The Lancaster County Convention Center and Lancaster Marriott at Penn Square, a seamlessly integrated facility that opened in June of 2009, is a cultural and economic centerpiece of vibrant Downtown Lancaster and the surrounding Lancaster County.
Considered by many to be one of the most important economic development projects in Central Pennsylvania in decades, the project brought jobs and additional, ongoing financial strength to Lancaster. In 2016 Freedom Hall, the 46,407 square foot exhibit hall, celebrated hosting over one million guests since the opening in 2009.
In creating a downtown convention center and hotel, community leaders sought to leverage Lancaster’s position as one of the most popular tourist destinations on the East Coast. Lancaster County’s wholesome variety of family entertainment, historic sites, and reputation for quality and value draws millions of leisure tourists each year. It restored Lancaster’s most historic streetscape and brought new life to its treasured landmark, the former Watt & Shand Building.
Lancaster’s Economic Development Action Agenda
In 1997, a group of community leaders comprising The Lancaster Campaign and The Economic Development Action Group contracted with LDR International, Inc., to create a plan to stimulate the economic revitalization of the City of Lancaster.
Through a comprehensive process involving community participation, research, urban design, and strategic planning, LDR International, Inc. developed Lancaster’s Economic Development Action Agenda for Prince and South Duke streets and downtown Lancaster. The plan identified almost 60 projects and strategies important to the development of these downtown commerce areas. This list was reduced to seventeen strategies, including separate proposals to develop a state-of-the-art downtown conference center and to revitalize Lancaster’s historic Watt & Shand Building.
As proposed, the action agenda envisioned the conference center as part of a redevelopment of Lancaster Square, including the former Armstrong/Lancaster Square Building and the Hotel Brunswick, now the Hotel Lancaster. Separately, the plan recommended adaptive reuse of the Watt & Shand Building to include a mix of retail stores and offices, with one or more tourism attraction venues.
Task Force Evaluates Strategy and Project Evolves
Through the efforts of the Lancaster Campaign, a Convention Center Task Force was formed in 1998 to address the Economic Action Agenda strategy that called for the development of a first-class meeting facility. As a result of the task force’s deliberations and initiatives, the original strategy from the Economic Development Action Agenda evolved to become a combined Lancaster County Convention Center and first-class headquarters hotel at Penn Square.
Task force members approached Penn Square Partners about the potential of developing the Watt & Shand Building for the privately owned headquarters hotel. (Penn Square Partners had purchased the dormant Watt & Shand Building in February 1998. The historic structure had been vacant since the Bon Ton Department Store closed in 1995.) Penn Square Partners comprises general partner Penn Square General Corporation, which is affiliated with the High companies; and Lancaster Newspapers, Inc.
After an independent feasibility study of the hotel and convention center idea, Penn Square Partners and the Lancaster Foundation jointly petitioned the Lancaster County Commissioners to create a Convention Center Authority and to enact a hotel room tax to support the project. County officials sought public input and debated the proposals before taking action in September 1999.
Convention Center Authority is Formed, Partners with Private Sector
On September 15, 1999, the Lancaster County Convention Center Authority was established under the Municipal Authority Act of 1945 and the Third-Class County Convention Center Authority Act.
The Convention Center Authority was, and continues to be, run by a seven-member volunteer board appointed by city and county officials.
The board was charged by local officials with developing a unique and inviting convention venue for this area and to work with a private-sector partner to develop a first-class lodging facility to enable the convention center to achieve its goals. In addition, the Convention Center Authority was encouraged to work with local experts to preserve any significant historical buildings that may be located at the site.
In 2001, the Lancaster County Convention Center Authority and Penn Square Partners formalized their relationship for the purpose of developing, designing, building, and operating a convention center and hotel. The partnership agreements between Penn Square Partners and the Lancaster County Convention Center Authority established performance covenants and were designed to carefully protect the interests of the community.
Convention Center Project Funded with Hotel Room Rental Tax
In January 2000, Lancaster County imposed a 3.9-percent tax on hotel room rentals to generate funding to construct and market a publicly owned convention center. Twenty percent of this funding is distributed to Discover Lancaster (formerly the Pennsylvania Dutch Convention and Visitors Bureau) to promote Lancaster County as a convention and meeting destination.
