Think this through

Learning is a life long task. It is the way we acquire the information we need to function.

Decisions should be made after gathering as much information possible.

It follows then, that learning leads to better decision making. (Noting that not everyone will derive the exact same assumption from the same set of data).

This is the essence of what those in attendance should take away from Thursday night's city council meeting that mostly centered on the issues of the city's floundering hotel.

Things learned.

Some key facts came to light that many did not know and others may have known but forgotten over the intervening years since the hotel project was first proposed. Some of the information was revealed via simple research into public documents. Some of it was explained by the city's extremely capable bond attorney, Ed McManimon.

• The Lafayette Yard Community Development Corporation was incorporated in June of 1998 by Shelly Zeiger. The other "trustees" besides the incorporator were Acquest Realty's David Ong, along with Bill Watson, Allan Mallach, and Gwendolyn Long. These five were, according to the incorporation document, "designated by the Mayor of the City" and two others were to be "designated by the City Council at a later date." Mr. Zeiger was the registered agent for the corporation.
• The purpose of the LYCDC was to assist the city, parking authority and state in redeveloping the parcel of land into a hotel, conference center and parking garage.
• The LYCDC, when adopting its bylaws, made the Mayor the appointing authority, with advice and consent of the City Council.
• The LYCDC, NOT the City of Trenton, owns the hotel.
• The LYCDC, NOT the City of Trenton, issued the tax-exempt bonds to raise some of the money for the project.
• The City of Trenton is the guarantor of the bonds. That is, if there is not enough revenue generated by the hotel operations to cover the payments of principle and interest on the bonds, the City of Trenton must make the payments. Since the hotel has, generally, not made a profit that means the city has made the payments and likely will continue to do so.
• There are other, subordinate loans from the state and the Trenton Parking Authority that helped finance the project.
• While the City of Trenton is responsible for the debt incurred to finance the development, it is NOT obligated to cover any operating shortfalls.
• In order for the hotel to be sold, the title has to first transfer to the City of Trenton from the LYCDC.

What this means, in short, is that the LYCDC holds title to the property and operates it via a contract with a management company. The LYCDC is technically the borrower of the money used to construct the facility. The city is the backup...if there are not profits from hotel operations to pay the lenders back, the city must (and has been) make the payments. The city is not obligated to honor the cash calls made by the LYCDC to cover operating deficits.

Take a minute and let that sink in.

Ok, so what do we do?

There is universal agreement that the hotel needs to be sold. There is not so much agreement on the where, when, how and to whom,

It is also pretty much agreed that the hotel is more attractive to a buyer as an open and operating concern rather than closed.

To continue operations after the current agreements with Waterford (the management company actually "running" the hotel) and Marriott (the brand or "flag"), a new computer management system must be purchased and up and running. (This is because the current system in use is Marriott's proprietary system and when they go, it goes. It is that simple.)

There will also be expenses incurred removing all "Marriott" branded items from the property.

This is the $200,000 in transition expenses approved at last night's council meeting. This will allow Marshall, the incoming management company, to operate the hotel after midnight, June 14 when the property becomes "the-hotel-formerly-known-as-the-Trenton-Marriott".

What is not settled is whether to proceed with the re-flagging of the hotel as a Wyndham or operate it independently. Here there are differences of opinion.

Many in the business community, along with the LYCDC board majority, place importance on having a branded hotel. Their arguments range from the improved market recognition a flag carries to implied "standards" of service and facilities. Some say the public seek out name brand hotels when traveling because they are known entities.

Of course, running with a flag can mean additional costs. There is reportedly a $10,000 application fee just to be considered for the Wyndham name. Then there will be some kind of license fee, franchise fee, etc. to actually put the name on the property, tie into its reservation system and utilize the chain's marketing muscle. In addition, we cannot overlook the $3 million in property improvements that Wyndham wants done. These have thus far been described in reports as essentially cosmetic makeovers of the bar area and freshening up the decor in the guest rooms.

In the other camp are those who feel the hotel could operate just fine without a brand for the very brief (but as yet undefined) period between losing the Marriott name and being sold. The thought is that if you are coming to Trenton and inclined to stay at a hotel here in town, you will really have no choice. A brand name is not going to make a difference. Surely, Marshall can operate a property to "chain" standards without the benefit or expense of the brand name. The money saved on application and franchise fees can be freed up for marketing and for those property improvements and maintenance that are actually necessary.

Would operating independently eliminate the need of further bonding?

Operating independently might eliminate the need to issue more bonds to cover this expensive bar makeover and such. However, there are undoubtedly some repair and maintenance issues that should be addressed as part of "polishing this gem" (as one speaker referred to it last night) and readying it for sale.

There is another option that bears consideration.

Bond counsel Ed McManimon noted that the city could issue taxable bonds in the amount equal to the LYCDC’s tax exempt bonds, essentially paying off the LYCDC’s bond debt and acquiring the hotel. At current rates, the city’s debt would be about the same as it is currently paying as guarantor of the LYCDC bonds.

A new body could be created, with members from the state, perhaps the county, the business community and such to oversee the operation AND sale of the hotel.

