Two Open Letters to the Library Lot Advisory Committee
PLPP's Open Letter to the RFP Advisory Committee
The following is a statement prepared for the March 3, 2011 meeting of the RFP #743 (the Ann Arbor Library Lot) advisory committee. The meeting has since been postponed to March 8. PLPP requested an opportunity to present this statement verbally to the group, but we were refused. We are now making the statement public.
You are meeting today to discuss a letter of intent between Valiant Partners LLC and the City. This is based on the recommendation of a consultant, The Roxbury Group. Though the 11/23/10 minutes stated “the Valiant proposal ...presented the better option for long-term viability”, the report itself said “this report does not include and is not intended to serve as a feasibility study... it is generally assumed that the overall concepts...are valid and supportable from a market and demand standpoint.” But an unsolicited, independent analysis from nationally recognized hotel expert Chuck Skelton provides a strong case with extensive data that the proposed hotel and conference center are not financially viable.
We urge you to recommend that the City withdraw RFP #743 and notify all proposers that no award will be made. We base this request on the following:
1. Neither of the two remaining proposals (Valiant, Acquest) actually meets all the stated objectives of the RFP.
2. The entire process of deciding how downtown city property is to be developed is being reconsidered. We believe that disposal of any public land should begin with a full community discussion of the desired outcome. The Library Lot is one of the most valuable downtown city-owned vacant parcels. It would be best to set aside this present effort and to begin again.
3. The Valiant proposal contains many likely costs and risks to the City. Complete details are too lengthy to include but the crucial points are these:
· The success of the entire enterprise hinges on a successful hotel operation. But current data show that projected room rates and occupancy are wildly unrealistic. The hotel will almost certainly operate at a loss.
· Payments for the City (used for bonds) are predicated on a high rate of return from the hotel and made only after the primary mortgage holder is paid and after profitable operation.
· Construction of the conference center would be financed by privately financed bonds. Again, lease payments (dependent on hotel income) to the City would be used to pay this debt. If the bonds go into default, the conference center is at risk.
· Operation of the conference center would be the complete responsibility of the city and no funding is provided from this proposal. As documented by Skelton and others, conference centers everywhere are operating at a loss.
· Valiant financial statements do not indicate that the City will receive property tax payments by leasing the land and air rights to the hotel and conference center. Thus, the City will receive no direct revenue from the project.
4. Thus, the Valiant proposal does not fulfill Site Objective #3 of the RFP:
Financial return. The proposal must provide a positive financial return to the City. In the absence of other considerations, the City has a fiduciary responsibility to obtain fair market value upon the sale of City assets. Long-term lease or other property arrangements will be considered, but must meet this financial return criterion.
This financial return requirement was repeatedly stressed by your committee and by its chairman in justifying the elimination of other proposals submitted under the RFP. Since this proposal also does not provide a financial return to the city, it should not be accepted.
Another Open Letter to the Library Lot RFP Committee
The following is a statement that a member of the PLPP group, Thomas F. Wieder, had prepared to present to the committee. It has not been edited or amended in any way. (Mr. Wieder is an Ann Arbor attorney.)
The Library Lot is a major community asset of the City of Ann Arbor. The use to which that asset is eventually put must be something that is desired and supported by the community. Unless the process used to make that determination is legitimate, sound and transparent, any resulting decision will not, and should not, have the support of the community. Unfortunately, it is becoming increasingly clear that the process that has been used to date meets none of those tests.
This Committee is, apparently, preparing to recommend to the Ann Arbor City Council that it proceed with a hotel-conference center project proposed by Valiant Partners. The decision to do so is primarily based opon a hurried, almost secret and perfunctory review of a report prepared by The Roxbury Group, the consultants hired to advise the committee.
Unfortunately, The Roxbury Group has, according to all available information, absolutely no experience in evaluating projects of this type – absolutely none. Moreover, The Roxbury Group was less than forthright when it made its proposal to the city for the consulting contract.
The City’s Request for Proposal, or RFP, required each proposal to “[i]nclude information regarding any pending or recent lawsuits against the organization, its officers or employees.” In its submission, Roxbury stated: “Neither the Roxbury Group nor its principals (or employees) have ever been the subject of any lawsuit.”
That statement is false. One of Roxbury’s two principals, David Di Rita, was named as a Defendant in the case of Haggerty and Kowal et al v Alexander Hamilton Life Insurance Co., AHLIC Investment Holdings Corporation, Household Finance International, Mark M. McMurtrie, and David Di Rita, Oakland County Circuit Court Case No. 99-012101-CZ. The Plaintiffs in that
case alleged that the Wixom Airport, which they purchased from some of the Defendants, suffered a substantial loss in value because those Defendants failed to properly clean up some environmental contamination, as required by law. The Plaintiffs alleged that Di Rita made false statements about contamination remediation efforts. The case was eventually settled, with some or all of the Defendants paying $700,000 to the Plaintiffs. It is not known what Di Rita’s participation in the settlement was, if any.
