299 1 IN THE COURT OF COMMON PLEAS LANCASTER COUNTY, PENNSYLVANIA 2 CIVIL 3 _____________________________________ : 4 PENN SQUARE GENERAL CORPORATION, : THE GENERAL PARTNERS OF PENN SQUARE : 5 PARTNERS, a Pennsylvania Limited : Partnership, and THE REDEVELOPMENT : 6 AUTHORITY OF THE CITY OF LANCASTER, : : 7 Plaintiffs : vs. : 8 : COUNTY OF LANCASTER, : 9 BOARD OF COUNTY COMMISSIONERS OR : THE COUNTY OF LANCASTER, : 10 MOLLY HENDERSON, Commissioner, and, : RICHARD SHELLENBERGER, Commissioner, : 11 : Defendants : 12 _____________________________________ No. CI-06-05555 13 LANCASTER COUNTY CONVENTION CENTER : AUTHORITY, : 14 Plaintiff, : vs. : 15 : COUNTY OF LANCASTER : 16 and : BOARD OF COUNTY OF COMMISSIONERS OF : 17 THE COUNTY OF LANCASTER, : and : 18 MOLLY HENDERSON, Commissioner : and : 19 RICHARD SHELLENBERGER, Commissioner, : : 20 Defendants : _____________________________________ 21 PRELIMINARY INJUNCTION 22 Before: HON. JOSEPH C. MADENSPACHER, JUDGE 23 Date : July 14, 2006 24 Place : Courtroom No. 2 25 50 North Duke Street Lancaster, Pennsylvania 300 1 APPEARANCES: 2 JOHN C. FENNINGHAM, ESQUIRE and GREGORY S. BERKE, ESQUIRE 3 FENNINGHAM, STEVENS & DEMPSTER, LLP Five Neshaminy Interplex, Suite 315 4 Trevose, PA 19053 For - Lancaster County Convention Center Authority 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 and 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 KATHRYN L. SIMPSON, ESQUIRE 16 METTE, EVANS & WOODSIDE 3401 North Front Street 17 Harrisburg, PA 17110 For - Intervenor Kopenhaver 18 19 20 21 22 23 24 25 WITNESS DIRECT CROSS REDIRECT RECROSS 301 1 2 3 4 5 6 7 8 9 10 INDEX TO EXHIBITS 11 Authority's Marked/ Admitted 12 Exhibit Nos. 13 14 15 16 17 18 19 20 21 22 23 24 25 302 1 P R O C E E D I N G S 9:00 a.m. 2 THE COURT: All right. Are we ready to 3 continue with, Mr. Fitzgerald? 4 MR. KELIN: I am, Your Honor. 5 THE COURT: All right. Mr. Fitzgerald, please 6 resume the stand. 7 THE COURT: He's still under oath. 8 [], called as a witness, having been previously sworn or 9 affirmed, was examined and testified as follows: 10 MR. KELIN: Your Honor, if I may, I do have 11 some additional exhibits for our book that I've provided 12 to opposing counsel. 13 And if you want, I'd be glad to fix or put them 14 in for you, the index page here that goes in the front 15 and -- 16 THE COURT: I'm capable of doing that myself. 17 MR. KELIN: All right. I will note the Exhibit 18 36 is not included. 19 I understand plaintiff's counsel are gonna have 20 an objection to that, so I have not given that to you, 21 and we'll address that later on when we get to that 22 point in particular. 23 THE COURT: All right. All right. We're 24 resuming your cross examination, so whenever you're 25 ready, Mr. Kelin. 303 1 MR. KELIN: Thank you. 2 CROSS EXAMINATION 3 BY MR. KELIN: 4 Q. Mr. Fitzgerald, I want to address to you some 5 comments that you made in your testimony on July 12th, 6 and I understand you're -- I have prepared a poster with 7 the excerpts I want to focus on. 8 I understand your counsel would like you to 9 have the entire transcript, and that's fine. So he's 10 going to provide that to you, in case you want to refer 11 to it in the context of these excerpts. 12 MR. PITTINSKY: And the reason is, these are 13 excerpts from an answer, and I think the witness is 14 entitled to see the entire answer when he's examined. 15 THE COURT: I agree that's appropriate. 16 MR. PITTINSKY: Thank you. 17 BY MR. KELIN: 18 Q. And Mr. Fitzgerald, I did share this with your 19 counsel beforehand and they did ensure that the excerpts 20 are accurate. 21 Of course, when I ask you questions about it, 22 you can refer to whatever you'd like in the transcript. 23 But first I just want to focus on the excerpts 24 themselves. 25 A. Okay. 304 1 Q. Okay. The first one says: I think the delays 2 caused in completing the governing documents, including 3 the design process that were caused by the actions of 4 the County Commissioners led to a delaying in the 5 project, which led to increased inflation associated 6 with the construction costs. 7 The next excerpt is: I think that since 8 January of 2004, when the current County Commissioners 9 came into office, they have taken steps repeatedly to 10 delay and derail this project, and I think that is their 11 intent, and I think that as a result of that, they have 12 driven the costs of this project up significantly. 13 And the third one is: I think to date, the 14 only people costing the taxpayers of Lancaster County 15 money are the County Commissioners. 16 A. Uh-huh. 17 Q. Now, I want to discuss with you when and how 18 the commissioners took the actions you've alleged, and I 19 want to break it down, as I was trying the other day, 20 into specific time periods. 21 And the first time period I want to talk about 22 is from January of 2004, as you've pointed out when they 23 first came into office, through mid-December of 2004, 24 when the cost estimate increase was announced. 25 All right? 305 1 Now, first, I want to start -- are we in 2 agreement that from the time they came into office, the 3 cost estimate for the project was $110 million was 4 reflected in the exhibit that Mr. Beckett had addressed? 5 A. Could you please refer me to the exhibit that 6 shows the 110 million? 7 Q. Sure. Sure. That's Exhibit 7 and this is the 8 presentation that was given by Mr. Beckett -- 9 A. Okay. 10 Q. -- at the commissioners' meeting in October of 11 2003. And the next to the last sheet of that exhibit -- 12 A. Uh-huh. 13 Q. -- says at the top, economic mission, and then 14 it says, revitalize downtown Lancaster, $110 million 15 project. 16 And Mr. Beckett had testified that that was his 17 understanding of the project costs as being the project 18 costs at the time. 19 Are you with me on that page, sir? 20 A. I cannot find that page. 21 Q. Okay. Second sheet from the back of the 22 exhibit. 23 Q. I think my book is backwards here, so -- I 24 think they're in order backwards in this book. Start 25 from the front. 306 1 A. Okay. Gotcha. 2 Q. Starting from the front, going to the back, 3 it's the second sheet from the back. 4 A. See that. 5 Q. And the second line item there says, $110 6 million project. 7 A. Correct. 8 Q. And Mr. Beckett had testified that was his 9 understanding of the estimate of the project costs when 10 he gave the presentation in October of 2003. 11 And I'm asking you, is that accurate, are you 12 comfortable with that figure for that time period? 13 A. I think when we met on Wednesday, that was a 14 representation that you made and looking at the 15 document, that is the number that is in the presentation 16 from Mr. Beckett. 17 Based on the information that I have, I believe 18 that -- that $110 million estimate is not a complete 19 estimate of the total project costs. 20 As we talked on Wednesday, I believe, I can 21 find nowhere in my records of a total project cost of 22 110 million. I believe this number represents the hard 23 costs and the soft costs for the project, but I don't 24 believe it includes the financing costs of the project. 25 I didn't make this presentation. I didn't 307 1 prepare this slide. So I can't find anywhere in my 2 records where we had a total project cost, including 3 financing costs, of 110 million. 4 I can find that we had a hard and soft costs of 5 approximately $110 million. So just to clarify what I 6 said on Wednesday, I think this number is an accurate 7 number as you represent it from Mr. Beckett, but it does 8 not include -- you would have to ask him since he put 9 the slide together, I don't believe it includes the 10 financing costs. 11 If you were to include the financing costs, the 12 project costs would have increased to about $123 13 million. So in October of 2003, based on the sketch 14 plans that were created by Cooper Carry, I believe it's 15 more accurate to state that the total project cost would 16 have been $123 million or in that range. 17 Q. Okay. Thank you. 18 A. You're welcome. 19 Q. Now, would you please turn to Exhibit 34 in the 20 black notebook. 21 A. Okay. 22 Q. And these are minutes of a Convention Center 23 Authority meeting on November 10, 2004? 24 A. Okay. 25 Q. All right? And if you turn to the second page 308 1 of the minutes, you'll see a project update by 2 Mr. Hixson, and he's telling the board that this evening 3 is one of the touch points in the evolution of the 4 project, he's going to update the board and the 5 community on the progress that's been made on the 6 convention center and hotel project over the past few 7 months, and then he says, I'm going to address two 8 specific areas, one dealing with a $22 million gap in 9 financing that's been identified and how they're 10 attempting to fill that gap -- 11 A. Uh-huh. 12 Q. -- and, second, an update on the schematic 13 design and pricing. 14 Now, are you -- were you at this meeting, do 15 you recall? 16 A. I'm going to assume I was at this meeting. I 17 attend most of the Authority meetings. But I can't 18 recall if I was at the meeting, but I'm going to assume 19 I was. 20 Q. Okay. You'll see as this report by Mr. Hixson 21 continues, he goes on to discuss the $22 million gap. 22 A. Uh-huh. 23 Q. And talks about a meeting that Senator 24 Armstrong convened in the mayor's conference room that 25 was attended by Senator Armstrong, Representative 309 1 Sturla -- 2 A. Are you still on page 2? 3 Q. Yes, sir. 4 A. Thank you. 5 Q. Are you with me? 6 A. I'm trying to find -- yes, I am. 7 Q. The meeting convened by Senator Armstrong in 8 the mayor's conference room, Senator Armstrong was 9 there, Representative Sturla was there, Mayor Smithgall 10 was there, the County Commissioners were there -- 11 A. Uh-huh. 12 Q. -- and a representative from the governor's 13 office, who is later identified as a Larry Segal. 14 A. That's correct. 15 Q. And it discusses a $22 million gap that's been 16 identified and how to fill that gap, at least in part, 17 through what's become known as Act 23. 18 Do you see that reference? 19 A. I do. 20 Q. All right. And then, if you go on to the 21 bottom of that page, and on to the top of the second 22 page, Mr. Hixson starts to talk about being very 23 confident that in the end, they'll be able to deliver a 24 project that will be first-rate and will meet the 25 community's expectations for the $129 million budget 310 1 that's been projected. 2 Do you see that? 3 A. I do. 4 Q. So now this is in November, 2004, and the 5 budget is now 129 million, correct? 6 A. Uh-huh. 7 Q. Okay. Now, does that include financing costs? 8 A. Yes, it would. 9 Q. All right. So to make an apples-to-apples 10 comparison, yes? 11 A. I believe that $129 million number did not 12 include the million dollars of contributions in-kind 13 from the City. So I believe if you add the 14 contributions in-kind from the City, that number would 15 have been $130 million. 16 Q. Okay. 17 A. So I think you're trying to get an 18 apples-and-apples comparison between the 130 million in 19 November of 2004 to today. So I just wanted to make 20 sure that you we're clear on that. 21 Q. Thank you. 22 Well, actually what I'm trying to get is an 23 apples-to-apples comparison between January 1st, 2004 24 and November 10, 2004. 25 A. Uh-huh. 311 1 Q. So that would be 120 to 130? 2 A. That would be 123 to 130. 3 Q. All right. Now, at the bottom of page 3, there 4 are comments by Commissioner Shaub who attended this 5 Convention Center Authority meeting. 6 Do you see that? 7 A. I do. 8 Q. Okay. And he says, I appreciate you coming 9 here. I know I'm very vocal about things. I hear 10 nothing about good reports about the teams working 11 together, cooperatively working on solving problems and 12 challenging. 13 Do you see that? 14 A. I do. 15 Q. That's not too harsh, is it? 16 A. No, I think that's very positive. 17 Q. And then down below, he says, about two-thirds 18 of the way down, I am very pleased with the work done by 19 the consortium being ready to augment with, when the 20 plans are built, with other plans in place. 21 Do you see the reference to the consortium? 22 A. I do. 23 Q. What was the consortium? Do you recall? 24 A. You would have to ask him. 25 Q. All right. Well, do you remember that Mayor 312 1 Smithgall had put together a group of various business 2 and community leaders, including the County 3 Commissioners, that met periodically to discuss the 4 project and provide updates and talk about how to 5 address different issues that occurred during the 2004 6 time frame? 7 A. I do. 8 Q. Okay. Do you remember that group being 9 referred to as the consortium? 10 A. I don't. I believe there was another name for 11 that group and I think it included other activities 12 other than the convention center project. I think it 13 was a broader committee that was pulled together. 14 I believe it met on a monthly basis and I 15 believe it discussed a number of projects that were 16 going on in the city. 17 Q. Okay. 18 A. I can't tell you that's the consortium that 19 Commissioner Shaub is referring to 20 Q. But the group you're referring to included the 21 County Commissioners and it addressed, among other 22 things, the convention center, correct? 23 A. I -- it was the mayor's meetings, so I can't 24 tell you who were on the invitee list. I think I only 25 attended maybe one of those meetings, and I don't recall 313 1 if the County Commissioners were present at those 2 meetings. 