TEE Center under construction August 2012
Originally posted on CityStink
Thursday, October 4, 2012
By Bradley Owens
Al M. Gray, President of Cost Recovery Works, Inc. contributed multidisciplinary review techniques in support of this article.
* Editor’s note: Please click on blue text to view documents referenced in this article*
Houston, we have a problem. Rather the City of Augusta’s special counsel Jim Plunkett and his predecessors who created the TeeCenteragreements have a host of problems. Most of them center around “ Conference Center” versus “Convention Center” but the Tee Center Catering Agreement is the lynchpin. Our Augusta Today and CityStink.net investigative team now seems prescient in our dogged pursuit of the elusive kitchen equipment.
The entire TeeCenter fiasco began with an unsigned, undated “Term Sheet” that became the only partnership agreement with Augusta Riverfront LLC that was approved by the Augustacity commission. This agreement refers repeatedly to the “ Conference Center” as being subject to the preexisting agreement between the partners. It says that Augusta and Riverfront agree to “ modify their agreement for the operation of the Convention Center to include the Trade Center. ” Trouble was, there was no agreement to operate any “Convention Center”, only the 1999 agreement for the operation of the “Conference Center.”
Since then there has been considerable publicity given that the entire Tee Center, Parking Decks, and existing Conference/Convention Center are now the “Convention Center,” which furthers the misconception that there ever was a “Convention Center” before, but all the while the lawyers reverted to labeling the existing facility as the “ Conference Center.” Was it deceit or wanton incompetence? Read on and you decide.
On September 24, 2012 Augusta Riverfront LLC’s Paul S. Simon appeared before the Augusta Commission with an ultimatum – Execute a plethora of contracts, assignments, releases, modifications and other legal documents within 22 days or face cancellation of Tee/Trade Center events.Augusta then knew it was being held hostage to the lawyer’s handiwork, efforts that Administrator Fred Russell promised were nearly complete 3 years ago.
Included was the catering agreement. This document spells out that the new kitchen built in the TeeCenter, but legally carved out as the “ Conference CenterAnnex”, is to serve both Marriott hotels and the existing Conference Center. Why is the term “ Conference Center” so important? Why, it is because if the existing Conference Center agreement was intended to continue – which it was – it means that the $1.4 million of kitchen equipment that Augusta bought under a controversial change order to the Tee Center Contract will mostly be used to generate revenues for the Marriotts and not Augusta. This is because the existing Conference Centeragreement pays Augusta 5% of the rental space revenues and nothing else, including catering.
|TEE Center abuts The Marriott Hotel
Unless Riverfront has quietly reimbursed the city, Augusta paid $1.4 million for kitchen equipment that it will get almost NO USE OF, because the Trade Centerspace will be used primarily for exhibits, with attendees adjourning to meeting rooms in the freely-catered Conference Center for meals. So far, our Georgia Open Records request responses fromAugusta have not shown that the Commission ever agreed to relieve Riverfront of the LLC’s responsibilities for kitchen equipment.
Under the circumstances, it would be wildly irresponsible for Augusta’s Commissioners to agree to pay for any of the kitchen equipment, particularly since some of the charges on the vendor’s invoices was to repair Riverfront LLC equipment! (Under prior agreements Riverfront owned the equipment) Where is our $1.4 million? Is there any prohibition whatsoever barring Riverfront from running a commercial catering operation citywide out of the Conference Center portion of the Convention Center, using the $1.4 million ofAugustakitchen equipment?
Worst of all the catering agreement mentions in several places that services to the hotels, to the restaurants, and to the existing Conference Center will be provided by the kitchen. There is no operational procedure manual to set out controls over food and beverage procurement, use or inventory for theTeeCenter versus these other operations. Without controls and in the midst of all of these operations that consume food and beverage, how willAugustaavoid being looted from various parties on and off the premises? Will there be household with freezers of steaks, courtesy ofAugusta taxpayers?
How many of the Marriott’s existing catering staff will be assigned to theTeeCenter contract? Since the vast majority of the catering seems to be outside of theTeeCenter, why should management level employees be charged to theTeeCentercatering agreement?
