With Dec 31 expiry of MOU#5 Downtown Hotel in legal limbo. What now?

As the new year was rung in the last legal obligation of the City to support Pete Plamondon's Downtown Hotel project went poof. That's because the last extension of the City-Plamondon Hospitality Partners (Plamondon) Memorandum of Understanding (MOU) expired Dec 31, 2023

So as of the new year Plamondon lost the 'exclusive rights' to City sponsorship and financial support for his downtown hotel that he has held for eight years from the original MOU signed Dec 2015. That first legal agreement ran 2.5 years from Jan 1 2016 thru' mid-2018 and was followed by four extensions of 1.5, 0.5, 1.0, and 2.5 years.  A staff Executive Summary for the Mayor & Board in May 2021 said that by the end of the 30 months of the extension PHP (Plamondon) was expected to have financing in place, have designs complete and permitted and "be ready to construct the project."

 

The City granted Plamondon $150,000 to cover costs of (1) and (2) above but no new designs have emerged. Permitting being a public process we know that no permits have been applied for, let alone granted. And no new financing has been put in place. So the project was NOT ready to construct by end-2023. Plamondon flunked on his MOU obligations yet again. 

 

City shares blame

He will likely blame the City. Plamondon's financing has always been dependent on substantial counter-part contributions drummed up by the City and it has only managed to come up with dribs and drabs. And as for getting permits, that's been precluded because the design still isn't firm. Is the City going to fund Plamondon's parking garage, or isn't it? Since mid-2021 the answer has been negative. It attracted little attention but the fine print of MOU#5 operative mid-2021 to end-2023 contained this important passage beginning; "At this time...":

[Article III (c) Party Agreement as to Project Components]

According to the City DED One-Pager public cost was being drastically cut from $22.25m to $4.52m by excising the parking garage/public podium from the project. Just how you could proceed with the hotel without the parking garage/podium underneath was not explained.  The whole idea of the podium roof atop the garage (thick line in diagram below) was that because of the constrained urban lot most of the parking for the hotel could only be located with its foundations: 

 

Reshapings of the project

Yet once again the project was being fundamentally reshaped.  Fluidity of design has been a chronic problem. Early MOUs had the City funding the 'conference center' portion of the hotel, gifting to Plamondon some 24,000sf[1] of meeting room space. Plamondon had said[2] that "there's no money" in meetings, so if the City wanted its 'conference center' it would have to pay for it. The City intially went along with this but through 2016/2017 the project was reshaped. Plamondon would build 'meeting space' but 20,000sf and one big ballroom instead of the 24,000sf and two ballrooms. Instead of being titled Downtown Hotel and Cnference Center it was now just the Downtown Hotel. Public cost dropped from $31m to $16.85m.

But the project conception kept changing. By the end of 2018 the meeting space had grown back to 22,000sf and the cost to Plamondon had risen from $44m to $60m. The City cost was on the rise too after the City accepted responsibility for funding the street level 'public podium' atop a sub-surface parking garage, providing Plamondon with structured car-parking and engineered foundations for his hotel. 

 

What wizardry now?

So after quietly ditching the expensive under-hotel car-parking in mid-2021 and awarding Pete Plamondon $150,000 to hold the land and advance the project, where are we? All we know for sure is: the project in its 14th year of planning is still shapeshifting.

But how can anything be finally designed with state support until it's known how much state money is forthcoming and when?

20240109

 

 

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[1] square feet = sf

[2] Short conversation with the author, 2015.

Alder. Katie Nash questions Downtown Hotel in Mid-Term report

The City's leading alderman, Board President Katie Nash is unhappy with the City staff's management of the Downtown Hotel project, she says in a mid-term report to constituents. Here are her comments in full:

"One controversial capital project I expect to come before us? The 2015 proposal for a hotel and meeting center on Patrick Street. I completely support the fact that a City of our size is due for a robust hotel downtown that supports the level of employers we must attract. 

"I am concerned, to be candid, that this project (dating back 8 years with the exact same partner from an out-of-date request-for-proposal) is struggling. I know from my private sector experience that a struggling project becomes a liability. 

"I have serious questions about the financing, traffic plan, and need for an updated concept that takes into account the hotels that have come onto the market since 2015. In 2023 I asked for a public meeting for this project at least three times - this request has been ignored.

"I have also indicated that I believe the City should issue a new Request for Proposal to account for the changes in the market and to better understand our potential private sector partner(s). 

"I am entering my third year as a member of the Board of Aldermen and I have no idea what the full public benefit is for this project or how we will proceed with construction to meet the large gap in financing requested from the current private sector partner (as of August 2023 Plamondon was requesting more than $23 million in public money in addition to what has already been provided - we have not been provided a public cost breakout of these funds)."

