“No harm, no foul” is no more.
For 20 years the Memphis Area Transit
Authority has been a conduit for millions of dollars of federal funds for
downtown projects like the trolley and Central Station. If they were wasteful
and underused, they were also pretty to look at, welcoming to tourists, and
catalysts for development. And they could always be rationalized by saying that
if Memphis didn’t take the money some other city would.
But the FedExForum parking garage,
funded with $20 million in Federal Highway Administration funds, has produced a
scathingly critical state audit, a demand that the city of Memphis repay $6.3
million, and an FBI investigation. Key players in the deal could be disciplined,
fired, or indicted.
What’s different about the parking
garage? Three things.
ย Deception, negligence, and
carelessness at the local and state levels caused funds to be approved. The
audit repeatedly uses the words “misrepresentation,” “ineligible,” “tailored to
qualify,” “contrary to regulations,” “questionable,” “did not notify,” or
“regulations not properly followed.” A free-parking garage for downtown workers
and bus patrons became a gift to the Memphis Grizzlies, earning them profits of
$2.7 million in 2005 alone. So complete was the transformation of the garage
from public to private that a card-carrying federal transportation inspector was
denied permission to park for free in the facility by an attendant who insisted
“everybody had to pay.”
ย
The FedExForum garage makes no pretense of being an intermodal transportation
facility (ITF). MATA doesn’t even list it on its Web site, and the small MATA
office on the south side of the garage has never been used. An alley behind
Beale Street that was supposed to be a bus lane is a pedestrian walkway, and the
plaza on the west side of the arena serves basketball fans, not bus passengers.
An adjacent building houses basketball offices and a music museum. Central
Station, on the other hand, is an Amtrak station, a police precinct, and
sheltered waiting area where MATA buses make regular laps around an empty
parking lot. MATA’s east-west trolley on Madison Avenue is also little used, but
it is undeniably a public trolley, as advertised. In the Alice in Wonderland
world of federal transportation funds, the distinctions are important.
ย
Finally, to use a basketball expression, the refs are calling them closer these
days. Former state senator Roscoe Dixon faces prison time for accepting less
than $10,000 in bribes from a fake company in an FBI sting. Former school board
member Michael Hooks Jr. is charged with taking a share of $60,364 in allegedly
bogus consulting fees. And the feds also prosecuted football booster Logan Young
Jr. on the theory that recruiting can be a criminal enterprise and a high school
football coach is a public official. In this context, Mayor Willie Herenton’s
claim that a $20 million misrepresentation is not a big deal rings hollow.
Herenton supporters suggest the FBI
investigation is pre-election posturing. Some of the City Council members who
demanded an investigation might run for mayor in 2007. U.S. attorney David
Kustoff is new to the job and a former Republican activist and friend of Shelby
County district attorney Bill Gibbons who is on the August ballot.
But the Flyer
has learned from sources that
government officials in Nashville were aware of the FBI investigation at least
two weeks before it was publicly acknowledged. In this context, the “Special
Report” by the Tennessee Department of Transportation (TDOT) Office of Internal
Audit, released in June and “conducted in anticipation of litigation,” looks
like a forerunner to firings and indictments. (No lawsuits have been filed so
far. Attorney Duncan Ragsdale, who sued in 2001 to prevent public funds for the
arena, said he has not filed anything.)
Details of the 22-page report, along
with public comments and other documents, indicate which of the players in the
parking garage story might be at risk.
Herenton has a better
chance of knocking out Joe Frazier than separating himself from the city’s $250
million signature project. His special assistant, Pete Aviotti, attended
all the important Public Building Authority (PBA) meetings and is chairman of a
MATA advisory committee on regional rail. Aviotti was absent from the City
Council’s session in June.
Herenton appointed Will Hudson as general
manager of MATA in 1993. Hudson did attend the council meeting, but he wasn’t
grilled. It’s impossible that Hudson was unaware of details of a $20 million
building with MATA’s name on it. MATA customers were getting the shaft when the
Grizzlies took over the garage minus free parking, bus lanes, and shelters. If
Hudson called a foul, nobody heard him.
