The Check Republic
Phoenix city officials appear to have improperly spent $527,000 in mid-December to pay vendors and entertainers threatening to cancel their appearances at a downtown New Year's Eve celebration, records obtained by New Times show.
On December 17, Phoenix finance director Kevin Keogh ordered his staff to deposit a half-million-dollar check into a special City of Phoenix parks and recreation fund to cover expenses associated with the Celebration 2000 party. Records and interviews with city officials reveal the expenditure was made without city council authorization and that it surprised several parks and recreation department officials.
The city was not financially responsible for the event and never entered into contracts with the performers or vendors threatening to walk out. A nonprofit corporation called Citizens for a Community Celebration Incorporated (CCC) signed the contracts and was responsible for raising private funds and paying the bills, says city attorney Philip Haggerty.
"We [Phoenix] didn't sign the contract. We are not liable on it," Haggerty says. "The contracts were signed only by the committee [CCC]."
But the nonprofit -- headed by former state attorney general Grant Woods -- was facing more than $1 million in losses by early December. Rather than cancel the event, city parks and finance department officials elected to cover the shortfall without first receiving city council approval.
City funds cannot be expended without council authorization, Haggerty says.
After spending the money, city parks officials are now asking the council to allow an expenditure of $617,964. The proposed expenditure, which was set to be discussed at a council meeting on January 19, would be used to reimburse city accounts including the $527,000 already spent.
Neither Phoenix Mayor Skip Rimsza nor city council members returned phone calls for this story.
The short-circuiting of city regulations by Phoenix officials culminates a chaotic and costly series of events related to Celebration 2000 -- an event that was supposed to raise more than $2 million in corporate contributions and attract more than 200,000 people. Instead, officials sold only 13,000 tickets and racked up taxpayer losses of more than $1 million ("Snafu 2000," John Dougherty, December 2, 1999).
Mayor Rimsza was the major force behind the New Year's Eve event. In September 1997, Rimsza appointed a volunteer city committee, also headed by Woods, called Celebration 2000 to oversee the event. The committee accomplished little over the ensuing 15 months. In December 1998, the city gave the committee $25,000 in seed money to cover fund-raising expenses and to secure entertainment.
The Celebration 2000 committee -- which was subject to city procurement regulations -- soon entered into a series of no-bid, sole-source contracts with entertainment production companies including a $170,000 contract with On Cue Productions for staging and lighting. The committee also began negotiations with entertainers, inking a $115,000 deal with the Tempe band the Gin Blossoms -- which had not made a public appearance since New Year's Eve 1996.
At the same time the committee was spending lavishly, it was failing to attract any corporate contributions. Last July, the committee was disbanded and replaced by the nonprofit Citizens for a Community Celebration.
Since the CCC was a private organization, it no longer had to follow city procurement regulations. The city council then approved a $500,000 loan to the CCC and entered into a contract with the CCC to organize the New Year's Eve celebration.
The July 7 contract calls for the CCC to "negotiate and enter into all contracts and agreements with vendors and providers for Celebration events and services." Nowhere in the contract does it state that the city is financially responsible for any shortfall. In fact, the contract stipulates that the CCC is to begin repaying the $500,000 loan by December 30, 1999.
"The only role the city has is to watch that the 500K is spent wisely and is paid back," city parks central district director Michael Whiting stated in a July 7 e-mail, obtained by New Times under the state public records law.
The CCC wasted no time in spending the $500,000 loan. By late August, the CCC had negotiated more than $620,000 in entertainment contracts. The contracts were negotiated by Scottsdale promoter Charles Johnston. A few days after Grant Woods signed the contracts and Johnston mailed them to entertainers, the city had a panic attack.
In reviewing the CCC budget, parks officials became concerned that the lack of corporate sponsorships would result in a huge shortfall. City officials ordered Woods to cancel about half the entertainment contracts. Lawyers for the entertainers immediately threatened to sue the CCC for breach of contract.
Rather than cancel the show, the city parks department stepped up its involvement in the celebration, devoting several staff members to try to salvage the event. By early December, CCC bills were mounting. City records show $157,000 was past due as of November 15 and another $35,000 was coming due on December 15. In addition, the CCC was to pay entertainers $484,110 by December 29.
