MacRo LTD Blog

Spinning with Mr. Hough

In making the case against the downtown hotel conference center proposed by City of Frederick, it seems that some members of our delegation have a need to exaggerate to make their points.

So here we go with the third chapter in the ongoing saga of addressing issues surrounding the proposed public- private partnership for the development of a downtown Frederick hotel conference center.

I happened to tune into local entrepreneur Jennifer Charlton’s Saturday morning show “Success Happens …” on 930 WFMD radio this past weekend, where she was interviewing State Senator Michael Hough about how he came up through the political ranks and the very savvy campaign strategies he has learned over the years since he left military service.

It didn’t take long before Ms. Charlton began to inquire about Mr. Hough’s position on the proposed public-private partnership for the downtown hotel conference center of which she referred to as the “Elephant in the room.”

That extra 2%

Two weeks ago the Republican delegation voted to take away the ability of the Frederick County County Council to have the flexibility to set the county hotel tax at anywhere between 3% to 5%. The current tax set at 3% is by far one of the lowest among the counties in Maryland. Last year about 97% of the tax revenues went to fund county tourism efforts. This taxation right allows the members of our new charter form of government to make this decision; however, with approval of the Maryland General Assembly during this session, that right will no longer reside with our local government.

This move clearly was sparked by a proposal to increase the hotel tax by two percentage points — about half of which (as I understand it) is proposed to add to the tourism budget and the other half to offset some of the debt service for the proposed conference center construction. The vast majority of revenues from the hotel tax and its proposed increase will not come from local residents, but from visitors to our county that lodge in county hotels.

Hough, who was never a fan of giving local county government the rights afforded under charter home rule, seemed to be stating that he doesn’t trust any elected body to make taxing decisions for our county other than the Republicans which hold a 5 to 3 majority within our Annapolis delegation.

So after an overwhelming majority of Frederick County citizens cast their votes for home rule in November of 2012, Mr. Hough seems to believe it best that he hold the keys to that gate.

When asked by Charlton why he voted to cap the hotel tax at 3%, Hough responded:

“‘I’ve always had qualms with [the proposed downtown hotel conference center] project … first off in that I am a strong believer in the free market and in competition, and in this case there are two conference centers that are coming online in the Jefferson Tech Park and the Holiday Inn is being redone, and it’s going to be square footage wise, it will be twice what the size of what the Holiday Inn is doing. But the bigger thing is they are not coming to us asking for any assistance and … so in fact they are saying ‘don’t put new competition in the market place against us … competition that we never factored in when we were doing our business plan’.”

With all due respect to Hough, I find it very hard to believe that Randy Cohen of the Holiday Inn and Brad Kline the developer of Jefferson Tech Park never factored into their proformas the plans for the downtown project. Both are well seasoned land and commercial real estate developers, who without a doubt were well aware of the City’s long time plans for a public-private partnership.

In each case Cohen and Kline became involved in their respective projects well after the City made its dream public.

In my opinion they had to have considered one of three outcomes:

  1. Factored the City project into their projections as some sort of competition, accepting that it will impact their plans to some degree,
  2. Had strong doubts that the City project would ever come to pass, and projected accordingly, or:
  3. Individually concluded that by announcing their plan to redevelop or develop (as the case may be), they would scare off the City from proceeding to fulfill its dream.

These are very smart people, and Mr. Hough can’t be that naive.

In fact, as I have opined previously, if all three were to actually be built, while there will surely be venue competition among them, the downtown project requires significantly more infrastructure and levels of approval which will likely add a much higher per square foot cost to that project over the other two. In addition, the economic benefit to the downtown and the county as a whole will be unmatched by either the Holiday Inn redevelopment or the hotel planned for the Jefferson Tech Park.

Frankly, I believe that a case can easily be made that the downtown hotel conference center as proposed, will over time significantly boost tourism, which in turn will contribute to the county more of a conference destination within the region.

The Marriott Factor

Senator Hough does not seem to understand who will actually own and operate the proposed downtown hotel, as he continued to further outline the reasons for his opposition to Ms. Charlton:

“… we are doing this for … a Marriott. Marriott is worth over $20 billion … the 29th largest company in … the United States. If they want to come in, and give $14 million … if this project is so worthy, why isn’t Marriott coming [to the table]?”

The fact is that the Marriott corporation is not building the hotel and will have no ownership interest in the project. The Plamondon family has owned and operated a restaurant and hotel business based in Frederick County for over 35 years. They are not a wholly owned affiliate of the Marriott hotel empire, but they do own hotels that operate under a number of Marriott hotel brand names. In other words, they are more like a franchisee – an independent business who actually pays to Marriott a fee to operate under license to use the company names and comply with their high standards. It doesn’t work the other way.

It’s very hard for me to accept that Mr. Hough does not understand this fact. But, I will give him credit, it sure makes good fodder in a speech opposing the city project.

… and so on

The senator continued in his interview try to make his free market case for opposing the City’s downtown hotel conference center by drawing a comparison and talking about the low hotel occupancy rates, but at the same time stating that there are “a bunch of new hotels coming on line.”

None planned for the downtown area, I might add. That’s the hole in the donut that needs a government stimulus in the form of a loan to take our county to the next level.

There is no need for Mr. Hough to put a spin to his opposition. If he has a case to make he surely does not have to come out of the spin room to make his case … he can just tell it straight.

Postscript on last week’s post:

As in the case of our first previous article on the topic, last week’s blog experienced another phenomenal response. But this time, it seemed to set off more than a few explosive tempers that may have rocked the foundation of the House Office Building where the Frederick County Delegation met last Friday in Annapolis.

The ruckus came roaring back at me with claims that I was waging a “hit job” on the developer of the Holiday Inn and the members of the Republican delegation. Over the course of the last week, I learned that several contributions from members of the Plamondon team were not listed.

It was not my intention to do anything but bring awareness to the flow of contributions  from interested parties. I tried to state the facts as I understood them. My sincere apologies for not being more clear about my intentions.

At the end of the day just over $17,000 was contributed to all the candidates: $10,997 from the owner/developer of the Holiday Inn, $2,072 from the developer of Jefferson Tech Park, who plans a hotel conference center in the west end of the city, and $4,075 from the Plamondon hotel contingent.

You can view the updated chart here and expanded explanation of the matter in a revised version last week’s post here.

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Rocky Mackintosh, the Founder and President of MacRo, Ltd., is a leading commercial real estate expert in the region. He has been an active member of the Frederick, Maryland community for over four decades. He has served as chairman of the board of Frederick Memorial Hospital and as a member of the Frederick County Charter Board from 2010 to 2012.

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