3 Q. All right. If you look at the bottom of 4 Commissioner Shaub's comments, he says, keep it up and 5 we are looking forward to breaking ground now. 6 Do you see that? 7 A. Yes, I do. 8 Q. So again, that was positive, right? 9 A. I think -- 10 Q. There's nothing in -- in -- as of this meeting, 11 in any event, that took place at this meeting that 12 reflects the commissioners taking any adverse action 13 against the project, correct? 14 A. I don't think there's anything from 15 Commissioner Shaub taking any adverse action. I think 16 Commissioner Shaub was very supportive in his comments 17 at that meeting 18 Q. Okay. Now, on the 12th, when you were 19 testifying -- 20 A. Yes. 21 Q. -- I believe you identified three things you 22 said that had occurred during this time frame we're 23 talking about, January 2004 through mid-November 2004, 24 that you thought reflected the kind of actions addressed 25 in your -- the excerpts of testimony that are here in 314 1 the poster, actions by Commissioners Shellenberger and 2 Henderson during that time frame that were adverse to 3 the project. 4 A. That were driving the cost of the project up, I 5 think I said. 6 Q. And I think one of the things you mentioned was 7 the commissioners were making an issue out of the 8 four-star hotel rating. 9 Is that one of the things you mentioned the 10 other day? 11 A. I did. 12 Q. Okay. Now, as we were discussing near the end 13 of your testimony, the commissioners did raise that 14 issue in their 57 questions that came later in March of 15 2005, when they were asking questions in the context of 16 the TIF application that had been brought before them, 17 correct? 18 A. That is correct. 19 Q. Okay. And those were questions trying to -- 20 trying to reconcile characterizations that had been made 21 by PricewaterhouseCoopers about a four-star hotel to the 22 way the project was characterized in the TIF project 23 plan, correct? 24 MR. PITTINSKY: Your Honor, we went over all of 25 this on Wednesday. Why are we going over it again 315 1 today? We covered this exact same subject on Wednesday, 2 and now Mr. Kelin is covering exactly the same ground 3 again. 4 THE COURT: It's a different witness. 5 Overruled. 6 MR. PITTINSKY: No. No. 7 THE COURT: What's that? 8 MR. PITTINSKY: I -- he covered that with this 9 witness, Your Honor. 10 MR. KELIN: He's correct. And -- he is 11 correct, Your Honor. 12 THE COURT: Hold on a second. 13 MR. KELIN: But you should still overrule the 14 objection. And here's why: I'm trying to frame my 15 questions now to the period of 2004. 16 I'm simply pointing out to Mr. Fitzgerald what 17 he was talking about the other day was 2005, and now I 18 want to ask, was there anything the commissioners did in 19 2004 about that four-star rating issue. 20 THE COURT: Well, I'm still overruling the 21 objection. 22 MR. KELIN: Thank you, Your Honor. 23 THE WITNESS: Could you please repeat the 24 question? 25 MR. KELIN: Sure. 316 1 THE WITNESS: Thank you 2 BY MR. KELIN: 3 Q. Keeping in mind that the 57 questions didn't 4 occur until March of 2005, 5 A. Correct. 6 Q. And your testimony the other day that the 7 commissioners had taken action in 2004 starting the 8 four-star rating action you thought was adverse to the 9 project, my question to you is: What did they do in 10 2004 to raise questions or concerns about the four-star 11 rating issue? 12 A. I think my statement was from the beginning of 13 January in 2004, the commissioners raised questions 14 about the four-star rating. I think the 57 questions 15 was a culmination of over a year's worth of discussion 16 about the four-star versus full-service. 17 So I think it's accurate to say that in March, 18 they reduced those comments to writing, but I think if 19 you would go back into the newspaper archives and all of 20 the public meetings that occurred in the Convention 21 Center Authority and the County Commissioners' 22 meeting's, I think you will find numerous references 23 going back to January that dealt with this issue of 24 four-star versus full-service. 25 So I stand by my statement that I made on 317 1 Wednesday. 2 Q. Questions raised by Commissioners Shellenberger 3 and Henderson? 4 A. I think questions raised by Commissioners 5 Shellenberger, Henderson and the project opponents. 6 Q. Well -- 7 A. And again, that's a long period of time and 8 it's a long time ago, Howard, so I cannot tell you 9 specific quotes that were made by either Commissioners 10 Shellenberger or Henderson. 11 But I can tell you that it was from that period 12 of time that those discussions were being had. 13 Q. Okay. 14 A. It was culminated in the 57 questions in March. 15 Q. Well, Mr. Fitzgerald, let me explain to you 16 what I'm trying to do. 17 You made pretty emphatic statements the other 18 day about the commissioners' activities in 2004; is that 19 correct? 20 A. Yes, I did. 21 Q. I'm trying now to understand and for you to be 22 able to explain to the Court the facts that support your 23 testimony. 24 And one of the things you said was that in 25 2004, the two commissioners -- 318 1 A. Uh-huh. 2 Q. -- were raising questions about the four-star 3 quality issue and in your testimony today, you still 4 remember that you don't remember exactly what was said; 5 is that correct? 6 A. I remember that there was -- I think what I 7 just said was that from 2004 until March of 2005, when 8 the 57 questions came out, the two County Commissioners, 9 as well as the project opponents, continually raised 10 questions about four-star versus full-service. 11 Q. All right. In terms of what the commissioners 12 either did or didn't do, how did any questions raised by 13 the commissioners about the four-star issue damage the 14 project or cause delays to the project? 15 A. It caused delays in the negotiation process 16 between Penn Square Partners and the Convention Center 17 Authority to resolve the governing documents which would 18 allow us to move forward with the completion of the 19 project. 20 Q. Why? Why did the questions being raised by the 21 commissioners -- how did that cause the delay? 22 A. Because the -- the insistence of the County 23 Commissioners, the insistence of a few of the hoteliers 24 in the community that were opposing the project put a 25 strain on the negotiation process between the Convention 319 1 Center Authority and Penn Square Partners on this issue 2 Q. I see. 3 A. So it -- it caused that process to get 4 elongated and, in fact, it was very difficult to finally 5 come to closure on a means of insuring to the Convention 6 Center Authority and the community what the project that 7 was going to be built. So you'll see, and I reference 8 back on Wednesday, that the quality standards that 9 specify the quality of the hotel that was going to be 10 built, as well as the quality of the convention center 11 that was going to be built tied back into the Marriott 12 standards that we talked about. And that process took a 13 tremendous amount of time to negotiate. 14 Q. All right. 15 A. Because of concerns over how do you define 16 something that's already defined in a Marriott-franchise 17 agreement. 18 Q. Okay. So that I understand, and again, I want 19 to go through this point by point to make sure we have 20 all the facts. 21 A. Uh-huh. 22 Q. Your testimony is that because Commissioners 23 Shellenberger and Henderson were raising questions with 24 the Authority as to whether this was gonna be a 25 four-star hotel, as the Authority's expert, Mr. Canton, 320 1 had said, that that put a damper or made things 2 difficult in the negotiations between Penn Square 3 Partners and the Authority? 4 A. That drug out the negotiation process. 5 Q. All right. You also mentioned the other day, a 6 second issue -- 7 A. Uh-huh. 8 Q. -- that you attributed to the commissioners 9 during 2004 about putting pressure to increase the size 10 of the exhibit hall. 11 A. Correct. 12 Q. Okay. And was that in 2004? 13 A. That was in 2004, as well as 2003. 14 Q. Okay. Now, my understanding from your 15 testimony the other day was that under the joint 16 development agreement from 2001, the exhibit hall was 17 supposed to be from 25,000 to 30,000 square feet and 18 that that was ultimately increased to 50,000 square 19 feet; is that correct? 20 A. 49,000 square feet. 21 Q. 49. Okay. And when did that occur? 22 A. The 49,000 square feet occurred at the 23 completion of the design development documents that 24 occurred in 2005. 25 Q. I see. 321 1 Could you please turn to Exhibit 33? 2 A. Uh-huh. 3 Q. And this is a reprint in the Lancaster Sunday 4 News from July 9th, 2006, of a letter sent by Mr. Cooley 5 to Commissioners Henderson and Shellenberger that had 6 been signed by other members of the community, correct? 7 A. Uh-huh. 8 Q. You have to say yes. 9 A. Yes, I'm sorry. Yes. 10 Q. And this letter had been sent two days 11 previously on Friday, July 7th; isn't that right? 12 A. The date of the exhibit here is July 9th, 2006. 13 Q. Yes. 14 A. Is that what you're asking me? 15 Q. Yes. And that was Sunday, and the letter was 16 sent a couple days before that, wasn't it? 17 A. I would assume it must have been. 18 Q. And, in fact, the very afternoon the letter was 19 sent, July 7th, there was another newspaper article in 20 the afternoon Lancaster newspaper explaining that this 21 letter had been sent to the commissioners to stop 22 attacking the Penn Square project. Isn't that true? 23 A. I believe so. 24 Q. Okay. So Penn Square Partners sends a letter 25 to the commissioners and there are two newspaper 322 1 articles about the letter being sent, right? 2 A. That's correct. 3 Q. In fact, Penn Square Partners have frequently, 4 since the commissioners have been in office, talked to 5 the newspaper, gone to the newspaper, to combat what you 6 thought was misinformation being spread about the 7 project by the commissioners. Isn't that true? 8 A. I think Penn Square Partners and the Convention 9 Center Authority went to the newspaper to try to get as 10 accurate as information out to the community as we 11 possibly could. 12 Q. And you haven't faced resistance from the 13 newspaper in having them print what you wanted them to 14 print in terms of getting out the information that you 15 thought was fair and project, correct? 16 A. The newspaper prints what the newspaper wants 17 to print. We don't control what the newspaper wants to 18 print. 19 Q. I didn't say that. I didn't say you control 20 it, but they haven't been resistant to you, have they? 21 A. They have not been resistant; nor have they 22 been resistant to the County Commissioners or the 23 project opposition. 24 Q. And, in fact, as you've acknowledged in your 25 deposition, an affiliate of Lancaster Newspapers owned 323 1 28 percent of Penn Square Partners, right? 2 A. I think in my deposition I said they owned 3 approximately 44 percent. 4 Q. I'm sorry. Thank you. 44 percent. 5 So if you look at this letter of -- and down in 6 the first column, just above the bullet, that's the 7 middle of the first column. 8 A. Uh-huh. 9 Q. Mr. Cooley says in the letter, you repeatedly 10 have made two specific claims that are not true. We 11 wish to publicly correct the record. And then the first 12 bullet says, the project has changed too much. 13 A. Uh-huh. 14 Q. And Mr. Cooley says, since the previous Board 15 of Commissioners pledged an irrevocable guarantee; that 16 was in October of 2003, right, Mr. Fitzgerald? 17 A. That's correct. 18 Q. The physical plan and size of the project has 19 not changed. 20 Is that what it says? 21 A. That's what it says. 22 Q. And then going down it says: We remind you 23 that the design of the project, and thus its costs, 24 directly reflects the community's request during the 25 two-day public design conducted by Cooper Carry 324 1 Architects in August, 2002, correct? 2 A. That's correct. 3 Q. And then down below that it says, the 4 hospitality industry, led by the Pennsylvania Dutch 5 Convention and Visitors Bureau and numerous hoteliers 6 said the exhibit hall of at least 50,000 square feet and 7 an upgrade full-service hotel would be required to win 8 their support, correct? 9 A. That's correct. 10 Q. And they had said that back in 2002, isn't that 11 right, as Mr. Cooley has indicated? 12 A. I believe that is correct. 13 Q. Okay. So the change to 50,000 square feet 14 occurred in 2002, before these commissioners came into 15 office, correct? 16 A. That's not correct. 17 Q. I see. Mr. Cooley's wrong? 18 A. The -- 19 Q. Is that what you're saying? 20 A. What I'm saying is that the exhibit you 21 referred me to of Mr. Beckett for 110,000 -- excuse me, 22 $110 million budget was based on a 32 or 34,000 square 23 foot exhibit hall. That was included in that design in 24 October of 2003. 25 In December of 2004, there was a sketch plan 325 1 completed referred to as exhibit -- as option 8 that had 2 a 50,000 square foot exhibit hall that could be 3 conducted in two phases, phase one and phase two. 4 I believe that phase one was 32,000 square 5 feet, and phase two was 18,000 square feet. And when I 6 referred you to the -- the budget of $129 million, that 7 included the 50,000 square foot exhibit hall. 8 So in October of 2003, as was the case in the 9 original design that occurred in 2002, in December of 10 2002, both of those designs had an exhibit hall of less 11 than 50,000 square feet. 12 Q. I see. 13 So when Mr. Cooley says in this letter 14 chastising the commissioners that since the previous 15 Board of Commissioners pledged an irrevocable guarantee, 16 the physical plan and size of the project has not 17 changed, you're telling me that Mr. Cooley is wrong? 