The sixth in a series
A Feasibility Study predicts the financial results of a proposed project, so the author’s credibility over the years depends upon outcomes and, if their methodology strays from professional standards, the firm may be actionable when its findings prove excessively wide of the mark.
In contrast, a Market Study simply describes what is happening with projects throughout the nation and regionally, makes assumptions based upon industry wide experience, comments on the local market place, but makes no prediction of financial viability.
In short, authors of market studies have no skin in the game! Thus the Ernst and Young Study of July 19, 1999 runs to 134 pages and is an excellent primer for someone interested in the state of hotels and convention centers nationally and regionally, but only makes brief comments about the nature of the local market and contains at least one glaring omission.
The study is predicated upon a 294 room hotel and a 61,000 square feet conference facility and shared common areas, less than one third of the 250,662 square feet that was actually built. It paints a rather negative picture of prospects for even a small Convention Center.
To make clear that this is only a Market Study and not a Feasibility Report, it states in bold print: "It is important to note that this does not take into account the estimated costs associated with the development of each Scenario, the financial feasibility, or the anticipated returns."
It "… summarizes projected demand at the Center, based on assumptions regarding the market" but does not include the most important comparable, the struggling downtown Brunswick (former Hilton) hotel. Instead it only provides market information for three suburban hotels: Lancaster Host Resort, Best Western Eden Resort and Willow Valley Resort.
(The market for a downtown hotel is distinct from the market for suburban hotels since the latter are closer to tourist attractions, commerce, industry, and the highway system. Note its comment "based on assumptions regarding the market." We can only assume Ernst and Young was encouraged not to include the pivotal information concerning the struggling Brunswick. )
In addition, the report recommends "tennis court’s and/or racquetball court(s)" and "preferred tee-times at nearby golf course(s)." It goes on to explain: "According to the IACC, a fitness club, swimming pool, and tennis courts are the most common recreational facilities offered at conference centers in 1997."
The report lists "Factors Assessed as Competitive Weaknesses: (1) Air access; (2) Cultural, arts and entertainment attractions; (3) Population (4) industry concentration; (5) Historical demand for lodging/meeting facilities; (6) Market image for meetings/conventions/trade and consumer shows; (7) Other quality-of-life issues."
"Competitive Strengths" were limited to:
"(1)Perceived cost savings associated with booking and attending an event in Lancaster versus other locations in Pennsylvania (including Philadelphia, Pittsburgh, and Hershey)."
"(2)The Center’s advantage with respect to including an attached, upscale full-service hotel (estimated to be of sufficient size to capture a portion of lodging demand generated by large shows and conventions), is offset by a lack of hotels within walking distance of the Center (other than the Brunswick Hotel) to capture spillover demand."
According to Ron Harper of FifthEstate.com, the Ernst and Young study was not made available to the public until twenty hours before the County Commissioners voted to establish a 5% hotel room tax, 3.9% to directly subsidize the Conference Enter and 1.1% to promote tourism.
Monday, March 23, 2009
Saturday, March 21, 2009
What CC market studies actually revealed
Fifth in a series
Now that reporter Jim Sneddon’s research has established the wasteful and highly questionable expenditures of millions of dollars of Convention Center Authority funds, NewsLanc will now examine the history of the Convention Center Project and report upon the sponsors' disingenuous representations, falsehoods, and connivances over the almost decade long evolution of the project.
Marketing Studies
In sequence, studies were as follows:
1) The LDR Plan – 1998.
2) The Pinnacle Advisory Group study of 1998
3) Ernst and Young Report of 1999.
4) PricewaterhouseCoopers study of 2000.
5) PricewaterhouseCoopes update of 2002. (Subsequently withdrawn.)
6) C. H. Johnson study of 2003.
7) The PKF Feasibility Study of 2006 funded by the County Commissioners and boycotted by the sponsors and the Convention Center Authority.
It is NewsLanc’s contention that the reports were at times concealed, made public at the very last minute prior to pivotal votes, observations ignored or misrepresented, and alarms disregarded by the Convention Center Authority and Sponsors.
LDR Plan of 1998.
It suggests: “Build on the visual impact of the 'New Lancaster Square West' to create an opportunity site on Lancaster Square East for a small, state-of-the-art conference center of approximately 40,000 – 50,000 square feet. Work with the new owners of the Hotel Brunswick to assure the hotel’s linkage with the conference center, and that its redevelopment includes not only interior renovation, but an external, architectural enhancement of the building façade – an entirely new image. All of this will create a major ‘people place’ for Lancaster and establish the city as an important visitor destination.”
Of paramount importance, it recommends a conference center of 40,000 – 50,000 square feet. Instead, the Convention Center consists of 183,917 square feet plus 66,745 square feet of shared space with the adjoining Marriott .
All studies prior to the PKF were predicated on the assumption of a "small to median size" conference center. Later, PricewaterhouseCoopers would withdraw its studies citing the growth in scale of the envisioned project.
Note the location is not the Watt & Shand bulding but rather adjoining the Brunswick Hotel.
Ample space was available in unused and underused portions of the Brunswick, the adjoining vacant theater and empty shops, plus the opportunity to expand the existing public facilities to accomodate a small to medium size conference center. NewsLanc estimates the the Brunswick could have been restored to its orginal splendor and the alterations and additions accomplished for under $40 million dollars, a fraction of the almost $200 million ultimately invested in the Convention Center / Hotel project.
The Pinnacle Advisory Group study of 1998:
This study apparently was withheld from the public, even though the Lancaster Newspapers Inc. and the City of Lancaster reportedly were sponsors and public money helped pay for the study. NewsLanc has filed a "Right To Know" request with the City. We anticipate the report was very negative.
Until the 2006 PKF report (the first true "feasibility" study), reports were predicated upon a small to median size conference center. In 2006, PricewaterhouseCoopers would withdraw its two studies citing as a reason the growth in scale of the envisioned project.
(To be continued)
Now that reporter Jim Sneddon’s research has established the wasteful and highly questionable expenditures of millions of dollars of Convention Center Authority funds, NewsLanc will now examine the history of the Convention Center Project and report upon the sponsors' disingenuous representations, falsehoods, and connivances over the almost decade long evolution of the project.