In March 2000, local hoteliers filed the first of several lawsuits challenging the constitutionality of the hotel room tax. For 3½ years, the Lancaster County Convention Center project was, in effect, put on hold while the litigation was resolved. Total cost to the Convention Center Authority was many millions of dollars, including litigation costs and increased construction material and labor costs resulting from the delay. Penn Square Partners also incurred substantial additional costs including maintaining the Watt & Shand Building, litigation, and increased construction costs.
In late 2000, the Lancaster County Convention Center Authority commissioned an independent study to evaluate and quantify the community benefits of the project. The analysis found that the convention center and hotel would:
- Create 520 to 590 construction jobs.
- Create 200 to 300 full-time jobs to staff the hotel and convention center.
- Increase Lancaster County tourism by an additional 114,000 to 147,500 visitors annually.
- Inject $150 million into the local economy during construction: $110 million in sales of Lancaster County-produced goods and services and $40 million in personal income.
- Inject $42 million per year into the local economy during operation: $31 million per year in sales of Lancaster County-produced goods and services and $11 million per year in personal income.
- Generate additional tax revenue for Lancaster City, Lancaster County, and the School District of Lancaster.
A development project plan was developed to allow the construction of the Lancaster County Convention Center and Lancaster Marriott at Penn Square. The plan was the result of a complex and cooperative effort among government and community leaders and public and private partners.
Project Financing (Total Cost: $178 million, including financing costs)
The business plan shares the expense of the $178-million project among many partners. Funding would be contributed by the Lancaster County Convention Center Authority, Penn Square Partners, and the Commonwealth of Pennsylvania. The City of Lancaster is contributing $1 million in in-kind services, such as waving permit fees, assisting the Parking Authority, and improvements to the streetscape.
The Lancaster County Convention Center Authority funding of the project is as follows:
- Hotel Room Rental Tax Funding. The Authority receives a portion of the revenue generated from the hotel room rental tax paid by visitors to Lancaster County. This tax is projected to raise $5.8 million for the project during the construction period.
- Hotel Tax Revenue Bonds. In 2003 and 2007, the Authority issued $63.9 million in bonds, secured by the proceeds from the hotel room rental tax. The bonds were obtained at a favorable rate with a Lancaster County guarantee, designed to protect the interests of local taxpayers.
- Grants. The Commonwealth of Pennsylvania made a $15 million grant to the Authority. $1 million in state grants was later added. An additional $3.5 millionwas received through a 2008-2009 Commonwealth of PA budget request.
- Other Sources. The Convention Center Authority will contribute cash and interest earnings.
Penn Square Partners comprises general partner Penn Square General Corporation, which is affiliated with High Industries, Inc., and Lancaster Newspapers, Inc. Penn Square Partners funding of the project is as follows:
- Equity. Penn Square Partners provided $11 million in private-sector equity.
- Lease Payments. Through a 20-year lease with the Redevelopment Authority of the City of Lancaster (RACL), Penn Square Partners will cover the debt service of $24 million of Hotel Lease Revenue Bonds that will be issued by RACL.
- Other Grants and Loans. Various state grants in the amount of $22.75 million were obtained by RACL and an Infrastructure Improvement Loan (IFIP) in the amount of $14.5 million was also obtained from the Commonwealth which will be repaid with future sales tax and other tax receipts attributable to the Hotel.
The project also incorporated the restoration of several historical properties and the facade of the former Watt & Shand department store. LancasterHistory.org maintains a lease with the Convention Center Authority for restoration work of the Thaddeus Stevens home, law office and Kleiss Saloon properties not included in the original Project. The incorporation of these aspects of the project will enrich the experience of those that visit and utilize the Hotel and Convention Center.
Redevelopment Authority of the City of Lancaster
The Redevelopment Authority of the City of Lancaster (RACL), Penn Square Partners, and the LCCCA created a condominium association. Within the facility:
- The Convention Center Authority will own a fee interest in the portion of the facility that contains an exhibit hall, meeting rooms, the ballrooms, and kitchen. A fee interest is equivalent to full ownership.
- Penn Square Partners will have a leasehold interest in the portion of the facility that contains the hotel tower. A leasehold interest provides the right of possession, but not ownership, of a property for an agreed period of time.
- Penn Square Partners and the Convention Center Authority will have the right to use common areas, including the lobby, employee facilities, and other mechanical and electrical support facilities.