Sunday, February 20, 2000

We'll all pay for rushing stadium


Cost overruns blamed on haste

BY DAN KLEPAL and LUCY MAY
The Cincinnati Enquirer

        Confetti flew as the politicians and dignitaries pushed their silver-plated shovels into the ground, each turning over a scoop of dirt. Groundbreaking for Paul Brown Stadium — April 25, 1998 — was under way.They should have kept digging.

        Even as the city partied and leaders declared it a great day for Cincinnati, the people really responsible for bringing the stadium out of the ground were checking their watches.

        The stadium was already behind schedule before the heavy lifting began.

        “When we got started on this, we were two months behind the original schedule,” said W. Shelby Reaves, project executive for the stadium's construction manager, Turner Barton Malow D.A.G.

        “We tried expediting the process with our trade contrac tors to recover,” Mr. Reaves said. “We never recovered the time, but we would be four months behind now if we hadn't taken those steps.”

        Falling further behind was not acceptable.

        The Bengals and Hamilton County commissioners had agreed to an ironclad deadline: The stadium would be done by August 2000, or taxpayers would pay millions to the team.

        In a rush to get the enormous structure done, as auditors reported last week, project costs got out of hand.

        Hundreds of changes to individual contracts were pushed through hurriedly, so that the pace of work never slowed. The changes went from concept, to architect's design, to reality, with little oversight.

        Some of the changes saved money. Most didn't. Some cost millions. Most cost thousands.

        They all added up to millions of dollars over budget — $45 million is the current best guess. And that number could grow.

        But revelations of cost overruns today don't fully explain why taxpayers may be on the hook for tens of millions tomorrow.

        That explanation is rooted in the complex history of why the county is building a stadium in the first place.

Brown's ultimatum
        Bengals General Manager Mike Brown first said in 1993 he would move his team unless Cincinnati pledged to build a new football stadium.

        Mr. Brown's team shared what he considered to be an inferior Riverfront Stadium, later renamed Cinergy Field, uncomfortably with the Reds since 1970. He saw other teams generating enormous amounts of cash in shiny new ballparks.

        Mr. Brown wanted the same for his Bengals. Negotiations began immediately between the team and the city, which ran the stadium.

        By 1994, the Bengals and Cincinnati officials reached a legal agreement that required the city to build a new football stadium by 2000, even though there was no money to pay for it.

        “We weren't in a financial position to get it done,” said Cincinnati City Manager John Shirey. “What we agreed to was to create a regional stadium authority, to raise the money and manage the stadium.”

        City and county leaders formed the Regional Stadium Task Force, a group of political and business leaders from the eight counties that make up the Tristate.

        But almost from the start it was clear that getting everyone to help pay for new homes for the Reds and Bengals would be difficult, if not impossible.

        It was then that financial consultants hired for the task force estimated that two stadiums could be built for $544 million.

        Some never believed that number. They would later be proven right.

        In June 1995, Mr. Brown stepped up the pressure by visiting Baltimore. He talked about moving the Bengals there. That same month, Hamilton County Commissioner Bob Bedinghaus, a former Delhi Township clerk and new appointee to the county commission, floated a plan to raise the Hamilton County sales tax by a penny on the dollar.

        “The Regional Stadium Task Force worked pretty good until they had their meeting to talk about taxes,” Mr. Bedinghaus said.

        It had become clear that Hamilton County would stand alone in paying the bills for stadium construction.

        In his proposal, Mr. Bedinghaus figured the 1-cent countywide increase would generate $100 million a year — plenty to pay for both stadiums, a new jail, an emergency communications system and property-tax relief in just 20 years.

        Mr. Bedinghaus and Commission President Guy Guckenberger — now a judge — voted to approve the sales-tax increase without a popular vote.

        But Cincinnati lawyer Tim Mara launched a petition drive to force the issue on the ballot. In just 30 days, he and his supporters collected 90,000 signatures.

