The Lancaster County Convention Center Authority board voted unanimously Thursday to refinance $63.9 million in debt.

The move comes near the end of a five-year bond indenture agreement on construction bonds used to finance the Penn Square meeting center.

The $177.6 million combined public center and private Lancaster Marriott at Penn Square hotel opened in June 2009.

Tom Beckett, the authority's financial advisor, said the bonds were being converted to a "direct purchase" agreement with Wells Fargo bank.

The direct purchase, in which the bank holds all the bonds, replaces the bond-marketing process put in place with Well Fargo's predecessor, Wachovia. Under that system, the bonds were repriced and remarketed every week, Beckett said.

He contended there was no downside to the authority in making the change.

Authority Executive Director Kevin Molloy said the upside to the arrangement was that it gives the convention center board budgetary certainty through February 2013.

The authority has paid about $3,000 monthly in bond costs in the last year, Molloy said. But, due to the variable interest rates of the bonds, those costs can spike dramatically with the rise and fall of the financial market.

In two months in 2008, the costs soared to $108,000, he recalled. In 2007, costs sometimes varied from negative numbers to $27,000 the next month, he said.

Yet audience members at the authority meeting urged caution in approving the financing. The most objectionable element of the financing was that the deal will only be in effect for 18 months. The authority must renegotiate the financing again before March 2013.

Under questioning, Beckett contended financiers all have begun requiring higher fees and shorter terms in the past few years.

"Yes, this isn't the greatest deal in the world, and yes, we're going to have to go out and renegotiate in 18 months, but that is the nature of the beast," Beckett acknowledged.

Peter Chiccarine, an owner of Eden Resort & Conference Center and other hotels, questioned Beckett's assessment of the real estate financial market.

Chiccarine said he has refinanced two properties in the past six months for lower rates. Further, he said he would not enter into a financing agreement for only 18 months because it would not make economic sense to do so.

"In 18 months, we're right back in the situation we're in now, and we're at the bank's mercy, and that's never a good situation to be in," he said.

Accountant Steve Geisenberger, who has worked on behalf of the authority, said the authority has been asking for a direct purchase agreement for almost two years. It was only this week that authority officials learned of the bank's offer.

Real estate developer Robert Field called for the vote to be delayed until the agreement could be evaluated.

Beckett, however, said part of the attraction of the agreement was the bank's willingness to reschedule a $540,000 principal payment due in October. To take advantage of the offer, the authority had to act so bond-holders could be notified of the change.

The center debt is paid from proceeds from the 3.9 percent county tax on hotel rooms. In the authority's current budget, adopted in November, that tax is projected to bring in $3.8 million this year. The center is projected to cost about $2.6 million to operate and bring in revenues of just over $1.6 million.

Since it was proposed, supporters have said the center would not be financially self-supporting, but they said it would be a boon for the county due to spending of conventioneers and others who would come to center events.

bharris@lnpnews.com