18 A. I'm saying as of the date that the guarantee 19 was done, and the $110 million number was based on 20 32,000 square feet. 21 Q. And that changed? 22 A. Excuse me. 23 Q. That changed afterwards? 24 A. That did change. 25 Q. So Mr. Cooley is wrong? 326 1 A. That would be correct. And, again, from the 2 perspective of the $110 million budget. 3 Q. Well, from the perspective of I'm trying to 4 understand, Mr. Cooley is your boss, right? 5 A. Yes, he is. 6 Q. Okay. Did he share with you this letter before 7 it was sent? 8 A. Yes, I did read the letter. 9 Q. Oh. Well, why didn't you tell him, boss, 10 you're wrong, the physical plan changed after, not 11 before, the commissioners took office? 12 A. Mr. Kelin, there were dozens of designs, and 13 dozens of budgets that were put in place. We're talking 14 about a one-month period or a two-month period that I 15 just stated, October to December. 16 So I don't -- I didn't recall at that point in 17 time. It came up in the questioning on Wednesday and I 18 went back to my records to reflect on what the actual 19 cost was that you represented on Wednesday. 20 When you represented that cost on Wednesday of 21 $110 million, that number did not seem right to me. So 22 I wanted to see if I could find where that number was 23 generated. 24 And, again, that was a slide that was created 25 by Mr. Beckett. It wasn't a slide that was created by 327 1 me. So I tried to look through my files to see if I 2 could find any number that would match that. 3 The information that I found that matched that 4 number was a budget, hard cost, and soft cost, FF&E of 5 $110 million based on a 32,000 square foot exhibit 6 hall. That's what I found. 7 I also found information that referred to 8 option 8, which was being negotiated and discussed 9 between the time frame of 2003, January of 2003, up to 10 2004. 11 So we have a lot of different plans that were 12 being reviewed and discussed during that time frame. 13 Q. So -- so when in 2004 did the plans change from 14 25,000 to 30,000 to 50,000? Was that early in 2004? I 15 think you just said a few months after. 16 A. Well, again, it was a sketch plan. We had from 17 option 8 to the final schematic plan, there were many 18 plans done. 19 In fact, I believe the final sketch plan that 20 was done was option 14. So there was an additional six 21 plans that were put together -- sketch plan, not 22 schematic, so it wasn't fully designed, it dealt with 23 program square footage. 24 So it was during that time frame that the 25 square footage was modified. 328 1 Q. So can we expect another letter from Mr. Cooley 2 signed by commissioners -- signed by community leaders 3 to the commissioners saying, we're sorry, we were wrong, 4 the plans did change after you took office? 5 MR. PITTINSKY: Objection. 6 THE COURT: Sustained. 7 BY MR. KELIN: 8 Q. Now, Mr. Cooley also says that that design 9 change, the larger exhibit hall was prompted by the 10 hospitality industry, including the Pennsylvania Dutch 11 Convention and Visitors Bureau. 12 Do you see that? 13 A. I do. 14 Q. He didn't say, commissioners, that was your 15 fault, too, does he? 16 A. He does not say that in this letter, no. 17 Q. Commissioners weren't promoting that change, 18 were they? 19 A. No, I believe they were. 20 Q. That they were behind it? 21 A. I believe that there were discussions with the 22 commissioners and a small minority of the PDCDB that 23 required the 50,000 square foot exhibit hall in order to 24 get their support, and as you know, there were many of 25 the litigants in Bold I and Bold II who were members of 329 1 the PDCB board. So those members that were trying to 2 kill the project that failed twice, the project was -- 3 the -- those lawsuits were -- were won by the Convention 4 Center Authority, continued to put pressure on the 5 project to increase the costs of the project by 6 increasing the square footage of the exhibit hall. 7 Q. I see. So this was a behind-the-scenes 8 conspiracy between the Bold litigants and the 9 commissioners to convince the Tourism Bureau to put 10 pressure on the Authority to increase the size of the 11 exhibit hall? 12 A. I didn't say that. I said that there was a 13 small number of people on the PDCB board that required a 14 50,000 square foot exhibit hall. Those people were 15 supported by the County Commissioners to push for a 16 50,000 square foot exhibit hall. That was not a 17 requirement of the original JDA, and it was an issue 18 that was rising the cost of the project. 19 So we were pushing back and saying, if we're 20 trying to bring this project in on budget, we should not 21 be increasing the exhibit hall initially. We should 22 plan for an increase in the exhibit hall size from 23 32,000 square feet to 50,000 square feet in a phase two 24 plan. 25 Q. I see. 330 1 So Mr. Cooley's wrong again when he's saying 2 this was the -- 3 A. I don't think he -- 4 Q. -- the Visitors Bureau he said we knew that was 5 really you behind the scenes commissioners? 6 A. I don't think that would have been appropriate 7 for Mr. Cooley to say in the newspaper. I think 8 Mr. Cooley's statement is accurate. I don't think it's 9 a complete statement as to everything that was being 10 discussed during that time frame. 11 I think if you recall in Mr. Hixson's 12 testimony, he said that the county commissioners -- and 13 I think his words were -- were creating a poisonous 14 environment during that time frame. And I believe it is 15 those activities that I have referenced on Wednesday. 16 Q. Okay. What were they doing to create a 17 poisonous activity during 2004? 18 A. Again, I think what I just explained is that 19 they were encouraging and -- and pressuring the 20 Convention Center Authority board and the hoteliers who 21 sat on the PDCDB board to require a 50,000 square foot 22 exhibit hall in the redesign of the project. 23 At a time when the budget was $22 million over 24 budget, we had the ability to construct a 32,000 square 25 foot exhibit hall at a cost of -- I believe the 331 1 differential between the 32,000 square foot exhibit hall 2 and a 50,000 square foot exhibit hall was approximately 3 $5 million. 4 So there was a lot of pressure being placed to 5 increase the size of the exhibit hall, to increase the 6 budget gap, from what could have been a $17 million 7 budget gap to a $22 million budget gap. And it was that 8 process and that environment that delayed the 9 negotiations between the Convention Center Authority and 10 Penn Square Partners and drove up the costs of the 11 project. It drove it up two ways. Both of them I 12 stated on Wednesday. 13 The first thing it did is it increased the size 14 of the project from what was contractually agreed to in 15 2001, and it caused the delay which allowed the 16 project's cost to increase as a result of inflation. 17 Q. Okay. And you believe that was done by the 18 Bureau, the Visitors Bureau, at the urging and promotion 19 of the commissioners? 20 A. I believe, as I said earlier, I believe that 21 was done at the urging of Commissioners Henderson, 22 Shellenberger, and the hotel litigants that sat on the 23 PDCB board at the time. That's what I believe. 24 Q. And then the third reason you mentioned the 25 other day, as -- with respect to how the commissioners 332 1 were poisoning the well or poisoning the environment 2 during 2004, was that they were taking actions to 3 prevent you from closing the $22 million funding gap? 4 A. That's correct. 5 Q. And that's the same funding gap that Mr. Hixson 6 was referencing on November 10th, 2004, in the meeting 7 minutes we just looked at in Exhibit 34, correct? 8 A. That's correct. 9 Q. All right. So if -- and this was announced, 10 this funding gap, was really first announced at that 11 meeting, wasn't it? 12 A. At which meeting? 13 Q. November, 2004. 14 A. No. 15 Q. Okay. Tell me, please, what did Commissioners 16 Shellenberger and Henderson do up to November 10, 17 2004 -- 18 A. Uh-huh. 19 Q. -- to poison the well against being able to 20 bridge this $22 million funding gap? And, again, limit 21 your answer, please, up to that meeting date. 22 A. Sure. Sure. During that time frame, Penn 23 Square Partners, the Convention Center Authority, 24 Representative Sturla, Senator Armstrong, were working 25 very diligently with the governor's office to try to 333 1 develop a strategy to fill that funding gap. 2 There were multiple meetings between Penn 3 Square Partners and the Convention Center Authority with 4 DCED to try to accomplish that objective, and I think 5 Mr. Hixson referenced meetings with Mr. Segal. 6 At the same time, we were meeting with the 7 governor's office to try to secure those additional 8 funds. It is my understanding that Commissioner 9 Henderson specifically had several meetings, the number 10 I do not know, with the governor's office trying to 11 prevent any additional funds from flowing from the 12 governor's office, from the state, to this project. 13 So at the very time that the project developers 14 were trying to secure those funds, supported by 15 Representative Sturla, Senator Armstrong, the existing 16 mayor at that time, Commissioner Henderson was having 17 conversations with the governor's office directly to 18 stop any additional flow of funds. 19 Q. And you're certain of that before mid-November, 20 2004? 21 A. I'm -- I am certain that during the time frame 22 that I just specified, while we were having discusses 23 with the governor's office, that Commissioner Henderson 24 was having simultaneous meetings with the governor's 25 office to try to stop those flow of funds. 334 1 Q. Could you look at tab 35? 2 A. Uh-huh. 3 Q. These are minutes from a Lancaster Convention 4 Center Authority meeting on July 14th, 2004, correct? 5 A. That's what it says, yes. 6 Q. Okay. Would you please turn to page 5? And 7 down at the bottom of page 5, there's a project update 8 report from Tom Smithgall of High Industries and Bob 9 Neal of Cooper Carry, correct? 10 A. Yes. 11 Q. And Mr. Smithgall, Tom Smithgall, was your 12 subordinate employee for High Industries, correct? 13 A. That's correct. 14 Q. And the first sentence says, Tom Smithgall 15 stated that we have some good news, as most are aware, 16 that the architect has been authorized to begin work and 17 Bob Neal will detail his work schedule. 18 Do you see that? 19 A. I do. 20 Q. Okay. So the financing that we heard about the 21 other day occurs in December of 2003, right? 22 A. The bond guarantee financing? 23 Q. Yes. Yes. 24 A. That did. 25 Q. Okay. And part of the reason for that as we 335 1 heard, as we saw Mr. Beckett had told the Authority was, 2 we're ready to move on this right away, so now's the 3 time to do the financing, right? 4 A. That was made by Mr. Hixson and Mr. Beckett, 5 that's correct. 6 Q. So the -- so the outgoing Board of 7 Commissioners approves the guarantee, signs -- I'm 8 sorry, approves the ordinance and signs the guarantee in 9 mid-December, 2003, and then you wait seven months to 10 give the architect approval to begin work. Right? 11 A. No. No, that's not how it works. 12 Q. Well, did it take seven months to give the 13 architect approval to begin work as reflected here? 14 A. It takes -- took seven months to complete the 15 schematic design. 16 Q. Well, what does it mean when it says that the 17 architect has been authorized to begin work? 18 A. On the next phase of that design process. So, 19 again, as I stated earlier, in 2003, there were 20 literally dozens of sketch plans that were completed. 21 Those sketch plans were the basis of the budget that was 22 put together in 2003. 23 Once a sketch plan was agreed upon, we would 24 then commence to the completion of the schematic 25 design. And if my memory serves me correct, the 336 1 schematic design was completed around the June time 2 frame of 2004. And then from that sketch plan, you move 3 to the design development documentation and then from 4 the design development documentation, you move to the 5 construction documentation. That is the process. 6 So I believe at this meeting, what we were 7 referring to was moving forward from sketch plan to 8 schematic plan to DDs. And, again, what I referred you 9 to was the delay in getting from a final sketch plan, an 10 agreement on a final sketch plan, to the end of 11 schematics. And that plot -- and that process did take 12 six months. 13 And as I mentioned earlier, I think part of the 14 reason for that was this pressure to have an exactly 15 50,000 square foot exhibit hall. 16 So I believe back in March of 2004, there was a 17 sketch plan that was produced that had a 45,000 square 18 foot exhibit hall, but that wasn't enough, we had to go 19 back and increase it to approximately where it is 20 today. 21 And as you keep going through that iteration, 22 it takes a tremendous amount of time for the architects 23 to develop those plans. 24 Q. Would you turn in that same exhibit, tab 35, to 25 the bottom of page 1? 337 1 A. Uh-huh. 2 Q. And Commissioner Henderson was at the meeting, 3 correct, the Authority meeting on July 14, 2004, page 1? 4 A. Page 1? 5 Q. Yes, tab 35. 6 A. I'm looking. 7 Q. Page 1. 8 A. Okay. 9 Q. At the bottom, Commissioner Henderson? 10 A. Yes, I was looking up under the attendance list 11 and I was looking at the Authority board members. I'm 12 sorry. 