreshing, but if we can agree on that, 12 then let's assign it. 13 Let's decide where and how it will be taken 14 care of and -- and not push it down the road when -- 15 when all of us have either moved on to another project 16 or we've moved on to another office or we've moved on to 17 fishing and golfing. 18 But we're going to let this zillion decisions 19 for somebody to make down the road when we knew it was 20 going to be there and we chose to do nothing about it. 21 Q. Do you have any concern with the kind of 22 impact, having to make those decisions, would have on 23 the county and this community? 24 A. I do. This project has a lot of good people 25 on -- on -- on both sides, if you will. A lot of good 25 1 people who believe this is good for the City of 2 Lancaster, a lot of good people who have looked at it 3 and questioned, not the project, but the funding 4 mechanism, the funding structure. 5 And there have been lawsuits, as we know, filed 6 by both sides. It's been bitter. It's been difficult 7 for a lot of parties on both sides. And when the 8 operating loss exceeds all revenue received, I believe 9 that there will be an incredible amount of pressure 10 brought to bear for government to step in again and do 11 something, rather than let a $160 million facility sit 12 empty. 13 Whether that's the general fund, an increase of 14 taxes, however it's handled, it will affect us, but, 15 more importantly, it will affect our children and 16 grandchildren. 17 Q. And do you have any concern as to whether that 18 debate would impose harm on the county and the 19 community? 20 A. Well, the debate wouldn't cause harm on the 21 county. The -- whomever is in the various offices at 22 that time, county commissioner, the mayor, council, on 23 the Authority board, I believe it will be an incredible 24 tug of war to keep that facility open, and those 25 operating losses, because they were never assigned, 26 1 will -- will then fall on someone, most likely a 2 government entity, to bail it out. 3 Q. Would you have any anticipation with regard to 4 the type of bitterness and divisiveness in the community 5 that we've been experiencing, whether that would again 6 arise? 7 A. It's been a tough couple of years. Once it is 8 built and -- and sitting there, the -- the threat of it 9 going dark because electric or heating or what have you, 10 bills, operating bills can't be met, Beckett said it 11 will make for some really tough decisions. He's 12 correct. It really will. 13 And -- and that's why it's more important than 14 ever that -- that we, who are here and now, make sure 15 that this risk is both defined and assigned. 16 Q. Now, you've testified about concerns you have 17 if there is prioritization of the debt service in terms 18 of paying -- using the tax revenues to first pay the 19 debt service before operating expenses. 20 What if Mr. Beckett's plan doesn't materialize 21 and they sell -- the Authority sells the bonds as he's 22 discussed, but there's no prioritization of payment? 23 What type of concerns would you have under those 24 circumstances? 25 A. If they're not prioritized? 27 1 Q. Yes. 2 A. Then debt service and operating loss basically 3 become one co-mingled expense. And at that juncture, it 4 would be very difficult -- well, if the operating 5 expense continued to -- to churn along as projected, 6 whether by Johnson or PKF, then it's -- it's likely that 7 the -- there would not be sufficient funds to cover the 8 debt service, because it's now one co-mingled kitty of 9 money. 10 Q. And what would happen under those 11 circumstances? 12 A. Under those circumstances, the trustee would -- 13 would direct that I pull the 20 percent from the 14 Visitors' Bureau, that is coming out of the 3.9 percent, 15 to pay for bonds that are in default. 16 Q. And do you have any concern over the 17 consequences of that action? 18 A. Yes. The -- the 20 percent out that have 3.9 19 percent that goes to the Visitors' Bureau is to market 20 conventions here in Lancaster City and Lancaster 21 County. 22 And if they no longer have that 20 percent 23 revenue to market the conventions, then either marketing 24 does not occur at the same level or the Convention 25 Center Authority themselves would have to increase their 28 1 marketing budget, conceivably adding to larger operating 2 losses. 3 Q. Could you please turn to Exhibit 54, please. 4 Can you identify this document, please? 5 A. Yes. This is an information sheet about the 6 project on the Convention Center Authority's website. 7 Q. Would you please turn to the second page under 8 the heading in the middle of the page, convention center 9 project funded with hotel room tax. 10 Do you see that, sir? 11 A. Yes, I do. 12 Q. Okay. If you'd look at the second sentence, 20 13 percent of this funding is distributed to the 14 Pennsylvania Dutch Convention and Visitors' Bureau to 15 promote Lancaster County as a convention and meeting 16 destination. 17 Do you see that? 18 A. Yes, I do. 19 Q. Is that what you were referring to as your 20 understanding of the Visitors Bureau's use of the 21 proceeds from the tax? 22 A. Yes. 23 Q. And your concern was that if the Visitors 24 Bureau doesn't have those funds -- would you explain 25 again? I'm sorry. 29 1 A. Well, if the Visitors' Bureau doesn't have that 2 20 percent to do marketing of conventions here in 3 Lancaster City and Lancaster County, then either the 4 marketing effort will suffer or it has to be reassigned, 5 either out-sourced, with an expense associated with 6 that, or the Convention Center Authority can -- can -- 7 when they get that 20 percent, can do their own 8 marketing, but it will add to their operating expense. 9 Q. All right. And if they already have an 10 operating loss and they have added operating expenses, 11 what will happen? 12 A. Well, a negative number with more expense put 13 to it is simply a larger negative number. 14 Q. So would that add to your concern? 15 A. Yes, it does. 16 Q. And what if the Visitors' Bureau doesn't do the 17 marketing and the convention center doesn't do it and no 18 one does it, would you have any concerns then? 19 A. Well, if no one does it, then it's simply a 20 potential for a downward spiral of less revenue, less 21 money to work with, and less marketing and we just keep 22 going in that direction. 23 MR. KELIN: Thank you, sir. No further 24 questions, Your Honor. 25 MR. PITTINSKY: Your Honor, may I approach the 30 1 bench? 2 THE COURT: Certainly. 3 MR. PITTINSKY: And present you with 4 Mr. Ebersole's deposition transcript? 5 THE COURT: All right. Thank you. 6 MR. PITTINSKY: Mr. Ebersole, here is a copy of 7 your deposition transcript. 8 THE WITNESS: Thank you. 9 MR. PITTINSKY: I assume you have it, 10 Mr. Kelin. 11 MR. KELIN: I do. Thank you, sir. 12 CROSS EXAMINATION 13 BY MR. PITTINSKY: 14 Q. Just by way of background, Mr. Ebersole, am I 15 correct that it was only in the last two weeks that 16 Mr. Kelin asked you to be a witness in this proceeding? 17 A. That is correct. 18 Q. All right. Had you expressed the concerns that 19 you've expressed here today to Commissioners 20 Shellenberger and Henderson prior to the time that 21 Mr. Kelin asked you to be a witness? 22 A. I had expressed concerns to the commissioners, 23 Mr. Kelin, the media, public meetings, yes. 24 Q. I'm talking about the concerns you expressed 25 today? 31 1 A. Yes. 2 Q. All right. So you expressed them to Mr. Kelin 3 and to Commissioners Shellenberger and Henderson prior 4 to the last two weeks? 5 A. Yes, sir. 6 Q. All right. And am I correct that you have been 7 following the disputes over the convention center since 8 you've been elected to be treasurer? 9 A. What do you mean by following? 10 Q. Well, isn't it a fact that you know that 11 Commissioners Shellenberger and Henderson oppose the 12 convention center project? 13 A. Do I know that? Yes, sir. 14 Q. All right. And you know that at a minimum from 15 just reading the newspaper, correct? 16 A. Well, I knew it before from talking to them. 17 We work in the same building. 18 Q. All right. Well, do you know that they passed 19 Resolutions 36 and 37? 