Marketing Studies
In sequence, studies were as follows:
1) The LDR Plan – 1998.
2) The Pinnacle Advisory Group study of 1998
3) Ernst and Young Report of 1999.
4) PricewaterhouseCoopers study of 2000.
5) PricewaterhouseCoopes update of 2002. (Subsequently withdrawn.)
6) C. H. Johnson study of 2003.
7) The PKF Feasibility Study of 2006 funded by the County Commissioners and boycotted by the sponsors and the Convention Center Authority.
It is NewsLanc’s contention that the reports were at times concealed, made public at the very last minute prior to pivotal votes, observations ignored or misrepresented, and alarms disregarded by the Convention Center Authority and Sponsors.
LDR Plan of 1998.
It suggests: “Build on the visual impact of the 'New Lancaster Square West' to create an opportunity site on Lancaster Square East for a small, state-of-the-art conference center of approximately 40,000 – 50,000 square feet. Work with the new owners of the Hotel Brunswick to assure the hotel’s linkage with the conference center, and that its redevelopment includes not only interior renovation, but an external, architectural enhancement of the building façade – an entirely new image. All of this will create a major ‘people place’ for Lancaster and establish the city as an important visitor destination.”
Of paramount importance, it recommends a conference center of 40,000 – 50,000 square feet. Instead, the Convention Center consists of 183,917 square feet plus 66,745 square feet of shared space with the adjoining Marriott .
All studies prior to the PKF were predicated on the assumption of a "small to median size" conference center. Later, PricewaterhouseCoopers would withdraw its studies citing the growth in scale of the envisioned project.
Note the location is not the Watt & Shand bulding but rather adjoining the Brunswick Hotel.
Ample space was available in unused and underused portions of the Brunswick, the adjoining vacant theater and empty shops, plus the opportunity to expand the existing public facilities to accomodate a small to medium size conference center. NewsLanc estimates the the Brunswick could have been restored to its orginal splendor and the alterations and additions accomplished for under $40 million dollars, a fraction of the almost $200 million ultimately invested in the Convention Center / Hotel project.
The Pinnacle Advisory Group study of 1998:
This study apparently was withheld from the public, even though the Lancaster Newspapers Inc. and the City of Lancaster reportedly were sponsors and public money helped pay for the study. NewsLanc has filed a "Right To Know" request with the City. We anticipate the report was very negative.
Until the 2006 PKF report (the first true "feasibility" study), reports were predicated upon a small to median size conference center. In 2006, PricewaterhouseCoopers would withdraw its two studies citing as a reason the growth in scale of the envisioned project.
(To be continued)
Wednesday, March 4, 2009
CC Consultant paid $407,000 plus vague expenses
Fourth in the LCCCA investigation series by Jim Sneddon
The bulk of the lengthy meeting was consumed by concern that Penn Square Partners was going to drop out of the project. They had found an $8 million shortfall in what they were able to invest in the new Convention Center project. The word was that if the Authority couldn’t find another $8 million Penn Square Partners were going to pull out.
That dire news may have been good news, however, for Hazard. The Authority never again discussed the issue in public. Whatever happened to solve it was done out of the public's eye.
Friday, February 13, 2009
Exhaustive research behind LCCCA series
The following exchange between a viewer who closely monitored the evolution of the Convention Center Project and investigative reporter Jim Sneddon both sheds light on the forces driving the project and the depth of Sneddon's research.
The issue contended is at what point in time was the future sale of the Watt & Shand building from Penn Square Partners to Redevelopment Agency of the City of Lancaster (RACL) under consideration. (Later in the series, NewsLanc will address the propriety of the sale price.)
LETTER re LCCCA series:
From Sneddon's report: "A number of things were happening at this time. Significant progress had been made in 2004 to get the Convention Center moving toward construction. Among items that remained, however, was a revision of the contract between Penn Square Partners and the Authority because of the new role of the Redevelopment Authority of the City of Lancaster as the owner of the land and new hotel. That was necessary in order to gain additional state funds and grants for the project."
RACL wasn't even mentioned as a potential owner of the Watt & Shand property until March 28, 2005. Title to the property was transferred on January 31, 2006.
The reason for RACL owning the property, building the hotel, and "leasing" it back to Penn Square Partners in exchange for payments on a $24 million bond over 20 years is because of S. Dale High's demand that the hotel not be obligated for paying ANY property taxes for at least 20 years. I have no evidence that the hotel received any additional state funds or grants because of RACL's ownership of the building.
RESPONSE by reporter Jim Sneddon:
While I stand in awe of and recognize [the letter writer's] expertise and long history with this project, I have to disagree with him. I do not write that these things happened, but they were "items that remained."
What has transpired repeatedly with these folks is that they hold non-public meetings and little discussion of those meetings occur in the public Authority meetings. And that discussion is often not until they have all of their ducks in a row, allowing the board to unanimously approve things with little or no discussion.
I cannot find the March 28, 2005 reference, but I can assure you that RACL discussions were happening far earlier than this date. Note that I write:
"Among items that remained, however, was a revision of the contract between Penn Square Partners and the Authority because of the new role of the RACL as the owner of the land and the new hotel. That was necessary in order to gain additional state funds and grants for the project."
First there are snippets of public references of Chris Cicconi of Stevens & Lee meeting for years with Penn Square Partners over various kinds of negotiations and agreements.
As early as the June 2, 2004 Authority meeting, Cicconi states:
"…that the main issues remaining, including additional state funding, the transfer of Watt & Shand to RACL … shared space costs and over runs, implementation of PSP financing plan, taxability of new public funds as well as others. …"
I believe there were ongoing meetings and negotiations about this during the summer, if not earlier. At the August 11, 2004 meeting we find:
Tom Smithgall states in his report that there were "lots of meetings held and more ongoing." They traveled to Atlanta for some of those meetings.
David Hixson states "...we continue to work on a business deal and structure for the convention center hotel project."
Then on August 27, 2004 Jones Lang LaSalle and Kauffman & Canoles are hired. Obviously there had to be significant prior discussion about this with Penn Square Partners because they initiated the discussion to hire these two firms and share the $30,000 cost. Why did they do this? I suspect Penn Square Partners [PSP] wanted to nail down some things before they went public with them.
