GOLDMAN: 10 legal flaws exposed in Mayor Jones’ Shockoe Stadium plan

Paul Goldman is a local lawyer who helped run Doug Wilder's historic campaign for governor of Virginia.

Paul Goldman is a local lawyer who helped run Doug Wilder's historic campaign for governor of Virginia.

RICHMOND, Va. – For six months now, Mayor Jones has wasted millions of dollars of your money on staff salaries, perks and other expenses on a Shockoe Stadium proposal that has serious, indeed fatal legal problems.

That’s right, the Mayor has been forcing you to pay for huge salaries and perks to people who apparently do not even know what a first year law student should know.

The Jones’ Shockoe Stadium boondoggle is a legal quagmire of jaw-dropping proportions for a combination of the following 10 reasons:

1. CITY/EDA LAND DEAL VIOLATES SECTION 9 OF ARTICLE VII OF THE VIRGINIA CONSTITUTION

As singer Laurie Morgan asked:  What is there about “no” that Mayor Jones and City Council don’t understand?

The City of Richmond CAN NOT LEGALLY give the Economic Development Authority certain public property as the Mayor demands and apparently the City Council accepts. Why do I say this? Because otherwise City Council would have by now objected!

There is not some financial or other detail. It is a legal violation no court could permit to stand. Whatever the views of the Mayor and City Council, the Constitution must be obeyed.

2. STADIUM CONSTRUCTION PROCESS VIOLATES STATE COMPETITION LAW

The EDA leadership – with the approval of the Mayor and City Council – said their contracting process for building the football practice stadium behind the Science Museum will be their model for the Shockoe baseball stadium project.

However, this is not legal. From reliable sources, I have been told the City Attorney’s office appears to believe this is legal due to Section 2.2-4344[B], which on its face purports to exempt the EDA from the Virginia Procurement Law.

But this exemption doesn’t apply if the EDA intends to be the owner of the ballpark. As best as one can determine from the documents provided to the Mayor’s office to the City Council, the Shockoe Stadium proposal contemplates EDA ownership since the Authority is issuing the bonds to finance the stadium [Section 3.2.2, proposed Shockoe Development Cooperation Agreement between the EDA and the City].

However, if the EDA is the owner, the exception contained in Section 2.2 – 4344[B] does not apply if you closely read the applicable definitions.

Accordingly, the construction of the proposed Shockoe Stadium to be owned by the EDA must follow the competitive procedures outlined here.

3. COUNCIL MISSTATES THE LAW ON PUBLIC CONTRACTS

Contrary to the statements by certain Council members, the no-bid contracts between the EDA and private interests which Council has been prepared to sign are not private contracts.

As I have been trying to tell them for months, a “public contract “ is clearly defined in Virginia law as an “agreement between a public body and a nongovernmental source that is enforceable in a court of law.”

This is not debatable. Therefore any no-bid deals negotiated in private between the EDA and various private parties essential to the Jones Shockoe deal are “public contracts” covered by state procurement laws.

The Mayor and Council are therefore wrong in claiming the EDA has no power to negotiate the terms of any such public contract.

4. MANDATORY QUOTAS DEMANDED BY MAYOR AND CITY ARE ILLEGAL

While the Mayor and City Council may agree with Shakespeare that the “law is an ass,” the rulings of the Supreme Court on the issue make it clear mandatory quotas for political allies of elected officials are illegal when it comes to the awarding of city contracts.

For example, one of the contractual terms demanded by the Mayor and not opposed by City Council requires “there shall be a 20% MBE/ESB development and ownership” in a part of the Shockoe Stadium proposal [Stadium South Memorandum, Clause # 6].

Such a mandatory requirement is illegal.

Indeed the 40 percent requirement, phrased as a “goal” by the Mayor through these EDA contracts, has likewise received Supreme Court review not only in the case previously cited but a later case.

What the Mayor wants to do, and without any push back from Council,  is to potentially give hundreds of millions of dollars in public contract cash to what could be – after all, the terms of the EDA contracts appear to keep the names of the firms secret – political allies and contributors of the city’s elected officials.  Based on the legal reasoning provided to date by the city, it does not satisfy the tests established by the Supreme Court.

5. TURNING THE EDA INTO A DE FACTO AGENT OF THE CITY.

By law, both in terms of the state code and the required city ordinance creating the EDA, the Economic Development Authority is a de jure separate non-city agency.

The EDA was created to be a non-city agency, this is the driving force behind allowing localities to create such an entity.

In that regard, the City Ordinance creating the EDA I 1972 and updated since then, follows the statute putting the EDA in sole charge of its affairs as stated in such legal enactments.

In turn this is the justification for claiming the EDA is not subject to the requirements of the City Charter and City Code, since it is not legally part of the city of Richmond. Taken then at face value on a de jure basis, the EDA and the City are two separate entities thus able to be the two parties necessary for a contract between two independent entities.

