"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.
• 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."
• 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.
• 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.