Hixson states: "The thought process was to bring business advisors on board to help us to strengthen the mutual operations between the two parties and also some of the processes that we have associated with our partnership."
We do know from expense documents that the "secret" meetings with the consultants occurred between Sept. 1 and 4 and it appears they took place at Franklin and Marshall. There is nothing stated publicly about these meetings. The scheduled October 2004 meeting of the board did not occur. Then there was a report, given to someone, on Oct. 25, but as I wrote in my story there is no evidence of any "legal, public meeting" of the board.
We do find out, however, in the Nov. 11, 2004 meeting that there have been numerous meetings with PSP and others. Some of those meetings related to additional state funding grants through the newly passed ACT 23 and the need to find additional funding for the hotel side of the project.
Hixson states: "As for the $22 million funding gap, in mid-August, after the state budget was approved and after we had begun schematic designs, Sen. Armstrong convened a meeting in the Mayor's conference room and that meeting was attended by Sen. Armstrong, Rep. Sturla, Mayor Smithgall, the County Commissioners and representatives from the Governor’s office as well as representatives from both PSP and the Authority. Armstrong and Sturla encouraged the two owners to look at that process by utilizing a tool that was part of the Economic Stimulus Package approved last spring, and specifically it was SB 10 which now ACT 23." (Any discussion of ACT 23 funds would have had to focus on RACL owning the property and hotel.)
Armstrong then spoke of the other $12 million needed: "I can assure you that I have these commitments as of today … we have identified $6 million from the Governor and I have two commitments for $3 million each."
Then at the Dec. 16, 2004 meeting there is the first public mention of RACL being involved. Hixson tells the board: "Look at the critical partners that we have here. Up front I could call these the contractual partners, the Authority, PSP and now some of you will hear for the first time our proposal to include RACL in this project to make this project a reality. Under this structure the ownership of the hotel tower will lie with RACL and that includes the Watt & Shand. As required by ACT 23, RACL owns the building in title only." (Various other topics in relation to this are discussed.)
Then the board unanimously approves this motion:
"Authorize the Executive Director to negotiate modifications to the existing contracts with PSP and High Associates and enter into any new contracts required to implement the core deal structure …" ( I can assure you there have also been behind the scenes meetings and discussions before this ever became public before the Board.)
Nevin Cooley states at the same meeting: "In the spring of this year we came before the county commissioners and explained that we had a $22 million gap in our total funding plan and that we were going to be seeking additional state support in the form of grants. … this creative use of RACL allows our community to access $22 million of additional state funding. It took a lot of time and meetings to get to that point."
Some of the confusion between myself and [the letter writer] is that ACT 23 funds, which amount to state sales taxes collected at the hotel and personal income taxes by the employees are to be retuned in the form of "grants."
I hope this explains the background of my writing. As is the case with having to condense things that happened over several years, it is impossible to provide this kind of background in an article of approximately 1,000 words.
The issue contended is at what point in time was the future sale of the Watt & Shand building from Penn Square Partners to Redevelopment Agency of the City of Lancaster (RACL) under consideration. (Later in the series, NewsLanc will address the propriety of the sale price.)
LETTER re LCCCA series:
From Sneddon's report: "A number of things were happening at this time. Significant progress had been made in 2004 to get the Convention Center moving toward construction. Among items that remained, however, was a revision of the contract between Penn Square Partners and the Authority because of the new role of the Redevelopment Authority of the City of Lancaster as the owner of the land and new hotel. That was necessary in order to gain additional state funds and grants for the project."
RACL wasn't even mentioned as a potential owner of the Watt & Shand property until March 28, 2005. Title to the property was transferred on January 31, 2006.
The reason for RACL owning the property, building the hotel, and "leasing" it back to Penn Square Partners in exchange for payments on a $24 million bond over 20 years is because of S. Dale High's demand that the hotel not be obligated for paying ANY property taxes for at least 20 years. I have no evidence that the hotel received any additional state funds or grants because of RACL's ownership of the building.
RESPONSE by reporter Jim Sneddon:
While I stand in awe of and recognize [the letter writer's] expertise and long history with this project, I have to disagree with him. I do not write that these things happened, but they were "items that remained."
What has transpired repeatedly with these folks is that they hold non-public meetings and little discussion of those meetings occur in the public Authority meetings. And that discussion is often not until they have all of their ducks in a row, allowing the board to unanimously approve things with little or no discussion.
I cannot find the March 28, 2005 reference, but I can assure you that RACL discussions were happening far earlier than this date. Note that I write:
"Among items that remained, however, was a revision of the contract between Penn Square Partners and the Authority because of the new role of the RACL as the owner of the land and the new hotel. That was necessary in order to gain additional state funds and grants for the project."
First there are snippets of public references of Chris Cicconi of Stevens & Lee meeting for years with Penn Square Partners over various kinds of negotiations and agreements.
As early as the June 2, 2004 Authority meeting, Cicconi states:
"…that the main issues remaining, including additional state funding, the transfer of Watt & Shand to RACL … shared space costs and over runs, implementation of PSP financing plan, taxability of new public funds as well as others. …"
I believe there were ongoing meetings and negotiations about this during the summer, if not earlier. At the August 11, 2004 meeting we find:
Tom Smithgall states in his report that there were "lots of meetings held and more ongoing." They traveled to Atlanta for some of those meetings.
David Hixson states "...we continue to work on a business deal and structure for the convention center hotel project."
Then on August 27, 2004 Jones Lang LaSalle and Kauffman & Canoles are hired. Obviously there had to be significant prior discussion about this with Penn Square Partners because they initiated the discussion to hire these two firms and share the $30,000 cost. Why did they do this? I suspect Penn Square Partners [PSP] wanted to nail down some things before they went public with them.
Hixson states: "The thought process was to bring business advisors on board to help us to strengthen the mutual operations between the two parties and also some of the processes that we have associated with our partnership."
We do know from expense documents that the "secret" meetings with the consultants occurred between Sept. 1 and 4 and it appears they took place at Franklin and Marshall. There is nothing stated publicly about these meetings. The scheduled October 2004 meeting of the board did not occur. Then there was a report, given to someone, on Oct. 25, but as I wrote in my story there is no evidence of any "legal, public meeting" of the board.
