Bombshell: After LBREPORT.com Asks To See "Financial Model" Attachment Missing From Contract For LB's New Civic Center, City Mgm't Says It Never Existed In Hard Copy As It Was "Too Extensive And Complex," Was "Proprietary" Model Developed By Plenary To Initially Cost The Civic Center, Was Reviewed By Unnamed Independent Consultants For Accuracy Before City Accepted It And With Final Agreement In Place Now "Serves No Practical Purpose"
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(August 17, 2019, 6:50 a.m.) -- In response to a request by LBREPORT.com, the City of Long Beach contends the "Financial Model" specified as an attachment but missing from the multi-million-dollar Project Agreement between the City and Plenary Properties Long Beach LLC governing design, construction, financing, operation and maintenance of LB's new Civic Center (City Hall, Main Library, Port HQ and "revitalized" Lincoln Park) never existed in hard copy as it was "too extensive and complex," was a "proprietary model" developed by Plenary to initially cost the Civic Center, was reviewed by unnamed independent consultants for accuracy before City accepted it and with the final agreement in place now serves "no practical purpose."
Project Agreement, p. A 16-1
The 876 page Project Agreement, authorized by a December 15, 2015 9-0 vote of the Long Beach City Council, details the terms that now obligate LB taxpayers to pay an annual increasing "service fee" to the specified private Civic Center operator for the next 40 years.
On July 25, August 5 and August 8, LBREPORT.com asked city management to provide the Project Agreement's "Appendix 16, Financial Model" or explain its non-appearance. Receiving no response, LBREPORT.com reported the missing contractual attachment on August 9. On August 14, LBREPORT.com received the following response from City of Long Beach Financial Management Director John Gross, who emailed in pertinent part:
Appendix 16, financial model is a proprietary model developed by Plenary to initially cost the Civic Center. The model was used by the Plenary to give the City the initial annual cost (service fee) based on construction and financing costs. It provided the initial calculation of the payments the City must make to Plenary. It does not and has never existed in hard copy as it is too extensive and complex. The model was thoroughly reviewed by independent consultants for accuracy before the City accepted the results. Once the Civic Center Project Agreement was executed, as it has been, the model serves no practical purpose. The final Agreement does not use the financial model in any way to determine the actual payments the City makes. The City payments are instead specified by the Agreement in Section 18.2 using definitions in the Definition Section 1.1...
Mr. Gross provided "the most recent calculation" of the payments for all years through 2061 based on agreement's formulas. LBREPORT.com will report these in detail separately.
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Page 160 of the executed Project Agreement states:
SECTION 19.1. FINANCIAL MODEL.
A) Copy Attached. A copy of the Financial Model is attached hereto as Appendix 16
B) Risk of Errors or Omissions. The Project Company shall bear the entire risk of any errors in or omissions from the Financial Model and shall not be entitled to any compensation from or other redress against the City or the Port in relation to any loss or damage that it suffers in consequence of such error or omission.
C) No Guaranteed Return. In no event shall the agreement of the parties to establish and maintain the Financial Model for certain purposes hereunder be construed to mean that the Project Company is entitled to receive a guaranteed rate of return on equity invested in connection with the Project.
SECTION 19.2. FINANCIAL MODEL UPDATES.
A) Updates. The Financial Model shall be updated from time to time to reflect changes as required by this Project Agreement. The Financial Model update shall become the Financial Model and shall be attached to this Project Agreement.
B) Project Company Preparation. The Project Company shall prepare the Financial Model updates and shall provide the City and the Port with all Financial Model updates and a complete set of the updated and revised assumptions and other data that form a part of the Financial Model as updated, including updated and revised projections and calculations with respect to revenues, expenses, the
repayment of the applicable Senior Debt and Distributions.
C) Access and Challenges. The City and the Port shall have the right at all times to gain access, on an open book basis, to the Financial Model and all Financial Model updates and the set of updated and revised assumptions and other data that form part of each such model. The City and the Port shall have the right to challenge the validity, accuracy or reasonableness of any Financial Model update or
the related updated and revised assumptions and data. In the event of a challenge, the immediately preceding Financial Model update that has not been challenged ( or, if there has been no unchallenged Financial Model update, the Financial Model) shall remain in effect pending the outcome or the challenge or until a new Financial Model update is issued and unchallenged.
D) Changes to Financial Model Formulas. In no event shall the Financial Model formulas be changed except with the prior written agreement of the City and the Port.