The city parks department was still optimistic that the downtown event would attract more than 100,000 people. In early December, officials were predicting that more than 20,000 tickets would be sold in advance. On December 8, the parks department asked for a $150,000 appropriation from the city council to help cover the CCC's expenses. Instead of a loan, as was done in July, the parks department decided to give the money to the CCC to sponsor one of the entertainment stages.
The $150,000 sponsorship fee paid by the city was nearly twice the amount paid by Arizona Public Service Company to sponsor a stage, records show. The city council approved the appropriation, which required the city's aviation department, the Phoenix Civic Plaza and the city's general purpose fund each to kick in $50,000.
Despite the latest appropriation -- which brought the city's investment in the event to $675,000 -- it soon became clear more money was needed. Advance ticket sales were lagging; fewer than 1,000 had been sold by December 15. Sponsorship income was a paltry $142,000 and huge bills for entertainers were coming due in less than two weeks.
"Many vendors demanded payment in advance, threatening to walk away from their contracts," parks department director James Colley stated in a memo to deputy city manager Alton Washington.
At 6 p.m. on December 16, city finance director Kevin Keogh, city parks director James Colley and central district parks director Whiting held a crucial meeting.
Colley says the meeting was to give Keogh "the heads up" that the CCC was facing a major financial shortfall and the parks department wanted to know if "the finance department could be of assistance to us."
Keogh says he approved the expenditure without city council authorization because parks department officials told him it was a city-sponsored event.
"We made an advance of funds to basically cover expenses through December," Keogh says.
Late in the afternoon of December 17, deputy finance director Barbara Alvarez called Kathy Trocino-Parizek in the city parks department, telling her a $527,000 check was ready. Trocino-Parizek had no clue what Alvarez was talking about. ". . . I had no idea what this check was for," she stated in an e-mail to another parks employee, Chris Curcio.
A few minutes later, Curcio got the answer. "Mike [Whiting] called and it is the amount of money that Kevin agreed to cover at a meeting between Jim, Mike and Kevin at 6 p.m. Thursday," Curcio's e-mail stated.
With the check in hand, the city -- - rather than the CCC -- made a series of payments to entertainers and vendors in the week leading up to New Year's Eve.
On December 28, the city held a press conference attempting to drum up publicity for the ill-fated event by announcing that ticket prices would not be raised to $15 on the day of the show from the advance ticket price of $10.
During the press conference, deputy city manager Jack Tevlin told reporters that the city had reached "an understanding" with the CCC that all performers would be paid.
"This city will cover that expense and we will be reimbursed by the sponsors of the event [CCC] on the money that's made from the event," Tevlin said.
When pressed, Tevlin acknowledged there was no written agreement between the city and the CCC for the city to cover any expenses related to the event.
Nevertheless, Tevlin said, "The city is prepared to back up the event."
Asked by New Times at the press conference how the city could spend money without city council approval, Tevlin either did not know that the $527,000 check had been written or he lied. Tevlin said that no money would be expended unless approved by the city council first.
"We are going to have to go back to the council when we find out what exposure there is, if any, and get their approval to expend city funds to cover that shortfall. But it will have to be a public city action. It's not something that we will do without council approval," Tevlin stated in a taped interview.
In fact, top city officials already had agreed to issue a $527,000 check 12 days earlier to cover the CCC losses without the approval of the city council.
The city's investment in the event -- which could total $1.29 million if the council agreed January 19 to cover funds already spent -- could climb even higher. (This story went to press before the council meeting.)
City records indicate that another $339,800 in bills were due to be paid on January 15.
Among those bills outstanding is a request for a $4,500 payment by the Motta Agency for advertising and marketing services related to Celebration 2000. Motta supposedly had "volunteered" its services to the CCC. The Motta Agency isn't the only "volunteer" who sought reimbursement for activities. Promoter Charles Johnston sought, and was paid, $2,000 for his "out of pocket" expenses.
Contact John Dougherty at 602-229-8445 or online at email@example.com
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