The Mary Davis Sand and Gravel Company

By Arrowflinger Al

Remember the good old days out here in the rural counties when your commissioner could rock, grade and maybe even pave your driveway if you supported him? Well, those days are gone out here because our commissioners don’t want to go to prison. Now, there is hope and help from our good neighbors down in Augusta  with their new Public-private partnership we are  calling the Mary Davis Sand and Gravel Company. Call  Augusta Mayor Pro-tem Davis at (706) 821-1831 and you may be able to arrange what one of my neighbors got here in Lincoln County – men, trucks, trailers, supplies, fringe benefits, and heavy equipment expended fixing a private road. All for FREE!

No need to worry about tipping the Augusta workers either because they get the greater of 3 months severance pay or a full retirement if they get caught.

Even getting 300 tons of stone like THIS isn’t impossible, because the Augusta Landfill down on Deans Bridge Road has stockpiles of everything you need – sand, gravel, screenings, surge stone and even rip rap. Those can be loaded up and sent out to us through the same gate that the equipment loaned to my neighbor was.

If you look at the pictures of my neighbors’ Augusta built Project, there is even drain pipe furnished with the deal you get from Mary Davis.

You don’t even have to pay a registered contractor with expensive insurance, permits, a business or contractor’s license in your county, either. Those gifts give a pretty big bonus to your free work value  from Mary Davis.

If the equipment from the landfill is tied up and can’t get to you, then the nice sheriff down there has a guy who will meet your equipment needs with no delay stationed at the shooting range next door.

Augusta taxpayers and residents, you do not qualify for this program, so don’t attempt to call. You give but cannot receive.

We out here in the sticks thank you for your generosity and the kind treatment we get from Mary Davis Sand and Gravel.

Mary rocks our world.

 

-AG

Domeward Bound No More

UPDATE: Legendary Lincoln County football coach Larry Campbell announced his retirement this week, which made the posting of this report and video timely, as Campbell and the Red Devils made the Georgia Dome their second home. Since this report and video were produced in the summer of 2013, there has been a $50 million publicly-funded parking deck added to the Falcons’ new stadium project, a $200 million change for HVAC (Augusta Tee Center readers will snicker at that.), and the land acquisition price soared.

*******************************************

Nothing is loved in Lincolnton, Georgia more than its Red Devils football team. 14 state championships in the small school classification. Georgia’s winningest coach in Larry Campbell. More times than any other school as state runners-up. So many trips to the Georgia Dome to play in state play-offs that there is a slogan that rises every year here – “We are Dome-ward Bound.” 8 times would tend to do that for doting fans. They look for greatness under the Georgia Dome, but sadly those quests won’t be the same thanks to the work of another crew of devils, the Legislature that frolics under the Gold Dome.

At the end of a not-distant season, the Red Devils won’t be Dome-ward bound, for the legislature decided to bequeath $1.2 billion (over the next 35 years) of public funds dedicated to the Dome to Arthur Blank, the 90% owner of the Atlanta Falcons Football team, in the form of a new stadium to be leased and operated by the Falcons. The stadium costs are put at more than a billion dollars, but with all of the likely cost overruns probably will exceed Blank’s $1.6 billion net worth (just this month upped to $1.7 billion) by the time the new retractable-roofed stadium is completed.

Dastardly deeds that small town folk cannot really understand underpin the arrangement. After receiving Blank’s hefty campaign donations in recent years, Lt. Governor Casey Cagle killed a key conservative right to work bill that stood in the way. There was a failure to account for the damage that losing $19 million in hotel tax funding and $15 million in profits does to Georgia World Congress Center’s finances. Then World Congress’ own consultant suggested claw-back terms or profit sharing with the public in case 90% owner Blank sells the team with its $1.6 billion stadium lease, but it isn’t in the final agreement, which contains a provision only that the Falcon’s cannot relocate without a penalty.

The legislature under the gold dome OK’d renewing the hotel-motel tax and using it to build a new stadium in 2011, but after 73% of Georgians arose in opposition, Governor Nathan Deal took negotiation of the final sell-out to the Falcons behind closed doors. Then it came to rest in the hands of Atlanta Mayor Kassim Reed, who rammed the agreement through a pliant City Council.
The Falcons and their supporters loudly claim that the team will be paying $800 million and the public only $200 million. Reed emerged with the final agreement and a press release saying that the public funds are “capped at $200 million,” but when if you read the legal documents, the terms said the funding will start at $200 million. Worse than that, analysis of various consultant reports puts public stadium funding at nearly $700 million, with several Hundred $millions more in operations costs funded by hotel motel tax once the stadium is built. The real numbers look like they are the reverse of what the Falcons’ claimed.