The audit says Tom Fox,
MATA’s general manager of planning and capital projects, decided it was unsafe
to send buses down Beale Street alley but apparently did not notify TDOT and the
feds. Fox told auditors he noticed the PBA had made changes in garage drawings
but he “did not feel strong enough about it to fight about it.”
Robert Spence was city
attorney until 2004. Spence suggested that the city could not profit from the
garage, but the Grizzlies could. The audit doesn’t support that view. Spence
also told auditors that David
Bennett, the former director of the PBA who is now dead, was
responsible for executing an operating agreement for the garage with the federal
agency.
But Charles Carpenter, the
attorney who succeeded Bennett, said the PBA had no role in garage operations
and its job was merely to “build it.” Carpenter, who ran Herenton’s 1991 mayoral
campaign and has earned hundreds of thousands of dollars in legal fees for city
business, assured City Council members last November that the city had “little
or no exposure” if money had to be paid back for the parking garage. In June,
Carpenter told the council that “for TDOT to say someone duped them” is
inaccurate.
An engineer interviewed by auditors
said Bennett ordered schematics or rough drawings to be used only at meetings
and not for actual construction because they differed from the final drawings.
Auditors called this “misrepresentation.”
Sara Hall, the current
city attorney, told council members last month she could not help them much
because the garage was not built on her watch. But last November, Hall told a
council committee she had reviewed Bennett’s records “in detail.”
HOOPS L.P., which owns
the Grizzlies, signed an agreement with the city of Memphis on June 29, 2001,
that gave them the parking garage 16 months before the TDOT agreement and before
federal funding was approved. The audit says HOOPS made $2,773,237 on the garage
in 2005, reserved 630 parking spaces (43 percent of the total) for employees and
players and others, and made sure no one else — including a federal investigator
— used them.
In Nashville, Don Sundquist, a former
Memphian and congressman, was governor when the arena’s complicated financing
package was approved and, on October 30, 2002, when TDOT signed a contract with
the city for an ITF. State assistance of some kind was seen as equitable
treatment for Memphis because the state helped the Tennessee Titans build a new
stadium in Nashville. The audit does not name Sundquist or his transportation
commissioner, Bruce Saltsman.
Gerald
Nicely, commissioner of TDOT,
told The
Commercial Appeal “there’s plenty
of blame to go around.” The audit is more specific. TDOT’s parking garage
overseer was Dennis Cook.
Like Nicely and Sundquist, Cook knew the Memphis powers-that-be wanted a
basketball arena, not an ITF. He could follow the letter of the law and possibly
delay the project or go with the flow. Cook told auditors he “did not ensure the
plans were reviewed in detail to verify the garage contained features necessary
to operate as an ITF but that he probably should have.” Cook also said he
reviewed payment requests but “did not notice” they included unallowable
reimbursements.
At the federal level, Mark Doctor and Gary Corino were
responsible for oversight. TDOT and the feds blamed each other. Doctor told
auditors “we were looking for ways to say yes rather than to say no,” and Corino
said they “backed into eligibility” for the project. Doctor said he was unaware
of the profit angle, but auditors said he “had access to knowledge” about it.
The next step proposed in the audit is, by TDOT’s own admission, illogical: turn
FedExForum’s garage into an ITF, thus preserving its “public transportation
purpose” and justifying the $14 million of the $20 million that does not have to
be repaid. A few pages earlier, however, auditors state that an ITF so close to
downtown and just five blocks from the “underutilized” Central Station ITF is
useless and would increase congestion.
“Parking at the
garage, walking to the bus stop while crossing streets and being exposed to the
elements, waiting for a bus while minimally if at all shielded from the weather,
and boarding a bus to travel a few blocks to the downtown area may not appeal to
many customers,” the audit states. ย