13 Q. All right. And if you just read that to 14 yourself and then go into the second page, do you see 15 where Commissioner Henderson is inquiring about the 16 rationale for the purchase of the Brunswick Hotel? 17 A. Yes, I do. 18 Q. Okay. And then Mr. Hixson responds below that, 19 and says the rationale for the sales and purchase 20 agreement for the Brunswick Ramada was twofold. And 21 then he explains the first reason and he says: 22 You can have a first-class Marriott on Penn 23 Square but you cannot have an inferior overflow product 24 on Lancaster square and they wanted to look into 25 marketing and -- into possibly purchasing the Brunswick 338 1 to help with improving the overflow product. 2 Do you see that reference to the first item? 3 A. Could you please refer me to the line you're 4 reading on? 5 Q. Sure. When Mr. Hixson says, the rationale -- 6 A. Would you give me the line, please? 7 Q. Sure. The third -- at the end of the third 8 line down. 9 A. Okay. 10 Q. That says, you can have a first-class Marriott 11 on Penn Square but you cannot have an inferior overflow 12 product on Lancaster square. 13 Do you see that? 14 A. I see the line 15 Q. Okay. That was the first reason that he gave. 16 And then he gave a second reason down in the 17 middle of that paragraph. 18 The second reason for moving forward on that 19 was very simply, as you look at the challenges that the 20 project was facing at Penn Square, and we have to go 21 back two, three, four months ago, there was a lot of 22 uncertainty with regard to additional state dollars that 23 had been identified at commissioners' meetings. 24 We had support from local legislatures, but it 25 would have been short-sighted not to take a look at the 339 1 fact in a very realistic manner that if the project 2 doesn't happen on Penn Square, where can we deliver a 3 first-class convention center here in Lancaster. 4 Quite obviously, our attention turned to 5 Lancaster Square which was the original site of this 6 project some years ago. 7 Do you see that? 8 A. I do. 9 Q. Okay. So is it accurate that during the July 10 2004 time frame, the Convention Center Authority was 11 contemplating the possibility of not having the 12 convention center hotel at Penn Square, pursuant to its 13 joint development agreement with Penn Square Partners, 14 but, instead, to move the convention center down to 15 Lancaster Square to the Brunswick Hotel? 16 A. I think as a result of our inability to secure 17 commitments from the State in the -- in that time frame, 18 the Convention Center Authority did pursue alternative 19 sites within the city. 20 Q. And was this the time frame -- same time frame 21 you think that Commissioner Henderson was going to the 22 governor's office -- 23 A. I do. 24 Q. -- trying to stop -- 25 A. That I do. 340 1 Q. Now, the reference to, quite obviously our 2 attention turned to Lancaster Square, which was the 3 original site of this project some years ago, are you 4 familiar with what's known as the Winter Bottomer 5 [phonetic] report? 6 A. I am not. 7 Q. Okay. Are you aware that there was a report 8 concerning the possibility of a convention center in 9 downtown Lancaster that had the location of the 10 convention center at Lancaster Square, as reflected by 11 Mr. Hixson's comments? 12 A. I believe that's correct. 13 Q. And isn't it correct that after Penn Square 14 Partners purchased the Watt & Shand building, that that 15 was part of what led to the concept of relocating that 16 project to Penn Square? 17 A. I think that's correct. 18 Q. Now, other than the three issues you mentioned 19 the other day, again, covering this 2004 time period, 20 the questions you understood the commissioners were 21 raising about whether this was to be a four-star hotel, 22 pressure you understood the commissioners were 23 collaborating in with regard to the Tourism Bureau to 24 put pressure on the Authority to increase the exhibit 25 hall, and visits you understand Commissioner Henderson 341 1 was having with the governor's office during 2004 to try 2 to stop the funding to this project, was there anything 3 else that you understand Commissioner Shellenberger or 4 Shaub did during 2004 that supports the allegations you 5 had made as reflected on the proposal? 6 A. I -- just to correct your statement, I think it 7 was visits and conversations. 8 Q. Okay. 9 A. So I don't know if all of the conversations 10 that were had by Commissioner Henderson with the 11 governor's office were physical visits or phone 12 conversations. So I just wanted to clarify that. 13 Q. But subject to that change, was there anything 14 else? 15 A. Other than just creating a -- a -- a hostile 16 environment, those are specifics 17 Q. And again, during 2004. 18 A. During 2004. And, again, I think it's fair to 19 state, and I think you stated it in the beginning, 20 Commissioner Henderson from the very beginning did not 21 like the public/private partnership that was proposed 22 and agreed to in 2001. So all of that is in that 23 context of continued opposition by Commissioner 24 Henderson on the original structure of that deal and the 25 requirement of the amount of public financing to 342 1 increase as a result of increase in the project costs. 2 Q. Yeah. Actually, you're misstating what I 3 said. I didn't say that. 4 A. I apologize. 5 Q. But what I said doesn't matter, 'cause 6 Commissioner Henderson is gonna testify and we'll get to 7 hear what she says, but you're misstating what I said 8 about what she would testify to. 9 A. I apologize. 10 Q. All right. Now, I want to shift focus to a 11 different time period, and I want to go from 12 mid-November, 2004, after this announcement that the 13 cost estimate was increasing to 129 million, to the end 14 of March, 2005. 15 A. Uh-huh. 16 Q. And as we talked a little bit about the other 17 day, this includes the period where Penn Square Partners 18 approached the county, and the School District of 19 Lancaster and the City with regard to the TIF 20 application. 21 A. That's correct. 22 Q. Correct? 23 All right. And the TIF application was part of 24 what you were trying to do to bridge this $22 million 25 gap, correct? 343 1 A. The TIF application was part of the 2 capitalization structure that would allow us to bridge 3 the $22 million gap. That's correct. 4 Q. And am I correct in explaining the TIF 5 process? I think we -- that was addressed by another 6 witness, but essentially, under the TIF, the taxpayer 7 would still pay real estate taxes, but instead of those 8 taxes going to the taxing authority, they would go to a 9 trustee who would turn around and use those revenues to 10 pay debt service on the project? 11 A. That is correct in terms of how a TIF works; 12 however, the TIF structure that we were proposing is 13 slightly different than that, in that the Redevelopment 14 Authority of the City of Lancaster was going to be the 15 owner of the hotel, based on the structure that is in 16 place today; and as such, the Redevelopment Authority 17 and the City of Lancaster is immune from taxation. 18 So the TIF plan that we put in place was put in 19 place to provide protection in the event that there 20 would be a legal challenge to the Redevelopment 21 Authority's tax-exempt status. 22 And we were seeking the support of the School 23 District and the taxing bodies to a structure that would 24 prevent any third party from challenging that tax 25 exemption or, in fact, the taxing authorities 344 1 themselves. 2 Q. Okay. Penn Square Partners and RACL were going 3 to ask for tax immunity, but you're aware of the Septa 4 case, correct? 5 A. I am aware of the Septa case. 6 Q. In fact, Mr. Pittinsky's law firm was involved 7 in that case; is that correct? 8 A. That's correct. 9 Q. And they advised you of the Septa case, and 10 under that case, somebody could argue RACL would not be 11 immune from taxation in the context of the Marriott 12 Hotel? 13 A. That's correct. 14 Q. So to prevent that from being even a 15 possibility that there be taxes owed on the hotel, you 16 sought approval of the TIF which would result in there 17 being, in a practical effect, no taxation on the hotel, 18 correct? 19 A. I think the Septa case you referred to actually 20 supported our position that the Redevelopment Authority 21 would be immune from taxation. And the reason for that, 22 I'm not an attorney, so you'd have to talk to the 23 attorneys that were involved in that, but I believe the 24 Court, in rendering their decision on that, said that 25 the reason that Septa could not have the tax immunity is 345 1 because their mission wasn't to redevelop real estate, 2 their mission was transportation. And since the tax 3 immunity they were seeking had to do with real estate 4 development, that's the reason that they lost their tax 5 immunity. 6 In our case, we think we've -- we fall directly 7 into that situation where the Redevelopment Authority's 8 mission is to revitalize the City of Lancaster. So we 9 do think that the tax immunity would -- would preveil 10 and we were doing this as a protection, so that we would 11 not have to spend additional time in court and legal 12 fees defending that position. 13 Q. So whether -- whatever -- whichever attorneys 14 are right or wrong, you were aware there was some risk 15 and that's why you went forward with the TIF? 16 A. That's right. 17 Q. And, therefore, in approaching the County and 18 the other taxing authorities about the TIF, you were 19 asking them to approve tax relief for the Marriott 20 Hotel, correct? 21 A. No. 22 Q. You weren't asking approval of the TIF as a 23 form of tax relief? 24 A. No, because as I just stated, the Redevelopment 25 Authority is immune from taxation. What we were asking 346 1 them for is re -- is protection against either 2 themselves or a third party challenging the tax immunity 3 of RACL. 4 Q. Okay. So can we call it tax relief protection? 5 A. You can call it whatever you want to call it. 6 Q. In any event, you knew you had to get their 7 approval of the TIF for the TIF to be effective with 8 regard to the county taxes, right? 9 A. For the protection to be in place. 10 Q. Right. Okay. 11 And you said the other day that the intent of 12 the 57 questions isn't to protect taxpayers, you believe 13 it's to kill the project. 14 A. I do. 15 Q. Okay. Let's go, if you would, to the 57 16 questions, which is at tab 17. 17 A. Okay. 18 Q. And the first two pages, and then just a little 19 bit on the third page, is a cover letter from 20 Commissioner Shellenberger to Mr. Cooley, correct? 21 A. The first two pages? 22 Q. Yes. 23 A. That's correct. 24 Q. Uh-huh. And the first page -- the first 25 paragraph starts, on behalf of the Board of 347 1 Commissioners, I commend Penn Square Partners, the 2 Convention Center Authority, and RACL and all affiliated 3 organizations that have worked hard for many years 4 trying to bring a convention center and hotel complex to 5 downtown Lancaster. 6 That's not too harsh, is it? 7 A. No, I don't think it is. 8 Q. This effort was started with the very best of 9 intentions, which was to form a private/public 10 partnership to help revitalize downtown Lancaster and 11 bring much-needed fiscal relief to the City of Lancaster 12 and the School District of Lancaster. 13 I'll tell you what, I'm going to keep reading, 14 and when I get to the point you think reflects an intent 15 to kill the project, you stop me. Okay? 16 Over the years, Penn Square Partners and its 17 colleagues have addressed many issues at considerable 18 time and expense. Some of these issues have required 19 the proposed project to evolve in terms of structure and 20 financing. 21 There is no doubt that all Lancaster County 22 residents owe thanks to those who have carried the 23 laboring work in trying to achieve your objectives. 24 Now you have brought this issue to the County 25 Commissioners by requesting our approval of the TIF Act 348 1 application. 2 The Commissioners have an important duty in 3 evaluating this application. Not only are we sworn to 4 uphold the statutory requirements of the TIF Act, but we 5 must evaluate this request in the context of the 6 County's 2003 guarantee of one-half of $40 million in 7 financing related to the project. 8 Including projected interest on the financing, 9 this guarantee exposes county taxpayers to potential 10 liability exceeding $16,000 over the 40 million 11 maximum -- over the 40-year maximum lifetime of the 2003 12 financing. 13 Both because of the cost of the TIF Act 14 requirements and the County's guarantee, all of the 15 commissioners take very seriously our role in evaluating 16 the TIF application. 17 The TIF Act application materials provided to 18 date address some of our conflicts of interest; however, 19 the materials do not explore some important issues in 20 adequate detail, and some other important issues are not 21 addressed at all in the applicable materials. 22 Enclosed is a list of initial questions and 23 topics we would like you and your colleagues to address 24 in greater detail. 25 Please note that this list is being presented 349 1 jointly by me and Commissioner Henderson. Commissioner 2 Shaub believes that any questions he has about the 3 project, either -- have either already been answered or 4 will be answered through the upcoming public 5 presentations made to the commissioners. 