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Leaders check on Pier subsidy
By BRYAN GILMER
© St. Petersburg Times, published June 11, 2000
ST. PETERSBURG -- Taxpayers own the top tourist attraction in Pinellas County, a landmark that draws some 2-million visitors each year: The Pier in St. Petersburg.
Each year, the city pays a small business more than $170,000 to run the minimall of restaurants and specialty retailers that sits on pilings a quarter-mile into Tampa Bay.
And each year, The Pier loses more than $1.1-million, which taxpayers have to cover.
Now, six years after William H. Griffith's corporation first landed an unbid contract to manage The Pier, his company's performance, and that of The Pier, are about to be scrutinized.
"It would appear that The Pier management is the highest paid personnel in the city," St. Petersburg Mayor David Fischer said recently when asked about the contract. "Not knowing what his expenses might be, he would be probably in the $150,000 or above (salary) category. That is out of kilter."
Griffith's WHG Management Inc. first took over the contract in 1994, and the city gave him a new one in 1996, both times without competitive bidding. It is up for renewal again in September 2001, but discussions about the future already have begun.
Griffith gets a free corner office at The Pier with a stunning view of Tampa Bay. Out of the $170,900 fee he charges the city (which increases yearly with inflation), Griffith pays his own salary, real estate license fees, travel and auto expenses.
Taxpayers cover virtually every other business expense: his employee salaries and benefits (including his secretary and accountant), office supplies, computers and recently even the legal fees when a Pier employee sued Griffith's company.
Fischer, by comparison, is paid $100,000 per year, and his second-in-command, City Administrator Tish Elston, earns $110,000.
"If you're being paid to manage something, you need to be putting forth the effort you need to to make it successful," said Council Chairman Larry Williams, who wants to trim the $1.37-million subsidy projected in next year's budget. "If it's not, you need to talk about how you're going to make it improve."
In 1988, Griffith began managing The Pier as an employee of the Bay Plaza Cos., which held the management contract. Griffith responded to complaints about poorly tended restrooms and surly employees that had led to the firing of his predecessor.
In 1994, when Bay Plaza's grand scheme to redevelop downtown was unraveling, the City Council took The Pier out of the company's control.
The council let Griffith start his own management company, and Bay Plaza signed over the remaining two years of its contract. Fischer objected. He wanted city employees to take over the attraction.
But Economic Development Administrator Rick Mussett, whose department oversees the contract, remembers that The Pier seemed to be operating smoothly, and Griffith was a "known commodity."
Fischer has a similar memory.
"It seems to me that there was lobbying done on the council side there, and they were persuaded that The Pier management was good and why don't we continue with it," Fischer said.
Griffith said, "I really try not to play too much politics about it. I think the city had tried to run it several times before and failed."
"There was a lot of pressure to make it more profitable," remembers Bob Stewart, now a county commissioner but a City Council member at the time. "The question came: Did we have the expertise on the city staff to run that facility and do it in a profitable way? That was sort of the motivating factor."
Since then, the annual subsidy has stayed in the neighborhood of $1.2-million. Next year, it is projected to rise to $1.37-million, as some $201,000 in Pier parking revenues must be used to pay down bonds instead of cover expenses.
"I guess the city's in a situation where they have to assess whether or not he's doing a good job," Stewart said when told the subsidy has not substantially dropped.
Griffith's contract contains no incentive either to reduce The Pier's drain on taxpayers or improve its revenues. The contract contains vague language that Griffith's company "maintain The Pier in a cost-effective manner while at the same time expanding the use and revenues of The Pier at minimal net cost to the city."
Griffith says The Pier is successful in ways you don't measure in dollars.
"It's what it's doing for the city" as an economic engine and tourism generator, Griffith said.
Because The Pier is in Tampa Bay and connected to land by a bridge, maintenance costs are high, he says. The Pier has to run its own trolley and valet parking service (budgeted cost this year: $208,000) to get people from the parking lots to the business end of The Pier, an expense most entertainment complexes do not have.
Griffith has leased all the store and restaurant spaces at The Pier. Vacancies were a problem when Griffith first came on board.
He said he pays himself a salary between $80,000 and $100,000 per year from the fee money, but is vague about what he spends the rest on. The contract does not require him to publicly report how WHG spends those funds.
"I'm earning my money," Griffith said.
Griffith has the autonomy to negotiate leases in private and manage The Pier without interference. It operates much like a city department, receiving its budget through the mayor and City Council each year and requesting checks from the city Finance Department to pay most bills.
A big reason to privatize a city function is to insulate the city from liability. But the city buys The Pier's liability insurance.
And after a former WHG Management employee sued the company in 1998, alleging he was fired in retaliation for a workers' compensation claim, the city paid the nearly $25,000 in legal fees. WHG and the employee have agreed to settle the suit for $14,000, and Griffith is seeking city reimbursement for that amount, too, said Mussett, whose Economic Development Department oversees the contract.
"That's still under review," Mussett said.
Though he is not a city employee, Griffith keeps close ties to several of St. Petersburg's current and former top officials.
His lawyer is former Mayor Bob Ulrich. Griffith is in a Tampa Bay Devil Rays season ticket group with city downtown facilities director Mike Barber (who directly manages The Pier contract), Barber's predecessor Bob Leighton, economic development executive Joe Zeoli, Mussett (Barber's boss), Elston (Mussett's boss) and the mayor's chief of staff, Don McRae, Mussett said.
Mussett said each member of the group gets the four first-base seats for a certain number of games and that he does not attend games with Griffith. Leighton brought Griffith into the group after Leighton left the city to work for the Devil Rays, Mussett said. "All we do is get together when we divide up tickets."
Last month, the city was poised to negotiate a 5-year extension with Griffith -- until a reporter, the Chamber of Commerce president and City Council chairman started asking questions.
Barber wrote a memo to Griffith on May 3 listing three options to prepare for the end of the contract next year: put the project out nationally for bids, have the city run The Pier in-house (as it does Bayfront Center, golf courses and Sunken Gardens) or negotiate an extension with Griffith. "Following a careful review of the advantages/disadvantages of each, the city would like to pursue Option Three, and to negotiate a mutually acceptable extension of the agreement," Barber wrote.
But in City Council budget discussions, Williams questioned the subsidy amounts for The Pier and other facilities. And Chamber president Russ Sloan wrote a letter to the mayor saying the contract needs to be competitively bid.
"We feel we can reasonably assure you and council that a fair bid of The Pier contract will generate both a competent bidder and a much better fee," Sloan wrote May 17. "Too much money is at stake for our city to ignore the benefits of a competitive bid."
A draft city analysis obtained under state public records law estimates the city could immediately save $187,000 per year if it took over management of The Pier. And the report notes that a national management company chosen through a bid likely would have relationships with national retailers and restaurants, whereas The Pier now is made up of tenants that are small businesses. The draft report also notes that the city could build incentives into the contract to reduce the taxpayer subsidy of The Pier. After Sloan sent his letter and a reporter interviewed the mayor, Barber sent an e-mail to Griffith May 30.
"It is the mayor's intent to take The Pier management agreement to a request for proposals," the bid process, Barber wrote.
Because downtown is booming now, not struggling as it was when Griffith's firm took over The Pier, the city is likely to have lots of interest and good proposals, Sloan said.
"I would like to see what the market could do," Sloan said.
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