Brass’s Brass Kills Coliseum Deal
Mayor seeking to jump back in the deal.
New members to the Council who pledged quick and easy answers for the Coliseum just ran into the brick wall of reality. The Council decision to kill the deal threw all of the officeholders into the buzz saw of public opinion that varied from kudos to threats of political extermination. The question is what is the real story about why the Brass deal failed?
(Correction in article below, The City maintained architectual control over the development in what was agreed upon, not Brass as was originally stated.)
From the beginning there were peculiarities about the Brass deal that made many suspicious. Brass was asked to participate halfway through the process by Mayor Joe Adame. Adame told WtP that he asked them to participate in the Coliseum after they were invited to look at a project of building a hotel next to the American Bank Center (see New Hotel Proposal Floated). Brass along with Leisure Horizons, NRP and the National Swim Center put in proposals.
Leisure Horizons has previously been chosen to negotiate a contract but had been dropped after being unable to prove it had the financial wherewithal to complete the project. NRP was continually questioned by Council about their plan to put a mixed use facility that included apartments and retail on the site next to the Coliseum space which they proposed would be torn down. They dropped out of the process feeling that a different set of standards were being used for Brass. The National Swim Center made it to the finals only to be bypassed for Brass because of unanswered questions about their finances. Their presentation was hampered by a last minute substitution because their lead presenter was stuck in Florida and the Council’s unwillingness to go into executive session to view their bank statement which they said showed a balance of more than $20 million.
The Brass proposal from the very beginning had little to do with the Coliseum. It is unclear whether Brass or Mayor Adame, wanted to expand the Request for Proposal beyond the Coliseum to include the whole bay front from McCaughn to Sherill Parks resulting in a massive development, but someone did. When the Economic Development Department asked City Legal if park land could be developed, the answer came back, “yes, but…” and asked for more time to research the issue. What is clear is that Adame chose to push forward without a clear answer. After the initial Brass proposal covering 28 acres came back to the Mayor’s coliseum committee, Adame admitted there were restrictions on the park land that would require a public vote, claimed embarrassment and blamed City staff for the site now being restricted to nine acres.
The additional research also revealed that the whole area might be a park producing a new dilemma threatening any development outside the Coliseum itself. A history of the area being designated parkland meant that the land could not be sold or leased long term (over 30 years) without a public vote. This would not only delay the project until an election could be held (a year away) but would let the public decide, something many on the Council wanted to avoid. The property could be swapped for other land, but only land that was of equal value, about $1,000,000 an acre.
According to sources inside City Hall, the Mayor then sought an outside legal opinion in the form of John Bell, who promptly delivered an opinion that said the Council could do whatever they wanted. That opinion ignored a fifty year history of park designations for the site, the City’s master plan and a bond vote to turn the area into a festival park conducted last November but reflected the Mayor’s desire. Brass’ response was to jam the 28 acre plan into less than six acres.
In the midst of this the Mayor recused himself from further input on the issue when it was revealed by WtP that he owned the land and building (downtown Whataburger) at the site across from Sherill Park and the proposed Brass Development. Brass continued with a full court press, ignoring the ongoing evaluation process repeatedly. Brass officials showed up at meetings where they weren’t scheduled, lobbied individual Council members who weren’t part of the committee and in general promised to resolve any questions that came up, promising they could in effect, do anything. The Council finally bought it 6-1 with Mark Scott voting against it and Brent Chesney and Adame recusing themselves, this began the negotiating process.
The Negotiations
The negotiations involved executive sessions between the negotiation team made up of Bell and representatives from the Development Services Department with Brass officials. City negotiators went to San Antonio twice and held two conference calls to negotiate with Brass. When Bell presented the outcome of the process, three Council members, District 4 Chris Adler, District 2 John Marez and At Large Representative Nelda Martinez, reversed their previous support and joined Scott in killing further negotiations 4-3.
Bell presented an overview of the problems which the City’s negotiating team felt were insurmountable.
1. Brass had originally promised $90 million dollars would be available for funding the project, indeed that was one of the biggest factors in their selection. In the negotiations, apartments, which were only part of the original proposal, in the end were the only thing that Brass would guarantee to build besides the renovating the Coliseum, which would be under a separate contract with the Ice Rayz. The City would donate two million dollars for those renovations and Rayz owner Tim Lange would kick in the rest.
