Now $40M: What's driving up cost of Yorktowne Hotel project?
In the early days of the York County Industrial Development Authority's plan to renovate the Yorktowne Hotel, the reported estimated cost was $20 million. But the scope of the project has changed significantly since then, and the project is expected to cost $40 million.
The IDA initially planned to sell the top two floors of the building to a developer for $1 million to $2 million, but after learning from hospitality consultants that they would need at least 123 rooms in order to attract a national hotel chain to the project, the authority changed course.
"Having less than that compromised our ability to advertise this as a type of property that could be nationally flagged as a full-service hotel," said Jack Kay, chairman of the development authority.
Instead of seeing $1 million to $2 million in revenue, the authority will spend about $5 million to renovate the top floors.
Regional businesses and corporations told the authority they have contracts with specific national hotel chains for business travel that determine where the businesses put up out-of-town clientele or associates, and Kay said the authority wanted to attract those businesses as customers.
When the hotel reopens in summer 2020, it will be part of the Tapestry Collection by Hilton, Kay announced in May.
But it wasn't only the extra room renovations that drove up costs.
Contractors found asbestos in materials throughout the building, from insulation and window caulk to floor tiles, according to reports by the state Department of Environmental Protection.
"We literally won’t know until we go in and test and open up walls and do demolition and see what we find," Kay said.
There also was a significant amount of lead throughout the building, Kay said.
Blanda Nace, former project manager for the YCIDA and a candidate for York County commissioner, said the estimated hotel renovation cost was more than $20 million "from the very beginning," and the project was always evolving.
"You don’t know the price until you get the bids from the contractors, so everything’s always been estimates based on what the current design was," Nace said.
Kay said there also were "soft costs" not included in the construction estimate.
To start, the authority paid $1.8 million to buy the hotel in December 2015, according to county property records, and incurred a $540,000 loss operating the hotel for 10 months before shutting it down in late 2016 to begin renovations.
Other additional costs include, but are not limited to, engineering, consulting and permitting fees, Kay said.
Nancy Barry, Right to Know officer for the development authority and chief financial officer for the York County Economic Alliance, did not respond to requests for a more detailed account of the remaining costs.
Original estimates: In a 2015 Round 1A application for a Redevelopment Assistance Capital Program grant through the state, the development authority estimated construction costs at the historic hotel would total about $17.2 million to $22.2 million.
The breakdown of the estimate in the grant application is as follows:
- $2.2 million for demolition of the 1957 addition and an old parking garage
- $4 million for mechanical upgrades
- $11 million to $16 million for room renovations
- No estimate given for partial demolition of unused space at Zion Lutheran Church
The state awarded a $10 million grant to the authority for the renovation.
The development authority still needs to raise $7 million, part of the $40 million estimate, to fund remaining project costs, Kay said.
As much as half of that $7 million could be covered by new market tax credits and historic tax credits, he added.
Governor's response: The governor's Office of the Budget administers the Redevelopment Assistance Capital Program.
It's not a problem if the development authority spends more than it originally estimated in its RACP grant application, said JJ Abbott, spokesman for Gov. Tom Wolf's office.
A problem would only arise if the development authority, or any other RACP funding recipient, were to spend less than the original estimate, Abbott said.
The RACP program provides reimbursement grants only.
The York Dispatch has submitted public information requests to the state Office of the Budget for grant compliance reports, reimbursement requests and other records related to the development authority's RACP grant and is waiting for a response.
Project leaders are now saying that the idea of "doubled costs" is misleading.
But no one from the YCIDA has requested a correction or clarification regarding any reports in The York Dispatch about ballooning expenses. Kay said they preferred not to bring more attention to the reports.
"That’s a judgment call," he said, "and perhaps we erred."