Choo Choo. We’re in the caboose again! And poor Mr. Painter is lying on the tracks.

But the good news is that taxpayers are hoteliers they just don’t know it.

We’ve all invested into a $12 million hotel! The owners say $18 million!

The City of Lock Haven purchased the Painter Stadium land for $1.25 million from Keystone Central School District and flipped it to the Shaner Group, a State College developer, for the same price (or $1.37 million with costs).

KCSD needed the proceeds to match a state grant to build its stadium. Shaner knew the price and was the lone bidder. In the business world, that is an “inside deal.”

At the time, I voiced concerns because the market hadn’t been tested. It was touted as a viable development strategy, but in reality it’s a hard coal car ride for county, school and city taxpayers. Our elected officials took on Amtrak and got rammed with a cow catcher.

The City used TIF (Tax Incremental Financing), whereunder a developer continues to pay existing taxes on the land to taxing bodies and the taxing bodies apply the taxes they would have notionally (tax that would have been due) received toward the developers’ debt service.

The City gave Shaner a 14-year free ride despite the fact that manufacturing companies normally receive 10 years.

The dealcutters argued it really was no free ride because KCSD was tax-exempt anyway. But as Paul Harvey says, “Here’s the rest of the story.”

Shaner agreed to build 12 units within 5 months, another 12 condominium units, a hotel and 2 restaurants within 14 years. Today, there is 1 hotel, 0 restaurants and 5 rental units. The score? 25 to 6 with Shaner out in front and taxpayers sitting in the station, getting ready to board the sleeper car:

Annual “notional” taxes would have been:

~ County – $26,154

~ KCSD – $57,539

~ City – $34,922

My calculator says that is $118,615 per year, or $1,660,610 over 14 years assuming no tax hikes. LMAO. Next, the Fairfield Inn and two middle parcels have a total assessed value of $4,843,400 and the building is $3,978,800 of that sum-or 84 percent. Therefore, to be fair about the field, we should reduce my total projected tax loss by 16 percent to $1,394,912.

Oh no! Pennsylvania is one of only three states that does not mandate regular assessment reviews. So, even though Fairfield cost $463 per square foot to build, the developer will only pay on $102 per foot in taxes!

Spot assessment is not allowed. So in 2022, they will start to pay between 6 and 25 cents on the dollar! That’s only $2 more per foot than Best Western pays and 32 years will have lapsed since it was built!

This means either the Fairfield Inn is greatly under-assessed or the Best Western is greatly over-assessed.

I once owned a Perkins and represented clients who own the type of restaurant Shaner implied would locate on Spring Street (with a vehicle count slightly higher than Fallon Alley) such as the Waffle Shop, Olive Garden and Gingerbread Man.

I know a 4,000-foot franchise such as Perkins will generate $1.6 million per year. Shaner said they should be open in early 2010.

Now five years into the excursion, Shaner phantom restaurants cause the City to incur an annual mercantile tax forfeiture of $67,200 based on .00150 percent of $3.2 million.

The plot thickens. It appears the Shaner boys railroaded the City Fathers. In an unfairfield move, they sold-off five “condos” and at $239,000 per unit, were over-priced and remained vacant.

Who did Shaner sell them to?

Town Homes at Susquehanna SQ, LP.

Who is that? Matt Shaner.

Who is he? Shaner’s son.

Why do we care? In the business world, we call this a shrewd asset protection maneuver.

~When the units were changed from condominiums to apartments, the anticipated transfer taxes from condo sales (the City estimated $97,000) floated over the Tidlow Dam. Twenty-four condo units turning an industry average of every 7 years over 14 years at 2 percent of $239,000, would produce $229,440 of transfer tax, not $97,000.

~ Without reading contracts and assignment rights, when the sale from the father to the son’s dummy company occurred, the boy should not benefit from daddy’s deal.

~ It is my perception taxpayers are getting screwed because those existing 5 units should now be taxable.

Because of my “snooping around,” the apartments were just added to the tax rolls.

When I heard of this proposed transaction, it made no sense. It satisfied the KCSD need to raise money, but it wasn’t openly marketed, no gain was made on the flip and the free train ride should have stopped at Bellefonte and not gone all the way to Altoona.

Comparable sales reveal the City gave this land away. Toot toot. Less loot.

The train wreck gets worse when you consider the cost per acre. Last month I sold a commercial parcel in the City for $1,534,762 per acre. Compare that with Painter Stadium that was sold for $230,160 per acre, or 15 percent of that price!

This whistleblower has spoken with some of the prospects for the vacant land in my practice.

I concluded (i) taxpayers are purchasing a substantial portion of the Fairfield Inn, (ii) government subsidized development creates unfair competition for the little guy trying to generate a profit and pay taxes and (iii) this major corporation had a much bigger train. Full of rosy optimism, we were just the “Little Engine That Could.”

The Shaners operate 40 properties and employ 2,700 people. It appears to be a well-run and respectable company. I certainly do not fault Shaner for engineering a sweet deal. I’m only suggesting the deal had “red flags” from the onset and it’s my impression we were eaten alive in the Marriott boardroom.