We do find out, however, in the Nov. 11, 2004 meeting that there have been numerous meetings with PSP and others. Some of those meetings related to additional state funding grants through the newly passed ACT 23 and the need to find additional funding for the hotel side of the project.
Hixson states: "As for the $22 million funding gap, in mid-August, after the state budget was approved and after we had begun schematic designs, Sen. Armstrong convened a meeting in the Mayor's conference room and that meeting was attended by Sen. Armstrong, Rep. Sturla, Mayor Smithgall, the County Commissioners and representatives from the Governor’s office as well as representatives from both PSP and the Authority. Armstrong and Sturla encouraged the two owners to look at that process by utilizing a tool that was part of the Economic Stimulus Package approved last spring, and specifically it was SB 10 which now ACT 23." (Any discussion of ACT 23 funds would have had to focus on RACL owning the property and hotel.)
Armstrong then spoke of the other $12 million needed: "I can assure you that I have these commitments as of today … we have identified $6 million from the Governor and I have two commitments for $3 million each."
Then at the Dec. 16, 2004 meeting there is the first public mention of RACL being involved. Hixson tells the board: "Look at the critical partners that we have here. Up front I could call these the contractual partners, the Authority, PSP and now some of you will hear for the first time our proposal to include RACL in this project to make this project a reality. Under this structure the ownership of the hotel tower will lie with RACL and that includes the Watt & Shand. As required by ACT 23, RACL owns the building in title only." (Various other topics in relation to this are discussed.)
Then the board unanimously approves this motion:
"Authorize the Executive Director to negotiate modifications to the existing contracts with PSP and High Associates and enter into any new contracts required to implement the core deal structure …" ( I can assure you there have also been behind the scenes meetings and discussions before this ever became public before the Board.)
Nevin Cooley states at the same meeting: "In the spring of this year we came before the county commissioners and explained that we had a $22 million gap in our total funding plan and that we were going to be seeking additional state support in the form of grants. … this creative use of RACL allows our community to access $22 million of additional state funding. It took a lot of time and meetings to get to that point."
Some of the confusion between myself and [the letter writer] is that ACT 23 funds, which amount to state sales taxes collected at the hotel and personal income taxes by the employees are to be retuned in the form of "grants."
I hope this explains the background of my writing. As is the case with having to condense things that happened over several years, it is impossible to provide this kind of background in an article of approximately 1,000 words.
Wednesday, February 11, 2009
$15,000 assignment evolves into $1.1 million plum
Third in a Convention Center Authority series by James D. Sneddon
Virtually unknown to the public, in the summer of 2004, Penn Square Partners recommended to the Lancaster County Convention Center Authority that each agree to spend $15,000 to bring in a couple of high-powered, out-of-state consultants.
For Penn Square Partners it was an inexpensive investment. For the Authority, however, that $15,000 would eventually drain more than $1.1 million of tax dollars to another consultant over a 22-month period.
The chain of events began in August 2004 when the Authority board unanimously agreed to engage Jones Lang LaSalle of Washington, DC and Kaufman & Canoles of Norfolk, Vir. Jones Lang LaSalle is a real estate investment group and is involved with hotels world wide. Kauffman and Canoles is a law firm, specializing in many areas, including public-private partnerships.
David Hixson, the Authority Executive Director, told the board at the time:
"The thought process was to bring business advisors on board to help us to strengthen the mutual operations between the two partners and also some of the processes that we have associated with our partnership."
A number of things were happening at this time. Significant progress had been made in 2004 to get the Convention Center moving toward construction. Among items that remained, however, was a revision of the contract between Penn Square Partners and the Authority because of the new role of the Redevelopment Authority of the City of Lancaster as the owner of the land and new hotel. That was necessary in order to gain additional state funds and grants for the project.
Beginning in the summer of 2004 and for months afterward, there were many discussions and meetings held outside of the public’s view. They led eventually to the first public mention of the Redevelopment Authority’s involvement in the project at the Dec. 16, 2004 meeting of the Authority.
Although meetings with the consultants apparently took place at F&M, very little information was made available to the public at that time, even though 2004 marked the beginning of an extensive, costly public relations campaign carried out by Kelly Michener of Lancaster.
Snippets of an extensive review of Authority records reveal the following:
• Herman Bulls and Alan Tantleff of Jones Lang LaSalle and Doug Smith from Kaufman & Canoles traveled to Lancaster from Sept. 01 to 04, according to expense reports filed for which they were reimbursed. They were to conduct interviews and then prepare a report.
• There is little evidence of participation in interviews on other consultant bills. Metro Vision billed $700 for a PSP/LCCCA history recap.
• Fairmount Capital Advisors, the financial consultant to the Authority, billed for 11 hours over this time frame. There is no description on his invoices for Thomas Beckett’s hours worked.
• Dan Logan of Growth Business Development has a vague "Community update meetings" on his bill for those dates, but no specific detail about meeting with any other consultants.
• According to Hixson’s expense statements, he had an "interview w/ Organizational Consultants at F & M." on Sept. 1.
• Then on Saturday, Oct. 25, again according to expense receipts, they returned to deliver that report. It isn't clear to whom it was presented. There was no Authority board meeting that day. Nor, according to its own minutes, did it have an executive session on that date. No mention of any meeting or report surfaces at the November board meeting. Kelly Michener, however, bills for four hours for a joint communications meeting with PSP on the 24th. There is nothing on the 25th, but Lori Hixon, an employee who handled a portion of the LCCCA account, worked most of the day Sunday on "core message development, special session talking points and joint meeting" according to the Kelly Michener bill.
Nothing further emerges from the two consultants except for final bills. Bulls, however, upped the Jones Lang LaSalle fee to $20,000 which was paid with no public questions asked.
Then, after several months had passed, Hixson felt compelled to add another consultant in the spring of 2005.
In March 2005, at $350 per hour, Bulls traveled to Lancaster. According to documented times on the expense records submitted, he was in Lancaster from 11:30 a.m. to 4 p.m. That 4.5 hours cost the Authority $1,575. He also billed 5.5 hours for travel, an additional $1,925. There is no evidence of why he came to Lancaster. But this time Bulls was representing his own firm, the Bulls Advisory Group.
