Your Oct. 30 editorial doesn’t consider the implications for local taxpayers of proceeding with the downtown Plamondon hotel without state money. Local taxpayers will now be asked to fill the gap left by the state — close to doubling our exposure to more than $20 million.
For “economic development,” you say.
That’s best promoted by business projects fully funded by those who stand to gain from success and who risk losing their own money if they fail.
Market analysis and financial forecasts in 2010, 2012 and 2013 showed the project barely breaking even in operating income with no provision for debt service or return on capital. Since then the local hotel scene has gotten more competitive, with four new hotels built and several more under construction — their costs disciplined by building without taxpayer subsidy.
In 2014, Municap, one of the city’s consultant firms, valued the proposed Plamondon downtown hotel by capitalizing projected cash flows. They calculated hotel value of $24.53 million and retail space at $2.69 million, for a $27.22 million total value. A parking garage for 240 cars is worth about $5 million. Total project value: about $32 million. Yet the memorandum of understanding the city signed with Plamondon last year put the capital cost of the project at $80.34 million. Spending $80 million to build something worth about $33 million is not economic development. It is economic lunacy.
Worse, the city has been talked into taking on the riskiest part of the project — underground construction. With county help, it is expected to buy the land, pay for cleanup, conduct archaeology, drive piles in the mud and build an underground parking garage, the roof of which will be an engineered podium designed as the foundation for the hotel above.
The main rationale advanced for city sponsorship of this hotel was that we’d never get lodging downtown without eight-figure public subsidies. But now, just two blocks away, the Visitation Academy Hotel is in design and permitting without any upfront subsidy or special deal with local officials.
Presented to the public as a “competed procurement,” the Plamondon deal was a fix. Invoice time sheets and meeting agendas clearly establish the two-site/two-firm “competition” was a sham. Plamondon was an insider and he had his proposal to the Downtown Hotel Advisory Committee (DHAC) before the request for proposals was even issued. The DHAC paid only cursory attention to his sole competitor’s proposal. The score sheet of the DHAC was absurdly biased to Plamondon. Let’s not forget the man first chosen by the city to lead the DHAC was Mark Gaver, a local gadfly later convicted of some $50 million of fraud.
City and county governments should walk away from this boondoggle as the state did.