20 A. Not until you brought it up the other day at 21 deposition. 22 Q. So when I brought that up at the deposition on 23 September 26th, that was the first time you knew that 24 Commissioners Shellenberger and Henderson had passed 25 resolution 36 and 37? 32 1 A. That they had passed them? Yes, sir. 2 Q. Yeah. Would you look, please, at Exhibit 58. 3 Oh, by the way, Mr. Kelin referred to your 4 position at Morgan Stanley. You were a stockbroker, 5 correct, at Morgan Stanley? 6 A. I was a financial advisor; 50 percent of my 7 book of business was retail; and 50 percent was 8 institutional investors. 9 Q. All right. But you were a stockbroker? 10 A. Well -- 11 Q. Right. 12 A. It was stocks and bonds and, you know, 13 investment trusts and annuities and managed money, 14 mutual funds. It wasn't limited to stocks. 15 Q. Fair enough. 16 But I meant you provided investment advice? 17 A. Yes, sir. 18 Q. You were not a financial administrator? 19 A. Correct. 20 Q. Would you look, please, at Exhibit 58. 21 A. Yes. 22 Q. And you see there that Mr. Kelin forwarded an 23 e-mail to me on September 25th telling me that you would 24 be a witness and telling me -- and as well Fenningham, 25 that you would testify regarding the injury that would 33 1 result to the county and its taxpayers from the granting 2 of the injunction; specifically, you will address the 3 risk to county taxpayers and the risk of losing 4 Visitors' Bureau funding to market the convention center 5 and other attractions. 6 Now, do you remember when I showed you this 7 exhibit at your deposition? 8 A. Yes, I do. 9 Q. All right. And remember when I asked you to 10 testify as to your opinion as to the risk of losing 11 Visitors Bureau funding? Do you remember that? 12 A. Yes, I do. 13 Q. And do you remember that the risk that you 14 identified, when I asked you about that risk, was the 15 risk that after the convention center was constructed, 16 if the convention center had an operating loss, there 17 would be a risk of losing the Visitors' Bureau funding 18 because of that operating loss? Do you remember that 19 testimony? 20 A. Yes, I do. 21 Q. All right. And you're not saying that here 22 today, are you? 23 A. No. 24 Q. Right. So that is -- you've changed your 25 testimony, correct? 34 1 A. No. At deposition, you pointed out to me where 2 I was wrong. 3 Q. All right. 4 A. And you were right. 5 Q. All right. So you -- and, in fact, you did not 6 even know, you, the treasurer -- the treasurer of 7 Lancaster County, you did not know until your deposition 8 on September 26th, that the Visitors' Bureau funding, 9 the 20 percent of the hotel room rental tax revenues 10 that go to the Visitors' Bureau that that could not be 11 diverted, could not be diverted to the convention center 12 project for an operational loss. That's correct. 13 You didn't know that up until September 26th, 14 correct? 15 A. I had not properly interpreted -- 16 interpreted -- thank you -- I had not properly 17 interpreted that legal paragraph of that ordinance. 18 You're correct. 19 Q. Well, you say it's a legal paragraph. It was 20 written in plain English, wasn't it? 21 A. Well, it's written in English, yes. 22 Q. Nothing legal about it, is there? 23 Would you look at Exhibit 3? It's in the large 24 binder, please. 25 MR. PITTINSKY: Your Honor, I'm presenting to 35 1 the witness Ordinance 45. 2 BY MR. PITTINSKY: 3 Q. And would you turn, please, to page 6. 4 At your deposition, I showed you Section C-2 5 and Section D-1 of Ordinance 45 on page 6. 6 Do you recall that? 7 A. Yes, I do. 8 Q. All right. And Section C-2, which is a 9 paragraph dealing with the 20 percent that goes to the 10 Visitors' Bureau, correct? 11 A. Correct. 12 Q. States that: Provided, however, that if an 13 event of default has occurred, and is continuing with 14 respect to any bonds, notes or other indebtedness of the 15 Authority incurred to finance the construction of the 16 convention center, 100 percent of the revenues received 17 from the Lancaster County Hotel Room Rental Tax shall be 18 deposited by the treasurer in the Convention Center 19 Authority fund, correct? 20 A. Correct. 21 Q. And that's repeated in Section D-1, correct? 22 A. I'm sorry? 23 Q. It's repeated, that -- 24 A. In Section? 25 Q. D-1. It states, provided that no event of 36 1 default has occurred and is continuing with respect to 2 any bonds, notes or other indebtedness of the Authority 3 incurred -- 4 A. Yes. 5 Q. -- to finance the construction of the 6 convention center. Correct? 7 A. Correct. 8 Q. All right. So -- so you now know, as of 9 September 26th, that you can't use that 20 percent from 10 the Visitors' Bureau, that goes to the Visitors' Bureau, 11 you can't divert it -- 12 A. Correct. 13 Q. -- to the Authority because of an operational 14 loss, correct? 15 A. Correct. 16 Q. Right. 17 Now, you rely in part on that PKF study, am I 18 correct? 19 A. In part, yes. 20 Q. So let's turn to that. 21 A. Do you know a tab number? 22 Q. That's in the small binder. Exhibit 52. 23 A. Thank you. 24 Q. Now, just by way of background, you haven't 25 talked to PKF about their study, correct? 37 1 A. I have since our deposition. 2 Q. Oh, you have since our deposition. 3 Well, all right, tell us what you have 4 discussed with them since our deposition. 5 A. I apologize. Is your question have I talked to 6 them about their study or did I talk to them during the 7 time they were conducting their study? 8 Q. No. My question was -- well, what have you 9 talked to them about since our deposition? 10 A. Your question on whether or not the -- his 11 question to me at deposition as to whether or not the 12 multiplier should have been three or nine or some other 13 number. 14 Q. All right. So you were -- that was something 15 that had never occurred to you before, correct? 16 A. I accepted their multiplier of three. 17 Q. You were so disturbed by my question that you 18 thought you better get some clarification, correct? 19 A. No, sir. 20 Q. Well, why did you call them? 21 A. You had the question, I anticipated you would 22 have it again, and I wished to have an answer for you. 23 Q. All right. Well, let's go over what the 24 question was. 25 A. Okay. 38 1 Q. All right. Would you turn, please, to page 2 II -- Arabic five. 3 THE COURT: I'm sorry. What are you referring 4 to? 5 MR. PITTINSKY: Exhibit 52, Your Honor. 6 THE COURT: Oh, I thought you were referring to 7 his deposition testimony? 8 MR. PITTINSKY: No. 9 THE COURT: Oh, okay. 10 BY MR. PITTINSKY: 11 Q. All right. You understand from this page, 12 Roman Numeral 2 -- 5 that PKF looked at two markets, 13 correct? 14 Do you see them saying they looked at the 15 regional convention center facilities market? 16 A. I see they looked at -- 17 Q. Convention center competitive market one, do 18 you see that? 19 A. Right. But -- but -- but market one includes, 20 like, five different regions. 21 Q. I understand that. 22 A. Okay. 23 Q. But I'm just saying they looked at two markets, 24 one was the regional convention center facilities 25 market, which they call convention center competitive 39 1 market one, correct? 2 A. Yes. 3 Q. And hotels with significant meeting space in 4 southeastern Pennsylvania, which they call convention 5 center competitive market two, correct? 6 A. Yes. 7 Q. And then if you go to the next page, they say 8 in the middle of the page they conducted survey research 9 of potential demand from both association and corporate 10 meeting planners. 11 Do you see that? 12 A. Yes. 13 Q. And do you remember I asked you about that, 14 correct? 15 A. I remember you asked me about the multiplier. 16 Q. Right. Right. Well, this is where it starts. 17 A. Okay. 18 Q. They talked about having mailed out a survey to 19 500 associations in the regional market area, correct? 20 A. Correct. 21 Q. All right. And that they received responses 22 from 45 of the 500, correct? 23 A. That is correct. 24 Q. And that that represented nine percent of the 25 500, correct? 40 1 A. Yes, sir. 2 Q. And that 19 of the 45 respondents indicated a 3 willingness to utilize the proposed facility in downtown 4 Lancaster, correct? 5 A. Yes. 6 Q. And we went over this in your deposition, 7 correct? 