Remember the Wal-Mart deal? We gave Wal-Mart 7 (not 14) years of zero taxes under LERTA. First, I introduced the concept of LERTA to our area nearly 35 years ago. It was designed for manufacturing firms, not retail stores.

But, over time the nomenclature changed because Wal-Mart agreed to employ 200 people.

What do you think Wal-Mart did? They built a new store and then, the moment their free train ride came to an abrupt halt, they hired a Pittsburgh law firm and filed with the county to lower the assessed value of the building. It gets worse.

The law firm missed the filing deadline, but they let them file anyway! Don’t you dare try that if you’re a local little guy. When I exposed the affair, officials got mad and really hurt my feelings.

Government is infamous for making lousy deals because unlike the private sector, when they lose money, they just bill you. When local government cuts a deal, they reach into your pocket and start throwing money at people.

This is why local government should not play in the corporate sandbox because those sharks are at their desk in the morning long before we arrive at Dunkin Donuts. When you recently read about the 2014 City “development,” did it strike you that it was all tax dollars? Hell, that’s like giving your kid a Christmas toy and then taking the money out of his piggy bank!

If the City wants to play real estate developer, it should fly a seasoned negotiator to the Rhode Island CVS corporate office because they are “chafing at the bit” to purchase land at the corner of Commerce Street and Bellefonte Avenue.

I’ve had numerous conversations with CVS and know that in 2012 they were willing to pay near the same price as the stadium land for that much smaller parcel!

This underselling and overpaying trend occurred when the City purchased wetlands for five times the value to erect the new sewage treatment facility, right after raising your taxes 20 percent, your sewer rates 42 percent and your water rates 32 percent!

Compare that swamp price with the no-tax price for Painter Stadium!

I genuinely respect the elected officials’ effort to manage and grow our region. I’m glad the State College developer invested in Lock Haven. I’m pleased they will pay some hotel tax which ultimately filters down to tourism. I’m half glad the school district spent $3 million-plus on a new stadium and expect the deal was done with all good intentions. I hope the restaurant rumors come true. The intent for everyone to support the university is very admirable. But, ya really can’t believe ’em. In April of 2008, the City boasted there would be 210 new employment opportunities. Last week, the hotel said it employs 17! In the real world, one would take the free ride back if they didn’t reach the benchmarks.

The entire project is assessed at $3,978,800 and it is on that amount the owner will be taxed after 14 years. Construction estimates for the northeast U.S. report the average hotel room is 325 square feet and costs $463 per foot to build.

That equates to $150,475 per room and there are 65 rooms bringing the cost (not including common areas, infrastructure and soft costs) to $9,780.870.

One must deduce that even after 14 years, the Shaners will pay tax based on $4 million for a $12 million project before depreciation! Let’s see now, that would mean they’ll get a 60 percent discount after they do start to pay! Are you shocked yet?

The engineers told us this was a high-speed luxury liner. But I vividly recall so many all-aboard smokestack assurances by former council members that uncoupled.

They reversed positions on apartment registrations, parking permit costs, ordinances, codes, nuisance taxes and utility hikes.

And when someone raises these uncomfortable issues…officials get defensive and try to shove facts into a boxcar.

I initially began this letter to encourage business-oriented citizens to apply for Lynda Carey’s vacated seat. Lynda was one who didn’t buy into goofy proposals. Her steadfast business mentality will be greatly missed.

Hopefully, council will appoint someone who is business savvy, but it is offensive they do it behind closed doors. The applicants aren’t employees, they’re unconfirmed potential candidates chosen with zero input from you, their real employers.

Let’s pray the City doesn’t give away any more of our ships. Maybe this letter will get them steamed up to open the throttle and pressure Shaner into meeting development parameters because our exposure to loss is:

~ Notional Tax – $1,394,912

~ Restaurant Mercantile Tax – $67,200

~ Current Apartment Tax – $1,512

~ Future Apartment Tax – $5,140

~ Lost Transfer Tax – $229,440

~ Interest – $56,635

~ Total – $1,754,839*

*Not including $160,000 of annual under-assessment or employment tax on the 193 people not working there.

So, the next time you drive-by “Susquehanna Square,” stop in the hotel and enjoy a free coffee because you’re a major investor.

Is my projection exact? Time will tell, but this isn’t my job. What I am very comfortable saying is: Not one single person, ever before, even considered the lost opportunity revenue that comes right out of your pocket. No one ever dreamed the Fairfield Freebies could cost $2 million.

Lastly, was there a contract requirement to memorialize good old J.A. Painter?

If you were fortunate to be one of his bookkeeping students at LHHS, you, too, would savor some very fond memories.

Mr. Painter had a comical pattern of repeating everything he said, to be certain you absorbed the lesson. I can hear him as though it was yesterday. “Listen now, now listen. No fun of any kind. You pay, you pay, you pay the city your taxes. You pay the city your taxes.”

Poorman owns and finances real estate projects in Pennsylvania and Florida. He founded a management consulting firm in 1984 that revives financially-troubled companies. He was the former CEO of Charles Chips and Nibble With Gibbles, and an executive with Oncology Services Corporation, a group of 91 cancer treatment and ophthalmology centers throughout the United States.