Three Rock Hill projects worth millions had ‘no-bid’ contracts

adouglas@heraldonline.comSeptember 8, 2013 

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Rock Hill officials have waived the competitive bidding process for three recent projects worth millions of dollars – a move allowed by city law, but criticized by the leader of a government policy think tank.

One of those projects is a $3.4 million parking garage connected to the four-story office building Comporium Communications is raising in downtown Rock Hill.

Another is a $1.6 million office and registration building designed to complement a new BMX Supercross race track in the city’s outdoor center at Riverwalk, near Interstate 77 and Cherry Road.

Typically, Rock Hill seeks bids from companies interested in taking on city projects or offering services to the city.

When government officials skip or waive competitive bidding for projects, the contracts are sometimes called “no-bid contracts” or the spending is referred to as a “sole-source procurement.”

Rock Hill City Manager David Vehaun says he knows of just three major projects over the past five years, including the parking garage and the BMX building, for which the city did not seek bids.

All three of those contracts were given to Rock Hill businesses – two to Leitner Construction, one to J.M. Cope Construction.

A few years ago, the City Council agreed to spend about $5 million to build the Giordana Velodrome, which opened in early 2012 at Riverwalk.

Rock Hill hired German architect Ralph Schuermann to design the bicycle race and recreational venue through its development agreement with The Assured Group – the master developer and owner of hundreds of acres of land at Riverwalk.

Leitner built the cycling facility from Schuermann’s design without the city’s soliciting competitive bids, Vehaun said, although the private developer did use a bidding process.

Cope is building the BMX facility, also part of the city’s Riverwalk development agreement.

Leitner is building the downtown parking garage, which is a part of Rock Hill’s development agreement with Comporium, signed earlier this year.

While South Carolina law mandates that state agencies such as universities follow state procurement code, it exempts “political subdivisions” from following the same rules. Cities must write their own purchasing policies.

State law states that cities must “adopt ordinances or procedures embodying sound principles of appropriately competitive procurement.”

Rock Hill’s purchasing policy refers to using “formal bids” for buying services or materials valued at $10,000 or more and awarding contracts to the lowest bidder, while taking into consideration the bidder’s abilities.

The policy states that Rock Hill’s purchasing rules are meant to “conserve public funds” by ensuring the city receives the best price and service available, to treat businesses fairly and to “secure, whenever possible, competitive prices on purchases.”

The city waives competitive bidding in “really limited circumstances,” Vehaun said.

“We understand how important the bid process is,” he said. “We are very much involved in the bid process.”

Vehaun points to recent and upcoming public projects in which city officials are using competitive bidding, including:

• A $6 million downtown park, which, along with Comporium’s office building, the parking garage and other planned improvements will make up what city officials call “Downtown East.”

• A $1.7 million expansion to Rock Hill’s Law Center, home to the police department and city courts, expected to be completed next year.

• Materials for a new electric substation near downtown on Stewart Avenue, which city officials have said will cost about $2.5 million

Competition combats corruption

Although “no-bid contracts” are rare in Rock Hill, the president of the South Carolina Policy Council takes issue with government officials spending money without seeking competitive bids.

The Policy Council bills itself as a private, non-partisan research group that promotes limited government, free enterprise and individual liberty.

Taxpayers deserve a competitive bidding process every time their money is spent, said Ashley Landess, the group’s president.

While Rock Hill and other cities are exempt from S.C. procurement law and can choose to waive competitive bidding, she said, sole-source procurement “should wave a lot of red flags.”

“Just because it’s legal,” she said, “doesn’t mean it’s not corrupt.”

Competitive bidding rules are in place to curb potential problems with government spending, Landess said, such as nepotism, “pay-to-play” campaign contribution tactics and corruption.

Landess thinks procurement laws in other states are better and more strict than government spending laws in South Carolina.

Relaxed policies in South Carolina have made it easy, she said, for private corporations and businesses to avoid spending their own money on projects from which they will profit.

Tax breaks, tax credits and – in other cases in S.C. – companies’ receiving infrastructure for free, take shape in some development deals, Landess said, and amount to taxpayers’ footing the bill for projects that should have been paid for with private money.

Part of Rock Hill’s deal with Comporium includes tax infrastructure credits that reduce state taxes for the company in exchange for money for local public projects.

By 2015, Comporium will have given about $1.3 million to the city under the tax infrastructure credit option.

