Legislators Criticize McKee’s Cancellation of Contract for Armory Rehab

Legislators Criticize McKee’s Cancellation of Contract for Armory Rehab

Two Democratic legislators have harsh words for fellow Democratic Governor Dan McKee — after his announcement Monday that he was canceling the contract with the Philadelphia-based developer Scout to redevelop the Cranston Street Armory.

The project has been immersed in controversy over the past few months after two members of the McKee administration traveled to visit Scout and allegedly made inappropriate sexist comments — both officials have resigned.

The McKee is also embroiled in a controversy regarding campaign expenditure for a lunch at Providence's Capital Grille, in which a lobbyist and political consultant, Jeff Britt, paid for the lunch.  Both the trip and the campaign expenditure are being investigated.

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Legislators Blast Move

Rhode Island State Senator Sam Bell and State Representative Enrique Sanchez “decried” the McKee administration's decision to cancel the contract with Scout.

The legislators said in a statement that the move by McKee to negate the consulting agreement — after Scout had reported extortion and sexual harassment by McKee Administration officials — was pure political payback. 

They also separately report that the McKee administration has broken their commitment to a community meeting with the neighborhood around the Armory. 

“Retribution on this scale makes my stomach churn,” said Bell. “The culture where state contractors got extorted for kickbacks and would lose the contract if they even dared to speak up about it was one of our state’s greatest shame.  That it continues to this day embarrasses not just Governor McKee but the state as a whole.”

“McKee’s retribution blows me away,” said Sanchez.  “I constantly hear from my constituents how important this project is to them.  To be so close to a great redevelopment and then to have Governor McKee try to stop it is such a slap in the face to the whole community.  That it was for retribution for reporting extortion and sexual harassment makes it so much worse.”

“There was a time not so long ago when even the appearance of retaliating against victims who had reported sexual harassment was seen as unacceptable behavior.  Have we lost that in the McKee administration?” added Bell.

 

McKee Defends Decision

McKee unveiled a third-party report earlier on Monday that showed the costs for the project is growing and the proposed usage by Scout may no longer align with the best use.

“If pressed, I’m sure Governor McKee would pretend retaliation is not his motive,” said Sanchez. "But McKee cannot hide from his decision to make such a public spectacle of his retaliation, to so clearly send the message that this is what happens if you speak out about extortion or sexual harassment in his administration.  He could have simply continued to block funding for the project.  Canceling the contract was unnecessary.  It sends a clear message.  He cannot run from the decision to send this message.  Unfortunately, all of Rhode Island will pay the consequences.”

According to Bell and Sanchez, a June 2 email from Interim Director Daniels delayed a promised community meeting until after the JLL report was released. 

"Back in March, Director Thorsen had promised, both in public and in private, to talk to the community in May.  Today, McKee Administration officials informed Representative Sanchez and Senator Bell that the promised meeting will not be happening," said the elected officials. 

“Now that the report has been released, that excuse has passed. It was time to finally schedule this long-delayed community meeting,” said Sanchez.  “Canceling it is yet another insult to every Rhode Islander who cares so deeply about this project.”

 “The commitment of a May community meeting mattered,” emphasized Bell. “Canceling it only deepens our concerns about the appearance of impropriety.  If you don’t have anything to hide, why run and hide?”

 

Consultants Report Raises Questions About Costs and Outlines Benefits

According to state consultant JLL's analysis, the project has significant benefits but also a range of unanswered financial questions:

JLL found the following; 

"We estimate that this project has the potential to create incremental onsite, full-time jobs in the local economy.

• There is a potential to create over 400 full-time-equivalent, direct jobs during the construction phase of this project and approximately 175 ongoing jobs after stabilization.

• The potential for taxes from this project could be approximately $2.4 million annually from income taxes, and indirect benefits.

• These cash streams, if realized over 15 years, could be worth over $50.4 million of fiscal benefit to State and local authorities on a nominal basis, including indirect tax revenues.

• If we analyze the cost to the State over a 15-year period for the adaptive reuse of the Cranston Street Armory, it is approximately $60.9 million. Therefore, the project as currently proposed does not appear to be in the financial interest of the State taxpayers.

• Further, the projected cost to the State for the adaptive reuse is $32.5 – $53.1 million more than the cost to the State to move forward with the baseline options for the Cranston Street Armory.

• Further, as JLL has noted throughout the report: There appear to be many assumptions by the Developer that are not aligned with market norms (i.e. multiple types of development fees). Should the State decide to move forward with the development, the structure and fees should be negotiated in order to ensure the project does not over-enrich the Developer at the State taxpayers’ expense. The proposed deal, in its current form, is structured such that the Developer takes on very limited development risks, while being compensated more than the typical development fee for that limited risk. In our view, the current proposal requires the State to shoulder nearly all of the development, operational, and leasing risks.

• The Applicant has provided conflicting information (i.e. financial model versus DRAFT Term Sheet), which has resulted in challenges with the analysis; additionally, the deal structure/financial analysis lacked specificity, particularly around: Hard costs, which have not been reviewed by a General Contractor; and Soft costs, which have not been updated.