Shut it Down. Now.

An auction has been scheduled for sale of the failed taxpayter-owned Lafayette Yard Hotel. There is already one bid on the table – for $5.5 Million – from a company called Edison Broadcasting.

If no other bids are received, that $5.5 Million would be a far cry from the $30-plus Million outstanding in debt on the property. But it would at least be something.

But the City is not likely to see even that much from the sale of the hotel and all its assets. As we found out last week, the first $2 Million of any sale proceeds – nearly 40% of the only bid now on the table – will be deducted to pay off a loan authorized by the hotel’s governing board, the Lafayette Yard Community Development Corporation (LYCDC), to keep the doors of the hotel open and continue operations as usual during the transition period to a new owner.

I must ask, to what end are we keeping the hotel open right now? Why did the LYCDC Board – without any City Council input or approval – decide to cut the proceeds nearly in half by keeping the place on life support? The hotel is dead, being kept alive only by this loan.

In today’s Trenton Times, we read of the admission by one of the LYCDC’s bankruptcy attorneys, Julie Cvek Curley, that “the hotel is losing between $70,000 and $100,000 a week” in the weeks and months leading up to the auction. [Emphasis mine – KM]

In my last piece, we reviewed that the Hotel’s own financial projections released earlier this year estimated annual expenses from normal operations of $5.2 Million for 2013.

In other words, just about $100,000 per week.

So, as of today we have statements by three different parties with knowledge of the situation (none from the LYCDC Board itself, not surprisingly) that the hotel’s operations are being deficit-financed almost entirely by a loan against the prospective sale proceeds from the upcoming auction, at a rate of 70% to 100% of weekly expenses. Today’s news article also seems to implicitly confirm that, at a current loss rate of up to $100,000 per week, the hotel has taken no steps to reduce operating expenses in the months leading up to the sale, even with a collapse of business income.

Again, I have to ask WHY?

Why has there been no outrage from the Administration and City Council that the hotel Board authorized in secret a $2 Million loan to finance operations up to the auction?

Why is there no outrage that this loan will likely cut the eventual likely proceeds from the auction by 40%?

Why is the hotel continuing business as usual, burning cash at the apparent rate of $100,000 per week, when it is doing so at almost a complete loss?

Why is the hotel still open?

We were told by hotel supporters over the spring and summer that the hotel couldn’t be closed down for fear of not attracting interested buyers. But we have several prospective buyers who may participate in the November 25 auction, and an actual bid from one is on the table. What purpose is now served by fully subsidizing the place when there is little to no business?

Why can’t we close the hotel? There are almost five weeks between today and November 25. If we closed the hotel tomorrow, we’d still likely have some weekly costs, certainly. But if we cut the bleeding red ink by only half, we could save around $50,000 a week, say.

That’s a quarter of a million we can save, people. By simply trying to cut our losses.

I know that one quarter-million may not seem like a lot of money compared to the tens of millions we will still be on the hook for after we unload this financial wreck. But from where I come from, $250,000 is still a lot of money.

Why aren’t we trying to salvage some more out of this deal?

Why is the hotel still open?

Shut it Down. Now.