The Georgia Dome that the Lincoln County Red Devils played in is property of the state. 60% of dome use was not for the Falcons. The state was making $15 million a year while hosting high school, SEC, and NCAA football. Concerns were expressed in negotiations that such events might be be “not on economic Terms” after the Falcons take over operations of the new stadium. After all, they expect that ticket prices will increase 20% and that food and beverage prices will go up 44% to nearly $18 per seat. Can small town fans afford that? The costs are going to be so high that Mayor Reed’s final deal provides public assistance of $3.5 million a year, with automatic 2% increases, for a total of $184 million to “Stage Other Events.” “Other events according to the legalese are non-Falcon events, like Red Devil playoff games and all of the other ones that our Dome’s profits used to provide for.

The San Francisco 49ers sold naming rights to their new stadium for $220 million. Georgia and Atlanta gave their naming rights up to the Falcons at no charge in the deal.

When this correspondent posed a list of questions to World Congress before the revised deal was public, they refused to answer. The Atlanta Journal Constitution, where Blank sits on the board of directors, has been silent on nearly all of these things. Oh, and don’t expect to hold Nathan Deal or World Congress’ Frank Poe to accountable. They will be retired before the damage is known.

In news breaking in June, the World Congress Center just approved this design, which USA Today Sports calls CRAZY, writing “Will this thing actually get built?”

Despite these questions, huge costs, and conflicts, it appears likely that a perfectly good Georgia Dome will fall to the wrecking ball to yield to the Falcons new rookery. The public and the Red Devils will find their sell-outs under an intact gold dome across town, with the only dome-ward bound being lobbyists looking for ever larger Blank checks.

    OPINION

Taking over the Augusta Commission Chamber

In early 2012, Augusta faced a dilemma. It had constructed a $15 million parking deck that it did not own. Local activists with the Augusta Today facebook group and CityStink.net had alerted the media when their research of real estate titles at the Clerk of Court’s office showed that the land was not owned by the city.

Cost recovery analyst Al Gray and Brad Owens took over the commission chambers to address the crowd and insist upon rights of audit, in what was seen as a one-sided contract.

Dear Arthur, Tipped Balls Hurt

Originally posted March 12, 2013

Are the Falcons underestimating the Atlanta City Council?

By Al Gray

As University of Georgia grads know, an untimely tipped ball tantalizingly close to the goal line can kill championship dreams. The Atlanta Falcons have executed a well-orchestrated plan over the last two years to carefully plan and execute the win of a free $1.2 billion new stadium. Now the weakened opposition is down to an unlikely, untested, last line of defense called the Atlanta City Council. Its members were spectators suddenly called into a game with no advance preparation. Only a disaster can stop the Falcons now. Surely a bunch of city council members can’t muster anything heroic. Everything has been so perfectly played that half of the backfield has been cloaked with invisibility.

Political maneuvers bail out GWCCA, get Falcons to first and goal

Moments after the opening whistle in 2010, the Georgia World Congress Center contingent on the team realized that they had a huge problem. If they fully surrendered stadium operations to the Falcons, not only would GWCCA be giving up $20 million a year in hotel motel tax funding (Consultants’ numbers lead to totals of $1.2 billion over 35 years), it would be giving away $15 million a year in net income on a successful Georgia Dome operation. If someone only looked at the financials there could be trouble. A worse problem was the $2 million to $3 million in GWCCA overhead that the Georgia Dome has been absorbing for years. Then someone realized that money is fungible and that the Atlanta Convention and Visitors Bureau (ACV partnership with GWCCA could be used as a conduit to shift costs equivalent to those then covered by dome operations. In 2011 the team got a new 1% hotel motel tax passed worth $6 million a year to expand the ACVB’s marketing of events in the World Congress Center and elsewhere. About $4 million of the new tax appears on the GWCCA’s 2012 FY financial statements. That might have tipped some people off, so GWCCA’s Frank Poe proclaimed, truthfully enough, that the new tax was not going toward stadium construction. The contract between ACVB and GWCCA was modified in 2011 uneventfully. The cost shift will be a handy tool.

The series of plays in the General Assembly enabling the Falcons takeover extended the hotel motel tax and, just last week, killed a conservative bill strengthening right to work laws that would threaten the “community investment” now needed to have any chance at victory in Council chambers.

Another saving grace in the potential damage to GWCCA’s finances is that Georgia governor Nathan Deal, who has had a major role in the stadium negotiations, and GWCCA’s Frank Poe, now 62, will probably be retired before the harm to GWCCA becomes known in 2018. $15 million Dome annual net income contributions might be too great a loss to overcome, necessitating a state bailout.

