“Black is really white” — Executive Summary misrepresents new MOU on City hotel construction risk

The Executive Summary begins with an Overview reporting supposed revisions to the draft new-MOU for the downtown hotel project made in response to comments at the May 23 Workshop. Bullet points describe revisions claimed to have been made “to address key issues identified by Aldermen at the Workshop.”

Supposedly the fifth bulleted revision is “Clarifying that any cost overruns for public infrastructure not caused by a City initiated scope change are solely the responsibility of (the developer) PHP.”  — page 1 of Executive Summary.

That’s reassuring to the many people concerned about the City taking on the cost and risk of building in the muck that constitutes the old floodplain of Carroll Creek. There’s substrata of unknown load bearing strength. Possible contaminated soil? Complications from archeological investigations? How deep will piles have to be driven? How many? Drainage and waterproofing uncertainties?

Under the new MOU the City will be committing to build not only the project’s foundations and a basement parking garage, ramps and delivery loading docks below ground level but also a massive ‘podium’ or engineered platform on top to support the developer’s hotel and conference center. The project budget attached to the MOU provides that the cost of this garage/podium will be covered by $11.55 million reserved for ’site development.’  This site development so-called is not broken down or itemized.

Nevertheless it would be reassuring if any cost overruns were covered by the developer who is to build the whole complex (including the City’s basement garage/podium) under a single construction contract.

Trouble is the text of the new MOU contradicts that. It states clearly that the City bears the risk of cost overruns: “The City affirms, and the Transaction Documents will memorialize the understanding that the City bears the construction and financial risk of completion of construction, and opening, operating and maintaining the Public Podium/Garage.” (page 3 of MOU)

To conclude: the Executive Summary misrepresents the actual MOU which is the binding legal document. Contrary to the Executive Summary claim, risk of cost overruns is on the City — on taxpayers. 

SOURCES: Here is the 83 page pdf containing the Executive Summary and new MOU for the Mayor & Board hearing June 21, 2018:

http://cityoffrederick.granicus.com/MetaViewer.php?view_id=12&event_id=2940&meta_id=87904

2018/06/18

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