8 A. Yes, we did. 9 Q. All right. And then -- 10 A. That's why I checked on it. 11 Q. Right. Well, we'll get to that. 12 And then they came up with usage data, which is 13 on page II-7, correct. 14 A. Yes. 15 Q. Which was based on the responses they received 16 from the 45 association representatives, correct? 17 A. Correct. 18 Q. And the fact that 19 of those 45 indicated a 19 willingness to utilize the proposed convention center in 20 the City of Lancaster, correct? 21 A. Correct. 22 Q. And then they said on page 2-7, that because 23 they only got the responses from 45 associations, they 24 say under the first bullet point, the second sentence, 25 we are of the opinion that this number should 41 1 conservatively be tripled in quantity to account for 2 non-responders, right? 3 A. Yes, sir. 4 Q. And I said to you, well, why is it if they only 5 got responses from nine percent, were they multiplying 6 their numbers by three to give them 27 percent instead 7 of multiplying by 11 to, in fact, give them 99 percent 8 to account for the non-responders, right? 9 A. Correct. 10 Q. And you had no objection that? 11 A. That is correct. 12 Q. You couldn't explain it? 13 A. Nope. 14 Q. And all the time you've had this report, that 15 never occurred to you up until now, up until September 16 26th? 17 A. I did not inquire as to why they used three as 18 a multiplier. 19 Q. And you agreed with me that these numbers are 20 fairly important, because they're factored into their 21 numbers producing that million four loss on an annual 22 basis, correct? 23 A. Correct. 24 Q. All right. So now tell us what you did to try 25 to achieve clarification on this issue? 42 1 A. I called Mr. Dave Arnold at PKF. He was in a 2 meeting. I left a voicemail with our question as to why 3 you used a multiplier of three. I didn't tell him nine, 4 I just said why was it three, why not a different 5 number? He called me back. I was in a budget meeting. 6 And he left a voicemail for me that said, based on the 7 blind survey that they did -- these are his words -- 8 based on the blind survey that they did and the number 9 of responses they received, that is their professional 10 opinion that the multiplier of three is the most 11 appropriate number. 12 Q. Just so our record is clear, who is 13 Mr. Arnold? I mean obviously he's with PKF. 14 A. I believe he's a principal of PKF. 15 Q. Fine. That's all. 16 So he just said basically that's his opinion of 17 what the multiplier should be? 18 A. No, he said it's our professional opinion. 19 Q. All right. It was his professional opinion of 20 what the multiplier should be, correct? 21 A. Correct. 22 Q. Now, you agree with me that they got responses 23 from 45 of the 500, correct? 24 A. Right. Nine percent. 25 Q. Nine percent. And they didn't just take 43 1 everything from the nine percent, because they 2 determined that only 19 of the 45 would actually use -- 3 indicated a willingness to use -- 4 A. A willingness to use. 5 Q. -- the convention center, correct? 6 A. Yes, sir. 7 Q. So now having determined that, and having 8 determined nine percent, even though multiplying by 9 three only gets you to 27 percent -- 10 MR. KELIN: I'm -- 11 MR. PITTINSKY: I haven't finished the 12 question. 13 MR. KELIN: I object. 14 MR. PITTINSKY: I haven't finished the 15 question. 16 MR. KELIN: I thought you had. 17 MR. PITTINSKY: You're entitled to object after 18 I finish my question. 19 MR. KELIN: Maybe it will get better. Go ahead 20 and finish. 21 MR. PITTINSKY: Well, I think my math is better 22 than PKF's. 23 BY MR. PITTINSKY: 24 Q. Multiplying by three only gets you to 27 25 percent. Even though that only gets you to 27 percent, 44 1 their opinion is that in order to determine what the 2 usage will be for this market, based on their mail 3 survey, they take 27 percent and not 99 percent to do 4 that, correct? 5 A. That's what they have indicated. 6 Q. All right. Now -- and when they did it, they 7 did the same thing -- if you go to the bottom of Roman 8 Numeral 2-7, they said in the mail survey on that page, 9 they said they sent the mail survey to 308 corporate 10 meeting planners in the regional market area, primarily 11 concentrated in Pennsylvania and New Jersey, correct? 12 A. Yes. 13 Q. And they said they received surveys from 35 14 corporate meeting planners, correct? 15 A. Yes. 16 Q. Constituting 11 percent? 17 A. 11.4 it says. 18 Q. Right. And they said 10 of the 35 indicated a 19 willingness to utilize the convention center in the 20 city, correct? 21 A. Correct. 22 Q. And then again, even though that was only 11 23 percent, they again used, if you look under the chart on 24 the first bullet point on 2-A, they again conservatively 25 say they multiplied it by three, correct? 45 1 Do you see that first bullet point? 2 A. I do. 3 Q. On 2-A they say as previous table indicates? 4 A. Yes. 5 Q. The response? 6 A. We are of the opinion the number could 7 conservatively be tripled in quantity I think. 8 Q. So they tripled 11 percent to 33 percent, 9 correct? 10 A. Correct. 11 Q. Right. And again, you had no answer for why 12 they did that at the deposition, correct? 13 A. Correct. 14 Q. And now you know that they said that's their 15 professional opinion? 16 A. Correct. 17 Q. All right. Now, as an investment advisor for 18 10 years at Morgan Stanley, I'm sure you frequently 19 found that companies were making projections all the 20 time of their future earnings? 21 A. Yes. 22 Q. And is it fair to say that those projections 23 were always estimates of their future earnings? 24 A. That's what they were called. 25 Q. Right. And is it fair to say that frequently 46 1 they proved to be wrong? 2 A. Plus and minus. 3 Q. Yes. Sometimes they were higher; sometimes 4 they were lower, correct? 5 A. That's fair. That's fair. 6 Q. And sometimes they were off by a lot and 7 sometimes they were off by a little, correct? 8 A. More times off by a little than a lot. 9 Q. All right. But frequently wrong? 10 A. Yes. 11 Q. And that -- 12 A. Not to the penny on an earnings per share. 13 Q. And that's not surprising to you, because 14 they're estimates, correct? 15 A. Yes. 16 Q. That's the nature of an estimate, correct? 17 A. Yes. 18 Q. Now, do you recall -- well, let me put it this 19 way. 20 You recall your deposition when you testified 21 that you were just speculating when you expressed your 22 concern that the county taxpayers would be compelled to 23 cover an operational loss at the convention center 24 because you had no idea what politicians would do in the 25 future? Do you remember that testimony? 47 1 A. I do remember saying that I had no idea what 2 politicians would do in the future. I believe my 3 speculation was based upon knowing that there was a risk 4 that had not been assigned. 5 Q. Well, let's look at your testimony. Would you 6 turn, please, to page 43 and first, I asked you if you 7 remember whether -- 8 MR. KELIN: Excuse me. What line are you 9 looking at? 10 MR. PITTINSKY: I'm sorry, line eight. 11 BY MR. PITTINSKY: 12 Q. I had been asking you whether the politicians 13 would pass a new tax to cover any operational loss at 14 the convention center. 15 Do you remember that? 16 A. Yes. 17 Q. All right. And there I said at line eight, so 18 you don't think if they were in office when the 19 Authority was losing money that they are not going to 20 pass any tax to help out the operational losses for the 21 convention center, are they? And your answer was: I 22 have no idea. 23 Correct? 24 A. Yes. 25 Q. And you stand by that testimony? 48 1 A. Yes. 2 Q. And then page 44, line 3, page 44, I said: But 3 then, if I understand you yourself admit, if I 4 understand what you're now saying, that you cannot 5 predict what a politician who is in office may do at 6 some point in the future and your answer was: That's a 7 fair statement. Correct? 8 A. Yes. 9 Q. And you stand by that testimony? 10 A. Yes. 11 Q. And then I asked you at page 45, line 13, but 12 you're speculating -- my question was: But you're 13 speculating. You're speculating when you suggest that 14 the county taxpayers are going to have to cover some 15 operational loss since you, yourself, admit that you 16 don't know what politicians are going to do in the 17 future about any operational loss. Correct? 