On first down –

Tipped Ball  #1 – Public costs are not capped at the $200 million advertised according to City’s and GWCCA’s own documents that are posted online.

The Falcons negotiators, gold dome allies, and GWCCA facilitators have stayed remarkably on message that public funds are only $200 million, while the Falcons will be paying $800 million of construction costs. When the deal with Atlanta Mayor Kasim Reed was announced on Thursday, March 7, the press release said “The public contribution for stadium construction is capped at $200 million.” Maybe the Mayor thinks the council won’t mind that the legal summary says

 “Budget/Contributions: Estimated $948 million, comprised of….. Public Contribution: $200 million net proceeds of the HMT Revenue Bonds”

The legalese says the $200 million is an estimate, not a cap and puts stadium borrowings on the same funding stream that a Citi consultant projected would produce bond proceeds of $360 million. Even more critical is that those funding assumptions are terribly conservative, given the extraordinarily lower interest rates are available to Atlanta than the 4.15% rates used  and that Hotel-Motel tax revenues are currently up 7.49% over last year.

Second Down –

Tipped Ball  #2 –  No one is explaining a $612 million cash gap in Hotel Motel tax funds ($211 on a debt funding basis) over the “$200 million cap” and fully funded O-M accounts (which are being ignored as a public contribution)

A key Citi presentation of June 2011, secured by agraynation.com, was integral to the planning of the stadium agreement. This agreement used the 2.7% annual growth rate in H-M tax revenues and it showed the debt service required at then-existent rates for $360 million in debt. If the debt is reduced to $200 million, where debt is to be “capped,” it leaves $612 million in cash outlays unaccounted for, or $210 million in estimated bonding potential. These public funds are being pretended out of existence.

The legal summarycontains this bombshell about the extra funds: “City would agree that all HMT revenues not required under the Funding Agreement to provide for the payment in full of the HMT Revenue Bonds (including appropriate reserves) shall be deposited with a separate GWCCA HMT Fund Custodian, where such funds shall be applied to pay for any costs relating to the construction and operation of the NSP, as provided in the HMT law.”  In other words, excess funds can go into stadium construction that are over and above the $200 million cap.

 Third Down –

Tipped Ball  #3 –  The $186 million that the Atlanta agreement puts into “other event staging” through FY 2051 is to make up for the much, much higher costs the Falcons plan on charging as stadium managers than GWCCA did, isn’t it?

This one might tip off the public and Atlanta City Council thatStadCo will be responsible for the cost (to be identified) of providing its staff and other support that historically has been provided by GWCCAThey might awaken to the fact that Falcons costs as stadium manager are required to be built into all GWCCA events, GWCCA legacy events and Atlanta hosted events – events that now account for nearly 60% of Dome attendance! There are indications that Dome legacy events might be “not on economic terms” after the Falcons take over. Having to allocate $186 million to “other event staging” to make the existing venues and events viable reveals a controversial truth about the contract – the GWCCA won’t be staffing the stadium and will have to pay the Falcon’s cost structure, which may be considerably higher. (GWCCA’s consultant having already predicted 20% (after tax) ticket price increases and 44% concession price increases) Having to inject $186 million to make your own events “economic” after the Falcons take over isn’t a surprise to Atlantans?

Fourth down, Arthur, but don’t sweat it –

Tipped Ball #4 The Falcons only agree to pay that which the public contribution cannot be “maximized” to cover, not $700 or $800 million.

The Atlanta agreement says,All NSP costs in excess of the Public Contribution to be paid by StadCo” (the Falcons). Worse it says this about handling of funds when the bonds are sold in August 2013: “Invest Atlanta shall issue the Hotel Motel Tax (“HMT”) Revenue Bonds and StadCo shall establish an account into which its contribution will be deposited. ” This doesn’t even set an amount or a requirement that any money be deposited by the Falcons, only that an account be established! Beyond this, crafty lawyers restricted Falcon responsibility to “NSP Costs” which are established by a maximum price. The trouble with this is that an increase in the “maximum price” (which can change throughout the project) is not necessarily a change order for which the Falcons are responsible.

******************

Expect the great Falcons special stadium team to pick up the tipped ball and run in for the score. The officials will push the ball carrier across the goal line. “Whatever it takes” is the Georgia and Atlanta politicians’ motto.

After the victory is scored, the Falcons can proceed into the construction phase of revenue enhancement, where the next $50 million to $100 million in public funds lay waiting.

Why not make the full agreement open for public scrutiny instead of just the legal summary? Why not make this process easier on all concerned and just ante up another $250 million that is perfectly justifiable under sound strategic planning and will make this project palatable to the public?

