City Withdrawing RFP For King Street Lot; Transferring Property To IDB

Friday, December 1, 2017

The city is withdrawing a Request for Proposals related to a city parking lot on King Street that a nearby developer wanted for a project that includes a new Moxie Hotel.

The city's Chattanooga Downtown Redevelopment Corporation board is set to take up a resolution to withdraw the RFP.

At the same time, the city is planning to transfer the parking lot to the city's Industrial Development Board.

No explanation was given for the moves.

The boards meet next week.

The King Street lot was in the news when the city initially planned to sell it to developer Hiren Desai for less than the city paid for it in 2007.

The city was also to pay the developer for some city vehicles to continue to use the lot.

That proposal was withdrawn and a higher appraisal was secured for the property.

The watchdog group, Accountability for Taxpayer Money, recently had this analysis of the King Street parking lot transfer:

The Mayor’s staff asked City Council to declare “surplus” a heavily used city parking lot on King Street so they could transfer title to the Chattanooga Downtown Redevelopment Corporation (CDRC). This city entity then issued a request for proposals (not a bid) to sell the parcel. Two corporations responded to the RFP. The CDRC was prepared to sell to their preferred proposer (Seaford Investments LLC/Hiren Desai) at a price much less than the city had paid for it in 2007 and well below its current market value. The public got wind of this plan, an appraisal was done, and the price nearly doubled. The Berke Administration is now asking the CDRC to execute a quitclaim deed to transfer the property to the City Industrial Development Board (IDB). A resolution authorizing this transaction is on the December 4th CDRC agenda.

City Council—July 26, 2016

Nick Wilkinson, Deputy Administrator of Economic Development in the Mayor’s Office, gave a visual presentation. (No one at City Hall can find the PowerPoint and the video of that meeting begins after his presentation.) Through an Open Records request, ATM obtained an audio recording. Here are the highlights:

·         In response to a question by Councilman Henderson on why the city is being asked to declare the property surplus, Mr. Wilkinson said it was because it presents an exciting potential for redevelopment. He acknowledged that the city had been talking for a “couple of years” to the developer (Mr. Desai) who owns adjacent property that he plans to develop. Mr. Wilkerson said the City would be taking a currently underutilized piece of property and making it surplus in order to enter into an agreement to facilitate the adjoining development. (These statements alone suggest that the City had already decided who would ultimately own the property.)

·         He said the existing use (parking) of the property would be maintained. He said the developers plan 300 spaces at their expense and that “75 presumably would be usable by the City at no expense.”

·         Councilman Henderson asked how the property would be transferred. Mr. Wilkerson’s response suggested that Administration had not yet decided whether it would be sold or leased. Mr. Wilkerson represented that any future parking structure would “add to the tax rolls.”

·         This parking lot was purchased in 2007 for $195,00 from local historic architect/developer Thomas Johnson to relieve a parking issue at the city/county Development Resources Center across the street. City fleet and employee vehicles fill this lot every day. There are about 75-80 spaces. Mr. Wilkerson did not make Council aware of the current usage.

·         Why was the City Council asked to transfer the property to the CDRC when the City Council has the same authority it does? The somewhat cynical but likely accurate ATM response is that the CDRC can do things under the radar screen since so few people know the board even exists.

CDRC-2017

January 19—In response to a question from ATM, Board President Daisy Madison (also City Finance Director) said there are plans to issue an RFP for lease of the property.

January 21— Board member Stacy Richardson (also Mayor Berke’s Chief of Staff) tells Times Free Press that the RFP will be competitively bid and that the CDRC will vote on the final terms of any agreement--whether it be lease or sale.

February 6—Two ATM members meet with Stacy Richardson in her office. She said the RFP would be to sell, with a possible lease back to City for parking spots. (What happened to Mr. Wilkerson’s representation to Council that the 75 or so city parking spots “presumably would be usable by the city at no cost”?)

February 22—CDRC passes resolution Authorizing the Issuance of an RFP for 1200 King St. for the Development of a Parking Garage to Facilitate Economic Growth in the Area. The RFP attached to the Resolution is for the purchase of the property. Narrative says the CDRC is looking for a qualified entity to purchase the property, lease a certain number of spaces back to the CDRC for a period of time to be determined (when? by whom?) for the purpose of fleet parking, and, “ultimately, build a parking structure on the parcel within a number of years to be determined upon negotiation of the final agreement.

February 22—ATM members asked the CDRC why the property was considered “surplus,” given its usage; why no minimum price was included in the RFP; and what was the anticipated role for taxpayers if there is a structure?  The Municipal Technical Advisory Service (MTAS) has provided a model resolution for cities to consider when they want to sell surplus property.