However, the Shockoe Stadium documents submitted by the Mayor, and sadly consistent with City Council prior approval by resolution, indicates that there is in fact a de jure agency/superior relationship between the EDA and the City.

For example, in the Shockoe Development agreement referenced previously, several sections say the EDA can only agree on terms and conditions “subject….to the approval” of, or “with the prior written consent” of Byron Marshall, the CAO for the city. Moreover, Mr. Marshall has been negotiating many terms of many of the deals that legally will be memorialized with EDA contracts.

To the extent, therefore, that the EDA has been turned into a de facto agent for the Shockoe Deal by its actions in deferring to Mr. Marshall, this raises the issue of whether the EDA can claim the exemptions from the public procurement laws applicable to city actions.

If the city has hijacked the EDA for the purpose of making a legal end run around the rights of the citizens in the City Charter and City Code, then this is contrary to the intent of the law. Based on those contract clauses giving the CAO final say, the EDA is operating, at least in those instances, as an agent of the city, not a separate non-city legal agency.

Indeed when the City Council as it has, approves by resolution of Mr. Marshall negotiating the terms of an EDA contract, what does their action due to the legal status of the EDA?

On one hand, it does nothing since a City Council resolution doesn’t change the city ordinance creating the EDA.

But to the extent the City Council is turning the EDA into an agent of the city, then the Authority loses the very character qualifying it for special rights under the state’s procurement laws. Therefore if Marshall’s involvement is seen as crossing a legal line although by de facto actions, all those contracts negotiated by him might become legally suspect in one or more ways.

6. EVADING THE PUBLIC’S REFERENDUM RIGHTS UNDER THE CITY CHARTER

The City Charter contains legal rights available to the citizens to protect Richmond’s finances, including among others, the right to require a citywide referendum to prevent the Mayor from risking the city’s future on a stadium boondoggle. Section 7B.05 of the Charter, anticipating risk-less projects by a Mayor and City Council, gives the public the right to demand a referendum on squirrely financing schemes.

I am not sure this referendum right has ever been previously invoked. But given certain changes in the Mayor’s original Shockoe proposal, there is reason to believe he changed his financing scheme not long after I first wrote about the Section 7B.05 aspect.

The precise financing scheme Mr. Jones intends to use remains still clouded in mystery. On its face, the referendum right in the Charter is limited to certain city bonds, and not applicable to EDA debt financing.

But Jones’ Shockoe Stadium proposal has evidently been altered in recent months to bypass as many of the public’s rights and protections as possible. In that connection, suppose a Judge, in an appropriate lawsuit, were to find that Mr. Marshall and others, enabled by City Council resolution, had turned the EDA into a de facto agent of the city for various reason, one being trying to avoid a Section 7B.05 referendum. Could the Court order one?

Moreover, under state law the EDA actually cannot issue any bonds unless approved by City Council after due consideration. Assume the Council is still debating the bonds when the 2015 General Assembly Session convenes. Could they pass emergency legislation giving the public a Section 7B.05 referendum for an EDA bond on the grounds the Mayor’s actions has essentially made it an obligation of the City de facto.

This could easily develop into a sticky legal point.

7. DEFYING SECTION 106 OF THE NATIONAL HISTORIC PRESERVATION ACT

In a letter sent to Byron Marshall this past March, the National Trust for Historic Preservation expressed shock and dismay over indications the Jones Shockoe proposal risked “destruction of historic or archaeological resources in Shockoe Bottom prior to the completion of Section 106 review.”

The letter said the “National Trust strongly urges the City of Richmond and its development partners to avoid taking any such action…”

Yet city officials have refused to commit to such a Section 106 review, indeed they seem to going in a different direction. The National Trust letter could be read as a form of “litigation warning” letter used in the law for certain circumstances. If the City doesn’t do any required Section 106 review, or heed the Section 110 requirements likewise referenced in the letter, the National Trust could be read as hinting about their intention to file a law suit.

8. THE EMPEROR JONES SYNDROME USED TO VIOLATE THE CITY CHARTER

In the Richmond Times-Dispatch on Sunday, Mayor Jones declared that his office, not City Council, should make all economic development decisions including whether to build a ballpark in Shockoe Bottom. It was an extraordinary declaration of unilateral power.

It defies the City Charter and effectively reduces City Council to a rubber stamp on such issues. What happens if the Mayor decides to use his veto power to force Council to secede him this power should his four pro-Stadium allies back his vetoing everything until the Council majority cries “No Mas, No Mas” on Shockoe?

This points to a troubling aspect of the Shockoe Bottom proposal not yet discussed. Its seeming violation of Section 2.05 (f) of the City Charter. This section addresses the many areas of Richmond home to many unique historical events in America including the notorious “Wall Street” of Slave Trading dominating Shockoe Bottom for many decades prior to the Civil War.