Another $250 million from the Falcons remains a bargain, Arthur.

 

-AG

 

Update: The Atlanta City Council has since voted to approve the Flcon’s New Stadium Project

Point Blank Video: The Art of a Finely Feathered Nest?

Originally posted March 7, 2013

Point Blank on agraynation.com is an irreverent point of view at events in and around the state of Georgia, including Augusta, Atlanta and the public policy meaning of it all to a perhaps-slightly-addled refugee of the late, great American middle class.

Today, in Point Blank, the topic for consideration is the haste with which the Georgia World Congress Center Authority and the City of Atlanta look to be pursuing a bad deal for the taxpayer.

 

Teeing Off for the Last Time

Originally posted March 8, 2013 at 12:14 PM

Harrison view of Tee

 

by Al Gray

A journey for this writer that began about a year ago concluded on Monday, February 11, 2013 with a presentation before the Finance Committee of the Augusta City Commission. Commissioners Wayne Guilfoyle and Bill Lockett had requested a final act of assistance with respect to the tumultuous Tee Center operating agreements in the form of an analysis of the proposed Tee Center plan and budget that had been submitted by Augusta Convention Center operator Augusta Convention Center Management LLC (ACCMLLC), a subsidiary of Augusta Riverfront LLC and a related entity to Morris Communications, publisher of the Augusta Chronicle.

The Chronicle local government writer who reported on the meeting made no mention of my report, which was very kindly received by all of the commissioners.

The analysis provided was compiled in a very rapid fashion, as is customary with Augusta events, but questioned about $323,000 of costs (the revised schedule accompanying this article is somewhat higher from factors mentioned in the discussion) within the budgeted loss of $804,000. The discussion, key issues, and related amounts are as follows:

The inclusion of $10,048 for vacation and holidays had been questioned because budgeting 2080 hours indicated that the costs were included elsewhere in salaries. This was not seriously contested and it was agreed that using the figures for imprecise budgeting would not be determinant of the actual costs paid.

Since access to the management company’s records was not afforded Augusta, one had to assume that nothing else was in the “Payroll tax” line item besides payroll taxes, hence $24,626 in unidentifiable costs were questioned. ACCMLLC responded that there were insurance costs and 401k costs in the figure. The response was unsurprising and those other costs are defensible.

Credit card fees at $3,702 were questioned, because catering that would have generated heavy credit card usage has been stripped from the final agreement, leaving only event organizers as the only likely payers. ACCMLLC contested that assumption, but not totally convincingly, in this observer’s estimation.

Various maintenance items were questioned at $7,800, because the facility would be under warranty for a year, but this analyst had missed the fact that ACCMLLC showed those expenses starting in later months of operation. ACCMLLC convincingly answered that question.

Property Insurance at $48,000 was listed, despite the fact that property insurance was specifically to be bought separately by Augusta, not by the manager. The response was that the description was incomplete, with other insurance being included.

Electrical power was budgeted at 10 to 11 cents per kilowatt hour, whereas Georgia Power has special rates of as little as 3.5 cents per kilowatt hour. The amount questioned of about $115,000 was the difference in the average industrial rate in Georgia of 5.5 cents and the 11 cents budgeted. The response was that after some 6 months or so of experience, rates would be negotiated with Georgia Power. This writer is of the opinion that this was a cost that the manager should have negotiated in advance.

ACCMLLC had provided no figures for the labor costs of Tee Center employees when they work for the Marriott Hotel or existing conference center project, for which Augusta bears no costs. 50% of designated management employees and 20% of other employees produced an estimated $113,760 in question. This issue was not specifically addressed in the meeting other than that the audit of actual costs would catch any credit or refunds due to Augusta. Discussion ensued that the city must show extreme diligence in administering the Convention Center contracts, because there are 4 entities with separate accounting and contract treatment, despite the “Augusta Convention Center” moniker being used to refer to the overall facility, even extending to the titles on the plan and budget.

A suggestion was made to have the Tee Center accountant transferred over to Augusta, but that recommendation was not met with any approval.

A commissioner asked what the recommendation would be for approving the budget. The response here was that a budget should not be the basis for rejecting the plan, that it was probably wise to provide a cushion because no one wants to revisit it later in the year, and that respect for property rights attendant with approving the operating contract meant that the plan should be approved.

So many assurances beyond those in the contracts are on video at this point that it will be hard for the parties on either side to renege without generating a firestorm.

Everyone involved is Tee-totally exhausted.