        Faced with the opposition, the commissioners decided to put the issue on the March 1996 primary ballot themselves. It became known as Issue 1.

        The proposal changed by the time of the vote. County commissioners reduced the sales-tax increase to a half-penny and dropped the jail construction.

        Mr. Bedinghaus assured voters of the $544 million bottom line. Opponents, with Mr. Mara in the lead, argued it would be much more costly — perhaps as much as $1 billion.

        With the news of the Cleveland Browns' move to Baltimore still fresh in voters' minds, the tax passed easily.

        But with the victory came some heavy baggage: An approaching deadline to get the stadium built and a ton of work to accomplish in just four years and five months.

        Officials had to negotiate a lease with the team; hire an architect, construction manager and project manager; design the stadium; refine the budget; secure the site, and, finally, build it.

        The county liked a site just west of the John A. Roebling Suspension Bridge. But city officials convinced the county to move the structure farther west — which added $30 million in land costs to the project and months of delay.

        “The issue for the city had always been the development of the riverfront,” said Mr. Shirey. “We never viewed it narrowly as placement of the stadiums. In hindsight, the city was right.”

        Nearly a year was lost as the team and the county bickered over details of the lease behind closed doors.

        But they were important details, outlining penalties against county taxpayers if the stadium wasn't finished on time, guarantees of ticket sales, rent payments, the number of luxury suites, and the amount fans would pay for personal seat licenses, just to name a few.

        County officials complained they had little leverage in dealing with the Bengals because of the August 2000 deadline — a fix they say the city put them in because of the 1994 settlement.

        The city's Mr. Shirey doesn't buy it.

        “That's a thin argument,” Mr. Shirey said. “There isn't any relationship between the two.”

        Troy Blackburn, the team's director of stadium development, said the county negotiated as hard as anyone could have.

        The county's point was that officials needed a lease with one team — either the Reds or Bengals — by June 1, 1998, or the sales-tax increase would be rescinded. No tax, no stadiums.

        “If they didn't get a deal with us, they would deal with the Reds,” Mr. Blackburn said. “If there was time and money left, then they would talk to us.”

        The lease finally was signed in May 1997. It promised to control the amount of tax dollars used to pay for the stadium with a “guaranteed maximum price,” or GMP.

        But negotiating the GMP took longer than anyone expected.

        Agreeing on the cap meant both parties signing off on what would be included in the stadium's design, and that wasn't easy, especially since the final drawings weren't done.

        The preliminary GMP fig ure, reached in November 1997, came in tens of millions of dollars higher than the parties wanted. So it was back to the drawing board.

        They settled on a $287 million GMP the following April — a full five months later than expected.

        Even though that number didn't include buying land for the stadium or roadwork, officials thought it would insulate the county from the kind of cost overruns that plagued projects elsewhere.

        As taxpayers found out last week, the GMP was actually little more than the best guess of the architects and construction managers hired for the job.

        Stadium Project Director Norm Getz — hired by the county specifically to watch over the project — says the GMP is anything but a guarantee because it must be determined before the stadium design is complete.

        Changes in the design of the project, known as change orders, are bound to happen, he said. Taxpayers still can be on the hook for those changes if they are deemed necessary or could be reasonably inferred to be part of the GMP, even if they were not included in the original drawings.

        County officials figured a contingency fund would take care of those costs.

        It didn't.

Land costs soared
        Acquiring the land needed for the stadium took longer and cost more than expected, too.

        County officials originally budgeted $40 million for the land. It cost $70 million.

        There were just 31 months to go when demolition of the old Castellini produce warehouses that dotted the riverfront began in January 1998.

        That put the project on a costly fast track.

        At the same time, the city and county were arguing over a 12-acre parcel of land in the middle of the stadium site. The city controlled the land and wouldn't transfer it to the county before an agreement was made over other riverfront development issues.

        Mr. Brown had set a Jan. 31 deadline for the city to transfer the land, saying he would move the team if a deal wasn't reached by then because any further delay would make it impossible to open the stadium on time.

