Garage costs city funds

Forum facility failed to meet guidelines, losing $6.3 million

By Michael Erskine and David Williams, The Commercial Appeal
June 9, 2006

The state is pulling $6.3 million in funding from the City of Memphis after months of investigation into how federal highway transportation dollars were used to fund construction of the FedExForum parking garage.

"Apparently mistakes were made, and now this is the reckoning for it," said state Sen. Mark Norris, R-Collierville, chair of the Senate Transportation Committee.

The city received a $20 million federal grant in 2002 -- passed to the city through the state -- to build the 1,500-space garage attached to the newest Downtown arena
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But the Tennessee Department of Transportation and Federal Highway Administration have concluded the project did not meet the grant requirements of including an "intermodal transfer facility" at the arena site, according to a letter sent to Memphis Mayor Willie Herenton, dated June 1.

A full report by the state is set to be released soon.

City Atty. Sara Hall described an intermodal transfer facility as a hub for public transportation. She said the garage was initially envisioned as a place for Downtown visitors to park and use public transportation to get around, but the idea was not fully developed. A small Memphis Area Transit Authority office is located at the garage.

"After the project was completed, there were some questions raised about whether the garage, as built and as functioning, was actually an intermodal transfer facility," she said.

It is not, and as a result, the city is losing out on $6.3 million in federal Congestion Mitigation/Air Quality (CMAQ) funds, although city officials say residents won't feel the impact.

Hall said $3.6 million of those funds were to be used by the city for improvements to the east I-40/240 interchange, but the state already has plans to make those improvements. "That's what's getting done, and it's not even our money," she said.

The rest of the projects will simply be delayed until money is allocated later, Hall said.

Since the garage project no longer qualifies for federal funding, the state is essentially taking over the $20 million funding obligation, swapping federal dollars for state dollars. The federal funds, meanwhile, including the $6.3 million recovered from the city, will be applied to other proj-ects that would have been paid for with state funds.

"I think this is the best possible result for the citizens of Memphis," Hall said.

"It's a result that doesn't require any taxpayer dollars to be spent. It has very little, if any, impact in a meaningful way on any of the citizens."

But Shelby County Commissioner John Willingham said the New Memphis Arena Public Building Authority and the Memphis Grizzlies discarded the original plans and specifications for the garage to the detriment of the public.

"I think somebody needs to go to jail over this or at least (be) reprimanded or (have) their pocket book scratched," said Willingham, who raised questions about the garage before the investigation started last year.

"If the Department of Transportation has found fault, then the question is, does it rise to the level of fraud?" he asked.

Hall said there was "absolutely no indication" of criminal activity.

The arena opened in September 2004, the centerpiece of a $250 million project that was crucial to the city and county luring the Grizzlies from Vancouver. PBA officials touted the arena for being completed on time and close to the budget.

One issue that may come out in the report is that the garage is operated by the Grizzlies on a for-profit basis -- contrary to the city's contract with the state.

The contract said garage operations must comply with federal law that states that fees "shall not be in excess of that required for maintenance and operation."

"The Grizzlies had nothing to do with that deal," said Grizzlies attorney Stan Meadows.

"... It was always contemplated that way (for profit), even before there was a financing proposal. That was the deal with the city and county."

Charles Carpenter, acting executive director of the PBA, said he was hopeful the state's report won't reflect poorly on the PBA.

"We followed all of the steps that were required of the PBA," he said. "At no time did the state inform the PBA that we were amiss or that we were doing something that was not in accordance with the contract."