18 Mr. Kelin said: Objection to the form. 19 You said: What does that mean? His 20 objection. What does that mean? 21 Mr. Kelin said: I'm objecting, because I don't 22 like -- it's a trick question. So I'm objecting. But 23 answer it if you can. 24 And I said: Would you like it read back or do 25 you have it in mind? 49 1 And you said -- you said: I have to 2 speculate -- about the question -- you're referring to 3 the question clearly and you said, read it back. 4 And the reporter read back the question. 5 And you said: Correct. I don't know what 6 politicians will do near term or far term. This is a 7 long project and the speculation, as you choose to call 8 it, is based upon where we're at in this project and no 9 one has kind of stood up and raised their hand and said, 10 I will assume that risk. 11 So you agree with me that it was speculation, 12 correct? 13 A. That what was speculation? 14 Q. When -- the speculation that you -- when you 15 suggest that the county taxpayers are going to have to 16 cover some operational loss since you admit that you 17 don't know what politicians are going to do in the 18 future about any operational loss? That's speculation 19 on your part, correct? 20 MR. KELIN: Excuse me. I just want to object. 21 He's trying to argue with Mr. Ebersole to buy into the 22 word speculation, which Mr. Ebersole didn't do at the 23 deposition. He said, you're using the term 24 speculation. I think Mr. Ebersole is quite clear in his 25 testimony, he doesn't know what politicians are going to 50 1 do. He didn't buy into the speculation now and now 2 Mr. Pittinsky is going to argue with him that he should 3 adopt the word speculation here. It's just 4 argumentative and really nonproductive. 5 Mr. Ebersole has already acknowledged he 6 doesn't know what politicians are going to do. 7 THE COURT: Well, we're really playing with 8 trifles here, because in my opinion, it is speculation. 9 It sounds that way to me. I mean, what's -- 10 speculation -- you are being argumentative, though, 11 Mr. Pittinsky, I will have to say that. 12 MR. PITTINSKY: Well, I -- argumentative to 13 make my point, Your Honor. 14 THE COURT: I understand. And you've made your 15 point. 16 MR. PITTINSKY: Thank you. Thank you. 17 BY MR. PITTINSKY: 18 Q. Now, you recall that you raised at the 19 deposition a concern about the fact that you didn't know 20 how this -- the city or the county would fair if they 21 had to close down the convention center because of the 22 operational losses, do you remember that? 23 A. Yes. 24 Q. Is that still a concern or is that no longer a 25 concern? 51 1 I didn't hear you mention that in your direct 2 testimony with Mr. Kelin, so I'm just wondering whether 3 that's still a concern? 4 A. If your question is, if I'm concerned how the 5 city or the county will be impacted if the convention 6 center were opened and later had to close, am I 7 concerned about that? 8 Q. Yes. 9 A. Yes, sir. 10 Q. Right. Well, do you recall at your deposition, 11 the concern you expressed was that there would not be 12 money generated from the sale of the property once it 13 closed down. Do you Remember that? 14 A. No, I didn't say that. 15 Q. You didn't say that? 16 A. I didn't say there wouldn't be money 17 generated. You and I had a discussion on whether it 18 would be worth more now or then, and I believe my answer 19 was that an investment, a piece of property or -- or 20 anything else, is really valued by the person who is 21 willing to buy it. 22 Q. Well, you -- you, yourself, don't know, sitting 23 here today, what anyone would pay for this property if 24 they were not building the convention center at all, 25 right? 52 1 A. No, I don't. 2 Q. And you certainly don't know what anyone would 3 pay in the future if they had to close it down? 4 A. Correct. 5 Q. For that property, correct? 6 A. That is correct. 7 Q. Now, if we could turn back to the PKF study, 8 and if you would, please, turn to page II, 4 that's tab 9 52. 10 A. Yes. 11 Q. All right. And do you remember we discussed, 12 among other things, RevPAR? 13 A. Yes. 14 Q. Why don't you tell us what RevPAR is? It's 15 capital R, small EV, capital P, capital A, capital R and 16 you'll see it on the charts on that page, Your Honor, in 17 the far right-hand column. 18 Why don't you tell the Court what RevPAR is? 19 A. RevPAR is revenue per available room night. 20 Q. And that's viewed by the hotel industry as a 21 pretty accurate barometer of how the hotel industry is 22 doing, correct? 23 A. Yes. 24 Q. And, in fact, you said in your deposition 25 twice, twice in your deposition, you said RevPAR is 53 1 joined at the hip with the hotel room rental tax 2 revenues. 3 A. I believe I said it once and you said it once, 4 but yeah. 5 Q. You're not disputing that? 6 A. No. 7 Q. All right. And would you explain why they're 8 joined at the hip? 9 A. The tax is a percentage tax. It's -- not a $5 10 per room tax. It's 3.9 percent and 1.1 percent on the 11 hotels of the cost of the room. 12 And so as RevPAR increases, the tax will 13 increase, because it's a percentage thereof. 14 Q. Now, I recognize -- I recognize and I know you 15 recognize, that the figures on this page, Roman Numeral 16 2-4 are basically figures that were presented to Smith 17 Travel; is that correct? 18 A. PKF notes that Smith Travel, as well as 19 themselves, PKF, are the source of the information. 20 Yes. 21 Q. Correct. So it's for those -- it's not for 22 everyone, but it's for the people who responded to Smith 23 Travel and PKF that these figures -- 24 A. Right. It's for those who voluntarily 25 responded to Smith Travel's survey. 54 1 Q. Right. Right. And their figures show that 2 from 2003 to 2005 for competitive market one there was a 3 growth of 6.1 percent in RevPAR, correct? 4 A. That's what their rear-looking estimates show. 5 Q. And for the competitive market two, that there 6 was a 5.9 percent, correct? 7 A. Same thing, yes. 8 Q. And so that is indicative that when you look at 9 our hotel room rental tax revenues here in the county, 10 they should also be going up over that period of time, 11 correct? 12 A. Yes. 13 Q. And if you look at Exhibit 51, am I correct 14 that the 80 percent, the 80 percent of the hotel room 15 rental tax that went to the Authority for the year, the 16 calendar year 2000, was $2,819,874? 17 A. And 76 cents. 18 Q. And am I correct that that went up in 2001 to 19 $2,938,458? 20 A. Yes. 21 Q. And am I correct that that went up in 2002 to 22 $3,019,442? 23 A. Yes. 24 Q. And that it went down, and this is the only 25 year it went down, in year three to $2,950,144? 55 1 A. Yes. 2 Q. And then in 2004 it went up to $3,150,399, 3 correct, for the year 2004. You do not have the year 4 2004? 5 A. I'm looking. 6 Q. Did you replace it there, Mr. Kelin? 7 MR. KELIN: I still think there's a page 8 missing from the corrected version. 9 MR. PITTINSKY: Well, I have copies. I have 10 copies. Let me present you. 11 MR. KELIN: Thank you. We're going to get this 12 exhibit right before we close the record, Your Honor. 13 THE WITNESS: Thank you. 14 MR. PITTINSKY: I think we have to strike from 15 the record the previous comment of Mr. Kelin. 16 BY MR. PITTINSKY: 17 Q. Do you have 2004 in front of you now, sir? 18 A. Yes. 19 Q. And am I correct that it went up to $3,150,399 20 that year? 21 A. You are correct. 22 Q. And that, in fact, was higher -- not only 23 higher than 2003, but also higher than 2002? 24 A. Yes. 25 Q. And then in 2005, it went up to $3,283,868, 56 1 correct? 2 A. Yes. 3 Q. And now this year -- this year we know that 4 through the first seven months, it's at $1,768,329, 5 correct? 6 A. Correct. 7 Q. And you testified earlier under direct 8 examination by Mr. Kelin that that's higher than it was 9 for the first seven months of 2005, correct? 10 A. Year after year it's up about one and a half 11 percent. 12 Q. So you don't -- you don't quarrel with the idea 13 that there's a trend of the hotel room rental tax going 14 up from year to year, correct? 