GALVESTON — The Redevelopment Authority voted Monday to end its agreement with island developer Sullivan Interests to lobby the federal government to give the city a dredge spoils site that now belongs to the U.S. Army Corps of Engineers.
The Sullivans had agreed to spend up to $500,000 advocating for the transfer, in exchange for the right to develop the property if the city ever took ownership.
But a majority of the authority’s five members agreed the original memorandum of understanding between the company and the authority had enough problems that it should be scrapped.
Members Ed Clack, Jos Wristers and Elizabeth Beeton, who also is a member of the city council, voted to end the agreement. Chairwoman Norma Venso and member Tarris Woods, the other council member who sits on the authority’s board, voted to keep it in place.
Backing out of the agreement now makes it unlikely any other developers will ever take an interest in the project, making it almost impossible for the island to ever capitalize on the valuable site, Billy Sullivan said.
Although Clack, who made the motion to terminate, said he wanted to send the agreement to the city council for direction, the council was not a party to the agreement and, therefore, does not have standing to reverse the decision, City Attorney Susie Green said.
‘Flawed Selection’
Island leaders have worked for years to get the 600-acre dredge spoils site known as the East End Flats from the federal government. The property, between Ferry Road and Seawall Boulevard, is the largest undeveloped tract of land left behind the seawall. It did not flood during Hurricane Ike.
In 2007, the city council decided to solicit a private developer to help with the project and asked for proposals from companies willing to negotiate with the federal government and eventually bid to become the site’s master developer.
The Sullivans won the bid for the work in May 2008, in part because the company offered to put up its own funds for the attempt to secure the site.
But the selection process was flawed, Beeton said Monday.
Exclusivity Questioned
The Galveston Economic Development Partnership, which managed the bidding, did not advertise it widely enough to gauge real interest from national developers, Beeton said. And the request for bids was so vague that the three responses varied, making them hard to compare, she said.
Beeton also criticized the lack of public input into the decisions about what eventually would be built on the site.
And the agreement made it impossible for the city to know whether it would get a good deal in its eventual negotiations with the Sullivans about the property’s development, Beeton, Clack and Wristers all said.
“I have a high regard for the Sullivans and the high quality of their developments,” Wristers said. “I would like the development of the East End Flats to be done by a local. But I am very reluctant to agree to exclusively negotiate in the future with the Sullivans.”
Risky Business
Under the agreement, the Sullivans had the right of first refusal to buy the property from the city and develop it, if the federal government ever agreed to give it up.
In his proposal to the economic development partnership, Billy Sullivan suggested the land could be worth only $1 because of the amount of work it would take to prepare it for building.
Sullivan estimates it could cost as much as $75 million to dry out the dredge spoils that now cover the site. The sludge is about 20 feet deep, he said Monday.
The project is risky, because of the cost, which is why it’s a good deal for the city to have a private developer putting up the money, Sullivan said. But with risk comes reward, he said.
“If we risk the money, there should be a reward at the end,” he said.
Although the city gave up its right to seek competitive bids from a developer under the agreement with the Sullivans, the compromise was worth it for a chance to get the land, something it tried unsuccessfully to do for 71 years, said Curtiss Brown, director of community services for Galveston County and a chairman of the group that selected the Sullivans for the project.
“If we’re going to have the opportunity to do that work, to do this development, we’re going to forget what competition could have given us because we can’t get there from here under competition,” he said.
‘No Fair Shake’
Beeton said she wanted the city to spend its sales tax revenue to fund efforts to get the federal government to give up the land. Once the city owns the property, it could do engineering studies to find out how much it would cost to stabilize the soil, she said.
The city could then get feedback from the public about what should be built at the site and give developers interested in the project solid information about what they would be getting into, she said.
But other developers will think twice about bidding on this project in the future after seeing how his company was treated, Sullivan said.
“What do you think out-of-town developers will think if a hometown team can’t even get a fair shake here?” he asked.
