'Lots of issues' in garage-gone-bad

State auditor and Senate committee to investigate

By Richard Locker, Commercial Appeal
June 23, 2006

NASHVILLE -- The state auditor and a Senate committee will investigate how Memphis spent a $20 million federal grant, intended for free commuter parking, on the for-profit garage run by its NBA team.

State Comptroller John Morgan and Senate Transportation Committee chairman Mark Norris confirmed Thursday they will probe the taxpayer-funded garage at FedExForum that a state Department of Transportation report said was not built nor used as intended.

"It's of great concern for the whole range of issues it raises: How did we make the grant in the first place? How did we monitor it? How did it get so far off track?" Morgan said in an interview.

"It raises lots of issues about the state, the Department of Transportation, the City of Memphis. It suggests there may have been some deliberate misleading of the state about how those dollars were to be used. I hope it doesn't turn out to be that, but based on what we've seen so far, it appears there may have been some deliberate misdeeds," Morgan said.

Norris, R-Collierville, said he'll convene his committee, which has legislative oversight responsibilities over TDOT, soon to launch its own review and likely will hold hearings in Memphis. He asked the comptroller to audit the case and said Morgan's report "will become an integral part of our investigation."

TDOT "is responsible for administering these grants and we need to understand the anatomy of this failure -- what went wrong to make sure similar errors are not made with the administration of other grants. It's all taxpayer money; we need to get behind the numbers and the name calling," Norris said.

The new investigations escalate a furor over the project, which originated in 2001 when Memphis was trying to seal pro basketball's Vancouver Grizzlies' move to the city. Then-governor Don Sundquist committed $20 million to the $250 million arena project. The state aid morphed into an agreement with the city, announced in March 2002, to build an "intermodal transfer facility" at the arena funded by a $20 million federal highway grant.

ITFs are hubs for public and private transportation. It "was supposed to reduce traffic congestion on Downtown streets and encourage the use of public transit through the week ... by providing free parking and easy access for daily commuters" who would then hop on MATA's buses and trolleys, TDOT's review said.

Its 1,500 parking spaces would be used by Grizzlies fans during games.

But unknown to the state, according to the report, the city had already signed over control of the garage to the Grizzlies before the city formally contracted with TDOT in October 2002 to build and operate it as an ITF. It was then built as a traditional for-profit arena garage: The team keeps the profits -- including $700,000 in corporate naming rights -- and reserves spaces for its high-ticket patrons.

Commuters hardly use it. A MATA office in the garage is never open, and a MATA bus transfer point is blocks away.

Tennessee House Government Operations Committee chairman Mike Kernell said Thursday he's gathering information for a possible review by his committee, too.

"I think this sounds like the city has defrauded the state, but the question is, are there other people as part of a conspiracy to defraud the state?" said Kernell, D-Memphis.

Morgan, whose agency audits state and local governments and funds, said his review may take weeks.

He said "several issues deserve attention, including how the grant originated, why it ended up being for a project that turned out not to meet the requirements, how it changed over time, who knew and who authorized the changes, and why the state didn't know until recently that the funds may have been misspent."

Norris said his committee won't interfere with other federal and state probes but "we cannot afford to sit back and do nothing. We've got to get to the bottom of it. It's our impression that the state plans to shoulder the $20 million responsibility. Does that mean we're paying it all?" Norris said.