15 A. No. I believe I do. 16 Q. You say it's not going to keep going up? 17 A. No, I didn't say that. 18 Q. Well, that's what I just asked you? 19 A. I quarrel -- quarrel, I don't quarrel -- at the 20 deposition, I believe I said to you that the numbers for 21 '04 and '05 were skewed by the collection of 22 delinquencies. 23 Q. Well, but you've told me that the numbers for 24 2006, for the first seven months, are higher than they 25 were for the first seven months of 2005. 57 1 A. That is correct. 2 Q. All right. 3 A. One and a half percent year over year. That is 4 correct. 5 Q. So -- so there's still a trend of going up, 6 correct? 7 A. Yes. 8 Q. All right. And that's without consideration of 9 the additional -- the incremental hotel room rental tax 10 revenues that will be attributable to the Marriott hotel 11 when it opens in the City of Lancaster, correct? 12 A. That is without their revenue but with revenue 13 of motels that came on-line since the inception of the 14 tax. 15 Q. Right. But do you -- is it your testimony that 16 the motels or hotels that have come on-line since the 17 inception of the hotel room rental tax are the same in 18 quality caliber as the Marriott hotel is going to be in 19 the City of Lancaster? 20 A. One would be. 21 Q. Which one? 22 A. The arts. 23 Q. Which one? 24 A. The arts hotel. 25 Q. You think that's of the same caliber and 58 1 quality as the Marriott hotel that is going to be built 2 here in the City of Lancaster? 3 A. If you're asking my opinion? 4 Q. Yeah, that's fine. 5 A. Yeah. 6 Q. And how many rooms are in that hotel? 7 A. I believe there are 60. 8 Q. Sixty? 9 A. I believe so. 10 Q. So that's the only hotel you would point to 11 that is similar to the Marriott hotel? 12 A. Well, the Courtyard that came on-line recently 13 is similar. It's one flag down. 14 Q. One flag down. All right. So your basic 15 disagreement with Mr. Beckett's testimony at this point 16 is that you don't think the growth rate will be as great 17 as he says it will be in the hotel room rental tax, 18 correct? 19 A. I'm not sure I heard Mr. Beckett's testimony 20 regarding hotel growth rate. 21 Q. Well -- 22 A. I mean, I heard Mr. Kelin tell me that he 23 testified to a million dollars loss. I do not recall if 24 he told me what Mr. Beckett said he anticipates the 25 hotel growth rate will be. 59 1 Q. Fair enough. And you haven't gone back and 2 read Mr. Beckett's deposition testimony, correct? 3 A. No, I haven't. 4 Q. And you -- you haven't had the opportunity to 5 read his trial testimony, correct, because he testified 6 yesterday? 7 A. No. 8 Q. And you didn't ask Mr. Kelin about that 9 subject? 10 A. No, I didn't. 11 MR. PITTINSKY: Now, I don't really want to 12 quibble with the witness, Your Honor. 13 THE COURT: That's -- but -- 14 BY MR. PITTINSKY: 15 Q. But -- but -- but you -- when I asked you if 16 you said that RevPAR was joined at the hip with the 17 hotel room rental tax revenues twice, you said, oh, no, 18 I used it once, and you used it once. 19 Do you remember that? 20 A. Yes, I know I used it at least once. I know 21 you used it once; and if I used it twice, then I used it 22 twice. 23 Q. I mean, take my word for it that you said it 24 twice. 25 A. Okay. Okay. Okay. 60 1 Q. Now, has -- in all this time, from the 2 inception of the hotel room rental tax until now, has 3 the Lancaster County Convention Center Authority ever 4 said to anyone in the county, county officially, we want 5 you to give us some assurance to cover any operational 6 loss that may arise for the convention center project? 7 A. I have no idea. 8 Q. Well, you haven't -- 9 A. I only know that they have not said that to me. 10 Q. Right. Well, did you ever go to them and say, 11 I want you to give us that assurance, that we're not 12 going to ask the county to cover an operational loss? 13 A. Mr. Beckett and I had conversations about 14 prioritization, discussions over the operating loss, et 15 cetera. Maybe as long as two years ago. I'm -- and 16 don't hold me to that time frame, but I asked him, I 17 said, well, simply take pen to paper and whether you 18 sign it or someone else that's in authority to do it, 19 you know, that the prioritization will be that the debt 20 service gets paid first. 21 Q. All right. And are you -- did Mr. Kelin tell 22 you that Mr. Beckett has testified that he is going to 23 prioritize -- 24 A. I believe. 25 Q. -- the hotel room rental tax revenues so the 61 1 debt service is paid first. 2 Did Mr. Kelin tell you that? 3 A. I thought I heard Mr. Kelin say that 4 Mr. Beckett testified that it was his plan. 5 Q. Right. 6 A. I didn't hear the word will or shall, but it 7 was his plan. 8 Q. Right. All right. Well, I can tell you it is 9 his plan. And I take it you're in agreement with that, 10 right? 11 A. That it's his plan? 12 Q. No, that he should do it? 13 A. Oh, that he should do it? 14 Q. Yeah. 15 A. Yes. 16 Q. And you agree that if that is done, if there is 17 prioritization of the application of the hotel room 18 rental tax revenues to the bonds, the 54 million in 19 bonds, that then you don't have to worry about diverting 20 the 20 percent of the Visitors' Bureau share of the 21 hotel room rental tax revenues to the Authority, 22 correct? 23 A. No. We had this discussion the other day as 24 well at deposition and at that time, the number that you 25 and I were using for deposition purposes was annual debt 62 1 service of $2.7 million. Now I learn that it was his 2 testimony yesterday that the debt service will be $3 3 million as opposed to 2.7. 4 Q. Yes. 5 A. Well, if you recall, when you and I spoke the 6 other day, I said that the risk, not to the operating 7 loss, but the risk to the 20 percent that goes to the 8 Visitors' Bureau was diminished, I believe was my word, 9 if they prioritized it. And I believe I also said that 10 not knowing if another hurricane hazel, Agnes or 9-11 11 would hit, that I was willing to accept that it was a 12 diminished risk, although not without risk, although now 13 we have added risk if his number is 3 million as opposed 14 to 2.7. 15 Q. All right. In every year since 2002, with the 16 exception of 2003, the hotel room rental tax revenues 17 allocated to the Authority have been in excess of $3 18 million, correct? 19 A. That is correct. 20 Q. All right. And in 2006, for the first seven 21 months, we're running ahead of the first seven months of 22 2005, correct? 23 A. One and a half percent, yes. 24 Q. So as long as it's above 3 million, there's no 25 problem, correct? 63 1 A. If there's -- 3 million is now a good number. 2 Q. Right. 3 A. Because 2.7 was the good number three days ago. 4 Q. You agree with me, if 3 million is the number, 5 there's no problem -- 6 A. No -- 7 Q. -- given -- 8 A. I don't agree there's no problem. I agree 9 there is diminished risk to the 20 percent. 10 Q. Right. Absent a hurricane coming through, 11 there's no problem? 12 A. Absent some -- 13 Q. Catastrophe? 14 A. I don't know if it will take -- well, absent 15 some horrific event over the next 38 years. 16 Q. Okay. 17 A. If we can go 38 years without a hurricane, a 18 9-11, anything like that, the risk is diminished. 19 MR. PITTINSKY: Your Honor, I have no further 20 questions. 21 THE COURT: Mr. Fenningham -- Mr. Fenningham, 22 I'm going to take a brief break here. Okay? 23 MR. FENNINGHAM: Sorry, Your Honor. 24 (Recess.) 25 THE COURT: All right. Now, Mr. Fenningham, 64 1 you can proceed. 2 MR. FENNINGHAM: Thank you, Your Honor. 3 CROSS EXAMINATION 4 BY MR. FENNINGHAM: 5 Q. Good morning, Mr. Ebersole. 6 A. Good morning, sir. 7 Q. During your conversations with Mr. Kelin 8 regarding the testimony of Thomas Beckett here 9 yesterday, did you ask Mr. Kelin if he had explained all 10 of Mr. Beckett's testimony to you? 11 A. No. 12 Q. Did Mr. Kelin discuss the subject of the 13 parking as a component of the project that Mr. Beckett 14 testified about yesterday? 15 A. No, sir. 16 MR. FENNINGHAM: Your Honor, I'm going to refer 17 to the transcript of yesterday's proceeding. 18 Do you have -- Page 177. 