The rest of the development by Brass was to contain a hotel, apartment building, a twelve hundred seat multi-screen theater, restaurants, retail space and a parking garage. Apartments were the least desirable part of the project from the beginning and Council made it clear they were only acceptable if they were in a mixed use project.
Council had urged Brass when they voted for the negotiations to reduce or shed the apartments altogether, now it was the only thing Brass would agree to build. Something that committee member Willard Hammonds had stated as the only thing the market would currently support. Hammond also stated that the Brass figures were questionable at best. Even though the City was willing to compromise if an acceptable ratio of apartments to retail could be reached, Brass refused to commit to other elements or a limit on the number of apartments.
2. Rent was another stumbling block. In addition to the City’s offer of no property taxes on the land, a rebate of taxes on the improvements, return of hotel/motel and sales taxes, and City funding of Brass projects through the Downtown Tax Incentive Finance District, Brass’s only offer was to pay 6% of the value, only on the small portion of the property their buildings sat on, at a value of $350,000 an acre amounting to about $60,000 a year. The City judged the property to be worth a million dollars an acre (land behind it is on the tax roles at $900,000/acre) and wanted an 8% return, at least a million dollars a year.
3. The parking structure was a problem from the beginning. The proposal would require a multi-story parking garage in order to replace those lost when Shoreline Drive was moved as well as meeting the requirements of the new buildings. Brass had indicated that the Regional Transit Authority was going to build the facility and a bus transfer station at the site. When negotiations started, it was clear that issue was not resolved.
When RTA Chairwoman Crystal Lyons was asked by WtP about the commitment Brass claimed the RTA had made, she stated that she felt that Brass had vastly exaggerated the situation. Lyons said that while Brass officials had visited with her and RTA CEO Ed Carrion, no commitment had been made past the willingness to discuss it. For RTA to build a parking garage, estimated at $8-10 million, they would have to seek federal funding and set back all of their current priorities. Brass has never made a proposal to the RTA board. That meant that a process to gain funding could be years away, Brass now insisted that the City guarantee the parking garage, contrary to the City’s RFP specifications about minimal direct City funding.
4. Contrary to normal practice, Brass sought the $2 million City investment upfront before renovations were made. While the City was willing to escrow the money and make reimbursement available as parts of the Coliseum renovations were completed, Brass refused, wanting all of the money up front.
5. Coliseum maintenance funding also was a no go. One of the major goals from the beginning was for the project manager to generate enough revenue to complete the renovations and provide future maintenance for the Coliseum. Brass wanted the city to cover continued future major capital investments including the roof, heating and air conditioning and other maintenance costs.
6. Brass sought to be the construction manager for the realignment of Shoreline Boulevard and be paid a fee for it, something that would normally be done by the City in conjunction with the contractor who would actually demolish and rebuild the road. Brass wanted to hire and supervise the company which would be outside the City required competitive bidding process. Brass also has no known history of road construction.
7. Brass was still balking at providing a financial pro forma showing how the project would work as well as an acceptable site plan that the City had made conditional to moving forward with any negotiations. Now Brass was demanding $200,000 dollars up front to produce that information. While they later reduced their demand to $75,000 and said it would be part of the $2 million City contribution, being paid to negotiate their own contract brought up questions about their financial ability. After the Caller Times article noting the charge was published, the paper reported that Brass spokesman Diane Cibrian said that the $75,000 wasn’t a requirement and that staff misunderstood.
8. Loss of trust was another issue mentioned by several City Council members, Adler had stated to the Caller-Times that she felt mislead by Brass. John Marez and Nelda Martinez in interviews with WtP also indicated that what Brass presented in negotiations was vastly different than the proposal the Council had agreed to move ahead on. Martinez who sat on the Coliseum committee noted that many of the concerns were addressed with Brass during committee meetings and that Brass had repeatedly stated they could accommodate those concerns, something they were unwilling to do during negotiations. Perhaps they judged the Council so desperate to get a deal that they felt they would be willing to give in once they had engaged negotiations rather than announce another failure.