        The strain was beginning to show.

        They reached a deal, finally, in the early morning hours of Feb. 1, 1998. Once again, the stadium project had cleared a hurdle that could have killed the deal. And once again, delays made it more difficult for the construction team to finish on time.

        Heavy spring rains in 1998 allowed more valuable time to slip away as crews struggled to lay the stadium's foundation. Making up time meant more money, in added labor and overtime costs.

        All the while, project architect NBBJ Sports and Entertainment was designing the state-of-the-art stadium — with its curving lines and open-ended bowl — as the construction work proceeded.

        The design-as-you-go approach, typical in stadium construction, was cited as a major part of the cost overrun problems unveiled last week.

A defining moment
        It wasn't until sometime around August last year, as the last effects of a killer heat wave were leaving the area, that county officials and the stadium project team began to understand the full extent of those overruns.

        They noticed the contract changes, handled for so long as a matter of routine, were bigger than they should be.

        It was a defining moment for the project.

        The county hired PricewaterhouseCoopers in November to review those change orders on the football stadium. The firm already was working for the county to develop the lease with the Reds.

        Mr. Bedinghaus said county administrator David Krings' recommendation to hire the firm was his first “red flag” that the project was in trouble.

        But he said he could not recall how many details Mr. Krings shared with him at the time. Regardless, it would be another four months before they decided to let the public know that the project would cost taxpayers more.

        Of course, there had been change orders all along. Bids were taken based on incomplete drawings. Then, as the drawings were finalized, the scope and cost of those contracts increased.

        No wonder then that commissioners approving the original bids consistently saw contracts that were well under budget.

        All that extra money, Mr. Bedinghaus explained over and over, would just add to the county's safety net.

        As it turned out, some of those low bids were, in part, an effort to get a piece of the high-profile job, said the coun ty's construction auditor.

        Contractors know that getting the job is competitive, but once they have the work, they have a monopoly. And that can lead to charging more than necessary for change orders, he says.

        County officials, though, viewed all those low bids as an endorsement of the process and of their “guaranteed maximum price.”

        Mr. Getz described last week how the stadium project team dealt with change orders:

        • A change in the project would be suggested, either so the project could meet building codes or to improve its design.

        • Project architect NBBJ would provide new drawings to reflect the change. The project manager then would determine whether the change was needed and make a recommendation to Hamilton County Deputy Public Works Director John Michel.

        • When approved, Mr. Michel would direct the construction management team to make the change. The construction manager would then ask a contractor to incorporate the change into the contract.

        Only then would the contractor determine how much the change would cost. Sometimes, Mr. Getz said, the work on the change order would be under way well before the cost was determined.

        But Mr. Green says the costs were known before the work began.

        In either case, everyone seems to agree that the change orders got out of control.

        And they never hit the desk of either the county administrator or any of the commission ers.

        At least not until the project team ran out of money. And that, as it turns out, is just what happened.

        In an unsigned Jan. 17 memo, county officials learned the cost overruns were in the tens of millions of dollars.

        County officials concede mistakes were made. But, again, they have vowed to push ahead and aviod paying the Bengals $2 million for each preseason game not played in Paul Brown Stadium this year.

        They approved $14.3 million last week to keep construction going for another month, maybe two. Project executive Reaves said the construction team will, undoubtedly, come back asking for more money before the stadium is finished.

        Whatever happens, Commissioner Bedinghaus, the man who has staked his political career on a new stadium for a losing football team, doesn't want to scale back the project.

        “That, in my mind, would be the worst thing we could do,” Mr. Bedinghaus said.

        This stadium, he said, should be built to last a generation, or more. The money spent now will be worth a stadium that functions for decades to come.

        The question is how much more money will have to be spent and who, ultimately, will foot the bill?

        How much will be answered over the next few months. But who is to pay for it all could be argued by lawyers for years to come.

Borgman cartoon



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