19 THE COURT: I don't think he has one. Do you 20 want to give him one? 21 MR. FENNINGHAM: I'll just -- 22 MR. PITTINSKY: I can give him mine. 23 THE COURT: Oh, thank you. 24 THE WITNESS: Thank you. 25 BY MR. FENNINGHAM: 65 1 Q. And if you would turn, Mr. Ebersole, to Page 2 177. 3 MR. FENNINGHAM: And, Your Honor, I'm going to 4 focus on the testimony of Mr. Beckett regarding the 5 questions of operating deficits or operating losses. 6 BY MR. FENNINGHAM: 7 Q. If you look at line 8, Mr. Ebersole, Mr. Kelin 8 asked a question on cross examination. 9 It starts with: And the convention center 10 expenses, according to the projection you gave in 11 2003 -- and let me interrupt my -- my read of that. 12 Mr. Kelin was asking Mr. Beckett about a 13 presentation in October of 2003 that Mr. Beckett made to 14 the Board of County Commissioners -- 15 A. Okay. 16 Q. -- just to put it in context. 17 A. Okay. 18 Q. So reading line 9 -- exceeded the revenue and 19 stabilized revenue by a little over 1.1 million, 20 correct? 21 And the answer was: That is correct. 22 The next question at Line 13: Do you have any 23 different projection now on the amount of the projected 24 operating loss of the convention center, leaving aside 25 the tax revenues and the payment of debt service? 66 1 Do you see his answer? 2 A. Yes. 3 Q. Yeah. He said: Absolutely. 4 And he goes on to say down at Lines 20 and 21: 5 That was entirely related to the parking -- meaning a 6 change in the revenues and expenses from the 2003 7 presentation to the current date. 8 Do you see that testimony? 9 A. Yes. 10 Q. If you turn forward to the next page, Page 178 11 of the transcript, Mr. Kelin elicited testimony from 12 Mr. Beckett that -- 13 A. May I ask a question? 14 Q. Yes, you may. 15 A. On Line 23, where he says: It was coming into 16 the Authority, was it the parking revenue? 17 Q. He was referring to -- right above it, Line 22, 18 we had parking revenue under an initial agreement with 19 LPA. It, meaning the parking revenue. 20 A. Okay. 21 Q. So that answers your question, right? Is that 22 okay? I covered your question. 23 A. That answers my question. I'm not sure I agree 24 with it, but I -- I -- okay. 25 Q. Well, my questions relate to what Mr. Beckett 67 1 actually testified yesterday to be the new projections, 2 which on Page 78 -- or excuse me -- 178, down at Line 3 20, the witness is Mr. Beckett, he says it's 600 -- I 4 have to go back to my sheets. It's in the 650 to 5 700,000. We escalate it about 3 percent per year. 6 And the Judge, Judge Madenspacher, asked: And 7 it's down because all the parking is out of there. 8 And the witness said: The parking came out, 9 and he carries over to page 179 -- and that's why, 10 before we were looking at including parking revenue and 11 expense and it was a net 300,000 to run that. 12 So following Mr. Beckett's testimony, Mr. Kelin 13 asked him to turn to Tab 18, which I'll just tell you is 14 the 57 questions, to go back over Mr. Beckett's 15 projections. 16 Of course, they relate to some time ago and 17 Mr. Beckett yesterday was talking about his projections 18 that are current. Because the parking change only 19 occurred after the bid openings, the rebid openings in 20 the summer, just in August. 21 Would you agree with that? Are you aware of 22 that? 23 A. No. 24 Q. Are you aware that there was rebid openings and 25 then there was an issue of a gap in the funding and then 68 1 further efforts to close that gap to have a balanced 2 budget, balanced capital budget for the project? 3 A. I was aware that there was a gap and then there 4 were discussions and -- and I read that they closed the 5 gap. 6 Q. Okay. 7 A. But I never received detail from Mr. Beckett or 8 the Authority. 9 Q. Did Mr. Kelin tell you that Mr. Fitzgerald of 10 PSP testified yesterday and presented a balanced source 11 and use capital pro forma? 12 A. I had understood Mr. Fitzgerald testified 13 yesterday, but I didn't know what he testified to. 14 Q. If you turn further to Page 180 of yesterday's 15 transcript, and if you look down at Line 20, Mr. Kelin 16 asking the questions, okay, and if you go to the 17 stabilized year, year five, that is showing a -- 637,000 18 loss -- dollars -- loss in the stabilized year, right. 19 Answer: That's correct. 20 So your testimony, based upon what Mr. Kelin 21 told you Mr. Beckett said relying upon a million 22 dollars, is not correct, because what Mr. Beckett said 23 yesterday was his estimates of the projected operating 24 loss is in the 600 to 700,000 range and he focused upon 25 637,000. 69 1 Do you see that in the transcript? 2 A. I see it in the transcript. 3 Q. Now, did you have discussions regarding your 4 testimony today with either Commissioner Henderson or 5 Commissioner Shellenberger last evening? 6 A. Nope. 7 Q. Before today? 8 A. Nope. 9 Q. Did you have discussions outside during the 10 recess regarding your testimony with Commissioner 11 Henderson? 12 A. Commissioner Henderson said, be tough. 13 Q. Okay. And do you feel you were tough with 14 Mr. Pittinsky? 15 A. Nope. 16 Q. How about with Mr. Kelin? 17 A. Nope. 18 Q. Are you going to be tough with me? 19 A. Nope; numbers are numbers. 20 Q. You mentioned in Mr. Pittinsky's questioning 21 that your concerns are built upon in the future possible 22 events, weather conditions, hurricanes, I think you 23 testified at your deposition? 24 A. Yes. 25 Q. Would you agree that over the period of the 70 1 collection of the hotel room rental tax, we have had the 2 attack on the World Trade towers? 3 A. Yes. 4 Q. And that had an impact on the hotel industry, 5 did it not? 6 A. All of the travel industry, yes. 7 Q. And would you agree that Hurricane Katrina had 8 an impact upon the hotel industry -- 9 A. Not locally. 10 Q. -- on the entire hotel industry. 11 A. No. 12 Q. On the localized regional hotel industry in the 13 southern part of the country? 14 A. Yeah, down there. Yeah. 15 Q. And the RevPAR projections from the Smith 16 Travel reports and from PKF, they're national in their 17 analysis, are they not? 18 A. I -- I know that they analyze nationally. 19 Whether that report was based on national or local, I 20 don't know. 21 Q. But you would agree that the PKF study that's 22 Exhibit 52 in the tables that Mr. Pittinsky asked you 23 about were localized competitive markets one and two 24 showing RevPAR percentages of 6.1 and 5.9 in growth. 25 Would you agree with that? 71 1 A. They were estimates on a look-back. 2 Q. You would agree that those tables contained 3 those figures? 4 A. Yes, they contained those figures. 5 Q. Now, I believe at your deposition you testified 6 that you actually attended one of the hearing dates in 7 July when we were before the Court on the preliminary 8 injunction petition. 9 A. Yes, I did. 10 Q. And I will show you -- 11 MR. FENNINGHAM: If I may approach, Your Honor? 12 THE COURT: Go ahead. 13 THE WITNESS: Am I done with this? 14 MR. FENNINGHAM: Yes, you can put it down. 15 Thank you. I'll take that back. Thanks. 16 BY MR. FENNINGHAM: 17 Q. I'm going to refer to Exhibit A-13 admitted 18 into evidence in July, which is Resolution Number 36 of 19 2006. 20 Would you turn to the last page and look at the 21 bottom left-hand corner of the document? Does that show 22 a date of May 10 of this year? 23 A. Yes, it does. 24 Q. And similarly, I'll show you what's been marked 25 and admitted into evidence as Exhibit A-14, which is 72 1 Resolution 37 of 2006. 2 And, sir, I'd ask you if you can refer to the 3 bottom left corner of the second page and read the date 4 of that document? 5 A. The second page or third page? 6 Q. Third page. Thank you. 7 A. May 24th, '06. 8 Q. And did I understand your testimony that you 9 only became aware of these two resolutions on September 10 26th when Mr. Pittinsky asked you questions at your 11 deposition? 12 A. Mr. Pittinsky asked me if I was familiar with 13 those two resolution numbers. I said I was not, and I 14 did not know that they had passed. 15 I knew they had been talking about them. And I 16 believe I said that I have only attended a handful of 17 commissioner meetings year-to-date. 18 So, no. I knew they talked about them. I 19 didn't know what the numbers were that they were 20 assigning to them. 21 Q. You didn't -- you didn't know the resolutions 22 numbers themselves, but you knew the subject being the 23 focus of the court proceeding with regard to the county 24 guaranty agreement? 