The city plans to use Comporium’s money to pay for downtown water line and street improvements and to help replace a city water tower on Laurel Street.

Rock Hill officials and council members often point out that major construction projects and other improvements would not be possible without private partners such as Comporium and The Assured Group at Riverwalk.

Private partners have “stepped up” to put their dollars to work in a way that benefits all of Rock Hill, said Steven Gibson, city budget director.

And, with the city paying for public amenities such as a parking garage and recreational venues, residents can enjoy them for free, Vehaun said.

For example, he said, a private company wouldn’t build a garage and let people park for free.

And a private developer wouldn’t invest in facilities like a BMX track or velodrome and then let people attend events there free, Vehaun said.

While Vehaun agrees that competitive bidding is ideal and that private companies should use their own capital for projects, he points out that Rock Hill’s projects are for public use, not for private businesses.

And when the city chooses to waive competitive bidding, he said, it still employs a third-party firm to verify costs and analyze the construction before paying the contractor or developer.

Rock Hill asked the firm that works on its existing Black Street parking garage to provide a projected cost for the new garage, Vehaun said.

The firm determined the garage could cost up to $3.8 million, close to an earlier estimate of $3.4 million from the city’s development partners.

A fixed price

In terms of cost and the scope of work, the city’s partnership with Comporium on the “Downtown East” project is one of Rock Hill’s biggest moves forward in the plan for revitalizing Main Street and the surrounding area.

At Riverwalk, Rock Hill’s partnership with The Assured Group has helped turned a former textile site and hundreds of acres of vacant riverfront property into a residential, commercial and recreational community.

In instances that the city has waived competitive bidding, Vehaun said, the projects have been unique, niche undertakings.

The opportunities afforded by the development agreements are “once-in-a-lifetime kind of projects,” he said.

On the “Downtown East” site, one reason city officials cited for not using competitive bidding was convenience.

As city officials discussed the project with Comporium, the company said it wanted to use a specific project manager – The Warren Norman Company, a local development firm.

In its agreement with Comporium, Rock Hill consented to use Warren Norman and the company’s chosen builder for the parking garage.

Although the city did not solicit for competitive bids for the parking garage construction, Vehaun said, The Warren Norman Company did.

Leitner was chosen to build the garage and Comporium’s office building.

Had the city sought competitive bids and hired a builder other than Leitner, Vehaun and Gibson said, it would have faced numerous operational problems by having two construction companies on the same site.

The Comporium deal includes a fixed price of $3.4 million for the garage, so Comporium would have to pay for any cost overruns during construction.

A fixed-price guarantee is one benefit of building the garage through a development deal instead of using the traditional competitive bidding process, Gibson said.

Cities and counties often see change orders on contracts awarded through competitive bidding, he said, which can drive up the cost.

Paying for projects

Rock Hill is paying for the 78,000-square-foot parking garage with money the City Council borrowed earlier this year.

The debt will be paid with future property taxes from Comporium’s office building and other developments, possibly including a downtown hotel.

City officials hope the park and other recent upgrades to downtown will draw in more development and tax-paying businesses.

The BMX facility and the Giordana Velodrome at Riverwalk also are being financed.

Rock Hill plans to repay its debt on the recreational venues with hospitality tax money – a 2 percent charge on prepared food at city businesses.

Tourism in the city is an $18 million business, according to city estimates of direct economic impact from its recreational attractions.

Last year, Rock Hill brought in more than $4.1 million from the food and beverage tax, Sunday alcohol permits and its 3 percent tax on hotel rooms.

Events at the BMX track should generate nearly $4 million a year in tourist money, city officials have said. The Supercross venue in Rock Hill will be the only one of its kind in the nation open to uses outside of Olympic trial events.

The city is paying for the sport’s national organization, USA BMX, to build the $1 million track.

Some of USA BMX’s largest events, drawing thousands of spectators, will be held at the Rock Hill track.

While city officials have celebrated the benefits of Rock Hill’s relationship with local developers and businesses, Landess doesn’t like the idea of government being involved in most forms of public-private partnerships.

The agreements – such as those delivering Riverwalk and “Downtown East” – give the government too much power to act as “investment brokers,” she said.

But Vehaun and others point to positive, transformative projects in Rock Hill and economic development spurred by the city’s partnering with private businesses.

Still, Vehaun said, “it’s important (to taxpayers) to know public resources are taken good care of.”

Anna Douglas •  803-329-4068

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