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The plans called for copper. Instead, steel was used. Now, the city-owned Hilton Baltimore Inner Harbor hotel claims it could face “catastrophic structural failures” if the hotel doesn’t replace its pipes.
That’s according to a 2018 lawsuit filed by the convention center hotel in downtown Baltimore. Details of the lawsuit — and the extensive damage at the Baltimore Hilton — are coming to light now after a routine financial filing by the hotel.
This weekend, in an annual report to bondholders, the Baltimore Hilton disclosed it had received $18.1 million for a contract settlement in March. The hotel had quietly settled a yearslong financial battle over the pipes in February, alleging that the galvanized steel pipes throughout the hotel that are now corroding, causing leaks and other damage.
One of the last filings in the case was a consultant’s report in January. The report estimated that replacing the pipes will cost $16.1 million and might disrupt business at the hotel. That could be another blow to the Baltimore Hilton, which has needed millions of dollars in taxpayer money to stay afloat.
The city authorized $300 million in municipal bonds to finance the hotel’s construction in 2006 under then-Mayor Martin O’Malley. Revenues and property taxes generated by the Baltimore Hilton were supposed to pay back the debt. The plan was controversial at the time, but city leaders argued a hotel was needed to attract business to the city-owned convention center on Pratt Street.
The city-owned hotel opened during the financial crisis, did not meet its profit projections and even lost money some years. In 2017, the city refinanced the debt to take advantage of lower interest rates, and the hotel eked out a modest profit. Then, the pandemic hit.
The hotel has been bleeding money ever since, requiring annual injections of $7 million from the city. Earlier this month, the city approved sending another $1 million to the hotel. As of last year, the Baltimore Hilton still owed about $250 million to bondholders.
This month, Mayor Brandon Scott floated the idea of selling the Baltimore Hilton, which is overseen by the Baltimore Development Corp., or BDC. Spokespeople for Scott did not respond to a request for comment Monday.
On Wednesday morning, BDC CEO Colin Tarbert said in a statement that the Baltimore Hilton is the city’s “premier choice for groups, business and leisure travelers, boasting a top-rated experience for guests.”
Tarbert said the hotel made plumbing upgrades in 2020 to ensure proper water temperature in guest rooms and that the hotel is operating at full capacity without any water issues.
“We have long-term plans underway to replace specific piping,” Tarbert said. “Any replacement efforts will be meticulously scheduled and managed to minimize any inconvenience to our valued guests.”
The Baltimore Hilton opened in 2008, but according to the hotel’s lawsuit, the steel pipes went unnoticed until 2015, when the hotel received 23 complaints about water temperature.
“Dangerously hot or annoyingly cold water would shock or hurt the guest occupants,” a report later summarized. “These issues were found to be widespread and not isolated incidents.”
A company hired to fix the problem opened the piping and found it was made of galvanized steel — not copper, which is much more resistant to corrosion.
The hotel undertook an investigation, pulling off insulation and finding more steel pipes, according to court filings. When the pipes were cut open, mud-like corrosion was found caking the insides.
“Based on engineering estimates, the galvanized steel pipes will fail completely in the next few years — an extraordinary thing to happen in a building that is only 14 years old,” the hotel claimed in a 2022 filing, adding that no other hotel in downtown Baltimore relies on steel piping.
Replacing the steel pipes is a complex job that would disrupt guest services and cost $16.1 million, according to a remediation report from Vermont-based Salem Engineering. The report suggested replacing the pipes in piecemeal fashion over a year to keep the hotel operational.
The builders named in the suit — Colorado-based Hensel Phelps Construction and California-based Southland Industries — claimed in court filings that they “explicitly informed” the hotel that steel piping would be used in its construction. Hensel Phelps was the builder and designer of the hotel, according to court records, and Southland was the subcontractor that installed the piping.
But the Baltimore Hilton countered that the final designs included in their contract called for copper piping and that the contractors hid the steel piping with insulation. A report commissioned by the hotel found the contractors saved an estimated $2.6 million by using steel instead of copper, money that the contractors allegedly pocketed.
Hensel Phelps, Southland and their attorneys did not immediately respond to requests for comment.
Reporter Adam Willis contributed to this story.
This article has been updated to correct the name and location of the firm that authored the Baltimore Hilton's remediation report. Salem Engineering, based in Vermont, authored the report.
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Giacomo "Jack" Bologna covers business and development at The Baltimore Banner.
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