Robert Lowe sketched it out this way in a post on Facebook last night:

 

The Trenton Hotel 7 Step

1. The City issues taxable bonds equal to the hotel equity it has guaranteed, approximately $13.5 mil, and retires the LYCDC bonds it has guaranteed in equal amount. With this action, the City officially owns the hotel, disbands the LYCDC and nullifies the Asset Manager contract.
2. The City works with the Management firm to operate as an unbranded hotel.
3. The City plans what is truly needed in a reservation system, and works with outlets such as Expedia, Flipkey, and the like to ensure continued internet marketing.
4. The City begins negotiations with the unsecured creditors to arrange for forgiveness of such debt.
5. The City studies the advisability of sale timing, and the possible returns potentially realized by initiating renovations - a true professional business assessment with realistic projections for each available scenario.
6. The City prepares an RFP for sale, and determines the timing of sale, based upon a thorough assessment of the business analysis described above.
7. The City sells the hotel, and encourages all stakeholders to step up to bat, requesting a demonstration of their support by steering business to the hotel. This includes the State, who by purchasing procedures and policy can drive volume.

We think Mr. Lowe is onto something.

We know we will likely never get back the money already invested in this project. We need to focus on getting the hotel into private hands.

As Mr. Lowe said, details need to be worked out. Still, this is more of a plan than we have seen or heard to date.  

It is worth a shot.

Past due

UPDATE:  Cleve Christie, LYCDC Board Chair has resigned.  Read his letter here.

The saga of Trenton’s lone hotel continues to get more sordid by the day.

This morning’s Trentonian has an article by David Foster revealing that Cleve Christie, chairman of the Lafayette Yard Community Development Corporation, has been promoting “jazz events” at the hotel.

One of these events, part of last autumn’s Bring Back Trenton series of musical events, was booked into the Trenton War Memorial. That rental showed up as an outstanding payable from the hotel in the amount of $1,698 owed to Patriots Theater.

This item came up at Tuesday night’s city council meeting when West Ward representative Zac Chester questioned the expense. It was explained that the hotel had “overbooked” its banquet/meeting rooms and had to bump an event to the venue next door, the War Memorial (Patriots Theater). We were made to understand that this is standard practice when hotels “overbook” rooms.

We can see this happening with guest rooms if there is an unexpected rush, fewer than expected cancellations, and guests unexpectedly extending their stay (we should be so lucky!).

Just how does it happen with banquet rooms when deposits are usually paid and contracts signed for a date and time for an event?

The answer appears in the revelation that the LYCDC board chair has been running a series of events at the hotel. In the article, Christie claims that he was approached by the hotel’s former general manager (presumably Jeff Zieger but we do not know for sure) to host concerts to “generate foot traffic and revenue for the hotel.”

Ok, first, this is a hotel. It is in the business of renting out rooms to overnight guests. Yes, it also hosts functions in its various meeting rooms but the primary business is to rent guest rooms. Building “foot traffic” does not generate room nights.
Second, the article explains that Christie didn’t have to put down a deposit to hold rooms for his events. This is contrary to the way the general public does business with the hotel. This is, therefore, special treatment, a benefit, afforded Christie that is not afforded others.

It is generally considered a conflict of interest if a board member personally benefits from business dealings with the entity whose board they sit on. It really doesn’t matter that the concerts only broke even or that they cost him some money out of pocket. Nor does it matter that the intent was to “generate foot traffic and revenue for the hotel.” Mr. Christie should not have been directly involved in the enterprise.

Still, Christie denies there was a conflict of interest.

Councilman Zac Chester said it best:

“The bottom line he did get a benefit as being board chair.”

What remains to be learned is if, as Christie claims, he or his group paid the hotel for the room rental. If so, then why didn’t the payment get made to Patriots Theater?

Was this a case similar to the $170,000 in parking fees collected from the adjacent garage but not passed along to the Trenton Parking Authority? Is the hotel so cash poor that they are playing shell games with the money streams just trying to keep their creditors at bay? That was surely the impression we were left with from the presentation given by Waterford (the current hotel management company) on Tuesday night.

Or is this a case of another “perc” that Mr. Christie felt entitled to as chairman of the LYCDC board?

Where was the rest of the board in all this? Were they aware, did they condone it?

What about the board’s legal counsel, Rocky Peterson? Was he asked to give an opinion on whether Mr. Christie’s activities might be a conflict of interest? Did he offer such an opinion or was he left in the dark about all of this?

What else has been going on at the hotel that we, the taxpaying public who are on the hook for $1.4 million in debt service every year for the next two decades, should know about?

From where we sit it is apparent that the current LYCDC board should be dismissed.  Letters of interest and resumes from those wishing to serve on a newly constituted board should be solicited…including those from any current members.  A new board should be put in place immediately with members vetted and approved by the city council as well as the administration.
And the matter of Mr. Christie’s apparent conflict of interest should be thoroughly investigated by the appropriate law enforcement agency.

Post script #1: It has also come to light that the currentbylaws of the LYCDC call for all appointments to be with the advice and consent of the city council. This clause has not been carried out in recent memory, if ever. This would then imply that the current board sits in violation of its own rules.

Post script #2: We don’t even know where to begin to address Mr. Christie’s quote that closes the Trentonian article. Christie implies that he is being persecuted because of his allegiance to our indicted mayor (who appointed Mr. Christie to the LYCDC). Kevin Moriarty does a fine job ofhandling that matter in his blog post.