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.
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
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
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
* Was a feasibility
study ever conducted demonstrating the necessity of a separate
* 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?
Another of the
“Frequently Asked Questions”: “Why haven’t we heard about this project
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.”
“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.
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
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.
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
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.”
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
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?
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.
payments to the DNR in Year 5 would be a projected $101,594; in Year 10, a
* 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
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
* Will customers of
the restaurant or the banquet center pay the gate fee, when it is being
* 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?