Special Report: Why is the Parking Deck Contract this Rigged?

Wednesday, June 27, 2012
Augusta, GA
By Al Gray

Rule Number One in contracting, whether you are the Owner or the Contractor is this: Never, ever sign a contract drafted by the other side, as is.

Why on Earth is the Augusta Commission poised this week to ratify the Reynolds Street Parking Deck Contract when in the upper, right hand corner we find this notation?

Hull Barrett 5/16/12

Version 14

I thought Andrew McKenzie was the City Attorney and Jim Plunkett was serving as Special Counsel for the parking deck and Tee Center deals. Hull Barrett is the attorney for the other side to the RSPD contract, Augusta Riverfront LLC (I will abbreviate this as ARFLLC in the article). So why is Augusta going to execute their contract?

Being in the asset protection business, I asked Augusta Today and CityStink.net Contributor, Al Gray, a semi-retired Cost Recovery Accounting specialist, to compare Hull Barrett’s contract with the one that the City suggested in its Parking Deck Management RFP as Appendix F (Click to view) . This contract was the one that Ampco Parking Systems tentatively agreed to on its way to becoming the Augusta-recommended parking deck manager, before being jilted by Fred Russell in favor of ARFLLC. The draft contract borrowed a lot of its language from the contract between Augusta and Republic Parking, management firm for the existing Conference Center Parking Deck before the Tee Center.

In this article I am going to dispense with triviality and call the RFP contract “the Ampco contract” because Ampco accepted it without significant reservations.

I wanted to see if the deal Augusta got was as good as the Ampco one Fred rejected. My unpaid consultant balked, saying he had done enough free work and there were powers given to ARFLLC that on their face meant this deal was a “blank check.” Others in our group chimed in and twisted his arm into doing a matrix comparing these contracts. You can view that matrix below. (*article continues after)

Deck Contract Matrix 2

The RSPD contract is indeed a blank check. Listen to this: “Manager shall have discretion and control, free from interference, interruption or disturbance, in all matters relating to management and operation of the RSPD, including, without limitation….. and, in general, all activities necessary for operation of the RSPD.” I was shocked to learn that.

It gets worse. ARFLLC  gets appointment as Augusta’s agent, with powers that the Ampco contract denied it. It gives the ARFLLC Manager the right to purchase capital equipment and make capital expenditures, creating risk that Augusta will have unrecorded assets.

The majority of costs under the Deck management agreement is labor and fringe benefits. ARFLLC sets salaries, can assign folks with heavy vested benefits, can assign its own agents as RSPD employees, bill “shared” employees, assign Officers of their company at will, and even pay bonuses for Augusta to fund. The Ampco contract allows almost none of this stuff.

Ampco could have done nothing beyond the limits of the Annual Plan. If it exceeded the costs in the Plan, it would be denied payment. Only the exact same sorts of costs could be billed as were identified in the Plan. The ARFLLC contract that Fred proposes says the Plan is only a goal and gives ARFLLC full authority to exceed the Plan and incur costs to be passed to Augusta not in the Plan.

Ampco was only going to get 2 months to reverse its prepaid operating expenses to Augusta. With ARFLLC, the requirement is 90 days, the balance has to be maintained, and Augusta funds it without limit. (Normally the Plan would be a limit.)

Accounting controls are pathetic, too. Ampco would have had to deposit parking fees by the next business day into Augusta’s account. ARFLLC has no such requirement, with the contract actually looking like it lets that manager hold back funds! If the balance in the RSPD operating account at the end of a quarter dictates Augusta’s need to replenish the account, can’t this defect allow the Manager to withhold revenues then, thereby making Augusta pay up more money? ARFLLC gets to set up an account in Augusta’s name that it controls! It can even directly transfer its fee out of the account. The parking management RFP contract did not allow that.

The Parking Deck RFP that Augusta put out was adamant about having a policy and procedure manual. The ARFLLC  deal does not require any manual at all!

Insurance premiums were going to come out of Ampco’s fee. With this Hull Barrett contract liability insurance is billed to Augusta! Not only that, Ampco would have been required to furnish a $75,000 fidelity bond at its own costs that ARFLLC is allowed to welch on.

I thought the really terrible thing about audit rights and records kept is that most of the costs are in the RSPD payroll and there is a statement in there that the manager doesn’t have to make records available for its other operations – with the RSPD payroll looking to be part of those other operations. Get this – this Hull Barrett contract lets ARFLLC assign folks with high salaries to the RSPD and never show Augusta the actual payroll records!

ARFLLC even gets benefit of 23% of the costs, at nearly $45,000 a year, associated with its 150 parking spaces. The Hull Barrett contract says these are “incidental costs.”  Now this contract says that the “incidental” costs cannot be material to Augusta. I think $238,000 and 23% pretty material, don’t you?

The benefits of the Hull Barrett contract are more numerous than I can get to. ARFLLC can assign the contract without Augusta terminating it. Ampco couldn’t. It can set rates. Ampco couldn’t. ARFLLC can pay itself with Augusta supplying an unlimited funding stream. Ampco couldn’t.

I’ve got the picture. It is one of Augusta caught in a matrix of incompetence, no accounting controls, and powers given to folks outside of government with what looks to be an unlimited revenue stream courtesy of Augusta taxpayers. Thanks a lot Fred.***
AG

* View the full Parking deck management deal constructed by Hull Barrett below:

Reynolds Street Parking Deck Management Agreement (00412263-14) (2)