Kerplunk: City approves funds to help EEG write business plan for space center

Kerplunk!

That’s the sound of the first drop of city funds into the Environmental Education Group’s (EEG) proposal to pick up where others have failed and build a space complex that will bring millions if not billions of dollars into city coffers.

The first money drip occurred Tuesday, July 3, when the City Council voted to spend $11,500 to hire a consultant to review EEG’s pro forma for the multi-million dollar complex. At least that’s what the Council was told, repeatedly, the contract was for.

Councilwoman Ashley Costa threw the first monkey wrench into the anticipated easy approval of the $11,500 contract by asking a question that stumped all in council chambers. Costa’s highly complex question was: Where will the money come from?  No one knew. Mayor John Linn suggested a short break to give staff time to get an answer, but Costa had more questions.

Since the purpose of the contract is to evaluate a pro forma, she inquired, has a pro forma been submitted?  No, no pro forma has been submitted. Costa pointed out the obvious: It’s counter-intuitive to hire a consultant to evaluate a pro forma that the city hasn’t yet received.

So now, the real but previously unstated reason for hiring a consultant before EEG submits a pro forma was revealed. The city, it seems, needs to pay the consultant to help EEG understand how to prepare a pro forma. According to the city attorney, who served as a determined advocate for hiring the consultant, the city needs to pay a consultant to advise and consult with EEG on how to prepare a pro forma in the proper “format.” Apparently, the city doesn’t know what a proper pro forma format is either.

The dictionary definition of a pro forma is “a standard document or form or financial statement showing potential or expected income, costs, assets, or liabilities, esp. in relation to some planned or expected act or situation.”

Since it takes hiring a consultant to know the proper format for a “standard document or form,” apparently the dictionary got it wrong — pro formas aren’t all that standard and that format thing is a deal breaker.

The city, it seems, rushed to EEG’s rescue with its own funds to help it figure out what a pro forma is supposed to include. That may be because the city knows EEG has not yet submitted even the semblance of a summary of its vision for the $220 million educational and tourist complex that will attract visitors from all over the globe to watch a rocket launch from far away.

The rationale might have gone something like this: “Hmm. They haven’t been able to prepare a simple one-page summary. They didn’t produce an organizational portfolio. Their written communications are illiterate and ungrammatical.  And a 5th grader with an iPad could produce more professional looking work. Maybe we should pay a consultant to tell them what to do next.” 

Apparently, the nine months EEG has been shepherding their plans for this project hasn’t been long enough to figure out how to produce a pro forma, or long enough for EEG to raise a few thousand dollars on their own to hire someone who knows what a pro forma is supposed to include.

But Councilwoman Cecilia Martner threw another monkey wrench into the discussion by pointing out the Exclusive Negotiating Agreement (ENA) with EEG actually spells out what the city agreed to pay for, or not. The ENA, Martner read, states quite specifically that the city :

“ shall not be liable for any costs associated with the planning, acquisition, or development of the Project Site … including but not limited to the City’s fiscal analysis of the Project by a third party chosen by the City.”

In other words, the ENA makes clear that EEG should pay for the costs of the fiscal analysis (not to mention the definition of a pro forma) provided by a third-party consultant, leading Martner to question why EEG couldn’t pony up half the cost of the Preparing a Pro Forma 101 lesson.

Undeterred by the evidence straight from the language of the ENA, and probably frustrated by these contrary women asking questions about fiduciary duties and legal agreements, Linn said it was time to move for a vote. There’s “too much disconnect,” he concluded.

Costa offered a compromise: Limit the amount of hours, and funds, the consultant can spend helping EEG understand what a pro forma is supposed to be, since the purpose of the contract, after all, was actually to evaluate the pro forma.  Linn suggested they halve the contract: the consultant can spend half the funds teaching EEG what to do and the remaining half evaluating what EEG produces after the consultant has told them what to do.

So, let’s see, it took the city about 35 days after approving the ENA on May 29 to begin the money drip, discarding the terms of the ENA intended to protect the city from losing funds on a failed venture. EEG is now the recipient of the city’s first space center kerplunk.

Back to Costa’s first question. After a short recess, staff disclosed the consultant fees would be taken from the city’s allocation for administering federal Community Development Block Grant funds, mostly used to pay staff salaries. That led Costa to point out that other organizations that need to prepare a pro forma to submit to the city had a right to request the same city-paid assistance from CDBG funds used to pay staff salaries, naming the motorsports park group as a possible candidate for a city-paid Preparing a Pro Forma 101 lesson. Setting precedents can be tricky stuff indeed.

And, one more note about that format thing:  The city just voted to spend $5,750 to help define a business pro forma for an organization trying to induce private investors to trust it to develop a $220 million California Space Enterprise Center. How enterprising.

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