Your correspondent would like to thank the City of Augusta for this opportunity. Doing the Augusta Project for a year and 3 months including the Tee Center before adding the Falcons’ Stadium project last month, provided simply stunning chances to expand knowledge into new areas of expertise especially Convention Centers. The Augusta Project is over, all objectives were attained with stunning success, and now the next phase will begin.

Thriving on the unconventional for the last 30 years has turned ‘boring’ accounting into a lot of fun.Now it will be fun to be able to market convention center expertise learned from the pros down on Reynolds Street.

To the citizens of Augusta, thank you for your kind support. Together all can strive to fix Augusta, as best we can. If Augusta can be fixed – do not underestimate the strides that have been made – anything is possible.

-AG

The Falcons Rookery Project

Falcon’s Rookery Project

Originally posted March 7, 2012 at 12:05AM

by Al Gray

Over the last 2 years the Georgia World Congress Center Authority and the Atlanta Falcons Management have negotiated a Term Sheet for the construction and operations of a new stadium whereby the WWC relinquishes its 39.3% hotel motel tax funding stream, management of the stadium, and the Georgia Dome, which is to be demolished.

Agraynation.com saw this $1.2 billion transaction as an opportunity to kill 3 birds with one stone:

The first objective was Public Service for the City of Atlanta, who was handed this project after it grew too hot for the State Legislature to handle, in evaluating the Terms.

A second goal was demonstration of the Aurelius Principle employing a multidisciplinary approach which uses the other party to a transaction’s own documents to present a counterargument.

Evaluation of the Falcon’s Claim that the team was spending $700 million to the public’s $200 million.

This site compiled a restatement of the sources and uses of funds for the project after securing a key document that was missing from the GWCCA’s stadium development web page.

The detailed report, which features link to the source GWCCA documents and consultant reports was posted on the Agraynation.com site for inspection.

The Conclusion? The Falcons might spend nothing for the $1.2 billion stadium because the H/M tax stream, would exceed $1.2 billion over 35 years and could be borrowed against for as much as $650 million. (Key omission is out-year revenue stream, as alluded to by Atlanta Business Writer Maria Saporta and AJC columnist Tim Tucker.) Seats rights that GWCCA is giving up pitch in another $150 million to $200 million, and other revenues ceded by Atlanta and Georgia make up the rest.

Coming up –

In POINT BLANK, we take an irreverent look at the benefits to Falcon owner Arthur Blank’s net worth, followed by

A Well-Orchestrated Trick Play? – a look at how the GWCCA seems covered against an otherwise suicidal Term Sheet that they agreed to.

Legal Twigs in a Falcon Nest – a look at Term Sheet Trick Plays and ways to shift costs to the public

Finally – White Flag Negotiators Serve Whom?

Agraynation.com – A public service site brought to you by Cost Recovery Works.com, where the Aurelius Principle now serves clients, after 30 years in development and implementation at ever-higher levels of business and government.

Falcons’ Rookery Nearly Perfected?

Birds’ offense scores a $1.17 Billion Stadium for Free, GWCCA gets a Safety, Deal Hangs on a Thin Reed

By Al Gray

February 25, 2013

 

Dear Arthur Blank:

Contracts, commonly dismissed as mere tools, can become art forms. Under your Picasso-like direction, the Falcons’ negotiators of terms to build a new stadium with the Georgia World Congress Center (GWCCA) had delivered the workings of a masterpiece. The deal exhibited the key elements of the art form in carefully extracting more profits than the other parties would ever recognize without help. The agreement approached genius in getting the GWCCA to make it so lucrative. Now that plan has been punted over to Atlanta’s Mayor Kasim Reed by Georgia Governor Nathan Deal. Can you still pull this off? Absolutely!

The situation is perfect, too. The World Congress Center owns the existing Georgia Dome, where your Atlanta Falcons have contracted to play through 2017. With that lease expiring, the Congress Center and city are anxious about the future of their complex. Insuring that the Falcons stay downtown is of paramount importance to the politicians.

A key Citi presentation obtained by agraynation.com completes a trail of cost estimates and studies posted by GWCCA that show that the Falcons may have to pay $43 million or less for the $1.17 billion stadium.

Please forgive the brashness in barging into your team of artisans. This author was initially seeking to provide pro bono services to the Atlanta City Council and the State of Georgia, but multidisciplinary techniques grounded in documents can assess either side of a major transaction like this one. The evidence has been gathered and in this instance has shown how masterful the Falcons’ team has been in negotiations! Here is the scorecard on their effectiveness.

Hyperlinks appear in blue to the supporting documents.

Sources of Funds

Description

Amount

Debt Funded by GWCCA Contribution of Hotel/Motel Tax & Seats Rights

 

State/local Bond Proceeds from Hotel/Motel tax in Initial Years*

$359,985,041.00

State/local Debt backed by GWCCA Seats Rights Contribution, primarily Private Seat Licenses.

