THE VIRGINIAN-PILOT
Copyright (c) 1996, Landmark Communications, Inc.
DATE: Sunday, October 6, 1996 TAG: 9610070183
SECTION: FRONT PAGE: A1 EDITION: FINAL
SOURCE: BY MAC DANIEL, STAFF WRITER
DATELINE: CHESAPEAKE LENGTH: 207 lines
Thomas J. Lyons Jr. was sitting on a pretty good deal.
Lyons, owner of the Holiday Inn Chesapeake, had an option to buy 5.5 acres next to his hotel, a piece of land long touted as a possible site for a conference center. It was a project that would bring some civic pride to Chesapeake while occasionally filling Lyons' 230 rooms.
For about four years, Lyons spent at least $25,000 to help develop the idea. He even placed a $5,000 deposit for the land with its owner, Armada/Hoffler Holding Co.
But two weeks before the deal went to bid, Lyons quickly got out. Something, he wrote, didn't look right.
In a letter on file with the city attorney, Lyons told Armada/Hoffler Holding Co. president A. Russell Kirk that he was dropping his interest in the project after a phone call between a member of Lyons' staff and an official from Armada/Hoffler.
According to the letter, John E. Babb, executive vice president of the Armada/Hoffler Holding Co., had said his company would be ``directly involved'' with the Chesapeake city attorney's office in the writing of a request for proposals, a key document that would be used to invite builders' bids for the publicly financed project.
``We are sure this was merely meant on your part as an effort to facilitate the development of the property by the city and help the city through a detailed process,'' Lyons wrote to Kirk in the letter dated April 30, 1996. ``Nevertheless, we believe that this presents real issues of conflict and public appearance, as well intended as it might be by your firm.
``We are sure that Armada/Hoffler had the best intentions, but in this day and time, it is better to avoid any situation that gives the appearance of conflict,'' the letter said. Lyons ended the letter by asking that his $5,000 deposit be returned.
On May 1, the day after Lyons' letter was sent by both fax and certified mail to Armada/Hoffler, the Chesapeake Industrial Development Authority held a special meeting to approve the request for proposals document, subject to amendments. It passed unanimously.
Two months later, Armada/Hoffler was the only company to bid on the project, which it won.
On May 9, Kirk replied to Lyons' letter, saying that Lyons must have ``misconstrued'' what Babb was saying.
``We totally agree that your firm and ours must be above reproach in dealing with the City of Chesapeake's efforts to develop a conference/convention center,'' Kirk wrote to Lyons. ``Apparently, you . . . have misconstrued John Babb's efforts to share information and ideas to aid the Industrial Development Authority and the City in developing an appropriate'' bid process.
``Although we have had limited participation beyond John's original submittal of information,'' Kirk wrote, ``we understand the city and IDA, ably represented by counsel, have pursued their own tack and are not relying on information provided by Aramada/ Hoffler.''
On Saturday, Babb said, ``I would simply agree with what Mr. Kirk said in his letter. I think he said it all there.''
Almost a week after Kirk's letter was sent, the minutes for the IDA's regular meeting on May 15 note Lyons' concern.
The minutes state that ``concern was expressed from the hotel and construction company involved in the development of the concept of an appearance of impropriety between them and the city in directing the conference center project to be awarded to them.''
Donald Z. Goldberg, Chesapeake's director of economic development, said Thursday that the hotel and construction company was Lyons' Tidewater Inn Management.
The city denied Lyons' concerns, the minutes note, saying there was nothing wrong. The authority changed the request for proposals, nonetheless.
``Although changes had already been made to the document to avoid any favoritism, it was in the best interest of everyone to kill the original RFP and draft a new RFP,'' the minutes state, referring to the request for proposals.
The new bid document was then presented to development authority members, who unanimously voted to terminate the old document and accept the new one.
On Thursday, Goldberg said Lyons was worried about favoritism because the original bid document specifically said the conference center should be in Greenbrier.
``They wanted it open for everyone to have a shot at this,'' Goldberg said.
An early draft of the bid document said the center should ``be adjacent to a full-service hotel facility with a substantial number of rooms.'' Lyons' Holiday Inn is the only full-service hotel in Chesapeake, according to Armada/Hoffler's proposal.
The final document was later broadened to say the center should have ``easy accessibility to hotel accommodations to meet the demands of a facility of this size.''
City officials have said they don't know who wrote the first bid document.
When asked why the city took issue with Lyons' statement of an appearance of impropriety, Goldberg said: ``We denied that there would be any impropriety.''
Asked to respond to Goldberg's statement, Lyons said Friday, ``We expressed in writing to Armada/Hoffler and the city our concerns as to the process. Other than that we don't have any further comment.''
``This is basically an issue between the city of Chesapeake and Armada/Hoffler,'' he said, ``and we do not wish to participate anymore in the situation.''
Lyons would only say he ``withdrew because of concerns'' over the bid process.
City attorney Ronald S. Hallman said Friday he is certain his office was not working with Armada/Hoffler officials in writing the bid document.
``I know it's not true,'' said Hallman. ``It's just a misconstruction of what he (Babb) said.''
