Augusta’s Tee Shot Hits Rough
Wednesday, November 7, 2012
By Al Gray
Part One – The Management Agreement
When Augusta’s Trade, Exhibition and Event (TEE) center was approved in 2007, prudence might have suggested that one of the first steps in the process of building the facility might have been to execute the Management Agreement in advance. This being Augusta, Georgia, where almost nothing is done in accordance with normal business practices, the building has gotten within weeks of being used before a management agreement was even submitted to Augusta commissioners for approval. Worse, the management agreement was one of a covey of documents to flush out for approval.
A very rapid assessment of the provisions of the contracts was needed, because the proposed Manager immediately began hawking the loss of events that might result if the Augusta Commission has the temerity to actually deliberate on the terms and conditions of the entire contract documents.
The following represents a summary of the primary Management Agreement issues compiled from a review of the contract documents. This list has been provided to Commissioners and has become the basis of discussion and attempts toward a speedy resolution of major issues. The approach was to review the agreements in PDF form, write comments, apply sticky notes that Adobe Acrobat provides to annotate documents, and then to provide a summary from the compiled sticky notes.
Solutions were designed to be the product of meeting participants and were not suggested in the summary.
The author is not a licensed attorney, auditor, or public accountant. This analysis was provided from a multidisciplinary perspective in the manner that accountants, attorneys, administrators, owners, policy makers, and media might find useful in trying to decipher the pitfalls and dangers in the agreements.
1. Differences in 2007 and 2009 Commission Approvals and these Documents. No cost cap. Unlimited conduit to Augusta General Fund.
2. Cost shifting between agreements. Electric utility example. Beer inventory example. $300,000 a year for 50 years = $15,000,000 ( Augusta’s Laney Walker Improvement cost calculation method)
3. Kitchen built under Tee Agreement where ARLLC supplies equipment switches to 50 year Conference Agreement where Augusta supplies and repairs kitchen equipment with no revenue from Conference Center.
4. No accounting provisions for backcharged labor to Hotels or any other credits, refunds, rebates, or other benefits going to Augusta.
5. Cross indemnification between Tee and Conference Center – sever-ability issues. WHO IS LIABLE?
6. Too many ways to circumvent Annual Plan, including that an unknown, unknowable “Standard” trumps everything, including Annual Plan.
7. Fringe benefits and bonuses, including for LLC PRINCIPALS, are unlimited.
8. Accounting and auditing envision most of the accounting off TEE Center books, without rights of audit to ALL HOTEL ACCOUNTING records on a real time basis.
9. Conventions can be booked using Tee Exhibition Hall while using Conference Center where Augusta gets no revenues.
10. When Augusta signs these contracts, it assumes extraordinary indemnity provisions immediately so that it would have to advance payments to the Manager to defend the Manager from actions by Augusta
Time will tell how many of the above issues are addressed, handled, and rectified.
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