In life, timing is everything. With the unsigned, undated Term sheet that began the Tee Center project in 2007, the seed was planted in the minds of the public and the commission that there was going to be a new Convention Center agreement. After that the branding was changed to emphasize the Convention Center labeling, including announcements at the opening of the Reynolds Street Parking Deck and at last month’s meeting. Behind the scenes the legal wording, finally disclosed at the September 24 meeting, narrowly focused on the Conference Center and preserved the sparse 5% payout to the city for the existing center, with no provision for catering revenues. The wording of the catering agreement is that catering only applies to the Tee/Trade Center.
Meanwhile, the Amendment to the Core Agreement extends these agreements out 50 years. Never mind a reported reduction to 15 years.
Throughout these agreements, one thing is repeatedly clear. The hotels and these agreements, which in the hands of others not as civic in their mindset as Paul Simon and Billy Morris provide an UNLIMITED CONDUIT to taxpayer funds, can be SOLD! In the hands of money hungry financiers of Wall Street, these agreements are loaded guns aimed directly at the finances of we Augustans.
How much more can Mr.’s Morris and Simon get for their two Marriott Hotels with $70 million of dedicated Augusta buildings permanently and legally bound to them with an UNLIMITED conduit into the general revenues of Augusta Richmond County?
There you have it, reader. Augustans already find themselves facing a property tax increase. How many more tax increases will be coming to feed the Tee/Trade/Conference/Convention monster?
When the finances of Augusta crater it will be in no small part because of Catering.***
**Cost Recovery Analyst Al Gray, President of Cost Recovery Works, Inc. contributed to this report.
Tee Catering Definitions From 9-2012 Agreement1999 Core Agreement Conference Center – Revenues
Originally posted on the defunct CityStink.net site October 3, 2012
Wednesday, October 3rd, 2012
By Al Gray
The author, Al M. Gray is President of Cost Recovery Works, Inc., a provider of Cost Avoidance and Cost Recovery for America’s leading companies, businesses and governments desiring Superior Returns.
*Editor’s Note: Click on highlighted text links to view documents referenced in this report*
In the five-year twisting tale of Augusta’s TEE Center project, we who have observed the events and decisions as they happened, learned to expect the unexpected. This didn’t keep reporter Susan McCord’s tweetfrom the September 24, 2012 Augusta Commission meeting from astounding me.
“Paul Simon: If documents aren’t approved by Oct. 15, (we) will have to cancel January police chiefs convention at TEE center,” she typed. My jaw dropped at the audacity of the city’s Tee Center partner suddenly resorting to what looks like a shakedown to get a management deal approved.
Simon’s Augusta Riverfront LLC is getting a $2 million a year subsidy courtesy of an unsigned, undated proposal from 2007 and that isn’t enough for him and his partners at Augusta Riverfront LLC? Augusta has been held hostage since then. What is worse is that the City Administrator, legal counsel, and Augusta Convention and Visitors Bureau might be the source of this clumsy, heavy handed way of extorting an agreement out of a suddenly reluctant Commission.
Augusta Held Hostage
It is impossible for me to accept this assault by Management Agreement on the city’s finances in silence.
· Augusta built at least $50 million in new buildings across multiple parcels owned by this Riverfront organization and probably $20 million of existing buildings, yet now is held hostage to liens on some of them?
· There will be hundreds of pages of recorded easements, cross easements, assignments, and agreements on these lands, meaning that Augusta has all of the costs of land ownership, but few of the packages of rights that come with land ownership. Can’t we at least get a fee in lieu of taxes?
· The unsigned, undated partnership agreement from 2007 says throughout that Riverfront is responsible for kitchen equipment while saying that Augusta is responsible for the kitchen space. Augusta has not been able to show where its City Commission has ever voted to change the partnership agreement, only that Augusta approved the change order to add $1.4 million of equipment to a project that Riverfront agreed to participate in as a builder and operator. Where is Augusta’s money?