$150,000,000.00

State/local Funding from Leveraging Excess Hotel/Motel tax into Subordinated Debt (If not used for financing, as much as a nominal estimated $246 million is designated by the Term Sheet for stadium maintenance and future improvements)

$178,271,016.90

Total GWCCA Contribution

$688,256,057.90

 

 

State and City Funds

 

Sales Tax Rebate on Construction Materials

$30,000,000.00

Land**

$24,500,000.00

Atlanta Infrastructure Costs

$53,000,000.00

Total State of Georgia and City of Atlanta Contributions

$107,500,000.00

 

 

Enterprise Debt/Equity supported by Revenues Ceded by GWCCA

 

New Debt backed by Stadium Naming Rights surrendered by GWCCA to Falcons, over the first 20 years reduced to present value

                    $73,324,149.00

New Equity backed by Food and Beverage Rights donated by GWCCA to Falcons, over the first 20 years reduced to present value

                      $55,579,705.00

Total Funds from GWCCA Contract Rights Ceded to Falcons

$128,903,854.00

Public-sourced Funds Total

$924,659,911.90

 

 

NFL G-4 Funds Program

 

Advance from NFL

$100,000,000.00

Grant from NFL

$50,000,000.00

NFL Loan

$50,000,000.00

Total Funds from NFL G-4 Program

$200,000,000.00

 

 

Funds to be provided by Falcons out of current finances and operations

 

Falcon’s Funding to meet Estimated Project and Financial Costs

$43,017,265.10

Total Funds from Existing Falcons’ Operations

$43,017,265.10

Private-sourced Funds Total

$243,017,265.10

 

 

Total Sources of Funds

$1,167,677,177.00

 

Uses of Funds

Description

Amount

Total Construction, Site and Land Costs*

$1,032,000,000.00

Retirement of Georgia Dome Debt*

$60,000,000.00

Atlanta Infrastructure Costs

$53,000,000.00

Debt Service Retirement Account, Cost of Issuance, Underwriters’ Fees*

$22,677,177.00

 

 

Total Uses of Funds

$1,167,677,177.00

 

*The total funds shown on the Citi presentation, $359,985,041.00, less Dome debt retirement of $60,000,000.00 and Debt costs of $22,677,177.00 ties to the $277,307,864.00 shown on the BSG Sept. 2012 report (cites the Citi report) containing the $1,032,000,000.00 total funding and cost figure.

** Land is not shown as a Use of Funds item, as it is included in the $1,032,000,000 project cost total.

Of course this is just one opinion, although one has to believe the negotiating team will find the documents most familiar. It can be imagined here that they would find some holes to shoot in this analysis, but there are more supporting arguments for it than can be recited here.  It would be a boat-load of fun to participate in a city council meeting for a debate over the basic concepts.

On Wednesday February 20, the Falcons and GWCCA artisans of this transaction were heard before the Atlanta City Council saying that the football club was funding “$500 million to $700 million” of the new stadium project and that the public would be pitching in $200 million. That PR seemed to be working pretty well for enough of the Council to be willing to pass the new arrangements, whatever those may be. The Council seemed resigned that this is a “done deal.” Atlanta should get a better deal – to the tune of $250 to $400 million – but will it?

From this vantage point in the pine woods of east central Georgia, it looks like the Falcons are well on their way to getting $1.12 billion from the public and the NFL. All that is left is for your football club to come up with the other $43 million. Thanks to the lawyers and certain “options” in the Term Sheet, last minute funding “waterfall” diversions, and looseness of the scope between what the Falcons are providing and the public is furnishing, massaging at least another $43 million should be a cakewalk. Getting a $1.17 billion stadium for free should top anyone’s business career!

Getting this agreement, or a similar one, signed, sealed and delivered is job one. Once that is done, the Falcons Special Teams in Program Management can take to the field and shift another $100 million or more in costs over to Atlanta. Hire a savvy program director who knows how to play this game with the same gutsy aplomb which the Term Sheet negotiators used playing theirs. Winning coaches have winning strategies from start to finish. Winning projects do much the same.

After the stadium is built, more $hundreds of millions can flow from operations and costs shifts. Those opportunities are another article for another day.

Vigilance builds victory. The Falcons have been vigilant. Any owner would be proud.