6 With respect to such meetings, we understand 7 Penn Square Partners and the Authority will be 8 presenting information to the commissioners at our 9 public meeting on March 16th, 2005, and the formal 10 presentations to the commissioners on behalf of RACL, as 11 required by the TIF Act, will occur at our public 12 meeting on March 23rd, 2005. 13 Pursuant to the TIF Act, the commissioners must 14 vote to opt in or out of the TIF before the City 15 Council's public hearing on April 8th, 2005. 16 It is important to stress that nobody should 17 assume the nature of the enclosed questions indicates 18 one way or the other how the commissioners may vote 19 regarding the TIF. 20 The questions and topics on our list are simply 21 issues that have arisen based on our evaluation of the 22 materials previously submitted to the commissioners and 23 other project documents. 24 In presenting this list, we are attempting to 25 be straightforward in seeking clarity on these issues; 350 1 firm, to reflect that we are resolute in obtaining 2 answers; and, fair, so everyone knows exactly what 3 information we need in order to make the best decision 4 possible for Lancaster County. 5 This is a critical decision for everyone in 6 Lancaster County; that this issue has become so 7 controversial, it reflects that it is not a one-sided 8 argument. All views need to be understood and 9 considered. 10 We trust you appreciate the commissioners' 11 obligation to ask questions and evaluate the answers on 12 behalf of our constituents. 13 We look forward to receiving such information, 14 either during your upcoming presentations to the 15 commissioners, or earlier in writing. 16 We would, though, appreciate receiving the 17 documents identified in our questions as soon as 18 possible. 19 Thank you not only for your anticipated 20 cooperation in responding to this list, but also for 21 everything you and others have done in bringing the 22 project to this juncture. 23 Sincerely, Dick Shellenberger, Chairman, Board 24 of Commissioners. 25 Now, there's nothing in that letter that 351 1 reflects some intent to kill the project, is there? 2 A. There's nothing in the letter, but there's 3 everything in the actions, and the actions of the County 4 Commissioners up to that point that they wrote the 5 letter were to delay and stop the project. 6 Q. Okay. Beyond what you talked about before, 7 asking questions about the four-star rating, what you 8 understand to be trying to influence the Tourism Bureau 9 to put pressure on the Authority to increase the size of 10 the exhibit hall, and Commissioner Henderson purportedly 11 going to meet with the governor's office or talking to 12 the governor's office in 2004 -- 13 A. To prevent the flow of -- 14 Q. -- to prevent the flow of additional funding? 15 A. To prevent the flow of additional funding. 16 Q. Right. Anything else up until the time they 17 sent this letter? 18 A. Other than creating the hostile environment 19 that I talked about, no. 20 Q. Through those actions you described? 21 A. Through those actions specifically. 22 Q. Are there any of the 57 questions themselves 23 that you believe reveal the intent by the commissioners 24 to kill the project? 25 A. Yes. 352 1 Q. Which ones? 2 A. Well, I think -- I believe the first one, and I 3 haven't gone through the 57 questions in some time. 4 But I believe there was in one of them they 5 asked for a private guarantee. I believe they asked for 6 Penn Square Partners to guarantee the bonds. And I 7 believe that's correct. 8 You have them in front of you and maybe you can 9 refer me to it, because you probably know it better than 10 I do. 11 But I think, as Mr. Beckett explained, that a 12 private guarantee of those bonds would invalidate the 13 tax-exempt status and would prevent the Authority from 14 getting a tax-exempt rating and, therefore, they would 15 not be able to finance them in accordance with the 16 conditions of the ordinance. 17 Q. Okay. 18 A. So I'm just picking one. 19 Q. Okay. Well, actually, that's not one of the 57 20 questions, but since you've raised it, let's go to where 21 it is. 22 Would you just keep one hand on the 57 23 questions and then turn to tab 21? 24 A. Okay. 25 Q. These are Commissioner Shellenberger's 12 353 1 points for taxpayers. 2 A. I'm sorry. It was the 12 points of taxpayers. 3 Q. And that was in May of '05, right? If you 4 look, May 23 of '05? 5 A. That's what it says. 6 Q. All right. And would you turn to the second 7 page and look at the third point at the bottom of that 8 page, Item C, and it identifies the concern that the 9 County's guarantee greatly benefits Penn Square 10 Partners, county taxpayers bare the risk of $60 million, 11 Penn Square Partners doesn't bear any risk with respect 12 to the convention center; and, therefore, the proposed 13 solution, which I think is what you just referred to, 14 that the owners of Penn Square Partners should provide a 15 first priorty guarantee on the Authority's construction 16 bonds, with the county still maintaining a guarantee, 17 but having that secondary to Penn Square Partners? 18 A. Right. 19 Q. That's what you were referring to, right? 20 A. That's right. 21 Q. And then it says, it will more appropriately 22 share the allocation between private and public risk yet 23 still preserve the helpfulness of the County's guarantee 24 in marketing the bonds and obtaining the lowest possible 25 interest rate for the bonds. 354 1 Do you see that? 2 A. I do. 3 Q. So at least the County was contemplating that 4 by maintaining the guarantee, you'd still have the 5 benefit of the county guarantee, even though it was 6 secondary to Penn Square Partners, correct? 7 A. Again, I think that's not accurate. I think a 8 first priority from Penn Square Partners would 9 invalidate the tax-exempt status and would prevent the 10 Convention Center Authority from remarketing the bonds 11 under the conditions of the guarantee or the indenture, 12 and would prevent them from maximizing the $40 million, 13 because it would no longer be tax-exempt. 14 I also think it's inappropriate for the private 15 sector to guarantee the bonds for the public sector 16 component of the project. 17 Q. Well, public sector is guaranteeing the bonds 18 on the private sector of the project now, aren't they? 19 A. No, they're not. That's not accurate. That's 20 an inaccurate representation of what's occurring. 21 Q. The City of Lancaster hasn't adopted two 22 guarantees of $12 million and a limited guarantee of 24 23 million? 24 A. The limited guarantee of $24 million only deals 25 with, not the -- not the successful operations of the 355 1 project, it is limited to only one issue; and that is, a 2 successful challenge of RACL's tax immunity. That's all 3 it is. And it only kicks in in the event of the minimum 4 $200,000 cash payment, plus the participation is 5 insufficient to pay any taxes that would otherwise be 6 due. 7 So in that case, it's a very limited guarantee 8 and only deals with that one issue. It does not have 9 anything to do with the successful operation of the 10 hotel component of the project. 11 Q. How about the City's $12 million guarantee? 12 A. With respect to the City's $12 million, that is 13 a funding mechanism that was structured and put in place 14 in negotiations with the governor's office, and the 15 project and those funds are for the benefit of both the 16 hotel and the convention center. 17 They're shared -- those funds will be used to 18 help fill the gap for the entire project. So those 19 funds are not directly attributable to the hotel 20 component of the project. They're shared costs. 21 So I think there's a shared benefit and that's 22 why you structure these types of projects as a 23 public/private partnership. 24 It would be cost-ineffective or 25 cost-prohibitive for a private sector to build a 356 1 full-service hotel in a downtown location. It is very 2 typical across the country for these types of structures 3 to exist. 4 Q. Okay. Now, my understanding of Mr. Beckett's 5 testimony on the issue of tax exemption was in response 6 to a question by His Honor to Mr. Beckett about what 7 amount of private guarantee, in place of a public 8 guarantee, and Mr. Beckett said, no, that would have a 9 problem with the tax-exempt nature of the bonds, but his 10 question wasn't dealing with a situation where you would 11 still have a public guarantee secondary to private 12 guarantee, isn't that your recollection? 13 A. That's my recollection of the question. I 14 don't know if that changes the outcome. 15 Q. You don't know? 16 A. I'm not an attorney. 17 Q. So let's go back now, now that we've had the 18 sidetrack you invited. Let's go back to the 57 19 questions. 20 A. All right. Which tab is that? 21 Q. Tab 17. And my question was: Do any of the 57 22 questions reflect the intent of the commissioners to 23 kill the project? 24 A. Again, as I stated, I haven't read these 57 25 questions since they were issued. 357 1 Q. All right. So the answer is you don't know? 2 A. I'd have to go through and read each of the 57 3 questions. I do also want to state, though, and I think 4 this came out on March 11th, you said. 5 Q. Yes. 6 A. Okay. There was a meeting that I attended with 7 Mr. Cooley, senator Armstrong, Representative Sturla, 8 commissioner Shellenberger, and Mr. Ebersole on, I 9 believe, March 24th, that attempted -- well, not 10 attempted, we went through each of the 57 questions and 11 addressed every question to Commissioner Shellenberger 12 at that time. 13 Q. Okay. 14 A. So there was an effort made to review with him 15 all of the questions that they had asked. 16 Q. And didn't Mr. -- Commissioner Shellenberger at 17 the meeting say, in essence, hey, this is great, I 18 appreciate it, but you realize, we've got to make a 19 public decision, so I need written answers that I can 20 share with the public, 'cause it's their money, not 21 mine? 22 Didn't he ask you for public responses just as 23 he had in the letter? 24 A. I don't recall that. What I recall him saying 25 at one point, I don't understand the answers to my 358 1 questions. And I recall Senator Armstrong saying, well, 2 just because you don't understand them, Dick, doesn't 3 mean they haven't answered them. And what we said is, 4 if we are going to go to a public meeting and you're 5 going to ask these questions at that meeting, then we 6 would answer those questions in that public meeting at 7 the time we requested the TIF. We never got to that 8 point. 9 So as I said in my meeting on -- or in our 10 discussion on Wednesday, we chose not to put any of this 11 information in writing, because we believed at the time 12 it was the intent not to try to find a solution to move 13 this project forward, it was an attempt to kill the 14 project and get additional information to be used 15 against the project. 16 Q. So you were concerned that if your honest 17 answers to these questions should become public, that 18 could lead to killing the project? 19 A. No. 20 Q. Well, then why not give honest written answers 21 as -- 22 A. We gave honest answers. I'm giving honest 23 answers. 24 Q. Excuse me. May I finish my question? 25 A. Yes, you may. 359 1 Q. You knew Commissioner Shellenberger appreciated 2 the private audience, but wanted information that he 3 could disseminate publicly, because it wasn't -- it was 4 his decision but he was gonna have to justify his vote 5 publicly, wasn't he? 6 A. Again, I don't know what his thought process 7 was. What we did is we met. We have repeatedly 8 answered these questions. We had a private meeting with 9 him in an attempt to answer all of his questions. And 10 we said, if we got to the point where we were making a 11 presentation to the County Commissioners on the TIF, we 12 would again answer all of those questions in a public 13 setting, as we have done repeatedly from the very 14 beginning of this project. 15 Q. You never gave the commissioners the written 16 answers they requested, did you? 17 A. We never gave the commissioners written answers 18 to the questions. 19 Q. Because you were concerned they would 20 disseminate that information publicly? 21 A. No, because we were concerned they would use 22 that information against us to try to stop the project. 23 We had asked -- you had asked -- we had answered the 24 questions repeatedly. There was documentation to all of 25 that. 360 1 In fact, and I'm sure you have the newspaper 2 article as well, I believe there was a newspaper article 3 when that statement was made, I don't remember who the 4 writer was, and Commissioner Henderson said, we -- I 5 have all that information in writing sitting behind me, 6 but I didn't read it. 7 Now, I might be misquoting, but I believe if 8 you research the newspaper records, I think you will 9 find a general quote to that -- to that. 10 Q. Actually, you are misquoting, but guess what, 11 the article was misquoting him, too. 12 A. Well, how convenient. 13 A VOICE: Yes. 14 BY MR. KELIN: 15 Q. I agree with that. 16 If you would turn to Exhibit 20. And this is a 17 letter from Mr. Simms from RACL to Commissioner 18 Shellenberger saying, we're withdrawing the TIF 19 application. Well, we're not formally withdrawing it, 20 but we don't want to go forward with the presentation, 21 correct? 22 A. Correct. 23 Q. And this was after the School District of 24 Lancaster rejected the TIF proposal as it had been 25 presented to them and made a counter-proposal, which 361 1 Penn Square Partners not only rejected, but did not want 2 to use as a basis for future negotiations; is that 3 correct? 