A state agency, not a private development company, would own the conference center portion of the proposed downtown hotel project under a new draft memorandum of understanding between project partners.
The new agreement outlining funding, ownership and operations of the roughly $84 million project was presented on Wednesday to the mayor and Board of Aldermen for review and discussion.
The decision to give conference center ownership to the Maryland Economic Development Corporation marks the most significant change to the project as planned and outlined under prior agreements. Previous plans called for hotel developer Plamondon Hospitality Partners to own and operate both the hotel and conference center.
Richard Griffin, the city's economic development director, on Wednesday explained the change as a way to further separate the public and private components of the project.
"There was a sense that, because of the amount of public investment going into [the conference center], that there needed to be public ownership," Griffin said.
The cost of the 200-room hotel and corresponding retail will be financed by Plamondon Hospitality Partners, the private developer awarded the project through a prior request for proposals, according to a December 2015 agreement between the city and Plamondon.
The 20,000-plus-square-foot conference center, parking and related public improvements will come from a combination of city, county and state funds, the prior agreement stated.
The Maryland Economic Development Corporation, run by members appointed by the governor, borrows money and issues bonds to help state and local economic development agencies "expand, modernize, and retain businesses, and attract new ones," according to its website. It also lends money to companies to maintain and develop facilities, the organization website stated.
The 2015 agreement also named the Maryland Economic Development Corporation, as well as the Maryland Stadium Authority, among a list of state agencies involved in "either a direct or oversight role as a result of financial investment."
The latest draft memorandum provides further information on the role of both agencies. Either could serve as the conduit through which the state funnels its anticipated $15 million contribution in fiscal 2018 and 2019.
Alternatively, state funding could come through a capital grant, as did the $1 million appropriation included in the state's fiscal 2017 capital budget. As a condition of its $1 million appropriation, the state required that all project partners sign an agreement outlining funding and next steps in the project before money can be spent.
Partners in the agreement are the city of Frederick, Frederick County government, Plamondon Hospitality Partners, the Maryland Stadium Authority and the Maryland Economic Development Corporation.
All five entities must sign the document. The aldermen are slated to vote on the agreement on Oct. 20. The Frederick County Council has scheduled a review of the agreement for its meeting on Tuesday.
The agreement must also be returned to the General Assembly’s budget committees for a 45-day comment period once it is signed by all parties.
Griffin said he hoped to have the agreement sent to the budget committees by Nov. 15 to give state legislators time to review the agreement before the start of the 2017 legislative session. The Maryland General Assembly has pre-authorized $15 million from the state for the next two fiscal budgets, but the funding is not guaranteed.
Griffin said that ensuring legislators have time to review the memorandum will help put project partners in the best possible standing to receive the anticipated state funding.
The draft document also provided more information on the estimated $84 million project cost, although Griffin emphasized the numbers are subject to change.
Plamondon will foot the $53 million cost for the hotel and retail, the draft agreement stated. The remaining $30.35 million will come from public funding sources. The public total is listed in the document as $30.35 million in one place and $31 million in another place.
The city of Frederick’s costs will be about $5.95 million: $2.2 million in tax-increment financing or a similar funding mechanism, $3.5 million in cash and bond revenue from the city parking fund; and $250,000 allocated in the city's fiscal 2012 capital budget, according to the draft agreement.
The county will also use tax-increment financing or a similar mechanism to provide $2.8 million in funding, according to the agreement.
The TIF allows the city and county to use a portion of the anticipated taxes generated from the project toward funding the development.
The Maryland Economic Development Corporation will issue the TIF and parking bonds.
Both bonds will be paid for from revenue derived from the project. Griffin emphasized that city and county taxpayers will not be at risk if the project does not generate the anticipated revenue or falls through completely.
Investors who purchase the bonds will take the fall if revenue does not meet anticipated levels, he said.
Plamondon will bear risk and responsibility for the operations and potential financial shortfalls of the hotel and conference center, according to the agreement. The change in conference center ownership does not affect previously agreed plans for Plamondon to operate the conference center and share 10 percent of all cash revenue from conference center activities with the city.
The city could bequeath its planned ownership of the on-site public parking to the Maryland Economic Development Corporation under the draft agreement. The city aldermen on Wednesday, however, did not indicate interest in this option.
The agreement also includes provisions that any party can terminate the memorandum at any time for any reason.
Staff writer Danielle E. Gaines contributed to this report.