Wednesday, August 13, 2014

Criminal Justice Center Contracts - Do They Violate the Law?

The beginning of August has been interesting in view of the massive amounts of money the City has contracted to pay for  work on the proposed criminal justice center - not the center itself, mind you - but just to gather proposals for it.

Now IBJ reporter Kathleen McLaughlin has an article where the City-County Council's CFO, Bart Brown, is saying the contracts may have been signed in violation of the law.

The contracts in question were brought to the attention of the public by the media over the last two weeks.

John Tuohy, IndyStar reporter, broke the news that the  Mayor contracted with the new employer of his former campaign manager / former counsel, John Cochran; Bose Public Affairs Group.  That was to the tune of $750,000 for PR work.

Then Mary Milz, WTHR reporter, had a blockbuster last night.  She reported that there are even more contracts, adding up to $9,945,376, were also let to a variety of legal and financial advisor firms.  One thing that caught my attention last night - as we happened to be watching Milz news broadcast - was the closing comments attributed to Marc Lotter, the Mayor's spokesman.

Milz had inquired as to how the nearly $10 M in newly revealed contracts would be paid.
Mayoral spokesman Marc Lotter said not all contracts need to be paid immediately.  He said some contracts are being phased in.
He also said the controller has "the ability to shift funds around or seek appropriations if necessary, so there are a lot of tools we can use."
Well, the Controller actually has limited ability to shift funds around.  The City-County Council is the fiscal body that sets the budget and appropriates the expenditure of funds.  No money can be spent beyond what the Council appropriated for any of 5 types of expenses in any one department or agency.  Service contracts fall in one of those types.

So, the Controller can spend money earmarked for contracts on any contract they desire, up to the limit set by the Council through the appropriation for that department. 

McLaughlin quotes Brown today
Brown contends that the contracts were signed in violation of state procurement law, which requires council approval for multi-year obligations that aren't already funded. He said the administration has only $2 million available for the contracts, and that money wasn't expressly appropriated for consultants' fees.
Brown called it a "bait-and-switch." Ballard spokesman Marc Lotter couldn't speak to the legality of the contracts, but he said the city won't be on the hook for the full amount. Lotter said the city's consultant fees will be reimbursed by whichever development team is chosen to build the justice center. That's assuming the deal goes forward.
The contracts in question are posted online.

There are 6 contracts in all.  The contract numbers are sequential; running from #12449 through #12454.  The start dates of the contracts, however, are not sequential.

Here are the highlights of the contracts in order of contract number.  Links to each contract are embedded in the number for those wishing to review them.  All are assigned to the Executive and Legislative department budgets (Mayor's Office and Council Office, among others).
#12449 -- Bickmore -- $50,000 -- start date 3/10/14 -- end date 1/1/15
#12450 -- John Klipsh Consulting -- $100,000 -- start date 11/15/13 -- end date 12/15/14
#12451 -- KPMG Corporate Finance -- $3,000,000 -- start date 12/10/13 -- end date 3/31/15
#12452 -- Bose Public Affairs Group -- $750,000 -- start date 12/20/13 -- end date 12/31/14
#12453 -- Hellmuth, Obata and Kassabaum -- $4,695,376 -- start date 2/26/14 -- end date 6/1/15
#12454 -- Nossaman / Bingham, Greenbaum Doll -- $4,000,000 -- start date 10/14/13 -- end date 6/30/15
The last contract is actually a contract with Bingham for $1.5 M and a subcontract through them to Nossaman for $2.5 M plus expenses.

The grand total comes to $12,595,376.

That is a goodly sum of money.  Jason Dudich, City Controller, signed off on every contract as "acknowledged and approved for funding purpose" or "approved as to availability of funding".

The type of expense under which service contracts, like these, are allowed is termed Character 3.  Other expenses also come from this Character.  But, it is the maximum appropriated.  The 2014 budget appropriated the following total Character 3 for each of these executive and legislative groups:
Office of the Mayor -- $968,488
Office of Minority 7 Women Business Development -- $105,040
Office of Audit and Performance -- $132,276
City County Council -- $470,885
Office of Corporation Counsel -- $816,722
Office of Finance and Management -- $3,847,576
Telecom and Video Services Agency -- $116,599
So, back to Brown's point.  Where did and will the money come from to pay these contracts?  The total appropriated funds, which bear in mind are needed for other things beyond service contracts, is $6,457,586 for all of 2014.  Brown says the administration delayed paying its December rent on the City-County building by a month, freeing up $2 M for calendar year 2013. 

McLaughlin's article drops more bombs.
Lotter said the size of the contracts shouldn't come as a surprise to council members, because Council President Maggie Lewis signed a memorandum of understanding in December which states that the city may incur costs up to 2 percent of the total project. 
With fees of $12.65 million, the construction cost could be as much as $632.5 million.
Now we are topping $600 Million for the cost?  Are they nuts?

The Ballard Administration has been particularly opaque on everything surrounding their proposed criminal justice center.  The fact that the contracts are sequential in number but not in start date demonstrate the administration had all this laid out before October 14, 2013.  Yet we are just hearing about this jaw-dropping amount of taxpayer money being spent on something that may not get built.  Now we hear from the Council's CFO, that the contracts may not be legal because the money to pay them has not been appropriated.

The public deserves full disclosure - and full disclosure now.

[edited to add - as I was typing this up, Gary Welsh posted about the same thing over at Advance Indiana - click here]


Gary R. Welsh said...

The project costs have always seemed way too low to me. Lucas Oil cost over $700 million several years ago. This isn't a stadium, but it is an expansive project that requires all the bells and whistles required for the security needs of a new court system, jail, juvenile center and other criminal justice agencies. Eskenazi Hospital cost over $700 million. It seems to me that $700 million has always been closer to the final project cost than the much lower figures they started out at, which were as low as $300 million at one point and later got bumped up to close to $500 million.

Anonymous said...

Although I believe a new jail and courthouse is long overdue, the recent stories have confirmed my suspicions that the Ballard administration is woefully incompetent to undertake such a task. Judging by the past debacles, including the Citizens transfer and the parking meter deal, why should anyone trust the administration to favor the public interest over the political elites? We haven't even built this complex. I don't want to imagine the inevitable cost overruns that will occur during construction and management of the system.

Had Enough Indy? said...

Well put Anon. I am also leary of such a long term contract with a prison-running company. There certainly would be minimum bed occupancy, like there is now in the contract to run one of our jails. More folks in jail should not be our goal. Plus, they would be able to bring prisoners in from other parts of the country. Why should we welcome anything like that?
But, you hit a nail on the head, this administration has proven over and over again that it cannot be trusted. If exactly the right questions aren't asked in exactly the right way, we don't find out important details until after the contract is signed.

Anonymous said...

How do we read the takes us to a login page.....please assist.

Had Enough Indy? said...

Anon 12:26 -- click on 'guest sign-in' under the password box. Then click 'run' when the Java box comes up.

Anonymous said...

Interesting that American Structurepoint is listed as sub-consultant - haven't they received a lot of City work lately? Wonder why the newspapers haven't picked this one up as well.

Had Enough Indy? said...

They seem to get a LOT of work.

They have nine live contracts totally over $6 M.

when you get into the search area, just put 'structure' in the name contains box.

you can sort the columns by clicking on the header