Chesterton Tribune



DNR to face questions on Pavilion project at Monday open house

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Three years before the Indiana DNR released its prospectus for the Adaptive Reuse Project for the Indiana Dunes Pavilion, in 2011, there was already a plan of sorts for the future of the Pavilion: “to convert the second floor of the Pavilion into a restaurant with a dining room.”

That, from the Indiana Dunes State Park Interpretive Master Plan 2008.

One’s impression, as suggested by the Master Plan 2008, is of rather a modest but family-friendly, casual establishment: kids’ menus with “coloring sheets” and “word searches;” paper placemats doubling as flyers “that visitors could take with them”; exhibits transplanted from the Nature Center and “used in the waiting area for the restaurant.”

Such a restaurant, the DNR envisioned at the time, could even offer “meal and program packages to special groups.” Thus, for example, steel company execs at a conference in the region “could be treated to an evening overlooking the lake followed by an indoor or outdoor program at the beach.”

But beyond that special use of the restaurant--which in any case has the look and feel in the Master Plan 2008 of an interesting afterthought, more a way of exposing folks to the beauty and history of Dunes State Park, like any of the park’s other programming activities, than of filling some market niche or meeting a consumer demand--the DNR showed no interest in 2008 in turning the Pavilion’s proposed restaurant into anything like a venue for weddings, benefits, and other large-scale formal occasions.

Three years later, however, in the Adaptive Reuse Project prospectus, the DNR is quite clear on the “Minimum Expected Services” which a vendor would need to provide: “Full service restaurant and banquet service operations shall be in operation year round.”

The DNR’s addition to its prospectus of “banquet service”--a very specialized area within the food-service industry and not at all the same as a “full-service restaurant”--is absolutely key to understanding why Pavilion Partners LLC (PP) felt it necessary to propose the construction of a 30,000-square foot conference/banquet center adjacent to the Pavilion: because “the tight spacing of structural columns existing within the existing Pavilion structure” (24-inch octagonal columns set in a 15-foot grid) would make banquet service in the Pavilion itself impractical and unappealing to potential customers.

Or as PP puts it in the proposal: the “Banquet Hall Addition was seen as a financial requirement to the success of the overall project.”

The questions in need of answering then become these:

* What happened between 2008 and 2011 to prompt the DNR to expand so markedly its original plans for the Pavilion? Why is banquet service now minimally expected, inasmuch as this service appears not only to require such an enormous increase of architectural footprint at the beach, but also to limit the number of private-sector entities capable in the first place of “bidding” on the Pavilion project to those with $3 to $4 million in ready financing (PP’s estimate of the project’s total cost)?

* What internal conversations were held by DNR on banquet service? Or was banquet service the recommendation of a consultant, tourism expert, or other outside party? Did the DNR investigate the market for banquet service in Northwest Indiana before releasing its prospectus?

* And did the DNR understand the likely consequences of making banquet service a minimal expectation when it released its prospectus?

These are just some of the questions which DNR officials will be on hand to answer at an open house, from 5 to 6:30 p.m. Monday, April 6, at the Dorothy Buell Memorial Visitor Center off Ind. 49 just south of U.S. Highway 20.

“Bait and Switch”

Isn’t this a bait-and-switch? We knew about a restaurant but nothing about new construction of a conference facility: This is one of the “Frequently Asked Questions” answered in a document posted on line at Dunes State Park website.

The DNR answers the question this way: “While new construction was not required as part of the proposal process, it was clearly acknowledged in the prospectus that the possibility of constructing a new facility (or facilities) existed.”

So far as it goes, that’s absolutely true. In multiple places in the prospectus, the DNR refers to “facilities” in the plural. Thus, to take an example, “The operator shall design, develop, build, manage, and maintain the facilities accommodating all activities that are customary”; and “The operator may offer meeting facilities as part of this offer.”

The prospectus also states this clearly: the proposer “will be allowed the opportunity to propose limited additional developments and services.”

Even so, later in the same paragraph, the DNR states that a separate banquet facility is, in fact, necessary, due to the “existing Pavilion structure”; and further that the “ability to conduct meetings and weddings is considered critical for the facility to be financially viable year-round.”

The DNR, in other words, appears to be entertaining two quite different positions simultaneously: that it “was not required” for a potential operator to propose construction of a banquet facility (or of any other facility); but that, nevertheless, it’s “considered critical” to offer banquet service which can only be provided in a brand-new stand-alone banquet center.