25 A. I -- I -- my take on the focus of the court 73 1 proceeding was to have the Court basically prohibit the 2 commissioners from taking any future legal action. That 3 was my -- my take on it, my non-legal take on it. 4 Q. Did you -- now, you emphasize in your testimony 5 that you were not aware that the two resolutions that 6 I'm asking you about were actually passed. 7 A. Right. 8 Q. Did you participate in any discussions prior to 9 May 10 regarding the drafting or formulation of 10 Resolution Number 36? 11 A. No. 12 Q. And similarly, with regard to Resolution Number 13 37? 14 A. Correct. 15 Q. Prior to May 24, did you participate in any 16 discussions -- 17 A. Any discussions -- 18 Q. -- relating to the formulation of Resolution 19 Number 37? 20 A. No. No. No. 21 Q. Have you read the county guaranty agreement in 22 its entirety? 23 A. Not in its entirety. 24 Q. What parts did you read, if you recall? 25 A. Controller Stuckey has -- has a copy of -- of 74 1 the entire thing and I remember being in his office a 2 year or a year and a half ago 'cause I -- I do not -- I 3 don't have the documents in their entirety. My job is 4 to collect the motel tax. And I read what -- what he 5 showed me is what he thought was applicable pages. 6 Q. Is part -- Mr. Kelin asked you to describe 7 briefly your duties as county treasurer. 8 Let me ask, do your duties as county treasurer 9 involve concerns about the bond rating of the county? 10 A. Yes. 11 Q. And did you read the part of the county 12 guaranty agreement that refers to that obligation as 13 irrevocable, absolute and unconditional? 14 A. I don't remember. I -- the part that stood out 15 was -- was the part that said, in my words, even -- even 16 if the Authority acted in a criminal nature, the 17 guaranty stood. 18 Q. What you're referring to is the provisions that 19 says even if items -- events A through P happen, this 20 guaranty obligation remains in force. 21 Is that what you're referring to? 22 A. I couldn't have said they were A through P. 23 I -- the one that jumped out at me was, even if people 24 are criminal, the guaranty is there. 25 Q. And that jumped out because you were a former 75 1 chief of police? 2 A. Yes, sir. 3 Q. It caught your eye? 4 A. Yes. 5 Q. There was a lot of other provisions that said 6 if these thing happen, the guaranty obligation of the 7 county remains irrevocable, absolute and unconditional? 8 A. There were a number of additional provisions. 9 Q. And would you agree in your capacity as county 10 treasurer, that part of the Authority's plan of capital 11 finance for this convention center construction involves 12 the reliance upon the county's guaranty agreement to 13 benefit from the bond rating of the county? 14 A. The Authority relies upon the county's bond 15 rating for these purposes. I have -- I have not 16 received an updated financial structure of the plan. 17 Q. I think you said yes to my question. 18 MR. KELIN: Well -- objection, his answer was 19 his answer, Your Honor. 20 THE COURT: I understand that, Mr. Kelin. 21 BY MR. FENNINGHAM: 22 Q. Now, you -- Mr. Kelin -- excuse me, 23 Mr. Pittinsky asked you questions about your 24 background. 25 So let me -- in terms of your being a financial 76 1 advisor. So let me just ask whether you're familiar 2 with the concept of a capital budget versus an operating 3 budget for a project such as the convention center 4 project? 5 A. I believe so. 6 Q. And would you agree with me that during the 7 construction phase of building the convention center 8 that there would be no operations of the convention 9 center? 10 A. No operations of the convention center, but the 11 staff of the Convention Center Authority continues to -- 12 and their rent on the Griest building, what have you, 13 continues to be an operational cost. 14 Q. All right. Well, that would be in the 15 operating budget, would it not? 16 A. Correct. Well, I thought your question was 17 there would be no operational expenses. 18 Q. Okay. Operating expenses, I said, relating to 19 the convention center. Operating a convention center. 20 But in the context of questions this morning 21 about the operating losses or deficits, that takes us 22 into the operating phase of the entire convention 23 center, would you agree? 24 A. Yes. 25 Q. Okay. 77 1 A. So then it would include the executive director 2 and their staff. 3 Q. Well, let me just break it out, so we both 4 understand each other. 5 A. Okay. 6 Q. That phase in the operational phase, if I can 7 call it that, when there's events and people going into 8 the Marriott and into the convention center, there would 9 be both an operating expense, budget of the convention 10 center facility, and there would be an overhead expense 11 for the Authority's staff. 12 Would you agree with that -- those 13 distinctions? 14 A. Why wouldn't the staff be in the operating -- 15 Q. I'm just asking you to recognize that there 16 would be two distinct, operating overhead of the staff 17 itself and the expenses of operating the convention 18 center facility? 19 A. In that budget, where would the revenues come 20 for the -- for the star? 21 Q. I'm saying, if you could just answer my 22 question. 23 Do you understand the point I'm making? And if 24 you don't, that's fine. 25 A. It's hard to break them out not knowing where 78 1 the revenues are coming to. 2 Q. I'm not asking you about revenues. I'm not 3 asking you about revenues. 4 A. Okay. 5 Q. I'm just saying that when we're -- the 6 Authority is into the operational phase of the 7 convention center facility, 8 A. Uh-huh. 9 Q. -- there would be an operating expense 10 associated with -- you said, the lights and the 11 utilities and all of that, and then also the staff, the 12 overhead of salaries and the staff office itself? 13 A. Correct. 14 Q. So that's -- 15 So before we get to that phase, and we are 16 in -- the Authority's in the construction phase, there 17 is a capital budget. 18 Do you recognize that? 19 A. Yes. 20 Q. Now, in that phase of the construction with the 21 capital budget, there is no operating expenses 22 associated with the facility? 23 A. Associated with the facility? 24 Q. Right. 25 A. See, it's hard for me to break out that -- 79 1 that -- that the staff for the Authority isn't an 2 operating expense of the facility. I'm -- I struggle 3 with that. 4 Q. Let me just try to cut that off. Let me try to 5 focus you simply on the expenses of operating a 6 building. 7 A. Okay. 8 Q. And all of the operational aspects of having 9 people coming in, to and fro, won't occur during the 10 construction phase. 11 Do you agree with that? 12 A. Yes. 13 Q. So there will not be any operating losses 14 during the construction phase in terms of the operation 15 of the facility? 16 A. Okay. 17 Q. Do you agree with that? 18 A. Yes. 19 Q. So you're -- when you marry your concerns, as 20 you expressed this morning, with these operating losses 21 and whether or not there's speculation, you're 22 projecting those operating losses into the operation 23 phase of this project. 24 Would you agree? 25 A. The operating losses are projected into the 80 1 operating phase. Yes. 2 Q. And now we're focused -- this court proceeding 3 is focused on the validity of the county guaranty 4 obligation under the county guaranty agreement to allow 5 for the Authority to remarket the 2003 bond for 6 permanent financing of the construction phase. 7 Do you recognize that? 8 A. If you say so. I -- I have not read the 9 complaint. 10 Q. And you've only read part of the guaranty 11 agreement, but you're here expressing your concerns 12 about projected losses sometime down into the 13 operational phase? Is that a fair statement? 14 A. That I'm concerned about the operating loss, 15 yes. 16 Q. Down the road. 17 MR. FENNINGHAM: That's all I have, Your Honor. 18 THE COURT: Any redirect, Mr. Kelin? 19 MR. KELIN: A little bit, Your Honor. 20 REDIRECT EXAMINATION 21 BY MR. KELIN: 22 Q. Would you please turn to Exhibit 52, the PKF 23 study. And back to -- in the executive summary, Section 24 2, page 11. 