Another Bulls client, according to his company web site, was the University of Pennsylvania. And on April 5, Hixson traveled by train to Philadelphia where he met with Bulls for seven hours according to records. Hixson bought lunch at the Inn at Penn for $42.06. Bulls billed $195.75 for travel expenses.
At this meeting, Bulls began crafting a position that the Authority will fill with another member of the Bulls Advisory Group. Recommendations were made concerning a new strategy, structure, and systems and staffing plan for the Executive Director. It's not clear why Bulls was chosen to craft this, because he does not appear to have expertise in this area.
He does, however, have the man for the job. In June, the board approves a contract with Bulls that brings Maurice Walker on board at $300 an hour. Walker was Managing Director of Bulls Advisory Group.
His expertise was the commercial real estate and finance industries. Over an 18-year period Walker worked in the areas of development, technology, operations, investment asset management, compliance and business development/retention.
At the Convention Center Authority office his duties outlined in the original contract expanded before he started. And, they kept expanding. He took on the chief role for the project. Walker’s position expanded to reviewing all project consultants' roles and realigned responsibilities, taking on the roles of financial advisor, public relations and minority business administrator.
The contract, as with most the Authority approved, was open ended. It had a 36-month time frame, but no cap on how much would be billed.
Walker submitted bills that were far more detailed than any of the other consultants. While that was a major improvement over what the other consultants had been submitting, they reveal how Walker’s role kept expanding, overseeing projects and people that could have been done by the executive director.
It was an extensive examination of those billing details during this investigation that provided examples and raised questions if anyone at the Authority reviewed how many hours Walker was billing and how many hours he was actually working.
As with other consultants there appears to be little checking of his bills. He is paid for whatever he submits. Here are a few examples.
He bills twice for Sept. 21, 2005. The identical billing is listed consecutively. A mistake by Walker when he created his bill? Perhaps, but it should have been caught and flagged by someone at the Authority. That 14-hour double billing cost the Authority $4,200.
On one day Walker listed 17.75 hours worked from his office. He noted that he created budget drafts and distributed them to board members. Almost 18 hours worked is a lot for anyone on a single day. This day, however, was New Year's Eve. Dec. 31, 2005. That means he would have worked from 6:15 a.m. until the stroke of midnight, no breaks, no time off for lunch or dinner. What a dismal way to end the year.
Travel was included in the contract to be paid, but again, there were no stipulations or parameters. So for each four-hour round-trip from Bowie, Maryland to Lancaster and back again, Walker was paid $1,200. Walker also was paid mileage for use of his own car.
The authority also reimbursed Walker for meals, both while traveling and in Lancaster. Walker, in spite of being paid $300 an hour, often billed the Authority for very small amounts, such as $1.51 for breakfast on Nov. 29, 2005 for which he had no receipt. There were no receipts submitted on 26 different occasions between May 30 and December 31, 2005, but Walker was reimbursed for all of them. At other times the expenses don't match the time frames submitted, such as the $7.26 he billed for breakfast on Aug. 17, 2005, but the receipt from Greenfield Getty Mart shows the items were purchased at 9:32 p.m. the night before.
In October 2005, Walker submitted some substantial receipts for meals reimbursed by the Authority. He was reimbursed $233 for Carr’s, $103 for Molly’s Pub, $101 for the Belvidere Inn, $77 for Steakhouse, $64 for Lancaster Dispensing Co. and $55 for The Brassiere.
These few examples are enough to ask why more questions were not asked by someone at the Authority during Walker’s 22 months of consulting.
Finally, some $1,124,642.61 later, in April 2007, it all ended for Bulls Advisory Group when Interstate was given the reigns.
Virtually unknown to the public, in the summer of 2004, Penn Square Partners recommended to the Lancaster County Convention Center Authority that each agree to spend $15,000 to bring in a couple of high-powered, out-of-state consultants.
For Penn Square Partners it was an inexpensive investment. For the Authority, however, that $15,000 would eventually drain more than $1.1 million of tax dollars to another consultant over a 22-month period.
The chain of events began in August 2004 when the Authority board unanimously agreed to engage Jones Lang LaSalle of Washington, DC and Kaufman & Canoles of Norfolk, Vir. Jones Lang LaSalle is a real estate investment group and is involved with hotels world wide. Kauffman and Canoles is a law firm, specializing in many areas, including public-private partnerships.
David Hixson, the Authority Executive Director, told the board at the time:
"The thought process was to bring business advisors on board to help us to strengthen the mutual operations between the two partners and also some of the processes that we have associated with our partnership."
A number of things were happening at this time. Significant progress had been made in 2004 to get the Convention Center moving toward construction. Among items that remained, however, was a revision of the contract between Penn Square Partners and the Authority because of the new role of the Redevelopment Authority of the City of Lancaster as the owner of the land and new hotel. That was necessary in order to gain additional state funds and grants for the project.
Beginning in the summer of 2004 and for months afterward, there were many discussions and meetings held outside of the public’s view. They led eventually to the first public mention of the Redevelopment Authority’s involvement in the project at the Dec. 16, 2004 meeting of the Authority.
Although meetings with the consultants apparently took place at F&M, very little information was made available to the public at that time, even though 2004 marked the beginning of an extensive, costly public relations campaign carried out by Kelly Michener of Lancaster.
Snippets of an extensive review of Authority records reveal the following:
• Herman Bulls and Alan Tantleff of Jones Lang LaSalle and Doug Smith from Kaufman & Canoles traveled to Lancaster from Sept. 01 to 04, according to expense reports filed for which they were reimbursed. They were to conduct interviews and then prepare a report.
• There is little evidence of participation in interviews on other consultant bills. Metro Vision billed $700 for a PSP/LCCCA history recap.
• Fairmount Capital Advisors, the financial consultant to the Authority, billed for 11 hours over this time frame. There is no description on his invoices for Thomas Beckett’s hours worked.
• Dan Logan of Growth Business Development has a vague "Community update meetings" on his bill for those dates, but no specific detail about meeting with any other consultants.