As I read this section, it intends for the Council to act, even against a recalcitrant Mayor, to preserve such history, empowering them, if needed, to eminently domain the land to a private non-profit group set up to protect such history from destruction.

This has not yet happened.

The failure of Council to act, should it be seen as potentially leading to the loss of such history, is likely to be a catalyst to lawsuit, if not protests creating any number of legal issues.

9. “INSTITUTIONAL CORRUPTION” THE NEW NAME FOR “HONEST GRAFT”

According to the Harvard Center for Ethics, the leading source on the subject, what was called “honest graft” in the days of the Tammany Hall political machine is now better viewed as “institutional corruption.”

This is defined as “the consequence of an influence within an economy of influence that illegitimately weakens the effectiveness of an institution especially by weakening public trust of the institution.”

It therefore seemingly applies to a widely proclaimed “economic development” project that triggers a wide public backlash against those leading a local government, thus hampering their ability to move matters forward.

The use of the EDA to justify no-bid, secretive sweetheart deals made in violation of the general state policy of competitive bids, therefore weakens the law by weakening public respect for those passing the laws and administering the laws.

The concept between “honest graft and dishonest graft” in terms of public laws on no-bid, sweetheart deals is famously featured in several speeches recorded in a book published in 1905.  It has since it legendary status for those who study public administration.

It seems increasingly likely that if the Shockoe Stadium debate continues into 2015, the General Assembly will be force to grapple with the fallout here in Richmond, almost surely leading to new state laws that might actually derail any Shockoe Stadium project.

10. VIOLATING THE VIRGINIA PUBLIC PROCUREMENT LAW

The Mayor and his pro-Shockoe Stadium posse insist their contracts with private interests are legal under an exception to the Virginia Public Procurement Act. This question has come up repeatedly as regards the contract with the Stadium South LLC, containing among the most questionable clauses as regards agreements therein with SWA Architects, and what seems to be the project of David White and Lou Salomonsky, the same boys under fire for their proposed Libby Hill High Rise project.

As I understand it, the City Attorney’s office cites here the same 2.2-4344[B] exemption clause wrongly claimed as discussed above for allowing the EDA to use the Redskins football field process to do the Shockoe Stadium baseball ballpark deal. Again, I don’t know for certain who is claiming what, but I mention it because this code section is the one usually cited for letting the EDA bypass the normal rules.

This statute reads as follows:

“An industrial development authority or regional industrial facility authority may enter into contracts without competition with respect to any item of cost of “authority facilities” or “facilities” as defined in § 15.2-4902 or “facility” as defined in § 15.2-6400.”

Those citing the statute as proof of an exemption are right in saying the definition of “authority facility” or facilities” does fit the contracts being issued by the EDA, they fail to address the issue regarding what is meant by “any item of cost.”

Thus they blithely assume that if the EDA contracts say with Mr. White on building an apartment complex, this is the end of the legal inquiry.

But maybe not.

As I read the statute, the exemption only applies to contracts involving a defined “item of cost.” The word “cost’ is defined in the statute’s accompanying definitions under Section 15.2-4902. The Section 15.2-6400 applies to regional authorities: the EDA is a strictly Richmond Authority.

Thus the definition of cost is strictly geared to how the term is defined in 4902. The plain reading of the term addresses the various costs of constructing the building at issue.

Which leaves open this question, what about the decision of the EDA to contract with Mr. White, for example, to build a structure, sans any discussion of costs? That is to say, the EDA must first choose someone to develop the property. The actual decision to choose A or B doesn’t appear to be a “cost” as defined in the statute.

Leaving open this matter, while Section 1.2-4902 may exempt the EDA from having to competitively bid any of the actual costs of construction, it might have to follow the state’s competitive bid laws in picking the developer per se.

This may be too fine a point. But it is a legitimate legal issue worth considering. As a general rule, exemptions from a state policy like competitive bidding should be narrowly construed. Moreover the developer, sans construction, provides professional services, an area giving the EDA more leeway than normal for state contracts. The law considers competition to be essential to get the taxpayer the best “bang for the buck” as the saying goes.

CONCLUSION

There are serious, indeed fundamental, legal issues hanging over the Mayor’s Shockoe Stadium proposal. They can’t be swept under the rug. For the most part they are not being deeply considered right now.

“The law may be an ass.” is a quote often attributed to Shakespeare, but it actually came from Charles Dickens.

Whatever the law may be, it isn’t going away anytime soon.

Right now, the Mayor’s Shockoe Bottom proposal is a walking legal time bomb. One hopes the City Council and others are been trying to get the Mayor to see it.

Paul Goldman is in no way affiliated with WTVR. His comments are his own, and do not reflect the views of WTVR or any related entity. Neither WTVR nor any of its employees or agents participated in any way with the preparation of Mr. Goldman’s comments.