Indeed the Caller-Times seemed to side with Brass in their headlines blaming the City Council for the process ending and repeated Brass’s allegations that the City did not inform them of a pending vote. That allegation by Brass is doubtful given their appearance at every meeting whether they were invited or not, numerous media announcements that a decision was pending or a simple check of the Council agenda.
Areas of Agreement
There were numerous areas of agreement. The City agreed to give Brass architectural control over the project, okayed apartments as part of a mixed use project, agreed to increase the maximum height of buildings to fifty feet (five stories), meet a minimum open space requirement of 30%, include east-west sight and pedestrian corridors, create a promenade along the waterfront of at least 32 feet, fund Brass projects with downtown TIF money and grant Brass a 60 year lease.
The sixty year lease opens another can of worms. Any lease over 30 years has been judged by Texas Courts as being a taking and if it involves park land, requires a vote of the people. In the last issue WtP outlined a history going back to the 1940’s, of City Council action designating the whole strip of land from Sherill to McCaughn Park, including the Coliseum and the land next to it as park space. While the Council could redesignate the land by changing the Master Plan, it leaves the whole issue open to both court and charter challenges through petition.
Council Gyrations
The willingness of some council member to continue with Brass brings up other questions. District 3 Councilman Larry Elizondo had previously been opposed to the project, but when it came to the vote to negotiate he raved about Brass, and says he wouldn’t reconsider the swim center and would like to reconsider Brass. Councilwoman Priscilla Leal also stated she doesn’t want to reconsider the swim project and voted against ending negotiations with Brass. While Kevin Kieshnick of District 1, voted against killing the Brass deal he stated he is open to reconsidering the swim center or tearing it down.
The two Council people who recused themselves for conflicts now want back in. Brent Chesney while recusing himself from involvement in the discussions promoted the Brass deal using his official position in a possible ethics violation. While state law allows Council members to continue to campaign for pet projects while recusing themselves from official discussions and votes, Chesney promoted the project in the “Council Member-at-Large Brent Chesney Newsletter Oct. ’09.” In that newsletter to constituents the week before the vote earlier this week, Chesney states, “We (the Mayor and Chesney) have great faith in our colleagues on the Council to do the right thing and get this done in some fashion. I have great faith in the majority of the Council who is really working hard to get this done.” Chesney promotes the deal and throws in the idea that the City will have a “black eye” if it doesn’t get done. Chesney now says that since the Brass deal is dead he wants back in the decision making process on the Coliseum.
Chesney as a part owner of the Ice Rayz was key in negotiating a different deal with the American Bank Center to lower rents based on performance improvements on ticket and concession sales. That performance is now being subsidized by the City through a decision by the 4A Board that distributes sales tax money for economic development, to fund $200,000 dollars worth of free tickets to Ice Rayz games. The money given to SMG, the management company for the American Bank Center was used to incentivize the Ice Rayz to stay two more years in the Center. One might say that the mere fact that the Ice Rayz were negotiating in leaving the Center for the Coliseum gained them leverage to gain City subsidies to stay.
Mayor Joe Adame faces a different problem. Adame now wants to get a new decision regarding his conflict of interest, and much as he did with Bell, has sought an outside Council to affirm his position, saying the current legal department doesn’t have a department head. Evidently the other twenty some lawyers in the department are too busy or incompetent to provide an answer. While the Caller Times reports Adame’s property being a half mile away, it is actually 600 feet from land Adame proposed to be developed. Adame has repeatedly stated he feels the Coliseum should be razed and the whole area prepared for development in the future.
Adame’s attempt to resurrect the issue under his control is certain to only raise more questions about his credibility. The recent fire sale auction of properties from his Atlantic Lofts project, raised questions in the development community of whether the project is facing foreclosure and have shaken faith in what many view as his development know how. While 28 units were put up for sale, only those without a reserve price were sold. Fifteen units were reportedly sold for $50,000-125,000. The unfinished units originally were priced at up to $250,000.
While the owners declared it a success that over 50% of the units were now sold, it remains to be seen if that will lift the project out of the woods. Many times commercial projects have initial lending that must be refinanced. In today’s market, a certain percentage of the units must be sold at a certain price in order to gain that refinancing. Whether the project achieved any financial stability remains to be seen.
Like the Coliseum the story goes on.