E) City and Port Audit. Prior to making any use of the output of the Financial Model, the City or the Port may, at its own expense, review and audit the revised Financial Model and all amendments and updates thereto prepared by the Project Company. The Project Company shall provide such information as is reasonably required by the City and the Port to conduct the audits described in this Section.
The Project Agreement resulted from an Exclusive Negotiating Agreement between the City and Plenary (authorized by Dec. 4, 2014 City Council voted approval) that included the following:
The Preferred Proposer acknowledges that the City will need sufficient, detailed information about the economic feasibility of the Project to negotiate and make informed decisions about the content and approval of the Agreements. The City will work with the Preferred Proposer to maintain the confidentiality of proprietary information subject to the requirements of the Public Records Act, California Government Code section 6250 et seq. (CPRA). The Preferred Proposer acknowledges and agrees that the City may share information provided by the Preferred Proposer of a financial and potential proprietary nature with third-party consultants who have been engaged to advise the City concerning matters related to this ENA and to the City Council members or members of the SHC as part of the negotiation and decision-making process. Information submitted to the City is a public record and may be subject to disclosure if requested by a member of the
public. The Preferred Proposer shall familiarize itself with the CPRA, including consulting with legal counsel, regarding its requirements for disclosure of public records and applicable exemptions from such disclosure. If the Preferred Proposer claims an exemption from disclosure under the CPRA, it must identify the specific provision(s) of the CPRA providing an exemption from disclosure for each such item claimed as exempt from disclosure. The Preferred Proposer must also clearly identify, in writing and with specificity, all copyright,
patent or trademark materials, trade secrets, or proprietary or confidential commercial or financial information claimed as exempt from disclosure under the CPRA (collectively, "Exempt Information").
Exempt Information shall remain the property of the Preferred Proposer. If a request is made under CPRA for disclosure of Exempt Information, the City will endeavor to provide the Preferred Proposer with reasonable timely notice of that request, in order that the Preferred Proposer will have the opportunity, under the CPRA, to seek protection from disclosure by a court of competent jurisdiction. The City shall not be, under any circumstances, responsible or liable to the Preferred Proposer, or any other person, for the disclosure of
Exempt Information, whether such disclosure is required by law, by an order of a court, or as a result of inadvertence, mistake, or negligence on the part of the City or its elected or appointed officials, officers, employees, agents, contractors, representatives, or consultants.
The Preferred Proposer submitting claimed Exempt Information in connection with this ENA, by making such submittal of claimed Exempt Information, unconditionally agrees to indemnify, defend, and hold harmless the City and its elected or appointed officials, officers, employees, agents, contractors, representatives, and consultants, from and against any and all claims, damages, losses, liabilities, and
expenses, including actual attorneys' fees and costs, including in-house legal counsel fees and costs, incurred by the City, in good faith, that arise out of, relate to, or result from the City's failure to disclose any claimed Exempt Information to any person making a request for such information. If the Preferred Proposer fails to timely and diligently undertake indemnification of the City, it shall be deemed to have waived the right to claim exemption from disclosure under the CPRA; and after reasonable notice to the Preferred Proposer, the City may release the requested information in accord with applicable law.
On July 29, 2019, Mayor Garcia, joined by immediate past Mayor Bob Foster, various past and present City and Port officials, staff and members of the public, held a dedication ceremony for the new City Hall and adjacent Port HQ building. A new LB Main library (roughly 30% smaller than LB's former Main Library and recently named by the Council to honor LB native Billie Jean King) is slated to open Sept. 21. As part of the Civic Center transaction, the Council voted to permanently give away a portion of the public's Civic Center land for private development on which a high rise with residences above and commercial/retail spaces below is now being planned.
Support really independent news in Long Beach. No one in LBREPORT.com's ownership, reporting or editorial decision-making has ties to development interests, advocacy groups or other special interests; or is seeking or receiving benefits of City development-related decisions; or holds a City Hall appointive position; or has contributed sums to political campaigns for Long Beach incumbents or challengers. LBREPORT.com isn't part of an out of town corporate cluster and no one its ownership, editorial or publishing decisionmaking has been part of the governing board of any City government body or other entity on whose policies we report. LBREPORT.com is reader and advertiser supported. You can help keep really independent news in LB similar to the way people support NPR and PBS stations. We're not non-profit so it's not tax deductible but $49.95 (less than an annual dollar a week) helps keep us online.