Hallman also said he believes Lyons' letter to Armada/Hoffler was a way to back out of the deal.
Hallman said he learned of Lyons' letter back in May and immediately requested a copy because it contained allegations about his office.
After talking with Martin M. McMahon, the assistant city attorney who handled the conference center's bid document, Hallman said McMahon ``categorically knew nothing about it.''
``He said it just simply was not true,'' Hallman said, referring to allegations that McMahon worked with Armada/Hoffler in developing the proposal.
Babb, the Armada/Hoffler official involved in the conversation with Lyons, said ``Marty McMahon is a personal friend of mine'' and that they have known each other socially for several years.
Asked if he wrote the bid document, Babb said ``absolutely not.'' When asked if he knew who did write the bid document, Babb said ``I assume that the city attorney along with the IDA and their attorneys prepared it, but I do not know who wrote it.''
``I think it's very clear what our response is in Russ Kirk's letter,'' Babb said. ``I don't think we have anything to add to it.''
These letters and allegations come to light after Armada/Hoffler officials confirmed that they provided informal advice to the Industrial Development Authority about how to write up the bid request. Company officials have said they did nothing to influence the city's decision to award them the contract.
The history of the request for proposals is important because it could answer questions about the competitive bidding process before Armada/Hoffler Holding Co. won the contract for the $9 million conference center.
Requests for proposals are issued to create competition among contractors and provide taxpayers with the best price. They usually contain information about a project's size, location and general requirements.
During the past week, three officials involved in the conference center all denied writing the original request for proposals.
Goldberg said Thursday that he was ``fairly certain'' that the city attorney's office drafted the original document.
``They must have,'' said Goldberg, ``because I didn't do it.'' No one on his staff wrote the document, he said.
When asked if Armada/Hoffler officials wrote the original document, Goldberg said, ``Not to my knowledge.''
On Friday, Goldberg said he was unsure where the original document came from.
McMahon, the assistant city attorney for Chesapeake who worked on the document, said he never wrote the original.
McMahon said he did write a second draft with the help of IDA's attorney after questions arose about the original.
``I didn't write the first one,'' said McMahon, who is now county attorney in Montgomery County.
W. Greer McCreedy II, an attorney for IDA, said last week that the document originated with the authority's staff. But, he could not identify who gave it to him.
McCreedy is on vacation this week and unavailable for comment. ILLUSTRATION: Graphic
CHRONOLOGY
The following is a timeline of the events surrounding
Chesapeake's proposed conference center:
April 30 - Thomas J. Lyons Jr. sends a letter to Armada/Hoffler
and city officials and drops out of the conference center project,
citing ``real issues of conflict and public appearance.'' Lyons had
long been involved in the project. A possible site was land behind
his Holiday Inn Chesapeake.
May 1 - At a special meeting of the Chesapeake Industrial
Development Authority, the board adopts the bid document for the
conference center, subject to amendments.
May 15 - The Industrial Development Authority is informed of
Lyons' concerns over an ``appearance of impropriety'' in the bid
process. The minutes of this IDA meeting state that Lyons is
concerned that the bid document would be geared towards awarding him
the contract. The city denies Lyons' concern and goes on to kill the
prior bid document and issue a new one.
May 30 - June 1 - The authority advertises the request for
proposals in The Virginian-Pilot and the Newport News Daily Press.
The authority does not advertise nationally, saying it is too
expensive.
June 10 - The authority, using an Internet web page, sends e-mail
messages to at least 10 companies with the bid documents attached.
Some of the companies do not do construction work. At least one does
not have access to Internet e-mail.
June 28 - The deadline for submitting proposals for the
conference center is reached. Armada/Hoffler is the sole bidder.
July 10 - The Industrial Development Authority is formally
presented with Armada/Hoffler's proposal for the conference center.
Armada/Hoffler's proposal comes in over cost ``due to the rise of
interest rates,'' authority minutes state. No financial plans are
listed with the proposal. The authority votes to present the plans
to the City Council ``to determine what the level of interest would
be in moving forward with the proposal,'' according to minutes.
Aug. 16 - The city's Public Works Department is asked to review
Armada/Hoffler's proposal.
Aug. 29 - The city holds a press conference to announce the
conference center. Armada/Hoffler is introduced as the firm awarded
the contract.
Sept. 9 - The Industrial Development Authority unanimously passes
a motion authorizing the authority to go forward with the project.
Sept. 10 - The City Council, by a vote of 7-2, approves the lease
agreement for the conference center with Armada/Hoffler. The council
raises local hotel and meal taxes to help pay for the project.
Sept. 24 - After an executive session, Councilman Alan P.
Krasnoff asks the council to delay signing the conference agreement
with Armada/Hoffler until an audit of cost overruns at the new city
jail is complete. Armada/Hoffler is the construction manager for the
jail. The council votes down the motion 6-3.
Oct. 3 - The City and Armada/Hoffler sign the contract and lease
agreement.
May 1997 - The jail audit is scheduled to be finished.
Sept. 1997 - The conference center is expected to be complete. by CNB