4 A. I think I stated my answer to that on 5 Wednesday. We rejected it because it did not allow us 6 to achieve the objectives of securing the financing that 7 we needed. 8 Q. Nor allow you to achieve your own financial 9 objectives for the project, right? 10 A. To move the project forward. 11 Q. Right. I mean, you could have, but you didn't 12 want to do so under those terms? 13 A. No, we could not. The request that they made 14 would not allow us to secure the additional -- the 15 financing that we needed on the $24 million. It was -- 16 it was cost-prohibitive to move forward; and, again, as 17 I stated, we believe that the Redevelopment Authority is 18 immune from taxation. 19 So the purpose of securing the TIF was to 20 protect the project from a legal challenge, so that we 21 would not be further delayed and tied up in court and 22 spending money on these types of issues as opposed to 23 putting that money into the project. 24 Q. Okay. 25 A. And creating the project and creating the jobs 362 1 for Lancaster. 2 Q. Do you believe that because the commissioners 3 asked the 57 questions, and wanted public answers, that 4 they're to blame for the TIF not being approved by the 5 School District of Lancaster? 6 A. I think the School District of Lancaster made a 7 decision to reject the TIF based on the history of the 8 project and the overall opposition to the project from 9 the County Commissioners and the project opponents in an 10 attempt to try to enhance, for the School District -- 11 and I don't blame them for that -- trying to get 12 additional funds for the School District of Lancaster. 13 Q. And at that point the opposition taken by the 14 commissioners were the three things you referenced back 15 in 2004, plus asking the 57 questions? 16 A. I think that's a fair statement. 17 Q. All right. Would you please turn to Exhibit 18 37? And this is a newspaper article from the Lancaster 19 Intelligencer Journal dated July 9th, 2005, from page 20 A-1, a front-page article, it says: Center has $5 21 million gap, construction costs estimate, $134 million. 22 Do you see that? 23 A. Yes. 24 Q. Okay. Is it accurate that on or about July 25 9th, 2005, the announcement was made that the costs of 363 1 estimates for construction had increased from 129 2 million to 134 million? 3 A. I would have to read this entire article, but I 4 believe what they were referencing was the raw dollars 5 that were submitted in the design development budget 6 prior to the owners and the developers going through the 7 scope clarification and value engineering process. 8 And when we went through that process, we 9 actually reduced that -- that number back down to the -- 10 the budget number that we've referenced before. I 11 believe that's the case. But I -- 12 Q. Okay. Well, let's take a -- take a look. This 13 article begins, it says: Construction cost estimates 14 for the proposed downtown hotel convention center 15 project total 134 million, $5 million over budget, 16 Lancaster County Convention Center Authority announce 17 Friday. 18 Developers and Authority officials disagree on 19 who is to blame for the overruns, but they say the gap 20 will not stop the project. 21 And then if you go down a little bit, it refers 22 to Mr. Cooley, about a third of the way down the page it 23 says, Nevin Cooley, president of Penn Square Partners, 24 says the convention center design is 9.7 million over 25 budget and the hotel is 300,000 under budget. The cost 364 1 of building shared space between the project is $4.4 2 million under budget, which brings the total estimated 3 cost overrun to 5 million over budget. 4 And then it goes on to refer to Mr. Hixson, who 5 says the partnership's breakdown of the numbers is 6 inaccurate. 7 Cooley's assertion is not a true assessment of 8 where we are. It's inconsistent to say all along this 9 is one big project and then shift the cost override for 10 one side of the project. You can't break it down for 11 self-serving purposes. He was referring to Penn Square 12 Partners having self-serving purposes, right? 13 A. That was his reference in this. 14 Q. And then let's see, this discusses how 15 different individuals are talking about bridging that 16 gap. About two-thirds of the way down the page it 17 quotes Mayor Smithgall, I'm sure we can go back up to 18 Harrisburg and get another source of money, we can ask 19 for money and see what we come up with, there's always a 20 way to do something if you want to. 21 And then down at the bottom of the page, 22 senator Armstrong says, he's encouraged by the numbers 23 and said savings could come from cost-cutting the 24 designs. It's like any other project, we just have to 25 decide where to save a few bucks. 365 1 But the article says, the Convention Center 2 Authority said in a press release it had already 3 exhausted all cost savings alternatives and wanted to be 4 up-front with the public. 5 And then it quotes Mr. Hixson, no more smoke 6 and mirrors, Hixson said. This project is at a critical 7 juncture. It's time for leadership, honesty and open 8 lines of communication. And the Convention Center 9 Authority is ready to step up and provide that. 10 He didn't include Penn Square Partners in that 11 statement, did he? 12 A. He did not. 13 Q. Wasn't the commissioners saying that, it was 14 the Authority, right? 15 A. That's correct. 16 Q. Down at the bottom -- about two-thirds of the 17 way down that page, talking about Mr. Hixson again, 18 Hixson reiterated the Authority's position and said Penn 19 Square Partners needs to take more responsibility in 20 eliminating the shortfall. We are in this together, he 21 said. The Convention Center Authority Board has 22 indicated enough is enough. 23 Now, you don't blame the commissioners for this 24 dispute between the Authority and the Penn Square 25 Partners over this $5 million budget gap, do you? 366 1 A. I think that the actions of the commissioners 2 continued to create a tension between the partners in 3 resolving the governing documents and moving this 4 project forward. 5 And I do believe that the actions of the County 6 Commissioners had an impact on the statements that were 7 made by Mr. Hixson at the time. 8 And for the record, I believe that the 9 statements attributable to Mr. Cooley are accurate with 10 respect to the cost allocations that were done at the 11 time the DD budget came in. It was based on the 12 governing documents that were negotiated between Penn 13 Square Partners and the Convention Center Authority up 14 to that point in time. 15 And if you refer to the governing documents 16 that were actually executed between Penn Square Partners 17 and the Convention Center Authority, you'll see that 18 there is a detailed allocation of space. Construction 19 managers used that allocation of space and the cost 20 estimates that came in to determine where the costs were 21 allocated. 22 So I agree with Mr. Hixson that at that point 23 in time, nobody was blaming anybody. And I don't think 24 Penn Square Partners was blaming the Authority. I think 25 we were just stating the fact that where we were at that 367 1 point in time the project was over budget, based on the 2 $34 million number from where we were at the $129 3 million number that was specified back the previous 4 year. 5 Q. Well, do you blame the commissioners for that 6 $5 million gap? 7 A. No, I do not blame them for that. I blame them 8 for the statement, I think was your question. Your 9 question wasn't, do I blame them or did they have any 10 impact on the statement that was made by Mr. Hixson. 11 I think that the tenor of the discussions 12 between the commissioners at that time did influence 13 statements that were made by Mr. Hixson as a 14 representative for the Convention Center Authority. 15 I do not blame them for where we came in. 16 Other than, to go back to what I stated earlier, that 17 the delays in the project, which I believe were caused, 18 in part, by the actions of the County Commissioners, 19 drove the cost up. Time is increased costs. 20 Q. What have the commissioners done that caused 21 delay in your design documentation? I mean -- 22 A. We just went -- 23 Q. The commissioners weren't getting in the way of 24 your architects doing their work, were they? 25 A. Absolutely. 368 1 Q. How? 2 A. Because if the owners couldn't come to 3 resolution on the project because of the actions of the 4 commissioners, the owners couldn't give the architects 5 clear direction on how to proceed. 6 So it all comes together. It all -- it all 7 knits together and we -- we need to have the entire 8 community -- and we've got the majority of the community 9 behind this project moving forward. 10 And I think what we were lacking at that point 11 in time was the support of the County Commissioners. 12 If we had the support of the County 13 Commissioners, I believe that the negotiation process 14 and the final design for this project would have been 15 completed sooner than what it was. 16 Q. You believe had they not asked questions, had 17 they not expressed concerns to this, they would have 18 sailed right through, do you? 19 A. I didn't say that. 20 Q. Don't you believe that? 21 A. No, I don't believe that. I have no problems 22 with the County Commissioners asking questions. 23 Q. You don't? 24 A. I have no problems. 25 Q. Just not 57? 369 1 A. They can ask 157 as long as the intent of those 2 questions is to try to figure out a solution to move 3 this project forward and not to try to kill it (listen 4 back there) and I think as I stated repeatly, the 5 actions of Commissioner Henderson from the very 6 beginning has been to kill this project. So she can ask 7 as many questions as she likes and we'll continue to 8 provide the best answers that we can. We will try to be 9 as absolutely open as we possibly can. And I think 10 we've done that. 11 Q. So softballs are okay, but not fastballs? 12 A. That's not what I said. I said what is the 13 intent of the County Commissioners. What we have 14 attempted to do is to work with two mayors in this city, 15 a Republican mayor and a Democratic mayor. 16 We have worked with two city councils, a 17 Republican and a Democratic city council. We have 18 worked with the Redevelopment Authority. They have all 19 asked very tough questions. They have all negotiated 20 very hard for the benefit of the city. 21 But they've done it with the intention of 22 moving this project forward. 23 Commissioner Henderson and Commissioner 24 Shellenberger have not done that. They have not engaged 25 in a dialogue trying to move this project forward. 370 1 Q. So by asking questions that don't get answers, 2 that's not trying to engage in a dialogue? 3 A. Howard, I've said it four times, and I'll say 4 it four more times if you keep asking the question, we 5 answered every single question. 6 If you go through all of the communication that 7 Penn Square Partners and the Convention Center Authority 8 collectively have provided to this community, to these 9 two County Commissioners, every one of those questions 10 has been answered. 11 We have made public statements repeatedly 12 answering those questions. I think that the partners of 13 Penn Square Partners have done everything they can to be 14 open and honest in trying to move this project forward 15 for the benefit of the residents of Lancaster City and 16 for the benefits of Lancaster County. That's what we 17 have done and that's what we'll continue to do. 18 And I am optimistic that if this court gives us 19 the injunctive relief that we are looking for, that we 20 will be able to get the cost of this project down and we 21 will be able to move this project through after eight 22 years of non-stop lawsuits, and get this thing done, and 23 deliver that to the residents of the city and the 24 community. 25 That's what I believe. 371 1 Q. Well, let's switch to that topic then -- 2 A. Okay. 3 Q. -- of getting the costs down. 4 A. Okay. 5 Q. The $134 million budget that's -- that was 6 referenced in Exhibit 37. 7 A. Yes. 8 Q. From July of 2005 am I correct that that was 9 the last-announced, publicly-announced cost estimate 10 prior to the -- going to bid in May of 2006? 11 A. I'm not sure of that answer. I'm not sure when 12 we identified the opportunity of increasing the IFIP 13 funds from 12 million to 14 million and when we 14 announced that. So I'm not exactly sure of that time 15 frame, but at some point in that process, and I think it 16 was prior to the bids coming in, it was very close -- 17 Q. But that goes to the revenue side, not the cost 18 side, correct? 19 A. No. Because we put that actually in the 20 contingency line item as well. So to get a balanced 21 budget, it goes in the sources side and it also goes 22 into the cost side. And I believe that that information 23 was made public prior to the bids coming in. 24 Q. So that would have added $2 million? 25 A. That's correct. 372 1 Q. But if it was before the bids came in, it was 2 shortly before the bids came in? 3 A. Very shortly before the bids came in. 4 Q. So basically we go from July of 2005 at $134 5 million up to or about the time bids are in without 6 increasing the budget, except maybe just before that by 7 a couple million dollars? 8 A. I think that's correct. 9 Q. All right. Now, let's talk first about the 10 timing of when these bids were to come in. 11 May 17th was when most of the bids were to be 12 opened, correct? 