Ford Park management contract in legal limbo

Commissioner Everett “Bo” Alfred

Jefferson County Commissioners, in a 3-2 split vote, decided to go with a new management firm to breathe life – and revenue – into the multi-million-dollar publicly subsidized Ford Park Entertainment Complex, but that contract offer is in jeopardy as new questions arise and deadlines near.

The day after the commissioners voted to extend contract offerings to new management firm Spectra over longtime provider SMG, County Judge Jeff Branick questioned the legality of the vote. According to an e-mail query soliciting a legal opinion from County Attorney Kathleen Kennedy, Branick asked if the court could have erred in awarding the contract to the vendor not thought to be the lowest cost provider. While Spectra was the lowest cost provider based on the initial request for proposal, after both companies’ offers were aired for all to see in public presentations, current provider SMG came back with an offer to cut their fees to next to nothing and offer capital investments not originally on the table.

“Specifically,” Branick wrote, “I wish to know whether the requirements of (Local Government Code) 262.0295 (a)(2) were complied with and whether, given the county auditor’s analysis of the cost of the two proposals to the taxpayers, the court’s action is in legal compliance.”

New blood

Deliberation over the two competing management firms began months ago, but the elected county officials voiced conflicting views on the proposals when the contract award was up for a vote Monday, Oct. 3. A decision is due to current provider SMG by Oct. 13 per the current contract.

Branick kicked off the vote by proposing the county stick with SMG. He noted several reasons for his support of SMG, including a capital investment that doesn’t need to be paid back, his assertion that SMG is the larger management company and “larger voice within the industry,” and that SMG Ford Park General Manager John Hughes was doing a good job at the helm of the public-private facility.

Members of the commissioners court disagreed with Branick’s understanding of the facts, as did the evaluation committee originally tasked with scoring the two competing firms based on criteria outlined in the request for proposals and the two firms’ first offers.

Evaluation committee members were asked to score the management agencies based on “experience in the industry network of promoters, TicketMaster sales; experience in the region; compensation of management fee, food and beverage fee, and other fees; quality of management team; marketing plan; (and) financial soundness.”

Out of five committee members, every one scored Spectra higher than SMG. With regard to the quality of the management team, two scored the competing firms evenly with the other three heavily favoring new blood. Two of the evaluators rated SMG’s Ford Park management team as just 5 out of a possible 10.

“We need to, at some point in time, do what’s right for the citizens of Jefferson County,” Commissioner Everett “Bo” Alfred said of his position that the county award the management contract to Spectra. “Right now, it’s about moving forward.”

Although Alfred tends to favor the evaluation committee’s take on the original proposals, Branick’s position was that once final offers were made, SMG came up with a better plan for compensation.

County Auditor Patrick Swain outlined what was on the table once final offers were analyzed. A 10-year comparison of the best and final offers for Spectra and SMG, he said, showed that SMG’s proposal of collecting 1.5 percent of gross revenue over $3.4 million, making a $275,000 investment with no payback required, and a $60,000 investment made by the company for maintenance items was a lower cost to the county than Spectra’s final offer of management fees including 2 percent of the three-year average gross revenue (operating benchmark), 15 percent of revenue over the operating benchmark, and a $700,000 investment amortized (taken off the books) over 10 years.

Alfred was unimpressed with SMG’s low offer, and said that they have promised things before that were never provided.

“I can go back and bring back the forms of what they said they were gonna do,” Alfred said. “And then they didn’t do.”

According to Alfred, if SMG could do all the things they say they’re going to do if given another five years out at Ford Park, then they should have been doing it already. Running at a $2 million annual deficit, even before the millions more given through Hotel Occupancy Tax grants, and their failure to adequately market the facility are just some of the problems Alfred noted from the dais.

“No public facility like this makes money,” Branick said, referencing several examples, including Houston’s Reliant Park and Minute Maid Park. “They all depend on taxpayers.”

“It’s not in line with economic reality,” Branick added, to think Ford Park can run without subsidy.

Some subsidy – maybe, Alfred said, but the rate at which SMG has collected funds from taxpayers has been too much — “way more than we should.”

“I read the budget,” Alfred said. “Every time we get it, it says we lost.

“I have a problem with that.”

And Alfred was not alone in his opinion. Commissioner Michael “Shane” Sinegal said he, too, was of the impression that Ford Park could use a new team in charge.

“Like a former coach,” he said, “sometimes you can be on the sidelines too long.” SMG, to him, “is like a comedian who’s been on stage too long – just not funny anymore.

“It’s not personal; it’s about what I think is best.”

Commissioner Brent Weaver said he would vote with the lowest cost to the county, which was analyzed to be SMG considering the amortization rate on the $700,000 capital investment Spectra brings to the table. The debt would go away in 10 years, but would be counted as a liability to the county at $70,000 annually until then. Although SMG did not amortize its proposed monetary contribution of $275,000, Alfred pointed out that the amortization of SMG’s last capital investment is likely why they made it past the 2012 contract negotiation phase. At that time, he said, Branick warned the court that selecting another management team would cost the county roughly $230,000 in capital investment money that would have to be paid to SMG if they did not stick around another five years. When the request for proposals went out for that same contract award year, any potential competitors were also warned that they would need to address how to pay SMG a quarter million dollars should they get the contract. No one bid, Purchasing Director Deborah Clark said.

This time, the original request for proposal warned would-be competitors that there was more than $23,000 still owed to SMG that any management firm awarded the contract would need to account for. According to Clark, that amount will have been amortized by the time SMG’s contract actually expires in March 2017.

Weaver voiced no opinion on past performance, promises or perceptions, saying that he’s voting strictly with the numbers.

“What I’m looking at,” he said, “are what the numbers are right now. That’s what this is all about.”

The tie-breaker, Commissioner Eddie Arnold, said he was intimately involved with Ford Park’s management contract since its inception, and was disappointed with what the company has done up to this point.

“Historically speaking, I’ve gone with the numbers,” he said. “This a very unique situation…”

Arnold added, “Yes, the numbers have improved,” but he had a problem with SMG’s plans to improve – in the future – things that could have been done before now to reduce the deficit charged back to county taxpayers all these years.

“SMG had 15 years to make a name for themselves,” he said. “I know from public sentiment, the general public thinks it’s time for a change.”

Hail Mary

Following the vote to award the Ford Park management contract to Spectra, no movement has been made to finalize the deal. According to Purchasing Director Clark, Branick’s e-mail seeking clarification as to the legality of the vote has put the process on hold temporarily.

“I’m waiting to see what I need to do, too,” Clark said, but offered clarification on Branick’s e-mail. According to her, the county sought requests for proposals using a different government code that allows for evaluation of the proposals based on criteria that not only includes lowest cost.

“They have gone with proposals that were not the lowest cost before,” she said, and selection of a vendor is based on several factors. Still, it is no done deal that Spectra will ever control the county entertainment complex.

“We’re just in the first step,” she said. “It’s not truly a done deal until we have the executed and signed contract.”

While Clark said she was waiting on word from the legal department as how best to proceed, County Attorney Kennedy said she was of the opinion that the vote was not in violation of the government code.

“Their vote was legal,” she said. “Now it goes to negotiations. My understanding is if contract negotiations fail, though, they still have the option of going with SMG.”

“We can still look at this and say we don’t want it,” Clark added.

But for the voting commissioners, the consensus has so far been to go with a new approach at Ford Park – starting with a new team in place to run the facility.

“Five years from now,” Commissioner Arnold suggested, “if they don’t produce … we find somebody else.”

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