Ebersole’s concerns dominated early going in Day 2 of testimony in County Court to determine if County Commissioners Dick Shellenberger and Molly Henderson can rescind a county guarantee to pay up to half of $40 million in construction bonds if the project fails.

Attorney Howard Kelin, representing Lancaster County, suggested “chaos and harm” to residents if the project developers are granted their injunction to keep the commissioners from rescinding an earlier bond guarantee.

Ebersole cited a study underwritten by County Commissioners and opponents to the project to make a case that the convention center-hotel very well could sustain operating losses that would exceed the debt service that the county’s hotel tax covers.

In one scenario, there would have to be a “Disney World-type of growth” in new hotels in the county to generate enough revenue from the room tax to cover debt service the project’s developer would be obligated to pay, Ebersole said.

So far, he said, “no one has stepped up to the plate” to say how such an annual loss would be covered.

In another scenario Ebersole sees as a possibility, room tax revenue would cover anticipated losses, but money used to market convention centers in the city and county would be sucked away, presenting new problems.

The key issue that emerged in the first day of testimony Thursday was whether Lancaster County officials in 2003 were authorized to sign a financial guarantee crucial to construction of the proposed hotel-convention center

Kelin argued that the language in several legal documents on the guarantee contains inconsistencies that make the guarantee invalid.

Attorneys for the project’s developers say Kelin is misinterpreting the language.

“There is no variation” between county law, construction bond documents and the guarantee county commissioners signed three years ago, even though they don’t match word for word, attorney John Fenningham said.

Fenningham represents Lancaster County Convention Center Authority, which is developing the project with Penn Square Partners and Redevelopment Authority of the City of Lancaster.

They plan to build a 300-room Marriott hotel and a 220,000-square-foot convention center at and around the former Watt & Shand department store on Penn Square at a cost of $155.4 million.

In July, county Judge Joseph Madenspacher imposed a temporary injunction against the commissioners. Developers are now seeking a permanent injunction, alleging the county is legally bound to honor the guarantee.

Kelin grilled former county special counsel Doug Rauch, who wrote the ordinance that created the guarantee.

The ordinance stipulates that bond documents must require a balanced budget before funds from the bond can be used for construction, Kelin said.

The documents, called a trust indenture, however, require only an itemized project budget, Kelin said.

Despite this inconsistency, the Board of County Commissioners in 2003 signed the bond guarantee in violation of the ordinance, Kelin said.

Rauch disagreed, saying a balanced budget is implied by the trust indenture.

Penn Square Partners consists of general partner Penn Square General Corp., a High Industries affiliate, and limited partners Fulton Bank and Penn Square Ltd. LLC, an affiliate of Lancaster Newspapers Inc., publisher of the Intelligencer Journal, Lancaster New Era and Sunday News.