 

-AG

Originally posted February 25, 2012 at 10:40 PM

 

The author is President of Cost Recovery Works, Inc. a firm focused on delivering superior returns for clients undertaking major projects including local governments searching for cost recovery in large construction, maintenance, entertainment venue, and other large contracted efforts. Clients and employers have included 9 Fortune 500 Companies, with 5 more served under subcontracts. Mr. Gray has been working on a pro bono basis for the Augusta, Georgia Commission since January 2012 in a comeback effort from early retirement, finding that stresses on local governments foster growing prospects for multidisciplinary cost recovery approaches. A foray into public policy is an opportunity to further multiple objectives, including public service.

Exclusive: 1120 Florence Street, A Nightingale Singing Questions

Wednesday, May 16, 2012
Augusta, GA
By Al Gray

Within the last three years the Housing Department of the City of Augusta has contracted for the construction of multiple new housing units throughout the city, most prominently in the Laney-Walker Community. Questions in the community, city, and area abound. Are taxpayer funds being used wisely? Are the funds being disbursed according to governing regulations? How do costs compare with similar new homes in the city or in Columbia County?

The question of whether the home building funds were dispersed properly within the terms of the governing contracts and regulations has been reviewed. Augusta Today contributor Dee Mathis submitted a Georgia Open Records Request Act on February 23, 2012 to the Augusta Richmond County Law Department requesting:

“Plans and Specifications for the two units built under contract with the City of Augusta at 1120 and 1122 Florence Street; Payments made under the contract for the construction of these units, including invoices, payroll registers, and any other documents substantiating the costs reimbursed or paid to the contractor.”

As background, it is noted that Dee Mathis has exhibited keen interests in the real estate developments and revitalization efforts in the Laney-Walker neighborhood, having previously appeared before the city commission in opposition to the Laney-Walker overlay zoning ordinance.
The housing constructed was a duplex of two stories built by designated Laney Walker contractor J&B Construction and Services, Inc. The contract for it was dated June 22, 2010 and it was completed before, October 2011, when the final payment was made by the City of Augusta. J&B Construction is a designated Development Partner for the City’s Laney Walker Bethlehem improvement district.There are other development partners who have similar contracts and this review is not intended to single out this contractor but to address the City’s performance in administering similar contracts.

On March 6, 2012, Ms. Mathis received a two page response from Kenneth Bray of the Augusta Law Department accompanied by 60 pages of documents. This report summarizes the key points of the resulting review and commentary. **(

View Dee Mathis’ GORA Request Documents here)

The nature of the contract is that it provides for construction costs to be reimbursable up to a Not-to-Exceed (Maximum) Price This is established by the language throughout the contract **(to view, click–> here) including the following provisions:

The stated amount of the contract was stated in Article 1, Section A, paragraph 1 as an amount not to exceed $272,681.00 shall be expended ….. from NSP Program funds for construction costs related to the development of an affordable multi-family housing unit as part of the Florence Street Project.”

Then the contract states in  Article II, Section A, paragraph 2:The method of payment shall be on a reimbursement basis…..For invoicing, J&B Construction and Services, Inc. will include documentation showing proof of payment in the form of a canceled check or check register and completed reimbursement form that includes the amount requested, amount remaining and specific line items that relate to contract Budget…..”

Article V, Section F. states that “Requests for payment shall be accompanied by proper documentation….For purposes of this section, proper documentation includes: “Reimbursement Request Form supplied by HCD, copies of invoices, receipts, other evidence of indebtedness, budget itemization and description of specific activities undertaken”

Article V, Section H, states “Unexpended funds shall be retained by Augusta.This supports the nature of the contract as being cost reimbursable because had the contract been a Lump Sum, the full contract price payment would have precluded the existence of any unexpended funds.

Appendix B, Reporting Requirements, contains this statement: “Report will contain actual/estimated costs/date, issues and concerns”

**Payments were made based upon the Maximum price, instead of reimbursable costs

The progress payments made against the contract were based upon the original estimate, plus 3 change orders, and less contingency allowances, resulting in a total contract adjustment of $1,874.28, so that the total contract payments were $270,806.74. **(View Final Payments Document Here)
In response to Ms. Mathis’ Georgia Open Records Request Act inquiry, The Augusta Housing Department provided no billing support that evidenced that the billed costs were actual costs as defined by check stubs, check registers, paid vendor and subcontractor invoices, or payroll registers for contractor employee-performed work.

When this writer contacted Mr. Shawn Edwards, Neighborhood Stabilization Program Manager for the City of Augusta to inquire about the required billing support, he initially indicated that the City was only getting the reimbursement form from the contractor and was making payments based upon the agreed-upon contract price, contending that the contract price was the proper basis for payment, not reimbursable costs.   A follow up request is in process for Augusta to provide the actual cost back-up it might possess. This report will be updated if contradictory data is provided.

**The Federal Department of Housing and Urban Development has already cited Augusta for deficiencies like those in evidence for 1120 Florence Street.