COMMENT: The Mayor's reported behavior in ignoring Alder. Nash's requests for a public meeting on the future of hotel project is, first up, rude. Common courtesy and respect for the leading elected official call for a response. It's also part of a broader clam-up. In the 2010s the City had constant meetings for 'presentations' or 'workshops' on the project. And there were flyers they updated regularly called One-Pagers (in fact they were two pages back to back on a single sheet.) The City DED and Plamondon both had promotional material on websites. Efforts to get state support were first put to the Board of Aldermen. But in the 2020s they've gone largely silent. The website stuff is several years out of date. City staff's approach to the Moore administration for the $1m grant and the Governor's November 14 visit to Frederick and his appearance for a press conference at Plamondon's hotel site were a surprise. Maybe the City administration has decided it's got too difficult to make the case for the project in public, and it will do better working with Annapolis out of public view. P. Samuel.

20240109

Against City sponsorship of Plamondon's Downtown Hotel

Consider the case against the City sponsoring Plamondon's downtown hotel under three heads:

1. A corrupt deal between thhe City & a hotelier -- wrong and politically damaging

2. City sponsorship began in 2010 & the promise of $30m has, perversely, delayed the needed downtown hotel lodging

3. Incompetence in project management has seen State grants forfeited, permits expired, studies need redoing thru' failure to meet deadlines... a full-blown, long drawn-out fiasco

 

1. Shady behavior continuous from 2005 onward

-- Hotelier Pete Plamondon initiated this telling the City Eco Development director Richard Griffin "It's now time" to discuss a City 'partnership' to build a downtown hotel back in Nov. 2005[1]

-- Mayor Randy McClement's pick in Feb 2010 to head of the City's Downtown Hotel Advisory Committee (DHAC) was local 'businessman' Mark Gaver[2] later revealed as $49m fraudster, now serving 17 years jail[3]

-- DHAC met privately at the call of City Director of Economic Development in City Hall[4] flouting State Open Meetings law (no public notice, no public access, no meeting minutes)

-- hotelier Pete Plamondon, a deeply interested party, was a member of this secretive City committee[5]

-- DHAC resisted competitive procurement persuading Mayor to bypass the regular procurement processes conducted by the City Purchasing Department and conducts the site and vendor 'selection' itself via a consultant under DHAC control

-- consultant Jones Lang LaSalle (JLL) and City Annapolis lobbyist Greenwill encouraged a competitive procurement[6] JLL arguing for a 2-stage procurement (1) site competition and selection then (2) hotelier selection

-- the Plamondon-favoring DHAC rejected this and went for a single shot BYO-site procurement (Feb 19, 2014) limiting competition to Plamondon and another site-ready bidder, Wormald

-- the RFP deadline for proposals was 43 days, only extended a few weeks when Wormald threatened to withdraw

-- JLL time-sheets attached to invoices[7] showed that Plamondon had five hours with DHAC procurement consultant JLL on Oct 10, 2013 and did a 2 hour presentation of his proposal to JLL on Dec 10, 2013. And on Jan 13, 2014 Plamondon presented his proposal to DHAC itself five weeks before the RFP was issued (Feb 20). Through January JLL billed $5503 for 35.5 hours dealing with Plamondon on his proposal. Jan 15 was billed as "Coordinate with Pl(amondon) regarding drafting RFP" making clear Plamondon was on the inside of the procurement process and able to shape the RFP itself. By contrast the DHAC and its consultant displayed no interest in Wormald's proposal, requesting no discussions with the applicant[8] as if it was window dressing

-- scoring of the proposals was, not unexpectedly, biased in favor of Plamondon. Example: Plamondon's site requires demolition (of the Birely Tannery), the last 19th century tannery in Maryland while the Wormald site has no historic buildings yet for historic preservation Plamondon scored 2.5 and Wormald 1. For green/sustainable design both were committed to LEED certification and Plamondon was scored 2.5 to Wormald 1.5. On parking Plamondon scored 1 while Wormald located next to a heavily underutilized City parking garage scored 0. On public financial support Plamondon required $22.5m and scored 13 while Wormald who asked for only $18.8m in a bridge loan, tax abatements and fee waivers were scored 9. [9]

Conclusion: the 'competed procurement' was a sham and a fraud on the public[10]

 

2. City sponsorship & open-ended 'public support' from 2010 discouraged private sector hotels

The proclaimed intent of City sponsorship of the Downtown Hotel in 2010 was to add hotel rooms and meeting space to Frederick's historic downtown, its local heart and premier attraction for visitors. A worthy and important aim. But after 13 years City sponsorship has not only failed to deliver a single City-sponsored hotel room but, more important, it has added serious risk to normal private enterprise hotel financing downtown. Potential investors and lenders have had to contend with the possibility they'll find themselves having to compete with a City-sponsored hotel whose capital was up to 40 percent provided by government favor. And just the knowledge that City Hall has a political stake in the success of a rival hotel is liable to generate all kinds of unpredictable costs in navigating the bureaucratic maze of local government regulation on a continuing basis.