25 THE COURT: I took mine back to read during the 81 1 break and I forgot to bring it back. Hold on a second. 2 MR. KELIN: Your Honor, if I may, I can give 3 you the page. My question here will be very brief. 4 THE COURT: Okay. All right. Thank you. 5 BY MR. KELIN: 6 Q. And do you see on the chart, Mr. Ebersole, that 7 reflects the $1.4 million loss in a representative year 8 that at the top of the chart it says stated in 2006 9 dollars? 10 A. Yes. 11 Q. Okay. Do you understand that to mean that the 12 actual loss over time with the impact of inflation there 13 projected will be greater than that but the present 14 value in any given year will be 1.4? 15 MR. PITTINSKY: Your Honor, objection, leading 16 questions. 17 THE COURT: Certainly is leading, but I think 18 that's the only way you can ask this question, so I'm 19 going to overrule. 20 MR. FENNINGHAM: I have an objection, Your 21 Honor. It goes to the foundation of the document. 22 There's no foundation for the analysis behind any of the 23 computations by PKF. 24 THE COURT: That's the same weight issue as we 25 had dealt with before. I forgot what the question was. 82 1 I'm sure he did, too. 2 MR. KELIN: I'll be glad to restate it. 3 BY MR. KELIN: 4 Q. What do you understand to be the reference to 5 stated in 2006 dollars as it applies in this chart? 6 A. It's stated in 2006 dollars and inflation will 7 compound on that year over year going forward. 8 Q. So just as actual tax revenues may well 9 increase, as Mr. Pittinsky had pointed out on cross, PKF 10 was taking into account that actual operating losses 11 will also increase over time and this 1.4 number just 12 reflects present value; is that correct? 13 MR. PITTINSKY: Objection, leading, Your 14 Honor. He's -- he's -- 15 THE COURT: It is leading, Mr. Kelin. I'll 16 sustain that. 17 BY MR. KELIN: 18 Q. Now, how does that relate to the projected tax 19 increases over time with respect to the questions 20 Mr. Pittinsky was asking? 21 A. One could make a -- I believe a reasonable 22 assumption that staff who work at the convention center 23 would have the -- over time will seek to see a raise in 24 their pay, and fuel costs, as we've experienced, have 25 gone up, and inflation takes its toll on everything and 83 1 all of us. 2 Q. Mr. Pittinsky was suggesting to you that PKF 3 had acted inappropriately in not giving equal weight in 4 interpreting survey results to non-respondents as it did 5 to folks who responded to the survey. 6 Do you remember those questions? 7 A. Yes, I do. 8 Q. Okay. Based on your understanding of these 9 types of surveys, do you agree with what he was 10 suggesting in that question? 11 MR. PITTINSKY: Your Honor, I -- 12 THE COURT: He can't testify to this. This is 13 all about the methodology. 14 MR. KELIN: Okay. 15 THE COURT: I sustain that. 16 MR. KELIN: No further questions. 17 THE COURT: Any follow-up? 18 MR. PITTINSKY: Excuse me. 19 THE COURT: Any recross? 20 MR. PITTINSKY: Maybe just one or two 21 questions. 22 THE COURT: Okay. Maybe just one or two. 23 Maybe just one or two means there will be one or two. 24 MR. PITTINSKY: You're right. That is 25 absolutely right. 84 1 What I meant to say was, I'll try to limit 2 myself to one or two questions. 3 RECROSS EXAMINATION 4 BY MR. PITTINSKY: 5 Q. Would you turn, please, to Exhibit 44. It's in 6 the big binder. I'm sorry. It's in the small binder. 7 Have you ever seen this document before today? 8 A. Yes. 9 Q. When did you first see it? 10 A. It was either a week ago today or this past 11 Monday. 12 Q. So it's a document Mr. Kelin provided to you, 13 correct? 14 A. Yes, sir. 15 Q. Do you understand from reviewing this document 16 that the budget for the convention center construction 17 provides for paying all of the debt service during the 18 construction phase? 19 MR. KELIN: Your Honor, I object. This is 20 beyond the scope of my redirect. I just asked the one 21 question about PKF's $1.4 million being stated in 2006 22 present value. 23 THE COURT: It is beyond. Recross. That means 24 as you go into redirect and reredirect it gets more and 25 more refined and this is beyond that scope, so I'll 85 1 sustain that. 2 MR. PITTINSKY: All right. 3 BY MR. PITTINSKY: 4 Q. Would you turn then, please, to the PKF study. 5 A. That tab again? 6 Q. 52. 7 A. Thank you. 8 Q. And it's on the same page as Mr. Kelin asked 9 you about, which is II -- 11. 10 Now, it's -- if I understood your testimony, 11 you were concerned about future years after 2006 because 12 of increased expenses; is that correct? 13 A. In -- and I have a number of concerns, but the 14 one in relation to the question Mr. Kelin asked me, yes. 15 Q. I'm just referring to Mr. Kelin's question. 16 A. Very good. 17 Q. But you understand that even if you assume, as 18 this page does, that there are 145 events, even if you 19 assume that there are no more than 145 events in all the 20 16 years, the revenue to be received is going to also go 21 up, correct? 22 A. I -- no, I don't know that. 23 Q. You don't know that over time, RevPAR goes up? 24 A. Over time RevPAR goes up. 25 Q. Right. 86 1 A. Okay. I thought you were meaning the revenue 2 for -- 3 Q. Per available room. 4 A. I thought you meant the revenue for the booking 5 of the convention center for meetings and banquets and 6 whatever. 7 Q. Don't people, as their expenses go up, don't 8 they charge more on the revenue side? 9 A. If they're able to. 10 Q. Isn't that a normal business practice? 11 A. If they are able to. 12 Q. Yeah. All right. 13 A. If the market will bear. 14 Q. So for the purpose of answering Mr. Kelin's 15 question, you are assuming no increase on the revenue 16 side and only increase on the expense side, correct? 17 A. For the purpose of answering Mr. Kelin's 18 question, I do make an assumption that inflation will 19 move forward. Whether or not the facility will be able 20 to attract and keep the markets going forward, whether 21 there will be another competitor built in a neighboring 22 county, casino, resorts, et cetera. I have no idea 23 whether they'll be able to continue their revenue for 24 their functions. 25 Q. And I'm not asking you for your justification. 87 1 But I just wanted to see if I could understand, you're 2 assuming -- you were assuming, for the purpose of 3 Mr. Kelin's question, that expenses would go up but not 4 revenues, correct? 5 A. I'm assuming that expenses will go up, yes. 6 Q. But not revenues? 7 A. I don't know on revenues. 8 Q. Well, you would -- 9 A. I do not make an assumption on the revenue 10 component. 11 Q. Fair enough. 12 MR. PITTINSKY: No further questions, Your 13 Honor. 14 THE COURT: Mr. Fenningham? 15 MR. FENNINGHAM: None, Your Honor. 16 MR. KELIN: None, Your Honor. 17 THE COURT: All right. 18 Thank you Mr. Ebersole. 19 THE WITNESS: Thank you, Your Honor. 20 MR. KELIN: Your Honor, I have no further 21 witnesses. I do move for the admission into evidence of 22 all exhibits in the notebook we've provided, 39 through 23 63, to the extent they've not been previously admitted 24 by plaintiff's counsel. 25 THE COURT: Any objection? 88 1 MR. FENNINGHAM: Your Honor, I object to 2 Exhibit 52, which would be the PKF study, on the basis 3 of foundation, recognizing that the Court has already 4 indicated that it's a matter of the Court's decision to 5 give it weight or not. But I do reserve the right to 6 object to it. 7 THE COURT: All right. 8 MR. PITTINSKY: And Your Honor, I join in that 9 reservation. 10 THE COURT: Okay. And you're both overruled 11 and they're all admitted, including 52. 12 MR. FENNINGHAM: Thank you, Your Honor. 13 THE COURT: All right. So there's no other 14 testimony? 15 MR. KELIN: That's correct, Your Honor. 16 THE COURT: All right. So I think that as we 17 discussed earlier, with the briefing schedule, that the 18 briefs will be filed within one week, by next Friday, 19 and we'll have argument the following Tuesday at 10 a.m. 20 in this courtroom. 21 MR. KELIN: Thank you, Your Honor. 22 MR. PITTINSKY: Thank you, Your Honor. 23 MR. FENNINGHAM: Thank you. 24 (The hearing recessed at 11:04 a.m.) 25