James D. McKay, Regional Inspector General for Audit, Atlanta Region, issued an audit report in 2010 which included the following: During the review, we identified two concerns regarding internal controls and entering obligations before contracts were fully executed.

The City did not have internal controls in place to perform continuous and routine monitoring of its obligation process to ensure that its obligations were processed as intended and were valid. We discussed this matter with the City during the review, and the City agreed to develop monitoring procedures.

The City entered its NSP1 obligations into the DRGR database in June 2010 for its LH25 set-aside activities. At that time, the obligations were not valid because the contracts for those obligations had not been signed by all parties. However, the City obtained the required signatures and fully executed the contracts in August 2010, ahead of the September 5, 2010, deadline. We discussed this matter with the City, and it agreed that its obligations were not valid until the contracts were fully signed and executed by all parties.

The failure to secure evidence of reimbursable costs, while paying out contracts based upon the maximum price, would appear to be a 1120 Florence Street manifestation of the first exception that HUD  noted.

The second failure is definitely found to exist with the 1120 Florence Street units, as the contract was signed in June, 2011 **(View Signature Page Document Here), three months after the initial contract payment. **(View Line to Draw Document Here)
The Office of Management and Budget circulars governing the NSP1 funds include the following.

OMB Circular A-87, Cost Principles for State, Local and Indian Tribal Governments (05/10/2004) HTML or PDF (58 pages, 216 kb),

OMB Circular A-110, Uniform Administrative Requirements for Grants and Other Agreements with Institutions of Higher Education, Hospitals and Other Non-Profit Organizations (11/19/1993) (further amended 09/30/1999, Relocated to 2 CFR, Part 215

OMB Circular A-133, Audits of States, Local Governments and Non-Profit Organizations

There are indications that the reimbursable cost could be materially less than the maximum price in the estimate and adjusted contract price.

The contract pricing detail on page 4 shows a charge for a central air system with a 15 Standard Energy Efficiency Rating (SEER). **(View NTE Estimate Document HereThe unit installed was observed to be a Nutone Model  NT4BD.This model is shown by the manufacturer as a 13 SEER Heat pump, capable of reaching a 14 SEER if paired with a variable speed air handler.  The cost differential between a 13 SEER and 15 SEER is significant, because of the rigorous ductwork, blower, and air handler upgrades to achieve the higher rating. Having the HVAC contractor invoice, as required by this contract, and inspection of the installed system would settle this question.

The paid-out contract price included a line item entitled “Administration.”  In the absence of clarification, “Administration” would be an indirect cost which would be covered by the 15% Overhead and Profit allocation against all of the direct cost in the estimate, meaning that inclusion as a marked-up direct cost overstates “costs.” The overage would be $13,800, according to page 2 of the price estimate. **(See NTE Price Estimate Document Here) This single factor would be 5% of the total contract value.

Using prices from Lowes in comparison to the estimate provides a mixed picture. The estimate prices for bricks and blocks would be a savings, but the prices of wallboard, lumber, mortar mix, concrete, roofing felt, and access doors seem to indicate losses. (These are current prices and can only be used as points of reference, as the actual contractor costs would govern.)

The contract estimate shows the “cost” per square foot on page 6 to be $79.73 **(See NTE Estimate Document Here), exclusive of land costs. Review of the real estate transfer shows the lot to have cost Augusta $12,000, taking the total square foot “cost” to $83.24. By comparison the sales prices of new homes in Grovetown, which include the developers overhead and profit on top of construction costs,  are in the $76 to $82 range. This would indicate as much as 10% savings could be had by complying with the reimbursable cost standards of Augusta’s contracts.

KEY QUESTIONS – Since there are dozens of similar Augusta contracts within the Laney Walker Bethlehem development project, wouldn’t the savings from enforcing the contracts as written save between 5% and 10% of construction costs? Wouldn’t the cost savings justify obtaining comprehensive, detailed costs? Based upon the $37,500,000 committed by the city to these developments the savings would range from $1,875,000 to $3,750,000.

Isn’t Augusta in danger of having to repay $100,000’s of thousands of dollars, if HUD finds the city out of compliance with its payment of the Neighborhood Stabilization Program contracts?

If Augusta’s contractor’s can save money by changing suppliers and methods, isn’t it worthwhile to help them do so under the cost reimbursable contracts?

More to come.

– Al Gray




Below are the pdf documents referenced in this story:



Dee Mathis 1120 Florence GORA Request1120 Florence Street NTE Price Estimate1120 Florence Street Contract1120 Florence Signature Page1120 Florence Final Payment1120 Florence Draw 1