ATM also questioned why the CDRC did not use the competitive bid process. The City’s Procurement Manual (Section 2.13) says: An “RFP is the last resort to accomplish a given task. A good bid specification is more competitive and should result in a lower cost to the city.”

March 9--Seaford/Desai Response to RFP

·         Bid Amount: $134,700           

·         Lease Back Proposal: 85 spaces @45.77 per space monthly, total cost to city of $46,685.50 annually

·       Length of Lease: 5 Years

·         Scorer 1 gave a huge edge to Seaford (51 to 36). Scorer 1 ranked Seaford higher on price, length of lease, cost per space, and lease back. See summary above that suggests South Market should have won these categories.

·         Length of Lease: 3 Years

March 17—South Market LLC/Thomas Johnson Response to RFP

·         Bid Amount: $200,000

·        Lease Back Proposal: $30 per space monthly; assuming 85 spaces, total cost to city of

$30,600 annually

·         Length of Lease: 5 Years

March 20—Letter to CDRC President Daisy Madison from Deidre Keylon, the “buyer” in the Purchasing Dept., saying that the (5 member) Evaluation Committee for this RFPscored the responses individually based on criteria in the RFP solicitation document. They then averaged the scores. “There was unanimous agreement that the higher scoring proposal by Seaford” …is the proposal to be recommended to CDRC. Members of the Evaluation Committee were Stacy Richardson, Jermaine Freeman, Cary Bohannon, and Gail Hart. ATM speculates that the other member may have been Ms. Keylon or Bonnie Woodward, Director of Purchasing.

ATM did an open records request in April, asking for a list of who of those who submitted proposals and for the scorecard the committee used to rate them. The City responded, but the scorecard was not filled out. ATM did another request in October, asking for Mr. Wilkerson’s PowerPoint presentation and a filled-out copy of the scorecard.

The City did respond with a filled-out scorecard. There were 11 criteria, including price, length of lease, and lease back proposal. There was nothing to indicate that any of the criteria were weighted. Scorers ranked them on a scale of 1 to 5 points , with 5 being the highest.

·         Scorer 5 ranked the proposals the same.

·         Scorer 4 gave the edge to South Market (40 to 35).

·         Scorer 3 gave a slight edge to Seaford (43 to 42)

          Scorer 2 gave the edge to Seaford (43 to 40)

         Scorer 1 gave a huge edge to Seaford (51 to 36). Scorer 1 ranked Seaford higher on price, length of lease, cost per space, and lease back. See summary above that suggests South Market should have won these categories.

April 9—After learning that Seaford’s proposal was considerably less than what the City paid for the property 10 years ago,ATM requested the board to table the resolution accepting the proposal, citing fiduciary responsibility to Chattanooga taxpayers and public trust. ATM pointed out that developer would recoup the money he paid for the lot in 3 years.

April 10—At the CDRC meeting, about 10 citizens spoke in opposition to the board’s accepting this proposal. Consensus among speakers that the purchase price was way too low, given what the city paid in the past and how property values have increased in this area. The two developer members of the Board—David Dalton and Julian Bell, III-- said they believed an independent appraisal was needed. Board member Stacy Richardson acknowledged that the last time the parcel was appraised was when the City bought it in 2007. The Board passed a Resolution accepting Seaford’s proposal but added a provision that the purchase price would be based on the results of the appraisal.

June 19—CDRC President Daisy Madison reported that the fair market appraisal placed the value at $360,000. (Seaford had offered $134,700. The Hamilton County reappraisal, which was available thus spring, placed the value at $395,000.) She said that the vendor has agreed to pay the $360,000 amount. She said the next step is to negotiate contract terms. Once terms are agreed upon and the contract is drafted, it will come back to the board for approval.

December 4—CRRC Board will be asked by the Mayor’s Administration to transfer ownership of the parcel to the City Industrial Development Board (IDB). The mechanism is a quitclaim deed to be signed by President Madison.

IDB 2017 or 2018?

According to the list prepared by the Hamilton County Assessor of Property, all of the 32 or so parcels currently owned by the City’s Industrial Development Board are under a PILOT agreement. PILOT stands for “Payment In Lieu Of Taxes.” It is a tax break mechanism allowing certain companies to pay greatly reduced property taxes to support city services because the tax exempt IDB technically holds title to the property and then leases it back for a nominal amount.

ATM emailed the City Attorney’s Office on November 27, hoping to learn more about the purpose of the transfer. No response yet.

5.     The Solution

Stay Tuned.

 



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