13 A. That's correct. 14 Q. Okay. Would you agree that from the 15 perspective of a developer or an owner, for a large 16 publicly-bid construction project, that you would much 17 prefer to have your -- to go to bid and have the bids 18 open earlier in the construction season than mid-May? 19 A. I think as I stated before, as soon as I can 20 get this project purchased, the better off we are. 21 Q. Let me ask again, and I'd like you to -- maybe 22 I didn't ask it in a way you understood it, because your 23 answer wasn't really responsive to what I was looking 24 for. 25 So let me try again. 373 1 A. Okay. 2 Q. From the perspective of an owner or developer, 3 if you're going to bid on a large public project, 4 wouldn't you like to go to bid earlier than mid-May? 5 Wouldn't you like to be at bid in the March or April 6 time frame, before contractors start getting to their 7 capacity in terms of projects? 8 A. No. I don't -- I don't think on a project of 9 this size that timing of the bid, other than from the 10 cost standpoint, escalation standpoint, really has a lot 11 to do with the costs. 12 And if where you're going with this, I also 13 don't think it has an impact on, you know, when you 14 start the project. 15 In some projects of smaller size and smaller 16 duration, you would want to build the project during the 17 prime building months, you wouldn't want to build over 18 the winter, you wouldn't want to start to break ground 19 on a project when the ground is still frozen. You 20 wouldn't want to lay slabs when the ground's still 21 frozen. That increases the costs. 22 On a projEct of this size, you're gonna run 23 over -- you know, the full cycle. So I don't think the 24 timing was critical in terms of when you went to bid. 25 Q. Well, I appreciate the explanation but that's 374 1 not exactly where I was going. 2 A. Okay. 3 Q. I was looking at more from one of the factors 4 you had mentioned in terms of the competitiveness of the 5 bidding environment? 6 A. Right. 7 Q. Wouldn't one expect to have greater competition 8 among bidders earlier in the season when -- before 9 bidders start to fill up by giving the successful 10 bidders on other project? 11 A. No, because this project is a 24-month 12 construction project, so I don't think that has a great 13 bearing on the competitiveness. 14 Q. All right. Could you look at Exhibit 28, 15 please? 16 Q. These are materials that your counsel, 17 Mr. Pittinsky, had e-mailed to me and we went over these 18 at your deposition, do you recall? 19 A. I do. 20 Q. Okay. And the first is a list of the apparent 21 low bids received for the project, the second is a chart 22 showing bids that had been received prior to March 17th, 23 received and awarded prior to March 17, then the last 24 three pages is the invitation to bid for the rebidding, 25 which at the time was scheduled to be opened on July 19, 375 1 I believe you testified it's now been pushed back a week 2 to July 26th; is that right? 3 A. That's correct. 4 Q. All right. If you would look at the first page 5 of the rebidding of the materials, which is this sheet 6 right here, which says invitation to bid. 7 A. Yes. With the -- with the bold categories? 8 Q. Yes. There are 21 total contracts originally 9 in the bid, correct, 21 total contracts that were bid 10 for May 17th? 11 A. Yes. Yes. 12 Q. And then the ones that are in bold, the five 13 contracts in bold, contract number 4, general trades, 14 contract 8, masonry, contract 11, glaze and glass -- 15 glass and glazing, contract 12, drywall, acoustical 16 ceiling and EFIS, and contract 13, painting, are all 17 being rebid and are all being rebid as part of general 18 trades, correct? 19 A. That's correct. 20 Q. And you had described doing it all as part of 21 general trades to increase the competitive bidding 22 environment because you're going to -- now High 23 Construction Company is going to bid, correct? 24 A. I believe I said there was two reasons. 25 One is -- 376 1 Q. And that was one of them? 2 A. That was one of them. 3 Q. Okay. And the other was to combine those other 4 four, what had been separate primary contracts under the 5 general trades? 6 A. Right. 7 Q. So as to make that available to a greater 8 number of subcontractors, more folks involved in those 9 other four trades could perform as subcontractors than 10 they could doing their own bid as primary bidders, 11 correct? 12 A. That's correct. 13 Q. All right. Now, as to that second aspect, the 14 fact that you now believe in hindsight that you could 15 have greater competition by including all of those four 16 other trades under general trades, that's something you 17 could have done originally, correct? 18 A. I think it's something we could have done 19 originally, but if we would have gotten adequate 20 coverage, I think all but one of those other four primes 21 only had one bidder. 22 Q. Okay. 23 A. So as a result of only getting one bidder, we 24 looked at how can we increase the number of bidders for 25 those prime contracts. 377 1 Q. And that was completely the -- 2 A. Rationale. 3 Q. -- the project team's decision, though, rather 4 to bid them separately or combined and first you tried 5 separately, and now you're doing it combined for the 6 reasons you explained? 7 A. Correct. 8 Q. Now, on the 12th, you testified about the 9 alleged chilling effect that you believe the 10 commissioners' actions had had on the bid environment, 11 correct? 12 A. Correct. 13 Q. And you said you had heard from Reynolds 14 Construction Management, who is the construction manager 15 for this project, that contractors were telling Reynolds 16 they weren't interested because of the chilling effect, 17 correct? 18 A. Correct. 19 Q. Am I correct that you didn't hear that directly 20 from contractors, you heard it, though, secondhand from 21 Reynolds? 22 A. That is absolutely correct. 23 Q. And to try to create an environment where 24 that's not going to be a factor, that's one of the 25 reasons you're having High Construction Company now bid 378 1 the -- the larger general trades package, correct? 2 A. That's correct. 3 Q. All right. Now, High Construction Company 4 previously has done environmental remediation work at 5 the Watt & Shand building for this very project, right? 6 A. That's correct. 7 Q. In fact, High Construction -- 8 A. Well, let me -- when you say for this very 9 project, they did it when we bought the building back in 10 1999. That wasn't this project. 11 Q. Okay. But -- 12 A. So I will -- I will agree that they did work on 13 the site back in 1999. 14 Q. And, in fact, the plan, until recently, was 15 that High Construction Company was going to be doing 16 some of the CM work on this project as a subcontractor 17 for Reynolds, right? 18 A. That is correct. 19 Q. And, in fact, they've been working all along on 20 estimating the job along with Reynolds, right? 21 A. That is correct. 22 Q. And High Associates, an affiliate of High 23 Construction Company, has been the master developer on 24 the project, right? 25 A. That's correct. 379 1 Q. And can you just describe as master developer 2 what High Associates has done? 3 A. I think I stated that on Wednesday. Do you 4 want me go through the full litany of things we've 5 done? 6 Q. Can you boil it down to a summary? 7 A. We've coordinated the development of the 8 project. 9 Q. Thank you. 10 And now, you testified that you, to accommodate 11 a request from High Construction Company, you've agreed 12 to delay the bid opening by a week from July 19th to 13 July 26th, correct? That was at the request of High 14 Construction? 15 A. That was a request of High Construction Company 16 to the design team and a recommendation from the 17 construction manager and the owners or an acceptance -- 18 a recommendation from High Construction to Reynolds and 19 agreement by Cooper Carry Reynolds to grant that 20 extension. 21 Q. Is it fair to say that, given the involvement 22 that High Construction Company has had with this 23 project, working with Reynolds, working on the 24 estimating, that no contractor could be better prepared 25 to make a bid and have a better understanding of the 380 1 project than High Construction? 2 A. No. 3 Q. How could someone have a better understanding 4 than High Construction does now? 5 A. All of the information that is -- 6 Q. I'm not suggesting -- 7 YOur Honor, he's interrupted -- he's 8 interrupted the witness's answer? 9 MR. KELIN: I'm sorry. I apologize. 10 THE COURT: Go ahead and finish. 11 THE WITNESS: Thank you. I think all of the 12 information that's required to submit a bid on the 13 project is contained in the bid documents. 14 And I think that High Construction, as any 15 other bidder who wants to bid on the project, can review 16 all that information and submit it. 17 I also think I told you in the deposition that 18 I did not have any information on what components of the 19 project High Construction did the design development 20 estimate on, versus what components of the project 21 Reynolds did the estimate on. 22 So I can't sit here today and tell you for 23 certain that the components of the project that are 24 being rebid were the components of the project that were 25 estimated by High Construction. I don't know that for a 381 1 fact. 2 Q. But whatever Reynolds did, they reviewed 3 anyway, right? 4 A. I think they -- I don't think it's fair to say 5 they reviewed. I think they collectively submitted to 6 the owners a joint design development budget. 7 Q. And, sir, I wasn't trying to suggest and didn't 8 suggest in my question that High was getting an unfair 9 advantage. I was simply saying that given their 10 involvement that they've had, a contractor wasn't -- 11 couldn't have a better opportunity to be well-prepared 12 and have a better understanding of the project. 13 Would you agree with that? 14 A. Again, I think I said no. Depending on the 15 contractor, if there's a contractor that has built 10 16 convention centers, and they chose to bid on the 17 project, they would have equal or better, because this 18 is a project that they've built before. 19 Q. Okay. 20 A. So I don't know if I would agree with your 21 characterization. 22 Q. Well, are you fully satisfied in any event that 23 High Construction Company has had an adequate 24 opportunity to be fully prepared to submit a bid that's 25 fair and reasonable and is based on an accurate 382 1 understanding of the project? 2 A. Yes. 3 Q. All right. And you're also confident that High 4 Construction Company will not be adversely influenced by 5 the actions of commissioners Shellenberger and 6 Henderson, correct? 7 A. I think I can say with certainty that High 8 Construction won't be influenced by the actions of 9 Henderson or Shellenberger. 10 Q. I mean -- 11 A. But, as I stated on Wednesday, as a general 12 trades prime contractor, the majority of the work that 13 is performed under the general trades package is 14 actually performed by the subcontractors, not by High 15 Construction. 16 So it still requires that the subcontractor 17 community that is performing 90 percent of the work is 18 crucial to getting a competitive bid, either from High 19 Construction, or any of the other prime contractors who 20 may submit the work. 21 Now, other prime contractors may do more or 22 less self-performance than High Construction. I can't 23 address that. But in a case of High Construction, it's 24 still critical, paramount, that they get adequate 25 coverage on each of the subcontractors underneath their 383 1 contract, including the four that were previously prime 2 contracts that will now be rolled underneath their 3 contract. 4 Q. Okay. The second issue -- you had talked about 5 three different issues that you were trying to address 6 in this rebid process to bring down the price of the 7 bids and one was increasing the competitive nature 8 through the involvement of High Construction, correct? 9 A. Correct. 10 Q. All right. The second one was you addressed 11 the issue of what you called design creep with respect 12 to the interior design? 13 A. That's correct. 14 Q. What's design creep? 15 A. Design creep occurs when you go from documents 16 with less specificity, I think, to more specificity and 17 the design team enhances or embellishes the materials 18 that are going to be used in that finished product. So 19 that would be design creep. 20 I don't know if you've built a house, but you 21 can go in and say, I want to buy a kitchen. And you go 22 in and you say, okay, I'm going to have a kitchen and 23 you're going to have cabinets in the kitchen and then 24 when you get in with the designer and they say, well, do 25 you want to have crown molding in your kitchen, that 384 1 would be great, they go along with the cabinets, right, 2 absolutely, sure, I'll take the crown molding, and you 3 want these pewter pulls, right, oh, sure, you have got 4 to have pulls, you can't open the drawers, so by the 5 time you're all said and done, you went from a $10,000 6 kitchen to a $20,000 kitchen just by adding features. 7 You didn't add any more space, you still got drawers, 8 but you added features. That's design creep. 9 Q. You don't blame the commissioners for design 10 creep, do you? 11 A. Not at all. 12 Q. The third of the three items you had mentioned 13 they were trying to address is to engage in value 14 engineering with the other contractors on the bids that 15 you're not rebidding, and those other contractors you 16 said came in either within budget or very close to the 17 budget; is that right? 