The DNR will be able to answer these questions as well on Monday:

* Why was banquet service not considered critical by the Master Plan 2008?

* Who first considered it critical, the DNR or PP, and at what point in the proposal process?

* Was a feasibility study ever conducted demonstrating the necessity of a separate conference/banquet center?

* What specific meaning did the DNR attach to the word limited when it spoke in the prospectus of the “limited additional developments” which a private-entity would have the chance to propose?

Public Input

Another of the “Frequently Asked Questions”: “Why haven’t we heard about this project before now?”

The DNR answers it this way: “This has been an open and public process that began in November 2011. Multiple media outlets reported the prospectus release at this time.”

What was “open and public,” certainly, was the legal ad run three times by the Chesterton Tribune on Nov. 18, 20, and Dec. 16, in which the DNR announced that it was seeking proposals for the “adaptive reuse” of the Pavilion. But that ad ran about two column inches in length, made no mention at all of “full-service restaurant and banquet service operations,” and required folks interested in a prospectus to go to the trouble of formally requesting one from the DNR.

The Tribune did not request a prospectus. In retrospect, it should have done so. Although it’s difficult to recall exactly what this paper’s editorial board was thinking at the time, it may have been something along these lines: “The DNR wants to rehab the Pavilion and put a restaurant in it. We already knew that. The DNR made that objective clear in the Master Plan 2008. We’ll be sure to report on the various proposals submitted when the DNR makes them public and asks for input.”

Even had the Tribune requested a prospectus, it’s unlikely anyone in the Tribune’s newsroom would have concluded, at the time, that the document could possibly inspire a winning proposal for a 30,000-square foot conference/banquet center.

In any event, no further public announcement was ever made and no public input ever sought. A total of two proposals were submitted to the DNR--by March 1, 2012--and a “team of DNR executives and staff reviewed both.” After oral presentations were made by each party in May 2012, the “preferred proposal was selected,” but without first putting either alternative before the public for comment and without ever making it publicly known that an alternative had actually been chosen. Not until demolition began on the Pavilion in February, 2015 did the DNR and PP disclose the Pavilion project’s details, and only after being contacted by the Chesterton Tribune.

The Tribune has also learned that the entity which submitted the other of the two proposals--comprised of “a group of very prominent local residents who had sought to carry out the same project,” as the group’s lawyer, Michael Sawyier, put it in a Voice of the People run on March 3--was never contacted by the DNR and informed that its proposal had been rejected.

The DNR will be able to answer these questions too on Monday:

* Even a fair-minded person who doesn’t care one way or another about whether a banquet facility is built in Dunes State Park might nevertheless conclude that the DNR was making an end-run around the public. Why would a fair-minded person be wrong to think that?

* As the DNR noted in the prospectus, per Indiana law “the offering will be competitive and will be designed to select a proposal which appropriately fulfills the IDNR’s objectives for the project.” In “Frequently Asked Questions,” the DNR reveals that a total of 18 entities requested a prospectus. Of those, only two submitted proposals. Did the DNR find that an unusually low return rate? Was there a point at which the DNR discussed the advisability of revising the prospectus in such a way as to attract a wider--or more competitive--pool of proposals?

* Could a public dialogue on the Pavilion project possibly have resulted in alternate--or more innovative--proposals capable of satisfying the DNR’s objectives and at the same time not necessitating the construction of a brand-new, stand-alone banquet facility?

Public/Private Partnership

Jim Sweeny, president of the Porter County Chapter of the Izaak Walton League, expressed his unhappiness about the project’s mix of private and public in a Voice of the People published on March 30: “I can’t state this any clearer. No private commercial business should be allowed on that beach. It is ours and has been entrusted to the DNR to manage for the citizens of Indiana.”

Private/public partnerships, however, are not at all unusual in Indiana’s state parks. “There are many instances where the Indiana State Parks system has concession and lease arrangements, including marinas, restaurants, lodging, concessions,” the DNR states in “Frequently Asked Questions.” “We take this approach when a service is needed but is not financially feasible for us to develop or staff.”

The DNR does reserve the right in the contract to enter the facilities in question without prior notification for the purposes of inspection. The title to all permanently fixed buildings is vested in the State of Indiana. “Any and all taxes” which a taxing unit of government may impose on the personal property or the business of the operator “shall be paid promptly as due by the lessee.”

