DPAC: The buck stops—where?

The Durham Performing Arts Center, a $46.8 million theater that holds 2,800 seatsfour shy of the main stage at Carnegie Hallopens in less than two weeks, topping a seven-year effort to bring the largest theater in the Carolinas to the Bull city.

The prospect of DPAC’s success, however, is dimmed by several problems: The city owes a daunting $67 million in bond and interest payments on the theater; the naming rights that would have helped offset that debt remain unsold; construction costs have steadily increased and now exceed projections by $3.7 million; a miscalculation in the original contracts required the city to pony up an unexpected $100,000; and while the costs are awash in millions of dollars, low-level employees such as ticket takers and ushers will be lucky to earn a living wage.

As troubling is the question of accountability: The center’s oversight committee is impotent, charged only with monitoring the enforcement of the city’s operating agreement with PFM/ Nederlander, not the wisdom of the agreement itself. And at the city, it’s difficult to discern with whom the buck stops.

“To get the project off the ground, everybody gave,” said Alan DeLisle, assistant city manager for Economic Workforce and Development, the liaison between the city and the project team. “Everybody did their part: the architect, the contractor, the city, the operator. We all gave, to make the project work.”

But some gave more.

The city’s $100,000 mistake, one of several crucial snags, is emblematic of the communication breakdowns and lack of transparency and accountability besetting the project.

At DeLisle’s suggestion, city council earlier this month approved a $100,000 cash outlay to PFM/ Nederlander, the New England-based production team contracted to manage DPAC’s operations. The reason: The contract between the city and PFM/ Nederlander promised an Aug. 1, 2008, opening datethree months before the building was to be completed by Skanska.

Scott MacLeod, executive vice president of Skanska, told the Indy that he was unaware that PFM/ Nederlander had contracted to produce its first performance before the building was complete. “I’m surprised,” MacLeod said. “If you would’ve told me it was Jan. 1, 2009, I might’ve said OK, because I always thought we were finishing ahead of Nederlander, and that that was a positive thing.”

(Bob Klaus, DPAC general manager, and Jack Meyer, an executive vice president at PFM/ Nederlander, did not return multiple calls and e-mails seeking comment.)

As a result, PFM/ Nederlanderwhich had been promised space in DPAC where employees could work before opening nightrented furniture and office space to work off-site for an additional three months, according to documents obtained by the Indy. Only now are the employees moving into DPAC.

DeLisle and Mark Greenspan, the city’s former general services director who left his post to work for Skanska, brought the PFM/ Nederlander and Skanska contracts to city council in 2006. Since then, DeLisle has recommended multiple amendments to both contracts, but he has never recommended adjusting the conflicting dates.

DeLisle justified the late change by saying, “We always knew, and I especially knew, that we had really shorted [PFM/ Nederlander] in the pre-opening budget, so I was open to their argument to request more money. But only as we got closer to the end and I had a better feel for where we were in the project.”

City Councilman Mike Woodard told the Indy he learned of the discrepancy only last month, from a memo DeLisle wrote to council at that time.

City Councilwoman Diane Catotti told the Indy that, though there were questions about DeLisle’s timeline, she decided that the extra money was “reasonable.”

“There was a lot going on at that point. They were trying to get things locked down,” she said. “I don’t know if it was an oversight or not.”

According to DeLisle, the DPAC oversight committee unanimously recommended that city council pay PFM/ Nederlander the extra money.

Meanwhile, newly hired city Manager Tom Bonfieldwho started his job Aug. 11 after the contracts had been signedsaid he recommended the extra payment as an investment in “enhanced marketing,” not to cover PFM/ Nederlander’s overages.”The additional money that the city committed to pay has nothing to do with the difference in the schedules of opening,” he insisted.

The money will come from a city economic development fund earmarked for incentives for Durham businesses, but were never paid because the companies didn’t meet the incentive requirements. DeLisle estimated that the fund is worth between $200,000 and $300,000, before the PFM/ Nederlander payment, which essentially cuts it by one-third to one-half. He said the money could be used for “really, anything,” as long as the council approved.

But this amount seems small compared to the increase in construction costs. The city has authorized Skanska to increase the guaranteed maximum price by $3.7 million, after awarding the company a no-bid contract in 2006. That deal bypassed the competitive bid process, in exchange for Skanska making a contractual obligation to absorb all construction costs beyond $34.7 million. With the approved increase in maximum price, which Skanska doesn’t have to pay for, construction costs total more than $38 million.

It is unclear how the city will cover this 11 percent increaseand whether it will affect its ability to pay for the overall project. DeLisle refused to provide an up-to-date, detailed budget, explaining that a full accounting would not be available until after the theater’s opening. Meanwhile, the total project cost has ballooned from $44 millionwhich the city still advertisesto $46.8 million.

“You’re making it sound like there’s one document that was approved by council that I can hand to you, to make this nice and simple for you, and I’m telling you that I can’t,” DeLisle told the Indy. “I’m telling you that there are several agenda items, and several contracts that have been approved over the course of time.”

These council agenda items unveil a pattern of increasing the guaranteed maximum price, which DeLisle asked council to approve. In an April 2008 memo to council, DeLisle recommended that it hike Skanska’s guaranteed maximum price by $2.4 million, citing an additional $1.5 million Duke University donation and a more favorable loan rate than anticipated. This extra money, DeLisle proposed, would help pay for the price increase.

However, these revenue sources were already budgeted into paying for the theater and should not have been considered in raising the maximum price, according to a 2007 budget provided to the Indy by former city finance director Kenneth Pennoyer. Yet, DeLisle told the Indy that the city had always planned to raise the guaranteed maximum price because the original estimate did not include items like carpeting, wood paneling and an extra elevator. The new maximum price accounted, in part, for “adding back” a short list of these items.

Catotti agreed. “We knew that not everything was included and that, if additional money became availablefrom, say, naming rightswe would try to do add-backs,” she said. “It was always our hope that we would have additional funding, particularly from naming rights, that would help add back some of the extras.”

Though the council has approved nearly all of DeLisle’s recommended changes to the contracts, they held the line on at least one issue: the city’s livable wage ordinance. In his October 2008 memo, DeLisle recommended exempting the company from paying maintenance, janitorial and box office staff the city’s required livable wages, or roughly $9.51 per hour.

At a Nov. 3 council meeting, Bonfield rejected the amendment before it came to a vote. “The problem was that they were adding so many exceptions, that it really was defeating the purpose of the livable wage ordinance,” he said.

However, Bonfield told the Indy that he still believes part-time ticket-takers and ushers will not be subject to livable wageat least until the council considers amendments to the livable wage ordinance at an upcoming work session.

After seven years and millions of dollars, there are high hopes that DPAC will be a cultural asset for the city. Yet, it also symbolizes the pitfalls of many such high-stakes public projects: Accountability and transparency are sacrificed. Money is mysteriously moved around. Extra costs pile up and there is pressure to pay them. As for where the buck stops, it’s still unclear, but the city is responsible for 67 million of them.