· The September 24 meeting was the first the Commission as a body had seen of the catering or management agreements and they were presented with an ultimatum that the documents have to be approved within 22 days! Five years of dithering and now the people of Augusta are presented with a manufactured emergency? Why? Keep reading!
· Can we say there might be C-O-N-S-P-I-R-A-C-Y within Augusta government? Darryl Leach was the General Manager of the Augusta Marriott.On September 24, Paul Simon announced the Tee Center is now the AUGUSTA CONVENTION CENTER.The agreements that Augusta has been commanded to execute are now with an entity called the Augusta Convention Center Management LLC. This is where things get really get good. Darryl Leach is now the General Manager of the Augusta Convention Center. In fact, it seems nearly all of the former Marriott Augusta Staff, Don Fuller, Janet Pierce , Greg DeSandy and Sharon Koon, are now on the Augusta Convention Center Team!
Who gets to decide if all, any or part of these employees – whose salaries and fringe benefits likely exceed a million dollars – who used to be Marriott costs become Augusta costs? The Management Agreement says the Augusta Convention Center Management LLC “… shall have discretion and control, free from interference, interruption or disturbance, in all matters relating to management and operation of the TEE Center” and “Manager shall select, employ, promote, terminate where appropriate, supervise, direct, train, and assign the duties of all personnel which Manager reasonably determines to be necessary or appropriate for the operation of the TEE Center” This Management agreement and the catering agreement provide capability for 100% of former Marriott employees to shift onto the Augusta payroll! It sure looks like Augusta will have no rights to contest this cost shift once this agreement is executed
(*article continues below)
The Augusta Convention Center
· Consultation with the Georgia Secretary of State Corporations Division does not show Augusta Convention Center Management LLC as being registered to do business in Georgia. Augusta is being demanded to execute an agreement with an entity that does not yet exist?
· Augusta is forced to deposit $250,000 at the beginning of the year into the operating account, but if the balance in that account falls below the amount to fund that account for the next 90 days, Augusta is required to contribute from GENERAL REVENUES enough funding to meet those expenses without regard to how soon the next $250,000 funds injection is required!!!!! The original partnership agreement limits Augusta funding requirements to $250,000 for operations and $100,000 for capital, yet this management agreement calls for an unlimited pipeline of funding from Augusta? Who authorized or negotiated that?
· The unlimited ability of this Augusta Convention Center Management LLC to establish what costs are is not limited by the Annual Plan that the Augusta Commission approves, because “the Annual Plan will be only a planning tool.” Also, shouldn’t references to any Annual Plan limits be clearly defined not just as the types of costs to be included, but the amounts as well?
· The management agreement provides for annual audits only, with no real-time or even monthly reporting. How can Augusta monitor these cost reimbursable agreements without continuous reporting and the strongest of audit rights? Shouldn’t these agreements be made subject to open records requests? Maybe the Augusta Chronicle can help us! No?
The Tee Center management agreement looks to have morphed into an agreement that allows most of the administrative staff of the Augusta Marriott to be shifted to Augusta’s Conference Center expense. There are unexpected liens on some of the property under the Center and a parcel that was not liened never was conveyed prior to construction. The Augusta Administrator promised the agreement was nearly complete over 3 years ago and now has provided the city commission with just 22 days to review and approve the contracts. The entity that Augusta is contracting with may not exist yet. The operating expenses, capped by the 2007 partnership agreement, are now unlimited conduits to the general funds of the city. The contracts fail to provide real-time program management and accounting.
The Augusta Commission should walk away from these agreements and put the management and catering agreements out for bid. Otherwise outside counsel from far outside of Augusta needs to be brought in to renegotiate the management agreement to conform to model contracts from other cities.
Beyond this, it looks to me that Commissioner Bill Lockett’s idea of a forensic audit or a county-funded investigation of these transactions needs to be revisited. The project was funded by sales taxes, there are ample unused sales tax revenues in the coffers of Augusta, and legal costs are legitimate uses of sales tax money.
Can all of these issues and the progression toward the renaming of the TEE Center as the Augusta Conference Center be just incompetence?
Can Augusta afford an unlimited pipeline to its general revenues?
I don’t think so.***