For the record, the DNR should be able to answer these questions as well on Monday:

* Which Indiana state park marinas, restaurants, and inns were actually built by private-sector entities under land-lease contracts similar to the one which the DNR entered into with PP?

* When was the last time in an Indiana state park an amenity to be privately operated was built comparable to the 30,000-square foot banquet facility?

* Given the fact that the lease with PP expires in 35 years, with an option for two additional 15-year terms--65 years, that is, very roughly a person’s lifetime--would it be reasonable to characterize the lease as similar to the 75-year one which the state entered into with the now-bankrupt Indiana Toll Road Concession Company?

* Is it true to say that banquet service is genuinely “needed,” though “not financially feasible” for the DNR to develop or staff?

Lease Payments

Under the terms of the lease, PP will pay the DNR a “rental fee” of $18,000 per year--or $1,500 per month, roughly equivalent to the mortgage payment which at least a few Duneland households are probably paying right now--over the lifetime of the contract: 35 or 50 or 65 years.

There is no mechanism or formula in the contract to account for inflation. There is language requiring PP to submit to audits. There is also language governing instances when PP underpays the 2-percent annual cut, including the application of a penalty rate of 8 percent on the deficiency.

After the first two years, PP will begin paying the DNR an additional rental fee of 2 percent of the gross receipts taken by PP. According to PP’s proposal, in Year 5 the enterprise is projected to earn a “Gross Profit” of $4,179,700, 2 percent of which is $83,594; in Year 10, a gross profit of $4,845,417, 2 percent of which is $96,908.

Total lease payments to the DNR in Year 5 would be a projected $101,594; in Year 10, a projected $114,908.

* Has the DNR determined both rental fees--the flat annual fee and the annual percentage cut--to be comparable to those paid under similar lease arrangements between lessor and lessee in the private sector?

* How was that sum and that percentage arrived at?

* How does the total projected rental in Year 5 of $83,594 compare, say, to Dunes State Park’s total 2014 gate receipts?

* How does it compare to Dunes State Park’s total 2014 budget?

* The DNR states in the “Frequently Asked Questions” that a state park’s revenues “go directly” to the DNR. Dunes State Park “directly benefits from this structure with the funding of staff salaries, utilities, supplies, and other operational costs.” Is there a way of determining what percentage of the $83,594 paid by PP will return to Dunes State Park in the sixth year of the lease? Or is it the case that the rental fees will largely be subsidizing operations and programming at other state parks?

Marina and Lodging

PP states, on the third page of its 25-page proposal, that “the development of a marina is considered to be a possible later phase of the project, as much study will be required to determine if a marina is appropriate for the area, whether it can feasibly be done, and what further impact a marina would have on the development area.”

PP also states, on the third page, the following: “NOTE: While not a part of this initial proposal, the developers are interested in exploring lodging opportunities at a later date.”

For the record, PP also states this: “There may be no more spectacular view of a sunset than behind the skyline of the city or the unobstructed view of the rare aurora borealis across the water.”

The DNR, in response to the frequently asked question whether the proposal is a “strategy/starting point for development of a hotel,” states that it is not: “There are no plans to build a hotel at Indiana Dunes State Park. This is a stand-alone project that has great public support; it is not part of a larger strategy or goal of any sort, beyond simply improving the user experience and improving the facility.”

* Is the DNR saying here that it would be willing to commit to a policy of this much and no further, that it has no interest any more ever in developing a hotel?

* What is the DNR’s position on the possibility of a marina at Dunes State Park?


The DNR states explicitly in “Frequently Asked Questions” that the Pavilion parking lot will not be available only for customers of the restaurant and banquet center: “There will be no reserved or set-aside parking; all three beach lots will remain first-come/first-served.”

* There is no language at all in the lease agreement about parking. Is the DNR willing to commit categorically--and PP for its part to stipulate--in an addendum to the lease, that under no circumstances, at any time in the future, will there ever be reserved or set-aside parking for Pavilion or banquet facility customers?

Miscellaneous Questions

* Will customers of the restaurant or the banquet center pay the gate fee, when it is being collected?

* PP is required to provide a surety bond--or certificate of deposit--in the amount of $100,000 “conditioned upon faithful performance of the lessee under this lease.” The contract, however, does not appear to address the event of PP’s going into bankruptcy before construction of the banquet center is completed. Is there some mechanism to ensure that the State of Indiana is not under those circumstances burdened with the cost either of completing the work itself or removing the structure as it stands?


Posted 4/3/2015




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