Originally published in the Lancaster Post on August 22, 2008
Elected and appointed government officials are often referred to as "public servants". We vote in primary and general elections for the individuals that we believe would do the best job of serving we the people. We expect that once these individuals take office, they will take actions that are in the best interest of all. We also expect that they will appoint individuals to boards, commissions, and authorities that will do the same.
It is plain to see that the taxpayer-financed hotel and convention center project has made a mockery of the term "public-private partnership": $11 million in "equity" (whatever that means), plus $24 million to be paid out of future profits, out of a $176 million (so far) project, makes for highly unequal "partners". It is clear that taxpayers carry an inappropriately large share of the burden in this project.
The Penn Square Partners have often been criticized for taking advantage of taxpayers, and rightfully so. But this raises another important question:
Who let them get away with it?
Unfortunately, it was the government officials who we elected to represent our interests. They repeatedly created and amended laws to make the hotel and convention center project possible. As the project evolved, and the Penn Square Partners demanded more and more from taxpayers, these same officials repeatedly worked to give the PSP exactly what they wanted.
Of particular note are the efforts of Republican State Senator Gibson E. Armstrong, who worked very closely with Democratic State Representative P. Michael Sturla. Rarely has bipartisanship been demonstrated in such a way that made it possible for any project to spend more and more taxpayer dollars on the "private" part of a "private-public partnership".
In February 1998, the Penn Square Partners purchased the Watt & Shand complex in a private sale. In less than a year, the focus on the site was for a hotel and taxpayer-financed convention center. During the same time period, Sen. Gib Armstrong and former Rep. John Barley negotiated concessions in a stadium funding bill so it would also provide State money for smaller stadiums and convention centers. The problem was, Pennsylvania law prevented a convention center from being built with public funds if there was already "an existing convention center which covers an area of more than 40,000 square feet." Sen. Gib Armstrong's solution was to introduce and shepherd through to passage in late 1999 an amendment to State law which modified this prohibition, making a taxpayer-financed convention center legal in Lancaster County.
Fast forward to 2005. By this time, Lancaster City (through its Redevelopment Authority) had purchased the Watt & Shand complex, freeing the Penn Square Partners from paying any real estate taxes on their "private" hotel for decades. Since the Redevelopment Authority of the City of Lancaster has no taxing authority of its own, it is dependent on State taxpayer dollars to provide enough funding to construct the hotel building. No less than eight separate grant programs provide funding to build the "private" hotel, all of which were shepherded through the system by Sen. Gib Armstrong. The biggest one of these is from "Act 23", co-sponsored by Sen. Armstrong, which provides State grants for economic development projects based on anticipated increases in State sales and income tax collections. In the case of the hotel being built by Lancaster City, it provides for a $14,523,716 bank loan, to be paid back over 20 years by $1 million a year in State grants - which is the amount of new State tax revenue expected to be generated by the hotel and convention center.
But there was a catch: "Act 23" grants are based on actual tax revenue collected over a period of three years; since no tax revenue would be generated by the hotel and convention center project during construction, this would severely impact the amount of the State grant for the following three years. In addition, the original wording of "Act 23" required the private user - in this case Penn Square Partners - to "timely pay all Commonwealth and local taxes and fees", which the PSP had already refused to do. To eliminate these issues, Sen. Armstrong (as chair of the Senate Appropriations Committee) took a bill already passed by the House that would have provided tax credits for film productions, gutted the existing language, and replaced it with wording that amended "Act 23"; it was passed in the spring of 2006. As a result, State "Act 23" grants are now guaranteed for the first six years (the first three-year cycle was based on estimated tax receipts, now the second three-year cycle is also). In addition, it is now legal for Lancaster City taxpayers to pay real estate taxes on the "private" hotel, if the for-profit facility is ruled to be taxable. It is interesting to note that every single Republican State representative in Lancaster County voted against this bill.
Meanwhile, other local officials were bending over backwards for this project…
