LOS ANGELES, Oct. 21, 2014 (GLOBE NEWSWIRE) -- With the Board of Recreation and Parks (RAP) Commission scheduled to discuss the Greek Theatre concession Thursday, new concerns have been raised regarding the external consultant's (Strategic Advisory Group) failure to disclose Live Nation's inclusion of a rent relief exception that the RAP General Manager admits was prohibited by the RFP.
"Buried on page 378 of Live Nation's proposal is an exception that would allow Live Nation to transfer some of its contractual risk to the City by requiring rent relief 'commensurate with the estimated loss of revenue' if Live Nation is unable to complete its capital improvement projects before the beginning of the 2016 season. The simple fact is that the rent abatement clause significantly distorts the revenue proposal Live Nation submitted to the City, and, due to the strings attached should have resulted in their disqualification," said Alex Hodges, CEO Nederlander Concerts.
According to the City's RFP, a fundamental concept underlying partnership between the City and any private party is the transfer of risk. In this case, the transfer of risk related to the capital improvements, operation and maintenance of the Greek Theatre. As structured, the City's procurement process is designed to transfer the city's risk of improving and operating the Greek Theatre, and transfer it to a winning management team. Those risks include permitting, construction, litigation, environmental and historical review. Live Nation's inclusion of "rent abatement for unforeseen circumstances" returns a significant portion of risk related to facility and site improvements back to the City. This is inconsistent with the philosophy of the procurement; not in the best interest of Los Angeles taxpayers, a violation of the RFP and should have been highlighted by the evaluation Committee for the City's consideration.
On Thursday, October 9, the RAP Commission failed to reach a consensus for the second time on whether to affirm an initial staff recommendation to award the contract to Live Nation. In a series of detailed letters sent to the city, Nederlander Concerts in joint venture with AEG Live have raised serious concerns about the evaluation of both proposals. Some of the more significant errors include:
- The Nederlander-AEG proposal guarantees over $6 million more to the City over 10 years and in excess of $17 million more over 20 years versus the Live Nation proposal. The guaranteed cash in rent to the City by Nederlander/AEG is not contingent on the number of shows, but a contractual obligation that is unmatched by Live Nation.
- The Panel was misled by Live Nation's inclusion of items in its proposal which were prohibited by the RFP, such as an inflated preventative maintenance commitment that included routine maintenance such as janitorial and pest control to inflate the number. While accepted at face value by the consultants, this was inconsistent with the RFP and erroneously turned the scoring in Live Nation's favor. When the numbers are equally tallied, the Nederlander/AEG Live bid was significantly higher than Live Nation's preventative maintenance commitment.
- Giving Live Nation financial credit for their "community trust fund" that does not provide any funding to the City, is unsound. Nevertheless, the fund, financed by charging above face value for tickets, is cited as a financial benefit to the City 14 times in the 11 page staff report as part of the financial analysis. The RFP did not ask proposers to tally expenses related to community activities, and if it had, a review of the pro-forma in the Nederlander/AEG Live proposal reveals substantially more community expenditures.
- City records reveal that the evaluation panel was told to "assume" that the proposals were for a 20 year contract, when in fact there is only a 10 year guaranteed term, plus two five year options to the City. As a result of this error, the panel scored Live Nation for a commitment of $15,000,000 as "guaranteed" capital improvements, which are in fact both contingent and speculative. This error has caused a recommendation that the City pass up millions of dollars in rent for an amorphous benefit that could not be realized until after 2026. SAG compounded the mistake by erroneously claiming Nederlander/AEG Live planned no capital expenditures in the option years.
"Even though we still have not yet had an opportunity to review the complete procurement file, we believe that if the process had been conducted fairly, Nederlander/AEG would have won with a superior proposal built on: (1) the highest minimum guaranteed rent payments to the City, (2) a proven track record of delivering on our obligations, (3) the earned trust and respect of the surrounding Greek Theatre community, (4) a labor-friendly operation, (5) a significant redesign of the venue by one of Los Angeles' most preeminent architects, and (6) a community program that will provide increased access to the arts, job training and mentorship for residents all over the City. We believe that it is part of the commissioners' responsibility to make sure the process was followed correctly. We are confident that after proper review and diligence is conducted, Nederlander/AEG's superior proposal will be the clear choice both financially and for the community," added Hodges.