Tuesday, March 6, 2012

Commissioners Look Like "Chumps" Over Bad TEE Center Deals

Tuesday, March 6, 2012
Augusta, GA
By The Outsider

With the local media fixated on the Super Tuesday primary elections, many people may have forgotten that the Augusta commission will once again take up the controversial $836,288 change order for the TEE Center project at today's 5pm meeting. All indications are that commissioners, despite all of their bluster from a couple of weeks ago, will go ahead and approve the change-order, including approximately $400,000 for a more expensive air handling system that the Marriott is demanding, but is not necessary under state building codes. 

At this point the commissioners may really have no choice. A series of bad decisions, poorly executed agreements, and a total lack of oversight have put them in between a rock and a hard place. They managed to give Augusta Riverfront LLC all of the leverage and now they are wielding it to demand even more from the taxpayers.  Commissioners have valid points to oppose the  more expensive air handling system on principle. It is not necessary for the building to function; it is merely something The Marriott is demanding. The city has an agreement with Augusta Riverfront LLC, not The Marriott corporation.  And commissioners were left in the dark for months about this expensive change-order, and now are being told it must be approved or the entire project comes to a halt. Why were they not made aware of these details on the front-end. All valid points, but in the bigger picture, the change-order is likely small potatoes comnpared to the $millions that taxpayers are being conned out of on this project.

We told you back in a February 23 article, that taxpayers were billed for $1,376,987 for Kitchen Equipment for the TEE Center, when previous agreements show that should be the responsibility of Augusta Riverfront LLC. An 8/21/2007 term sheet clearly states  in THREE places that the LLC pays for Kitchen equipment and/or Augusta gets no catering revenues from the use of such equipment. (You can view the term sheet here) But it appears taxpayers paid for the equipment and will get no revenues from it's use.

The only revenue taxpayers were guaranteed under the previous convention center agreement with Augusta Riverfront LLC was 5% of gross rental revenues, a measely sum, but it is not even clear if the city will get that under the a new TEE Center deal. Instead, Augusta pays $250,000 to operating expenses and $100,000 to capital. This is matched by the $1 motel/hotel tax increase as a funding mechanism. IF by the LLC's accounting that it only has to provide to Augusta once per year there is a profit, it counts as an offset to the capital funding requirement of Augusta. Does anyone in their right mind believe that this is a good deal for the taxpayers?

But now back to the kitchen, because that's where the bacon is for the TEE Center, and it appears Augusta Riverfront LLC will be hogging all of it for itself. When we talk about where the profit is really generated from  convention center functions it's actually in the catering and not in the rental for the space itself. In many cases the space will be comped or heavily discounted because the profit is made up in exhorbitant catering charging. We will have an upcoming article detailing just how lucrative the banquet and catering functions have been for Augusta Riverfront LLC and The Marriott. And the worst part of it all is that taxpayers are not seeing one thin dime in revenue from it, despite paying $1,376,987 for new kitchen equipment that The Marriott will use to generate pure profit for themselves. What a great deal for them; what a lousy deal for the taxpayers. We've seen no documents indicating that taxpayers are getting a better deal; in fact, by all accounts, it appears things have tilted even further in favor of Augusta Riverfront LLC and against the taxpayers.

But it goes further...Augusta built $50 million in buildings over land the LLC's own without getting the legal documents to do so. Now it has to fund a parking deck capital reserve of $250,000 PLUS 3 months of operating expenses PREFUNDED plus the LLC's $25,000 fee. They get to pay up to $350,000  a year on the TEE plus another $350,000 of CVB marketing expenses.

By all accounts it appears Augusta will be shelling out $750,000 to $1.3 million a year on these deals. Throw in interest and depreciation and Augusta will lose more than $2 million, maybe approaching $2.5, million a year on these arrangements. It kind of makes the $836,288 change-order seem like chump change doesn't it? Well guess who the "chumps" are.***

Realated Stories:

No comments: