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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

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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.

Comments

Keith Richards 1 year, 6 months ago

Why is Schumm in a such a hurry?

I support the overall project but the way the city, KU endowment, and Bliss is handling everything looks very suspicious and shady.

3

FarneyMac 1 year, 6 months ago

I don't trust Schumm, Fritzel et al. any more than you do, but in general - once cost estimates for projects come in, it's important to start them as quickly as is feasible because construction material prices fluctuate wildly (usually up, of course).

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Budgets_Smudgets 1 year, 6 months ago

I may be losing track of the chess pieces, Chad, so help me out:

1) wasn't there a mention on the KU side of things that it would not be KU Endowment Association (KUEA), but a different entity (I believed it was described somewhere as a "subsidiary" of KUEA. But understanding that not for profits with IRS charitable status don't generally have "subsidiaries." I am guessing this will therefore be an entirely different organized entity which has a board of directors closely associated with the board/management of KUEA, but not KUEA. Has the name of this "new" entity been identified to the public anywhere in the process?

2) Hasn't the actual named entity involved on the Bliss side of things also changed since submission to the city last fall? Is this "Bliss 2"

3) Looking at the signature page of the draft agreement you posted, I noticed that the City of Lawrence is described as a Limited Liability Company, and not a Kansas municipality. Have one of those attorneys on that page explain it to you.

1

Budgets_Smudgets 1 year, 6 months ago

Chad, I answered one of my own questions. RCP, a Kansas LLC, is owned by a single member, KU Endowment Association.

I scratch my head why the entity RCP even needs to exist. (perhaps to protect the overall IRS 501c status of KUEA in a not so clearly tax-exempt transaction) But I now understand why the existence of RCP could also call into question the previously assumed property tax exemption status of the Bliss part of the project in the eyes of the State of Kansas.

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Eride 1 year, 6 months ago

It is very common for an organization to form a new, separate organization when undertaking a major project.

There is nothing unusual about that...

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Richard Heckler 1 year, 6 months ago

So it appears Friitzel will be deciding what is appropriate and what is not which is reckless for the city to move forward with any taxpayer funded project.

OUR dollars cannot be held hostage. Lawrence does not need this extravagant spending on top of all the other tax increases coming at us like a blizzard.

How in the world could the city commission have approved anything without having all related documents in hand and reviewed by the city legal staff. Who knows what kind of language is written?

This entire process has been sloppy at best. Pull the plug on the rec center ,move the location and spend less money. KU sports and Fritzel are the bullies kicking around a spineless city commission.

3

Bob Forer 1 year, 6 months ago

The so-called open bidding process is a sham,. as any money we save by having a bid lower than Fritzel will increase the city's contribution to the infrastructure.

Meet the new boss. Same as the old boss.

This stinks even more than the sham before it, as these folks think we are dumb enough for fall for it.

Time to throw out the project and start from scratch.

5

Richard Heckler 1 year, 6 months ago

"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."

How in the world could the city commission have approved anything without having all related documents in hand and reviewed by the city legal staff? Who knows what kind of language is written or might be changed? What Chad is providing is not the last word.

What exactly does JOINT VENTURE mean? Taxpayers 95% Fritzell 5% ? Does anyone know who could provide Chad with correct information?

Taxpaying stakeholders deserve far better representation than it appears we are getting.

1

Richard Heckler 1 year, 6 months ago

Has Fritzel paid his $50,000 fine as yet? Will he ever?

Are property taxes paid up on all Fritzel projects?

What do we know Chad?

3

irvan moore 1 year, 6 months ago

mr schumm would better serve the citizens of laerence by getting answers to all of the questions before signing off on this project

4

deec 1 year, 6 months ago

"Plans for the infrastructure can’t be changed, unless the city agrees to the changes in writing. "

Because this developer has been so trustworthy on following plans and regulations in the past. Astroturf. Cell phone towers. Varsity house. Junction City taxes.

4

lunacydetector 1 year, 6 months ago

this thing needs to be put on hold for the time being, and most everyone knows why.

2

flyin_squirrel 1 year, 6 months ago

Sounds good! I agree with Merrill that we should start building immediately! Construction is one of the driving forces of an ecomony and this will only help the Union workers and bring more people to the area.

0

jack22 1 year, 6 months ago

Squirrel, that's the same kind of thinking that brought us the failed idea that the Bush tax cuts would bring us years of economic prosperity and reduce the deficit. You might consider how the recent non-stop home building and condo development worked out in Florida? Building and real estate speculation payed for in large part through tax abatements, special tax districts, and other favors to spur economic development is at best a short sighted solution to our economic woes.

0

flyin_squirrel 1 year, 6 months ago

But that was what Merrill said when Brownback was talking about getting rid of the unions, so it must be true...

0

Richard Heckler 1 year, 6 months ago

I would say City Hall build a $30 million $$$$$$ Vo Tech campus that could be supported with student fees 24/7. Allow the management to be USD 497. This is far better use of those 1994 sales tax dollars.

Students graduate with the fundamentals of how to support oneself instead of damaged bodies that increase the cost of health care.

I have read recently that corporations are looking for VoTech grads and those with 2 year degrees as well. So the story went is this type of education is valued at a salary of $64,000 whereas a high school diploma brings about 35,000 - 42,000k.

Taxpayers get results with new small business ventures thus more employment.

I vote higher education over a field house. Higher education has been worth lots of $$$$$$$ to Lawrence,Kansas

0

oldbaldguy 1 year, 6 months ago

why is the project so important again?

0

Richard Heckler 1 year, 6 months ago

Here are some interesting points that deserve our attention....

Cost Specifics http://www2.ljworld.com/news/2013/feb/11/letter-cost-specifics/?letters_to_editor

I would say the city commission has a long way to go. Cut our losses = pull the plug!

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Richard Heckler 1 year, 6 months ago

What could be the alternative?

How can Lawrence taxpayers get the best bang for our 1994 sales tax bucks and improve the quality of life for families throughout the entire community?

Construct a NW neighborhood rec center with 2-3 gyms and a walking/jogging track for public exercise probably for about $10 million. On city owned property. Now we have achieved shoring up the alleged lack of court space.

Connect the River Levy Trail to the new Old East Lawrence warehouse rehab project. A design is in place.

0

jafs 1 year, 6 months ago

Sounds way too complicated - sort of Rube Goldberg-esque - to me.

I'd be more comfortable with simple plans that don't involve crossovers between public and private entities.

0

Richard Heckler 1 year, 6 months ago

Put this to a vote

Put this to a vote

0

Richard Heckler 1 year, 6 months ago

The birth of this fiasco began about here at least this is about when the public at large got wind of it. This is a high dollar PLAY concept make no bones about it. Does it ever stop? http://www.ci.lawrence.ks.us/currenttopics/PLAY/i_executive%20summary.pdf

PLAY Overview http://www.ci.lawrence.ks.us/currenttopics/PLAY/i_executive%20summary.pdf

PLAY Committee Members Kelly Barth, Mark Buhler, Dave Corliss, Fred DeVictor, Rick Gammill, Mike Grosdidier, Sue Hack, Paige Hofer, Bonnie Lowe, Pam Madl, Julie Manning, Scott Morgan(USD 497), Wayne Osness, Linda Robinson(USD 497), Bob Sanner, Ernie Shaw, Doug Stremel and Doug Vance.

The Mission Statement of PLAY http://www.ci.lawrence.ks.us/currenttopics/PLAY/i_executive%20summary.pdf

Background and Process http://www.ci.lawrence.ks.us/currenttopics/PLAY/i_executive%20summary.pdf

The first step in the needs assessment was to collect data from a variety of sources. Three methods were developed to collect data for this study. The design team has completed the following: http://www.ci.lawrence.ks.us/currenttopics/PLAY/i_executive%20summary.pdf

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