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Commissioner offers no-tax-hike plan for Lancaster convention center

By - Last modified: August 23, 2012 at 8:52 AM

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Lancaster County Commissioner Scott Martin presented a plan Wednesday to shore up the finances of the Lancaster County Convention Center Authority for the next five years without raising the hotel tax.

The plan, if adopted, would allow the authority to meet its debt obligations and allow the convention center to fund its furniture, fixtures and equipment budget, Martin said.

"Our numbers are legit … (and) this solution works from a financial standpoint," he said.

Kevin Molloy, the authority's executive director, seconded that assessment.

"Those numbers meet all the obligations," he said.

The plan calls for the major stakeholders in the convention center to make concessions in order to close the gap between the authority's revenues and its expenses. At a news conference Wednesday at the county offices, Martin outlined the following provisions:

• The Pennsylvania Dutch Convention and Visitors Bureau's 20 percent share of the county's 3.9 percent hotel tax would continue to go to the convention center authority, as it has since April. At present, that amounts to $930,000 annually, Martin said. If hotel tax revenues rebound strongly, the county could consider capping the convention center's share and return at least some money to the bureau.

Penn Square Partners, the partnership of High Cos. and Lancaster Newspapers Inc. that holds the lease to the Marriott Hotel adjoining the convention center, would increase the share of food and beverage royalties paid to the authority from 5 percent to 12 percent. That would add about $250,000 a year in revenue, Martin said.

• The city of Lancaster would contribute $100,000 a year to the authority, or guarantee some of the remaining debt.

• The authority would cut its operating deficit by $35,000.

Wells Fargo Bank, which holds the authority's debt, would reduce the fee for the authority's letter of credit by 60 basis points annually. That would save $380,000 annually, Martin said.

In all, the plan would improve the authority's balance sheet by $1.7 million annually, Martin said. The plan assumes hotel tax revenues will grow by 1 percent a year, a conservative figure.

The provisions would be implemented via a master memorandum of understanding, Martin said. The stakeholders have not agreed to the plan, but no one has walked away from it, either, he stressed. Ideally, the memorandum would be finalized by the end of the year, he said.

The convention center authority's financial troubles have been a topic of concern for many months. The authority is responsible for paying down $60 million in debt incurred to build the facility at King and Queen streets in Lancaster, but the hotel tax revenue that was supposed to cover the payments has fallen well short of the amount needed.

In March, Wells Fargo is due to reset the interest rate on the variable-rate component of the authority's debt. If the bank determines the authority's financial condition has grown riskier, it could raise the rate sharply, putting the authority further in a financial hole.

Molloy and Penn Square Partners have come out publicly in favor of raising the hotel tax. However, Martin said he always views taxation as a last resort, adding that, in this case, raising the hotel tax probably would not be enough to meet the authority's obligations.

The plan is a short-term solution, he said. Asked about a long-term solution, he cited consultant Convention Sports & Leisure International's report, which makes various recommendations regarding the convention center's operations and especially its marketing.

Lancaster County guarantees $20 million of the authority's debt.

Write to the Editorial Department at editorial@cpbj.com

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