 

The 67-room Visitation Hotel[11] is the only new lodging project beyond bed & breakfasts and airbnbs advanced in downtown Frederick in two decades. Various hotel projects are publicly known[12]:

-- Dillon Development proposed a 156-room hotel at 200-240 E Patrick St, July 2007

-- Wormald proposed 183-room hotel at the Galleria site on S East St, Mar 2010 and subsequently

-- 120-room Hotel 162-at-the-Creek proposed off E All Saints St, Dec 2014 

-- a 200-room hotel (sponsor confidential) on East Patrick St/Carroll Creek Park, 2012 to 2015

 

It is not clear how many of these hotels or others like Visitation would have proceeded in the absence of City sponsorship of the Plamondon Hotel. But the promise of $30 million or so taxpayer support for a City-favored rival and a continuing City Hall political stake in that rival's success was a huge downer to self-financing proposals. It seems clear that, absent City sponsorship of Plamondon, at least one or two of them would by now have been financed, permitted, built and be in hosting visitors today. 

 

Conclusion: the protracted City sponsorship of a downtown hotel has seriously obstructed the normal provision of lodging by market incentivized and financed entrepreneurs.

 

3. Gross project mismanagement

From 2005 when its two principal promoters, hotelier Pete Plamondon (principal of Plamondon Hospitality Partners or PHP) and the City's economic development director Richard Griffin first talked seriously about it, management of the project has been abysmal: 

 

-- Deadlines have been set and missed, time and again 

-- in 2005 the hotel was due to open by 2010,  in 2011 opening was 2014, in 2012 2015... always three or four years away[13]

-- the public role has been recast several times: at first to build interface with streets, utilities etc, then to finance the conference center portion which would be provided to the hotel nominal rental, later to fund sub-surface parking garage and podium platform foundation for the hotel

-- funding sources have been in constant flux: tax increment financing, parking revenue bonds, state grants, Maryland Stadium Authority funds, 25-year exemption from 5% county hotel room taxes

-- the controversial public $-contribution being proposed has varied erratically starting percentagewise in the 20s, jumping to the 40s, slipping to the 30s, then unexplained plummeting to an all-time low of 6 percent in 2022[14]

-- about a dozen consultant firm have been hired, and studies done and gone stale[15], now need to be redone

-- permits have been obtained after presentations and public hearings, then expired through inaction[16]

-- State grants have been announced amid much local hullabaloo, then quietly forfeited on account of failure to meet the terms[17]

-- the DHAC or 'hotel team' has written and debated one MOU (memorandum of understanding) after another, but not one has ever delivered on its commitments

-- DHAC was managed on 'the more the merrier' principle which every textbook on management advises against and at one stage it drafted an MOU with six signatories: three State agencies, the County, the City and Plamondon -- a dispersion of power guaranteeing paralysis

 

Conclusion

City sponsorship of a downtown hotel beginning 2010 has been a costly fiasco. It has wasted millions of private and public dollars and thousands of person-hours of city staff, elected officials, consultants and citizens. The promises of tens of millions of taxpayer-$s have attracted the worst kind of grifters, and deterred investors without close City Hall connections. Far from adding lodging downtown, city-sponsorship has deterred quiet, self-financing, entrepreneurial provision of hotel facilities in the core of Frederick.

 

P Samuel                                                            petersamuel@mac.com     Jan 8, 2024 

 

 

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[1] Pete Plamondon speaking at celebration of state government grants Apr 13, 2016 http://cityoffrederick.granicus.com/MediaPlayer.php?view_id=27&clip_id=288

[2] https://www.fredericknewspost.com/archive/frederick-names-point-man-for-downtown-hotel-plan/article_ced4ec15-a3ca-5960-b079-f5d3aeba6812.html

[3] https://www.justice.gov/usao-md/pr/former-frederick-business-owner-sentenced-17-years-federal-prison-bank-fraud-more 49#:~:text=Bennett%20sentenced%20Mark%20Ian%20Gaver,scheme%20in%20which%20he%20obtained

[4] Earl Robbins, later chair DHAC

[5] Plamondon was recognized as a member of DHAC at a presentation on the status of the project to the Mayor & Board of Aldermen

[6] July 31, 2013 Mayor & Board Aldermen Workshop

[7] obtained via state Public Information Act request

[8] Conversation with Jane Weir

[9] Scoring sheets obtained by Public Information Act request

[10] Documented more fully in "Sham procurement of downtown hotel developer by City of Frederick in 2014," by Peter Samuel, July 3, 2016

[11] the Visitation Hotel is a rehab of historic catholic academy whose grounds allow for several blocks of condos

[12] reports in Frederick News-Post

[13] see table Hotel to Open, above

[14] see table Downtown Hotel, Projected cost, developer/City split

[15] studies on the DH were published in 2007, 2010, 2012, 2016, 2020, and a 2nd also 2020 see Studies Compared table, p3

[16] The City Historic Preservation Commission granted Plamondon a permit to demolish the Birely Tannery building in the way of DH construction in September 2017, the permit valid for 5 years or until September 2022. Level 1 permits valid for 3 years were granted Nov 2017 and extended Mar 2019, also expired in 2022.

[17] Loss of grant announced Jul 22, 2018