Schmoke Choice Of Hotel Site Assailed

Development Official Says Paterakis Project Could End In Bailouts

April 24, 1997|By Gary Gately and Kevin L. McQuaid | Gary Gately and Kevin L. McQuaid,SUN STAFF

Attacking Mayor Kurt L. Schmoke's choice of a 750-room Inner Harbor East hotel to receive potentially tens of millions of dollars in public subsidies, Baltimore's top economic development official warns that the selection could force a city bailout of the hotel and the Convention Center.

Baltimore Development Corp. Chairman Roger C. Lipitz's letter to the mayor represents perhaps the most scathing criticism of the controversial decision to award rights to develop a $112 million, 27-story hotel to a politically connected team led by H&S Bakery Inc. owner John Paterakis Sr.

Lipitz and a number of industry experts, economists and meeting planners argue that the Inner Harbor East hotel would fail to meet the need for a major new hotel near the Convention Center -- which recently underwent a $151 million expansion and renovation -- because of the hotel's distance from the center.

The 20-acre Inner Harbor East site, owned by Paterakis, is nearly a mile from the center. The hotel planned there also has been challenged because of its costs. At $112 million, it would be roughly $30 million less than the industry standard for a four-star lodging project, which the BDC stipulated it required.

"I am deeply concerned that in five to 10 years, we could look back on this decision as very costly to the city if, in effect, the Convention Center bookings are negatively affected because the distance of the hotel from the Convention Center is detrimental," Lipitz wrote.

"If the hotel's occupancy is insufficient to make it financially viable, there will be great pressure on the city to subsidize the losses of both the hotel and the Convention Center," Lipitz added in his letter of Feb. 25, a copy of which was obtained by The Sun.

While remaining opposed to the selection, Lipitz said yesterday that he now has "a better appreciation" for the mayor's thought process and his decision.

The Paterakis team, which Schmoke picked in late February, would develop downtown's largest hotel. With $42 million in taxpayer subsidies, the project also would be one of the largest publicly supported downtown projects of the past 20 years.

Lipitz, the city's convention bureau and downtown business leaders supported a $173 million hotel plan proposed by Schulweis Realty Co. of New York for the site of the former News American on Pratt Street, roughly four blocks from the Convention Center. That 44-story hotel would be operated by Westin Hotels & Resorts, a company favored by convention-goers for its quality service.

Lipitz wrote the letter after recusing himself from the BDC board's vote on the hotel because of a business relationship with the Cordish Co., which had sought to develop a hotel on a parking lot owned by Baltimore City Community College.

He wasn't alone. Of the nine BDC board members, only four voted. Three members recused themselves because of potential conflicts, while two others weren't present for the vote. In making the selection, the four members rejected a BDC staff finding that Schulweis' proposal would best serve the Convention Center.

Lipitz wrote Schmoke that he believed that if more members had voted, a "significant minority" would have opposed the Inner Harbor East selection.

Schmoke said yesterday that he didn't "recall the specifics" of Lipitz's letter, but said, "Nobody from the [BDC] board has asked me to reopen the process and start over."

Paterakis did not return a telephone call seeking comment.

The mayor also acknowledged the debate over the site but expressed no second thoughts.

"I know there were a lot of differing views on the issue," Schmoke said. "That's why it came down to me to make a decision. There were pros and cons on each of the sites. I considered that the strengths of the Inner Harbor East proposal outweighed those of the other proposals."

Schmoke also said he blessed the Inner Harbor East proposal because it is within the Empowerment Zone, a $100 million federal program to enhance blighted neighborhoods, and because it would spread development toward Fells Point.

An Inner Harbor East hotel would also create rooms downtown for conventioneers who are currently housed in hotels near Baltimore-Washington International Airport, said Schmoke and Carroll R. Armstrong, president of the city's convention bureau.

Lipitz's letter represents only a fraction of the frustration and torrent of criticism that have developed over the decision, however.

"Inner Harbor East is not a convention headquarters hotel [site] and it would not serve that need," Armstrong said.

Meeting planners and competitors also are bewildered.

Lauren Kramer-Whelan of the Society of Nuclear Medicine said it canceled a convention here in 2000 because of the lack of a large hotel close to the center.

"The [cancellation]," she said, "is proof that the Baltimore Convention Center expansion is a $151 million white elephant without the right hotel to support it."

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