Hotel may be ‘the best economic development opportunity that our community has entered in decades’

DELEGATE KAREN YOUNG

Hotel may be ‘the best economic development
opportunity that our community has entered in decades’

I am writing in response to Sen. Michael Hough’s letter, “Arguments against hotel.”  I believe that the minority opinion of our state delegation needs to be heard as well, particularly since we represent the downtown area.  Although the majority of the Frederick County delegation voted against this bill, as of Wednesday we’ve received 62 letters of support for this project and 10 letters against it.  Included in the statements of support are the Chamber of Commerce, several major employers and numerous downtown businesses.

The senator’s first point is that he wants to cap the hotel tax at 3 percent even though enabling state legislation in 2004 gave the county authority to impose a tax of up to 5 percent.  This defies the goal of moving toward a charter form of government that gives local elected officials more of a voice in the decision-making process.

Every Maryland county and Baltimore City levies a tax on hotel room rentals.  Only Frederick and Cecil are at 3 percent.  The others range from 4 to 9.5 percent.  A 2 percent increase in the hotel tax would equate to between $2 and $4 per room.  For the most part, visiting tourist would absorb this.

The Tourism Council of Frederick County receives 97.4 percent of the current hotel taxes (projected at $1.7 million for fiscal 2016).  These funds are allocated to the Visitors Center, marketing efforts, nonprofits (e.g., the Weinberg Center for the Arts, National Museum of Civil War Medicine, Delaplaine Visual Arts Education Center, Historical Society of Frederick County, etc.), and other endeavors that promote tourism.  These funds benefit all hotels in the county.  A conference center would certainly generate incremental room rentals as well.  Not all conference attendees chose to stay at the flagship hotel.

Hough objects to raising this tax “to fund the construction of a competitor hotel.”  However, if one fact has been emphasized repeatedly, it is that public funds will not be allocated to the hotel. The hotel cost estimate of $40.7 million will be financed 100 percent by the developer.  Public funds are being sought to support public facilities such as the conference center, roads, streetscape and utilities.  This should meet the senator’s criteria of “general public items.”

The downtown conference center is unlikely to compete with conference centers in less urban settings.  Professional associations and millennials want to attend conference in unique tourist destinations that feature dozens of gourmet restaurants and boutique shopping within a short walking distance.  Public-private partnerships are the economic model for downtown conference projects throughout the country.  In fact, it is difficult to identify any urban hotel/conference center projects that are totally financed by the private sector.

The Maryland Stadium Authority has already invested in projects where other private ventures exist such as the Bethesda North Marriott Hotel and Conference Center, the Ocean City Convention Center, and the Baltimore Convention Center.  This is not the first example of a state-funded entity competing, on a limited basis, with a nearby private-sector venue.  No evidence exists that state investments in unique partnerships have resulted in private failures.

Hough claims that there are still “many unanswered questions about the costs of this project and the environmental problems of the site.”  The delegation has had about a dozen presentations on the project in the past two years.  In fact, on Feb. 4, 2014, we were handed a color-coded spreadsheet (revised version 3.3) that detailed all of the costs and revenue streams.

At least three needs-assessment studies have been completed on the project.  I am sure that the private developer of the hotel has conducted one also.  Not only is this a very financially viable project but it also may be the best economic development opportunity that our community has entertained in decades.

According to the contract purchaser of the property, the current property owner conducted both Phase I and II Environmental Studies in 2007-’08.  The various levels of site plan approval will require additional environmental assessments before proceeding.

Hough concludes by stating, “I voted against the state giving over $19 million to the proposed downtown hotel and conference center.”  I am fairly certain that the senator understands that the MSA bond leverage figure is a statement of capacity, not the actual funding request.  Moreover, the MSA does not intend to give the project anything.  Tax increment financing is a nationally accepted financing instrument that permits jurisdictions to promote economic development.  TIFs allocate property tax revenue from increases in assessed values within a designated TIF district to public infrastructure within the same district.  In other words, it is a loan, or advance, against future tax obligations that are generated by the project.

It is important to note that taxpayers will not have an increases tax burden as a result of this project.  Nor will taxpayer dollars pay for this project. Moreover, the significant increase in the commercial tax base resulting from this project will make a substantial impact in supporting local services.

Hough is correct about the delegation vote of 4-3-1 against the project.  I proudly stand with my two other colleagues representing District 3A, where the project will be built.  We appreciate that this exceptional economic development opportunity could represent an additional $26 million in annual local spending, 280 new jobs, $1.5 million in incremental annual tax revenues, and minimal risk.

DELEGATE KAREN LEWIS YOUNG
writes from Annapolis. A Democrat, Young represents District 3A.

This letter to the editor originally appeared in the Sunday, February 28, 2016 edition of The Frederick News-Post.