Earlier today, in addition to the press conference about the resignation of Joyce Wilson, the mayor announced that the downtown ballpark would cost an additional $8.1 million. Unlike the previous administration under John Cook, Oscar Leeser released a complete explanation of the negotiations, advised the community that city council would be voting on the proposal on Tuesday, October 15 and released a copy of the proposed agreement modifications.
According to the mayor’s office press release, on September 5, the Construction Manager at Risk advised the city that the estimate for the construction of the ballpark would exceed the $52.5 million “guaranteed maximum price” for the ballpark. According to the press release, the higher costs were due to the higher bids submitted by the subcontractors to complete portions of the ballpark.
The city’s press release goes on to state that on September 27, 2013, MountainStar submitted a signed “Supplemental to the Ballpark Development Agreement” where it agrees to pay for the cost overruns. The release adds that the ownership group “affirms the City is not responsible for funding more than the $64 million previously approved by City Council” and agreed to “fund and portion of the GMP in excess of $52,545,810”. GMP stands for guaranteed maximum price.
In order to assure the city of MountainStar’s commitment, according to the press release, MountainStar provided two irrevocable letters of credit to fund the excess by 5:00 pm on October 7, 2013.
An irrevocable letter for credit is basically a letter issued by a bank guaranteeing that a payee will be paid once a certain defined project is completed. It is similar to a certified check where the bank is the one that guarantees the instrument will be paid. However, a letter of credit sets requirements before the bank releases the funds. An irrevocable letter of credit means that no changes can be made to the terms unless the three parties agree to them the city, the issuers and the bank making the guarantee.
According to the mayor’s press release, on September 30, 2013 the guaranteed maximum price was revised to $60,691,560. This new price was approved by both the city and the ownership group. The press release adds that this new cost meant that MountainStar would be responsible for $8,145,750.
The press release adds that MountainStar “provided two irrevocable letter of Credit totaling $8,145,750” to the city on October 7, 2013.
Oscar Leeser’s press release states that on October 15, 2013, the city council will be voting on the proposed changes to the ballpark agreement, including the higher cost and on accepting MountainStar’s letters of credit.
You can view the proposed Supplemental Agreement by visiting this link.