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City releases draft agreement related to bidding of proposed recreation center; other agreements between Fritzel entity and KU not yet released
Let’s all play lawyer, which of course means we need to say “theretofore” and “henceforth” several times because we bill by the hour.
The city has released the draft agreement that would govern how the city would bid the proposed $25 million city recreation center, and how the city would partner with Kansas University Endowment and Thomas Fritzel’s private entity to build infrastructure for the recreation center and the adjacent Rock Chalk Park.
Your law degree is likely better than mine, so review the document for yourself by clicking here.
I have reviewed the document quickly (I would have failed Billing by the Hour 101 in law school). My quick take is there don’t seem to be any surprises in the information that is there, but some watchers of the project probably will want to see more information.
What hasn’t been released yet are any agreements between Fritzel’s entity and Kansas University Endowment or KU Athletics in terms of how Fritzel’s company will manage and operate the facilities near Sixth Street and the South Lawrence Trafficway. If you remember, Fritzel’s Bliss Sports LLC actually will own the facilities and lease them back to KU Athletics at a discount, while KU Endowment will own the land and lease it to Bliss Sports.
I’ve talked to several people who want to see those agreements because they will spell out what role, if any, Bliss will have in operations such as providing concessions, charging for parking and selling alcohol at events.
Fritzel told me in a previous interview that Kansas Athletics will be in charge of those issues, just as they are at events held at Memorial Stadium or Allen Fieldhouse. Fritzel went on to say that his company won’t receive any revenue from the project, other than the lease payments KU will make to occupy the facilities.
But, I think some folks still want to see the documents. Fritzel has said he’ll make those documents public once they are finalized. It appears, however, the public won’t see them before the city’s Feb. 19 meeting, which is when the city likely will consider signing agreements that commit the city to move forward with the recreation center.
At least Mayor Bob Schumm isn’t counting on it. Schumm said he has some interest in how the operations of the adjacent Rock Chalk Park will be handled, but he said he does not think it is critical to know the details before the city makes a decision on the recreation center project.
He said that’s because the largest issue regarding the operation of Rock Chalk Park is whether there would be any inappropriate events held at the facilities that would interfere with the recreation center or cause other problems. He said the city has the protection it needs in that area because the city must approve a special use permit before any nonathletic event can be held at Rock Chalk Park.
As for what is included in the document that is available for review, the most significant details have to do with the city’s bidding process. The agreement spells out the recreation center portion of the project will follow the “normal bidding process used by the city for its construction projects.”
As previously reported, how the infrastructure — such as roads, parking lots and sewer lines — will be built won’t use the city’s standard bidding process. That’s in part because the infrastructure will be a joint venture between the city and Rock Chalk Park Development, since most of the infrastructure will be shared between the two projects.
I’ve had several people ask for more details about that part of the project, so here’s a quick look:
• The city will have agreements in place that make it clear it won’t pay more than $25 million for the recreation center and the surrounding infrastructure.
• RCP LLC — a private entity controlled entirely by KU Endowment — will contract with Fritzel’s Bliss Sports to build the infrastructure. Architects have estimated it will cost about $13 million to build the infrastructure.
• According to the latest agreement, Bliss Sports will hire King Construction, an area excavation company, to build the infrastructure.
• The city will go through its normal bidding process to select a builder and to get a guaranteed price on the recreation center building. Architects have estimated it will cost about $18 million to build the 181,000-square-foot building.
• Bliss Sports will provide invoices to the city and to KU Endowment showing the amount it has been billed by King Construction. Bliss will be allowed to add a 10 percent management fee to those amounts. City officials said KU Endowment has indicated that is the standard management fee KU Endowment pays its contractors.
• The city won’t make any payments for the infrastructure until such time it is ready to take ownership of the recreation center and the 26 acres of property that will be included in the project.
• Under the terms of the agreement, the city does not yet know what percentage of the shared infrastructure costs it may pay for. It won’t know that amount until both the costs for the recreation center and the infrastructure are identified.
Maybe a few examples would be helpful. Say the city gets a bid for $15 million on the recreation center, and the infrastructure costs $13 million to build. In that scenario, the city would pay $15 million for the building and would pay $10 million of the $13 million in infrastructure costs.
On the flip side, say the city gets a bid of $20 million on the recreation center and the infrastructure costs $13 million to bid. In that scenario, the city would pay only $5 million of $13 million in infrastructure costs.
Or, say the city gets a $13 million bid for the recreation center and the infrastructure only costs $10 million to build. Under that scenario, the city would pay $23 million for the project instead of the agreed upon $25 million.
How likely that is to occur, I don’t know. What seems more likely: The city will pay $25 million for the project, which was going to be the case even before the city agreed to the open bidding process. But now, the city does have a bid process in place that will give it comfort that it will be getting a good value for its building.
Now, the city must ensure it will get a good value for the infrastructure. City officials I’ve talked to have said they’re comfortable they will. A majority of commissioners long have said they are willing to help KU cover some of the infrastructure costs for Rock Chalk Park. They note that it is not unusual for cities to help universities with projects that are expected to draw visitors or students to the community.
It also is worth noting that the city won’t pay any of the costs to construct the actual KU facilities, such as the track field stadium, soccer field and other such amenities. Those facilities are expected to cost about $40 million.
As for other details in the agreement, they include:
• The city will have the ability to hire a construction quality control manager that can inspect all portions of the infrastructure projects.
• Bliss Sports can be made to improve any portion of the infrastructure project, if the city, KU Endowment and the project architect believe the infrastructure doesn’t meet the agreed upon plans.
• Plans for the infrastructure can’t be changed, unless the city agrees to the changes in writing.
• Building permit fees and impact fees for both the infrastructure improvements and construction of the KU facilities will be rebated back to Bliss Sports or KU Endowment, whichever entity pays the fees.
• Several important details of agreement have yet to be released. The document posted by the city doesn’t yet include several exhibits and secondary agreements that will govern various aspects of the project. Those include agreements that spell out how the 26 acres for the recreation center will be transferred from KU Endowment to the city, and what specific KU facilities will be covered by industrial revenue bonds and the tax abatement that comes with those bonds.
Commissioners will discuss the agreement, and possibly vote to sign it, at their 6:35 p.m. meeting on Tuesday at City Hall, Sixth and Massachusetts streets.