• According to Hixson’s expense statements, he had an "interview w/ Organizational Consultants at F & M." on Sept. 1.
• Then on Saturday, Oct. 25, again according to expense receipts, they returned to deliver that report. It isn't clear to whom it was presented. There was no Authority board meeting that day. Nor, according to its own minutes, did it have an executive session on that date. No mention of any meeting or report surfaces at the November board meeting. Kelly Michener, however, bills for four hours for a joint communications meeting with PSP on the 24th. There is nothing on the 25th, but Lori Hixon, an employee who handled a portion of the LCCCA account, worked most of the day Sunday on "core message development, special session talking points and joint meeting" according to the Kelly Michener bill.
Nothing further emerges from the two consultants except for final bills. Bulls, however, upped the Jones Lang LaSalle fee to $20,000 which was paid with no public questions asked.
Then, after several months had passed, Hixson felt compelled to add another consultant in the spring of 2005.
In March 2005, at $350 per hour, Bulls traveled to Lancaster. According to documented times on the expense records submitted, he was in Lancaster from 11:30 a.m. to 4 p.m. That 4.5 hours cost the Authority $1,575. He also billed 5.5 hours for travel, an additional $1,925. There is no evidence of why he came to Lancaster. But this time Bulls was representing his own firm, the Bulls Advisory Group.
Another Bulls client, according to his company web site, was the University of Pennsylvania. And on April 5, Hixson traveled by train to Philadelphia where he met with Bulls for seven hours according to records. Hixson bought lunch at the Inn at Penn for $42.06. Bulls billed $195.75 for travel expenses.
At this meeting, Bulls began crafting a position that the Authority will fill with another member of the Bulls Advisory Group. Recommendations were made concerning a new strategy, structure, and systems and staffing plan for the Executive Director. It's not clear why Bulls was chosen to craft this, because he does not appear to have expertise in this area.
He does, however, have the man for the job. In June, the board approves a contract with Bulls that brings Maurice Walker on board at $300 an hour. Walker was Managing Director of Bulls Advisory Group.
His expertise was the commercial real estate and finance industries. Over an 18-year period Walker worked in the areas of development, technology, operations, investment asset management, compliance and business development/retention.
At the Convention Center Authority office his duties outlined in the original contract expanded before he started. And, they kept expanding. He took on the chief role for the project. Walker’s position expanded to reviewing all project consultants' roles and realigned responsibilities, taking on the roles of financial advisor, public relations and minority business administrator.
The contract, as with most the Authority approved, was open ended. It had a 36-month time frame, but no cap on how much would be billed.
Walker submitted bills that were far more detailed than any of the other consultants. While that was a major improvement over what the other consultants had been submitting, they reveal how Walker’s role kept expanding, overseeing projects and people that could have been done by the executive director.
It was an extensive examination of those billing details during this investigation that provided examples and raised questions if anyone at the Authority reviewed how many hours Walker was billing and how many hours he was actually working.
As with other consultants there appears to be little checking of his bills. He is paid for whatever he submits. Here are a few examples.
He bills twice for Sept. 21, 2005. The identical billing is listed consecutively. A mistake by Walker when he created his bill? Perhaps, but it should have been caught and flagged by someone at the Authority. That 14-hour double billing cost the Authority $4,200.
On one day Walker listed 17.75 hours worked from his office. He noted that he created budget drafts and distributed them to board members. Almost 18 hours worked is a lot for anyone on a single day. This day, however, was New Year's Eve. Dec. 31, 2005. That means he would have worked from 6:15 a.m. until the stroke of midnight, no breaks, no time off for lunch or dinner. What a dismal way to end the year.
Travel was included in the contract to be paid, but again, there were no stipulations or parameters. So for each four-hour round-trip from Bowie, Maryland to Lancaster and back again, Walker was paid $1,200. Walker also was paid mileage for use of his own car.
The authority also reimbursed Walker for meals, both while traveling and in Lancaster. Walker, in spite of being paid $300 an hour, often billed the Authority for very small amounts, such as $1.51 for breakfast on Nov. 29, 2005 for which he had no receipt. There were no receipts submitted on 26 different occasions between May 30 and December 31, 2005, but Walker was reimbursed for all of them. At other times the expenses don't match the time frames submitted, such as the $7.26 he billed for breakfast on Aug. 17, 2005, but the receipt from Greenfield Getty Mart shows the items were purchased at 9:32 p.m. the night before.
In October 2005, Walker submitted some substantial receipts for meals reimbursed by the Authority. He was reimbursed $233 for Carr’s, $103 for Molly’s Pub, $101 for the Belvidere Inn, $77 for Steakhouse, $64 for Lancaster Dispensing Co. and $55 for The Brassiere.
These few examples are enough to ask why more questions were not asked by someone at the Authority during Walker’s 22 months of consulting.
Finally, some $1,124,642.61 later, in April 2007, it all ended for Bulls Advisory Group when Interstate was given the reigns.
Friday, January 30, 2009
Contrary to members' assurances, LCCCA negligent in spending
Second in a semi-monthly series by Jim Sneddon
There were times, over several years of public meetings of the Lancaster Convention Center Authority, when various board members and the executive director claimed they were keenly aware of their fiduciary responsibility in handling tax dollars. In reality, after a careful and meticulous check of years of records, there was little justification required of consultants who were paid millions of dollars for work allegedly done for the Authority.
When questioned, however, it didn't stop the Authority from creating a picture for the public that it was being "prudent" in how it was spending millions of dollars in taxes for consultants and attorneys.
Chairman Ted Darcus told the audience at the Oct. 13, 2005 board meeting "our goal is to be prudent towards the taxpayers’ dollars." He echoed comments from former Chairman James Pickard who "acknowledged the grave responsibility the Authority has in managing public dollars…"
Executive Director David Hixson regularly functioned as cheerleader for the board and the project. Often he responded to questions about bills and lack of details by talking about "negative discourse" rather than providing substantive answers.
Willie Borden stated that as treasurer he reviewed the monthly billings for accuracy.
Board member Joe Morales told the public "I trust the people we've hired to run this project and I take a lot of stock in the … experts that do this for a living."
