Local in Ann Arbor

I. What’s not in the Roxbury report

As we recently reviewed,  the long process of deciding about a conference center on the Library Lot has taken the next step with a report from a consultant, the Roxbury Group.  We will examine the details of those recommendations in a future post.

First, let’s discuss what is not in the report – but should be.

The report was prepared in response to RFP 758, issued by the city on January 5, 2010.   That RFP was for a consultant to help the RFP advisory committee evaluate the financial capabilities of the proposers (as explained in the committee meeting) and the DDA pledged the money ($50,000) to pay for the work.  There were 11 tasks named for the consultant to perform.  Here are the significant ones:

• Determine if the projects submitted to the City are economically viable and make financial sense in the Ann Arbor marketplace
• Help the City determine which project will provide the maximum financial return to the City
• Assist the City in working with each developer to improve their proposals and provide the City with competitive options that optimize desired features
• Help the City determine which project will provide the greatest community benefits
• Provide information on the impact of similarly scaled projects in similarly sized communities
• Assist the City as needed in negotiations with the selected project team

And indeed, in the proposal in response to the RFP,  they promised to (again, a selected list):

• Determine if the projects submitted by the respondents are viable, financially as well as from a marketplace perspective.
• Evaluate the strength of the prospective development firms – helping to determine whether the firms are financially sound and performing the necessary due diligence to confirm their ability to execute and track record of success.
• Support  the City, to the extent needed, in negotiations with the selected development team.
• Assist the City in determining which project will provide the greatest community benefits.
• Assist the City in crafting and executing a robust community involvement process to ensure residents are informed, have the opportunity for meaningful input and feel positive about the result.
• Advise the City on the strengths and weaknesses of each project, and provide analysis of which project will likely maximize the financial benefit to the City.

Note that the top item in each list is to determine whether the project is financially viable from a marketplace standpoint. But here is what the actual report says:

“It should be noted that this report does not include and is not intended to serve as a feasibility study for the concepts included in the two proposals. Accordingly, for purposes of this report, it is generally assumed that the overall concepts included in the uses for the Library Lot contained in each proposal are valid and supportable from a market and demand standpoint.”

And yet, early on, all parties seemed to agree that a market demand study was needed.  Indeed, in a letter dated January 28, 2010, the Valiant partners stated that they had hired a firm to do one:

“in response to the Evaluation Committee inquiry, we have hired a nationally known firm to do a ‘Demand Analysis’  for us, which we will share when completed.”

Acquest, in a letter sent to the advisory committee after the Valiant letter was publicized,  emphasized that feasibility studies were needed.

“we quickly acknowledge that the potential for a conference center on the YMCA site would most certainly require an independent feasibility study and equally important an economic impact study measuring the economic benefit to the City and the County as well as other downtown commercial establishments and other stakeholders…The scale of the project and specific functional and programmatic components will clearly need to respond to an independent market analysis…Valiant has apparently made a unilateral decision to commission a study by HVS Consultants to evaluate the demand. We assume they are referring to hotel as well as convention center demand.  In our opinion this should be a function under the direct control of the City and/or the DDA as the report loses its independence when the consultant’s client is one of the proposers.”

(See our previous post discussing the two letters.)

So – as we consider the new Valiant proposal as presented by Roxbury, the first thing to remember is that it does not contain a market study or the financial analysis that was discussed by the advisory committee.   But as has been said yet again in a recent article from AmericanCity.org, and as we summarized earlier,  conference center-hotels often do not pay for themselves.  We must hope that Valiant’s proposal will be studied with extreme care, and with the assumption that if things can go wrong, they will.  And can we please see what Valiant’s own consultants had to say about their project’s financial feasibility?

This entry was posted on December 3, 2010 at 6:24 pm and is filed under Business, civic finance. You can subscribe via RSS 2.0 feed to this post's comments. You can comment below, or link to this permanent URL from your own site.