18 A. That's correct. 19 Q. And just looking at the page we're at in 20 Exhibit 28, with the 21 contracts listed, that means if 21 you're rebidding five, that 16 of the 21 contracts came 22 in at or under budget, right? 23 A. No. They came in at under or close to budget. 24 Q. Close. All right. Thank you. 25 A. I think you made a statement about six or seven 385 1 percent. I think it's -- I forget which one it is, six 2 or seven percent of the variance is contained within 3 those contracts. 4 Q. Okay. 5 A. It's not a big number, but it's still there. 6 Q. Okay. So of the -- I think you've said $22 7 million variance, 93 percent is in the five contracts 8 that are being rebid? 9 A. That's correct. That's approximately correct. 10 Q. Okay. Now, as to value engineering with these 11 16 other contracts, the value engineering process is 12 something that had been ongoing by the architects and 13 engineers for the project for some time, correct? I 14 mean, even before the bids were out? 15 A. Again, I think as I stated in my deposition, 16 that back when the design development documents came in, 17 there were the same process of scope clarification, and 18 value engineering was done on certain packages within 19 the overall project. 20 So it's correct to state that both value 21 engineering and scope clarification, activities, by the 22 construction manager, the architect and the developer 23 were occurring during that process. 24 Q. Okay. So now, after the bids, you're looking 25 to see if there are additional value engineering items 386 1 that weren't caught previously by the architects and 2 engineers that could still lower the cost even further, 3 correct? 4 A. I don't think caught is an accurate reflexion 5 of the word. Decisions were made not to accept those 6 value engineering ideas, because we believe we have the 7 ability to fund the project as it was designed. 8 So in the value engineering process, some of 9 the value engineering occurs, just eliminates costs and 10 doesn't change any other aspects of the project. 11 In other value engineering, you've got to make 12 a decision, do I want to modify the scope or the -- or 13 the materials to get a lower cost, but also a different 14 product? 15 Q. Well, you don't blame the commissioners for 16 decisions that have been made previously -- 17 A. No. 18 Q. -- or are being made by a value engineer, 19 right? 20 A. Do not. 21 Q. So of the three areas you identified, 22 competitiveness, design creep and value engineering, two 23 you don't blame the commissioners for, one you do? 24 A. I also said inflation. I believe that's on 25 your board there. 387 1 Q. Okay. 2 A. I can't read it from here, but I think that's 3 what I said. 4 Q. And of the three areas that you've identified, 5 isn't it true that for each of those areas that you're 6 addressing, you hope to decrease the bids by a range of 7 5 to 8 million for each of the three areas? 8 A. That's correct. 9 Q. Now, this is not the only project of which 10 you're aware from recent times that has come in well 11 over budget, correct? 12 A. Are there over projects that come in over 13 budget? 14 Q. Well, and particularly recently, haven't there 15 been quite a few because of cost escalations over the 16 past year that have been more or less unprecedented in 17 the construction industry? 18 A. I would agree with that. I would also agree 19 that there's been some that have come in at or under 20 budget. 21 Q. And there have been some that have had multiple 22 bidders and some that have had only single bidders, 23 particularly as to general trades other than this 24 project, right? 25 A. I can't comment as to how many bidders were on 388 1 other projects. 2 Q. You don't know? 3 A. I don't know. 4 Q. Let's shift focus to project financing. 5 THE COURT: If you're going to shift focus, 6 we'll take a recess at this particular time. 7 (Recess.) 8 THE COURT: Now, be seated. Come to order 9 doesn't mean be quiet. 10 Okay. We don't want to get people up and down 11 all the time. It looks like a jack in the box. 12 All right. Ready to continue then? 13 MR. KELIN: Thank you, Your Honor. 14 THE WITNESS: Your Honor, before we start, and 15 as much as it pains me to do this, I need to go back on 16 a comment that I made earlier regarding a question that 17 Mr. Kelin asked relative to tab 33. 18 THE COURT: Do you have any objection to going 19 back? 20 MR. KELIN: No, no. 21 THE WITNESS: Just for clarity sake, Howard, I 22 want to make sure I'm clear on this. 23 BY MR. KELIN: 24 Q. Yes. 25 A. The letter to the newspaper that you 389 1 referenced, I believe states that as of the date of the 2 guarantee, there has been no changes to the square 3 footage of the project being 50,000 square feet. 4 I believe the guarantee was issued in 5 December. I don't know the exact date that the 6 guarantee was issued. 7 $110 million budget that you were referring me 8 to, back to Mr. Beckett's testimony, was based on the 9 project that was 32,000 square feet. 10 During the month of December, there was a 11 option 8, I think I referred to, which was a 50,000 12 square foot exhibit hall. 13 So if that option was the option that was being 14 referred to in this article and the guarantee was issued 15 in December, then Mr. Cooley's letter is accurate. 16 Okay? So I just don't -- I was referring back to the 17 October time frame when the ordinance was issued and I 18 wasn't sure if you were talking about the ordinance and 19 $110 million budget or the guarantee and the 123,000 -- 20 $123 million budget. 21 So I just wanted to -- I just wanted to be 22 clear there so I didn't have any confusion on that. 23 Q. No, I appreciate that. 24 A. So you didn't have any confusion on that? 25 Q. Or Mr. Cooley? 390 1 A. Or Mr. Cooley. Which would be worse for me. 2 Q. And I'm sure we all appreciate the 3 clarification. 4 A. You're welcome. 5 Q. So in other words, assuming Mr. Cooley's 6 correct and this decision for the 50,000 square foot 7 exhibit hall was made prior to December 15, 2003, when 8 the guarantee was signed, then he's correct that that 9 decision was made before the commissioners -- present 10 commissioners took office? 11 A. He's correct that the size of the exhibit hall 12 didn't change. That's the statement, that the size 13 didn't change. 14 Q. Right. 15 A. There was a 50,000 square foot exhibit hall. 16 That just didn't reference back to the 110, that went to 17 129 million. 18 Q. Right. But as far as the size? 19 A. Or excuse me. 20 Q. The size of the exhibit hall, that didn't 21 change? 22 A. That's correct. 23 Q. After mid-December, 2003, correct? 24 A. It went from a sketch plan of 50,000 to 49,000 25 square feet where it is today. 391 1 Q. Okay. So then Mr. Cooley's right? 2 A. That's correct. 3 Q. But you're wrong? 4 A. If that date is correct. 5 Q. But you're wrong in what you testified, that 6 the commissioners, during 2004, were putting pressure on 7 the Bureau -- the Visitors Bureau to increase the size? 8 A. No, I think I stand by my statements relative 9 to the actions of the County Commissioners that occurred 10 in 2003 on the campaign trail and in 2004 when they 11 became commissioners, because as I stated to you, option 12 8 was a sketch plan. It went from option 8 to option -- 13 actually, to option 14. 14 We had a schematic plan that had the exhibit 15 hall at less than 50,000 square feet, and that wasn't 16 sufficient, and that was during the 2004 time frame. So 17 I stand by my statement. 18 I just wanted to be correct with respect to the 19 timing of this letter and the guarantee, not the 20 ordinance and not the $110 million budget. 21 Q. So that I understand your testimony as to the 22 role of the commissioners, am I correct that you believe 23 at the time they came into office, the 49,000 square 24 foot exhibit hall was decided upon, it was later an 25 option to go to 45,000 -- 392 1 A. No. 2 Q. -- square feet? 3 A. No. No. 4 Q. Okay. 5 A. What I said was the time they came into office, 6 there was a -- an option that was being discussed, 7 option 8, which had a potential 50,000 square foot 8 exhibit hall that would be built in two phases, phase 9 one and phase two, or it could be all built at once if 10 you had the funds to do that. 11 When we finalized the design process, which, 12 actually, didn't finalize, but when we completed the 13 first set of sketch plans, I think it was March, it came 14 in at 45,000 square feet. And that wasn't enough, so we 15 kept redesigning until July, until we got it to 49,000 16 square feet. 17 So I think all the statements that I've made 18 relative to the actions of the County Commissioners 19 during the time frame that you referenced me, 2004 to 20 that period of time, is correct. 21 I also think that it had an influence while 22 they were on the campaign trail and their actions, not 23 the County Commissioners at that time, because there was 24 a different set of County Commissioners, but the actions 25 of Commissioners Henderson and Shellenberger -- and at 393 1 that time I think they were elected, when the election 2 was in November. So they were commissioners-elect. So 3 I just wanted to make sure that you got an accurate 4 picture of that time frame. 5 Q. All right. Would you please turn to Exhibit 6 27. 7 Now, Exhibit 27 is Exhibit E to the joint 8 development agreement of -- for the project, dated 9 January 31, 2006, correct? 10 A. Yes. 11 Q. All right. And this identifies for the project 12 sources of funding, correct? 13 A. Correct. 14 Q. All right. And the column that says committed 15 reflects what the project team understood was committed 16 in terms of funding as of the end of January, 2006, 17 correct? 18 A. That's correct. 19 Q. And the column that says commercially 20 reasonable efforts reflects what at that time was 21 proposed, but not yet committed, but which the parties 22 to the joint development agreement had agreed to use 23 commercially reasonable efforts to obtain, correct? 24 A. That's correct. 25 Q. And the top half identifies PSP, the investment 394 1 of $10 million, correct? 2 A. Correct. 3 Q. And then there are seven items identified for 4 RACL and that relates to funding for the hotel portion, 5 correct? 6 A. Correct. 7 Q. All right. And then under that are items for 8 the Convention Center Authority and those relate to 9 funding portions for the convention center, correct? 10 A. For the condominium units that will be owned by 11 RACL and the convention center. Included within the 12 condominium unit is an undivided interest in the common 13 areas. 14 So in terms of the cost, it includes both the 15 direct portion of the hotel, which I think your question 16 was, as well as the portion of the common elements. So 17 it's both. 18 Q. For both the hotel portion and the -- 19 A. Convention center. 20 Q. -- convention center portion? 21 A. Which is defined as common elements within the 22 condominium documents. 23 Q. Okay. Let's look at the line item for RACL 24 that says hotel revenue bonds, $24 million. 25 A. Yes. 395 1 Q. Okay. That relates to $24 million of bonds 2 that is proposed to be sold by RACL and debt service on 3 those bonds to be paid by RACL, correct? 4 A. That's correct. 5 Q. And the course of funding to RACL for that debt 6 service is going to be rent on the hotel paid by Penn 7 Square Partners over a period of 20 years, which is the 8 anticipated time frame for the bonds, correct? 9 A. That's correct. 10 Q. And the city guarantee that you discussed 11 before in your testimony is a limited guarantee by the 12 City of those $24 million bonds only to the extent 13 there's a shortfall in RACL's ability to pay debt 14 service if the hotel is deemed to be taxable and RACL, 15 therefore, has to pay tax -- real estate tax on the 16 hotel, meaning it won't then have enough money for debt 17 service; also, the City guarantee kicks in, and they 18 pick up -- the city picks up that shortfall in debt 19 service, correct? 20 A. It may not have enough -- 21 Q. Okay. 22 A. -- through our structure. If it doesn't, then 23 the City would pick that up. 24 Q. Now, at the time, the plans for the $24 million 25 RACL hotel construction bonds were discussed, it was 396 1 also made public that to support financially RACL, that 2 in addition to Penn Square Partners' agreement to pay 3 rent, that there would be a consortium of local banks 4 that would issue a letter of credit in the event Penn 5 Square Partners, for any reason, did not make all of its 6 rent payments over 20 years, correct? 7 A. It would be a credit enhancement that 8 Mr. Beckett talked about for the Convention Center 9 Authority side. That would be the same type of 10 structure that would be put in place on this side. That 11 was what was anticipated. 12 Q. And what was publicly discussed at the time is 13 that it would be a consortium of local banks that would 14 provide a letter of credit, right? 15 A. That's correct. 16 Q. Okay. And at this point, -- well, up to now, 17 including at this point, there is no such consortium of 18 local banks, right? 19 A. With respect to the permanent financing? 20 Q. With respect to the $24 million hotel bonds 21 that we're talking about? 22 A. Which portion of the 24 -- what time frame? 23 Q. Is there a consortium of local banks to provide 24 credit enhancement to those bonds as had been publicly 25 discussed? 397 1 A. Under the current financi