Even auditor Donald Diehm stated that he looked at a sampling of the detail of invoices and found that all invoices had sufficient detail. Since the audit was for the 2004 – 2005 fiscal year it would have included $122,000 in miscellaneous expenses for Dan Logan that provided no detail. It also included invoices from another consultant, Fairmount Capital Advisors that were woefully short on detail.
With offices in Center City Philadelphia, Fairmount Capital Advisers signed its original contract with the Authority in June 2003 while Pickard was still Chairman.
As with some other consultants, the firm had a link to the Pennsylvania Convention Center Authority and the City of Philadelphia's Convention Center project. It touted its ability in the financial markets and provided a glowing reference for Thomas Beckett, its Senior Vice President, who had 15 years of municipal market experience.
The contracted rate for Beckett was $150 an hour, the same as the controversial Dan Logan, the Medford, N.J. businessman who would work enough hours to be paid almost a million dollars over a four-year period. In one way, however, Beckett outdid Logan. In six months, Beckett’s rate jumped to $225 an hour. Then, in another six months, it was hiked to $275, almost double the original contract.
Fairmount was paid a total of $409,039, almost all of it for hours billed by Beckett.
Beckett's bills were exemplified by their simplicity and lack of justification for what he was being paid.
In fact, under the Pennsylvania Right-to-Know law, the Authority could produce no substantiating documentation for work done in 2003. There are listings in the monthly Pay the Bills reports in 2003 for Fairmount Capital that total $121,218.51.
It isn't until April 2005 that Beckett started detailing his hourly billing. Up until this time he merely submitted the number of hours allegedly worked per day. During this period of time he was paid over $280,000 which included about $6,000 in unsubstantiated expenses. At no point does Beckett ever submit back-up receipts for his expenses, yet they are paid without question.
In fact, for 22 months after the contract was signed, Beckett submitted bills that simply listed hours worked. For example, in his Aug. 29, 2004 bill, he has a total of 107.02 hours. That cost the Authority $24,079.50. It is broken down by various dates, but there is no explanation of what Beckett did on those dates, simply "consulting."
Even when he provides more details there are questions.
The contract required reimbursement for expenses incurred, including "travel," but there is no indication this would include paying Beckett at his hourly rate for the time traveling between Philadelphia and Lancaster. The contract notes "…we expect these expenses to be modest for this engagement." No one on the Authority board asked for an explanation.
Beckett does not provide any detail of "travel" hours. In looking at his bills and the length of Authority board meetings he attended, if the meeting lasted only a couple of hours, he might submit a bill for 6.0 hours as he did for Sept. 14, 2004. No one questioned the extra hours.
Beckett provided expertise in the bond markets for the authority. Fairmount Capital touted itself by telling the Authority that "as an independently owned financial advisory firm, Fairmount is not affiliated with any bank or financial services company. The firm believes that its clients are best served when its financial advisor is free from the actual or preconceived conflicts of interest that are created when an underwriting firm also serves as financial advisor."
That didn't stop Beckett from a potential conflict of interest.
When it came time to secure an underwriter for the issuance and re-marketing of 2003 and 2006 bonds, Beckett recommended as financial advisor the George K. Baum & Company of Denver, Col. with local offices in West Conshohocken.
Baum's fees were $130,000. Those amounts came out of the bond issuing proceeds and thus do not show up in the Authority bills.
Apart from the fees received at financing settlements, there was a separate bill from Baum for $25,937.50 for 103.75 hours ofwork at $250 per hour. The bill was for work performed by Baum's new vice president: Tom Beckett!
Fairmount Capital's last work was in February 2006. The Baum billing period for Beckett's work is from March 7, 2006 through May 19, 2006.
Good business acumen? Or conflict of interest?
There were times, over several years of public meetings of the Lancaster Convention Center Authority, when various board members and the executive director claimed they were keenly aware of their fiduciary responsibility in handling tax dollars. In reality, after a careful and meticulous check of years of records, there was little justification required of consultants who were paid millions of dollars for work allegedly done for the Authority.
When questioned, however, it didn't stop the Authority from creating a picture for the public that it was being "prudent" in how it was spending millions of dollars in taxes for consultants and attorneys.
Chairman Ted Darcus told the audience at the Oct. 13, 2005 board meeting "our goal is to be prudent towards the taxpayers’ dollars." He echoed comments from former Chairman James Pickard who "acknowledged the grave responsibility the Authority has in managing public dollars…"
Executive Director David Hixson regularly functioned as cheerleader for the board and the project. Often he responded to questions about bills and lack of details by talking about "negative discourse" rather than providing substantive answers.
Willie Borden stated that as treasurer he reviewed the monthly billings for accuracy.
Board member Joe Morales told the public "I trust the people we've hired to run this project and I take a lot of stock in the … experts that do this for a living."
Even auditor Donald Diehm stated that he looked at a sampling of the detail of invoices and found that all invoices had sufficient detail. Since the audit was for the 2004 – 2005 fiscal year it would have included $122,000 in miscellaneous expenses for Dan Logan that provided no detail. It also included invoices from another consultant, Fairmount Capital Advisors that were woefully short on detail.
With offices in Center City Philadelphia, Fairmount Capital Advisers signed its original contract with the Authority in June 2003 while Pickard was still Chairman.
As with some other consultants, the firm had a link to the Pennsylvania Convention Center Authority and the City of Philadelphia's Convention Center project. It touted its ability in the financial markets and provided a glowing reference for Thomas Beckett, its Senior Vice President, who had 15 years of municipal market experience.
The contracted rate for Beckett was $150 an hour, the same as the controversial Dan Logan, the Medford, N.J. businessman who would work enough hours to be paid almost a million dollars over a four-year period. In one way, however, Beckett outdid Logan. In six months, Beckett’s rate jumped to $225 an hour. Then, in another six months, it was hiked to $275, almost double the original contract.
Fairmount was paid a total of $409,039, almost all of it for hours billed by Beckett.
Beckett's bills were exemplified by their simplicity and lack of justification for what he was being paid.
In fact, under the Pennsylvania Right-to-Know law, the Authority could produce no substantiating documentation for work done in 2003. There are listings in the monthly Pay the Bills reports in 2003 for Fairmount Capital that total $121,218.51.