Of greater significance is Roxbury’s participation, as both a consultant and a principal, in a major infill redevelopment project in the City of Detroit, a project which was a total failure. In its proposal to the City, Roxbury touted its “Prior Experience with Large Downtown Infill Projects” and cited, as its primary example, the Capitol Park Redevelopment in Detroit. It identified its role in the project as “Development Advisor.”
What Roxbury failed to mention was its role as a co-developer, with the Detroit DDA, of “The Griswold,” an 80-unit residential condominium project to be built on top of the parking deck being constructed for the refurbished Book Cadillac Hotel and condominiums. In March, 2007, the other Roxbury principal, Stacy Fox, predicted that demand for condos in downtown Detroit would “outstrip supply for the near future.” (Crain’s Detroit Business, March 18, 2007.) By December of that year, The Griswold project was shut down. The developers had failed to secure the 20 condo pre-sales necessary to secure financing for the project. Unfortunately for Roxbury, and the Detroit DDA, cancellation of the project was costly. Roxbury and the DDA had to share responsibility for more than $1.1 million in construction material costs that had to be paid. In addition, the City of Detroit was reported to have incurred a cost of $700,000 to build the parking structure to accommodate the condominium project on top of the structure. Oddly, Roxbury still displays The Griswold project on its website, www.roxburygroup.com, touting it as “a dramatic mixed-use development which is already re-defining the Capitol Park district.”
Roxbury identifies no involvement in any proposal or project to develop a hotel, conference center or similar facility. How, then, was Roxbury selected to advise the City of Ann Arbor on a hotel – conference center project?
Although the intent of the drafters cannot be determined with available information, the RFP gives the appearance of having been written with Roxbury in mind, and to exclude at least one far more qualified potential consultant. The RFP calls for a consultant with experience in providing “advisory services to municipalities and other public bodies for large infill downtown multi-use projects.” This description seems tailored to fit Roxbury’s role as a “development advisor” on the Capitol Park project, although it ignores its role in the disastrous Griswold project. No information has been located verifying Roxbury’s participation as an advisor, or as a principal, in any other project of a municipality or related government agency.
The RFP also contained the provision that “the City will only consider submittals from professionals that have no operations based within Washtenaw County…” This was supposedly included to “avoid any perception of influence or conflict on the part of the consultant.” This is a most curious requirement. The task of the consultant was to evaluate two competing proposals, the proposal of Valiant Partners, LLC, located in New York City, and the proposal of Acquest Realty Advisors, Inc., located in Bloomfield Hills, Michigan. There is no logical reason to exclude locally-based consultants from evaluating out-of-town developers. Moreover, the city has standard requirements precluding participation by any consultant with any actual or potential conflict of interest.
Perhaps the exclusion of local consultants can be explained by the following facts. As the committee is aware, Ann Arbor is home to Hospitality Advisors Consulting Group, headed by Charles Skelton. Mr. Skelton has had literally hundreds of consulting engagements regarding hotel and conference center facilities and proposals. These engagements have included projects in 21 states and for 20 government agencies, including 16 in Michigan. Unfortunately, before the RFP was prepared, it became known to certain individuals involved in this process that Mr. Skelton maintained the view that a hotel – conference center of the type and size under consideration is probably not viable in Ann Arbor. This fact raises the concern that the RFP may have been designed to exclude Mr. Skelton, and his healthy skepticism, from the process.
The handling of Roxbury’s eventual report also raises serious questions. David Di Rita presented his report, dated November 23, 2010, to a meeting of the Committee on the same date. When Mr. Rapundalo provided notice of the meeting about a week beforehand, Committee member and Planning Commissioner Eric Mahler, and Committee member and public representative Samuel Offen both informed Mr. Rapundalo that, because of existing professional and personal commitments, they could not attend a meeting on that date. Mr. Rapundalo decided to proceed with the meeting, anyway. Mr. Offen reports that, while he was in Ann Arbor until the morning of November 23, he was not provided with a copy of the Roxbury report, and he has no indication that it was available for review prior to the meeting.
Mr. Di Rita made an oral presentation of his report, which is 30 pages long, to the three members of the Committee who were present. They promptly accepted the report and moved immediately to direct city staff to prepare a proposed Letter of Intent between the city and Valiant Partners. According to the Committee’s minutes, this was accomplished in one hour and eight minutes. It seems doubtful that the three present members of the Committee even had time to read the report before acting upon it. There was, of course, no opportunity for the two absent members of the Committee, or any member of the public to even read and review the report, let alone provide any input to the Committee, before it proceeded to the next crucial stage of the process.
Every aspect of this process has been problematic. It should not be the basis for going forward with a project of such importance to this community.