Edgemoor Infrastructure & Real Estate on Thursday stood on the brink of losing a $1 billion deal to design and build a new KCI terminal after a super-majority of the Kansas City Council rejected a proposed agreement.
And while the firm survived a hectic Thursday council meeting, it could still lose the job.
Councilmembers threw out a memorandum of understanding with Edgemoor, the product of negotiations between the firm and the city’s hired legal team from Husch Blackwell.
They expressed concerns about the agreement’s vague terms, insufficient community benefits and worries about a provision that could pay Edgemoor up to $30 million if the deal never closes.
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Quinton Lucas, a 3rd District at-large councilman, said the memorandum left open several questions.
“There’s a reimbursement agreement that obligates the city to potentially millions of dollars, a number of those costs incurred before the election,” Lucas said. “There was absolutely no detail on financing. I know we want flexibility, but we also want to know what we are binding the city to, potentially for years to come.”
It was an at-times tense council deliberation over the Edgemoor agreement, cut in half by a one-hour closed-door meeting. But in the end, a veto-proof majority would not budge.
Voting against the agreement were Scott Wagner, Heather Hall, Dan Fowler, Teresa Loar, Lucas, Lee Barnes, Alissia Canady, Scott Taylor and Kevin McManus. Voting to approve it were Jermaine Reed, Jolie Justus, Katheryn Shields and Mayor Sly James.
“If they want to sit down and discuss additional issues, we’re happy to sit down and discuss those with them,” said Geoffrey Stricker, managing principal for Edgemoor.
But Stricker left City Hall before Councilman Barnes introduced a resolution that would immediately end further negotiations with Edgemoor. Barnes, who has made no secret of his unhappiness with Edgemoor, said the city was at an impasse with the Maryland firm.
Barnes relented and was persuaded to send the measure to a committee for further negotiations next week, forestalling a vote on cutting off Edgemoor right away.
The scene at City Hall was a stark contrast to the hugs and high-fives Nov. 7 after a huge majority of voters —75 percent — approved the replacement of KCI’s three-terminal layout with a gleaming new single terminal building.
Thursday’s meeting was a reminder of the dog days of summer when the council was wrestling with a bidding process for the terminal contract between Edgemoor, AECOM and Burns & McDonnell.
Barnes’ resolution, if approved, would have the city negotiating with AECOM, the runner-up firm from this year’s bid contest.
James suggested that the majority’s stated complaints about the memorandum were window-dressing for their preference to have AECOM land the KCI contract.
“Those aren’t the real reasons. Some of the folks wanted AECOM in the first place,” James said. “When they didn’t get them, they are now constructing a way to get what they want. That’s what this is about in my mind.”
Barnes acknowledged that he thought AECOM was the better firm.
“They had the best proposal from the start,” Barnes said. “They spelled out in much more detail how they would approach the project, the financing of the project.”
Other council members questioned whether the city had seen the best agreement it could get.
“I have concerns about whether this is the best deal,” Wagner said. “Whether it be community benefits or how the financing is handled.”
Edgemoor won the selection process earlier this year with a proposal that was somewhat open ended; Barnes called it “ambiguous.”
Its financing structure was flexible and nonspecific and its design didn’t exist until after it won the contract. That’s in contrast to Burns & McDonnell, for example, which submitted a specific financing framework, even though that framework was later the basis for its disqualification from the bidding process. AECOM also had a specific financing plan, including $115 million in equity into the project.
Some council members were perplexed that the Edgemoor memorandum still had no firm outline of its financial proposal.
There was also criticism about an insufficient community benefits agreement, which would involve Edgemoor supporting disadvantaged communities with job training, child care, transportation and loans to minority businesses so they could participate in the project.
Council members also questioned a reimbursement agreement that pays Edgemoor and its partners up to $30 million for work performed on the KCI project in case they can’t stitch together a final agreement and a financing package.
Some of those costs included preconstruction work ($3 million), architecture and design work ($19.8 million) and legal costs ($1.1 million) between now and September 2018.
It also included other costs, like $165,000 for travel and $220,000 for community relations. Skeptical council members thought that was imprecise.
“When you just have a generic line items for $15,000 a month for travel and it’s not saying who and where and how, that’s a little vague,” Hall said.
Charles Renner, the Husch Blackwell attorney negotiating on City Hall’s behalf, said the $30 million agreement allows the city to keep any work product created by the Edgemoor team in the event the firm walks away from the deal. That way, Renner said, the city isn’t stuck starting over from scratch.
Shields said that when the memorandum was discussed in committee last week, council members were asked to bring forth issues they had in the intervening week.
“My understanding is nobody came forward,” Shields said. “My real concern though is we went through a lengthy process this summer and it got off to a bad start. We cleaned up the process, had an outcome and we presented that outcome to the voters. The voters voted overwhelmingly in November. I wonder how they feel? Do they think we just engaged in a bait and switch from what we committed to?”
Thursday’s vote leaves the future of KCI in some doubt. If Edgemoor is sent packing, can the city just start negotiating straightaway with AECOM? Does the city have to put the project out for bid once again?
“We have conflicting legal opinions on that,” said Kansas City Manager Troy Schulte, adding, “The goal has always been to avoid litigation.”
Justus said the city will still get its new airport terminal.
“This does not change the fact that over 75 percent of our voters voted to advance a project that we as a council have said that we’re in favor of,” she said.