It isn't until April 2005 that Beckett started detailing his hourly billing. Up until this time he merely submitted the number of hours allegedly worked per day. During this period of time he was paid over $280,000 which included about $6,000 in unsubstantiated expenses. At no point does Beckett ever submit back-up receipts for his expenses, yet they are paid without question.
In fact, for 22 months after the contract was signed, Beckett submitted bills that simply listed hours worked. For example, in his Aug. 29, 2004 bill, he has a total of 107.02 hours. That cost the Authority $24,079.50. It is broken down by various dates, but there is no explanation of what Beckett did on those dates, simply "consulting."
Even when he provides more details there are questions.
The contract required reimbursement for expenses incurred, including "travel," but there is no indication this would include paying Beckett at his hourly rate for the time traveling between Philadelphia and Lancaster. The contract notes "…we expect these expenses to be modest for this engagement." No one on the Authority board asked for an explanation.
Beckett does not provide any detail of "travel" hours. In looking at his bills and the length of Authority board meetings he attended, if the meeting lasted only a couple of hours, he might submit a bill for 6.0 hours as he did for Sept. 14, 2004. No one questioned the extra hours.
Beckett provided expertise in the bond markets for the authority. Fairmount Capital touted itself by telling the Authority that "as an independently owned financial advisory firm, Fairmount is not affiliated with any bank or financial services company. The firm believes that its clients are best served when its financial advisor is free from the actual or preconceived conflicts of interest that are created when an underwriting firm also serves as financial advisor."
That didn't stop Beckett from a potential conflict of interest.
When it came time to secure an underwriter for the issuance and re-marketing of 2003 and 2006 bonds, Beckett recommended as financial advisor the George K. Baum & Company of Denver, Col. with local offices in West Conshohocken.
Baum's fees were $130,000. Those amounts came out of the bond issuing proceeds and thus do not show up in the Authority bills.
Apart from the fees received at financing settlements, there was a separate bill from Baum for $25,937.50 for 103.75 hours ofwork at $250 per hour. The bill was for work performed by Baum's new vice president: Tom Beckett!
Fairmount Capital's last work was in February 2006. The Baum billing period for Beckett's work is from March 7, 2006 through May 19, 2006.
Good business acumen? Or conflict of interest?
Wednesday, January 21, 2009
LCCCA Board membership for suspect period
by Jim Sneddon
Below are the list of Convention Center Authority Board Members during the events that NewsLanc will be describing through a series of special reports over the next few months. The plan is to publish the series every two weeks rather than once a month as originally announced.
The concern is to avoid providing so much information at one time as to make it difficult to fully read and absorb, yet not to allow so much time to pass that memories of past disclosures fade.
NewsLanc will run concurrent radio 'informationals' on local stations.
Please ponder the significance of Jim Sneddon's observation in the last line. At the time NewsLanc described the four City appointees as "seeing no evil, hearing no evil, and speaking no evil."
From the 01/08/03 meeting:
James Pickard (chairman)
Willie Borden (treasurer)
Christina Hausner (secretary)
Garth Sprecher (1st vice chairman)
Judy Ware (2nd vice chairman)
Frank Taylor (assistant secretary)
Paul Wright (assistant treasurer)
From the 02/02/03 meeting:
Christina Hausner submits her resignation
David Schwanger is appointed (assistant secretary)
Taylor moves up to be secretary
From the September 2003 meeting:
Pickard submits letter of resignation. No new members are added at this meeting, but Ted Darcus is present in the audience and Garth Sprecher is named temporary chairman
From the 11/24/03 meeting:
Ted Darcus joins the board – replaces Pickard
John Fry joins the board – replaces Wright
From the 1/14/04 meeting:
Darcus is named chairman
Borden (still treasurer)
Sprecher
Ware
Taylor
Schwanger
Fry
From the 10/13/05 meeting:
New appointees are:
Laura Douglas
Debra Hall
Joseph Morales
They replace Ware, Taylor and Fry
Remaining members are:
Darcus
Borden
Sprecher
Schwanger
From the 11/9/05 meeting
Jack Craver replaces Sprecher
The board remains the same throughout 2006
Darcus (chairman)
Borden (treasurer)
Morales (1st vice chairman)
Schwanger (secretary)
During disputed votes, the above four always vote together.
Below are the list of Convention Center Authority Board Members during the events that NewsLanc will be describing through a series of special reports over the next few months. The plan is to publish the series every two weeks rather than once a month as originally announced.
The concern is to avoid providing so much information at one time as to make it difficult to fully read and absorb, yet not to allow so much time to pass that memories of past disclosures fade.
NewsLanc will run concurrent radio 'informationals' on local stations.
Please ponder the significance of Jim Sneddon's observation in the last line. At the time NewsLanc described the four City appointees as "seeing no evil, hearing no evil, and speaking no evil."
From the 01/08/03 meeting:
James Pickard (chairman)
Willie Borden (treasurer)
Christina Hausner (secretary)
Garth Sprecher (1st vice chairman)
Judy Ware (2nd vice chairman)
Frank Taylor (assistant secretary)
Paul Wright (assistant treasurer)
From the 02/02/03 meeting:
Christina Hausner submits her resignation
David Schwanger is appointed (assistant secretary)
Taylor moves up to be secretary
From the September 2003 meeting:
Pickard submits letter of resignation. No new members are added at this meeting, but Ted Darcus is present in the audience and Garth Sprecher is named temporary chairman
From the 11/24/03 meeting:
Ted Darcus joins the board – replaces Pickard
John Fry joins the board – replaces Wright
From the 1/14/04 meeting:
Darcus is named chairman
Borden (still treasurer)
Sprecher
Ware
Taylor
Schwanger
Fry
From the 10/13/05 meeting:
New appointees are:
Laura Douglas
Debra Hall
Joseph Morales
They replace Ware, Taylor and Fry
Remaining members are:
Darcus
Borden
Sprecher
Schwanger
From the 11/9/05 meeting
Jack Craver replaces Sprecher
The board remains the same throughout 2006
Darcus (chairman)
Borden (treasurer)
Morales (1st vice chairman)
Schwanger (secretary)
During disputed votes, the above four always vote together.
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