After an anxious discussion, County Commissioners approved a lease agreement for the proposed Lubbock County Expo Center on a 3-2 vote.
“I don’t like this,” said Michael Dalby, commissioner for Precinct 1, during Monday’s meeting.
Dalby is in favor of an expo center and he’s been generally supportive of the county’s partner, Lubbock County Expo Center, Inc. The LCEC is in charge of fundraising for the public/private partnership for the project at North Loop 289 and North University Avenue.
LCEC will also oversee operations of the expo center – including the right to hire a day-to-day operator.
“I support the project. I just have heartburn with this document,” Dalby explained.
Curtis Parrish, county judge, agreed with Dalby, saying, “We’re leasing a building that doesn’t exist.”
Ashley Cox, one of the county’s civil attorneys, explained.
“I’m proud of the work,” Cox said.
“Why do we need a lease if we don’t have a building yet? That’s a good question and it’s understandable,” Cox told commissioners.
The answer starts here.
Lubbock County will need approval from the Texas Attorney General to borrow roughly $32 million in the form of bonds (paid back with a hotel and car rental tax). The total cost is pegged at $67 million, roughly $10 million of that is in reserve from the hotel and rental taxes.
And because this is all part of a public/private partnership, a lease agreement must be in place, according to Cox.
“It will help effectuate that AG approval to have the lease already in place,” Cox said.
Parrish was not satisfied – saying, “We were able to acquire bonding for our medical examiner’s office without a lease agreement. Why do we need a lease agreement to acquire funding for this?”
Cox answered, “My answer doesn’t change as far as that goes. [It’s] in order to get that preliminary AG approval.”
The county consulted with specialized lawyers called bond counsel. Their advice was to have a lease agreement before approving bonds, she said.
Who gets protection under the lease?
Parrish said, “As an attorney, I would caution my clients not to sign this agreement. It does not protect Lubbock County.”
Jason Corley, commissioner for Precinct 2, pushed back.
“The lease is there to allow for LCEC to go ahead and get their loan,” Corley said to LubbockLights.com after the meeting.
LCEC needs a loan because it has, in some cases, donation commitments but not cash on hand from donors. Large donations are sometimes paid over several years.
The bank wants certain things in place – like a lease agreement, which can be assigned to the bank.
To protect the county, Corley said an operating agreement will also be needed. But the lease is not meant for that, he said.
Parrish responded, “I think that’s a little short-sighted.”
Parrish also said the county is supposed to have final control.
“That was all taken away today by this lease agreement. The Commissioner’s Court does not have the final say in anything regarding this venue project from this point forward,” Parrish said.
He said the county’s voice was “drowned” by the lease agreement.
LubbockLights.com examined the lease
Lubbock Lights tried to get a copy of the proposed lease before Monday’s meeting and could not. But after the meeting we examined the 14-page lease.
For LCEC:
- $1 annual rent.
- 27-year term (25 years each on renewals).
- Right to assign the lease (for a bank loan).
- Broad discretion for events.
- Ownership of revenue opportunities (like naming rights, for example).
- Access to net operating income for paying down debt.
- Potential reimbursement for capital expenditures.
For the county:
- County has at least four (4) members on the LCEC board (but not more than 49 percent of the total board).
- LCEC must provide financial reporting each year.
- LCEC cannot, for the most part, allow liens on the project or the property.
- County has the right to approve any operator LCEC chooses.
- County has inspection rights.
- County has the right to require LCEC to give up certain interests, but the county would have to assume the related obligations.
LCEC goes into default if it:
• Abandons or vacates the Expo Center project.
• Allows the project to be inconsistent with its public purpose.
• Voluntarily files for bankruptcy.
• Consents to the appointment of a receiver, liquidator, trustee or custodian.
• Has an involuntary bankruptcy that is not dismissed within 30 days.
LCEC would also go into default if it failed to meet contractual obligations on building maintenance, insurance, financial reporting, utilities and trash pickup. LCEC agrees to take on the liability for injuries, death, and property damage that come from operating the Expo Center.
A development agreement was already in place, in which the county retained ownership of the expo center project.
🔗 Click here to read the lease. 🔗
27 years or 77 years
Some of the critics claimed the lease puts Lubbock County on the hook for 77 years. The first term is 27 years (25 years of operation, plus two years to account for construction). It can then renew for a second of 25 years and then a third round – also 25 years.
Parrish said, “As I understand the language, and these are automatic renewal agreements.”
The contract mentioned, “the right of Lessee to exercise any extension …”
Cary Shaw, commissioner for Precinct 3, and Cox discussed that concern in the public meeting.
“It has to be mutually agreed. … It’s not an automatic. If it’s not working and we don’t like what’s going on and it would cost more money for the county to renew, we say, ‘No, we’re not renewing,’ and we walk away,” Shaw said.
Cox agreed, saying, “Right. Yes.”
Shaw added, “In 27 years, we decide whether we want to continue this or not.”
But during the term itself, the county can only leave by mutual agreement or by LCEC’s default.
Cox told commissioners, “If we’re not pleased with LCEC as the operator, or there are financial deficiencies that keep us from being able to use the facilities for the purposes intended, that falls under the default termination paragraphs.”
Corley said, “That gives them two years for the construction to be completed. And then they have 25 years to operate. They have a lease on the facility for 25 years.”
Proponents said it gives LCEC time to pay off the bank loan.
Corley added, “If we’re not satisfied with those operations, then that’s going to fall under the operation contract.”
We asked Corley if the bank might want some leverage in that contract too.
“That seems like a reasonable request, but that would be something to get worked out,” Corley said.
Public comments
During public comments, three citizens had concerns with the lease.
Carl Isett, who serves on the county’s oversight board (the Local Government Corporation) for the expo center project, said, “You guys continue to do ridiculous things.”
Isett voted against going forward a couple times on the LGC over the last year.
“How do you lease a building when there is no building there? … When you had a chance to step back and take a breath and reconsider, you just plowed ahead without a single question from this dais – not a single question,” Isett said concerning a Commissioners Court meeting in January.
Ysidro Gutierrez, a former county commissioner, said “If it is something that you would not do for your own family, then you should ask those questions of yourself before you vote on this particular item. My recommendation is that this item be rejected.”
“Put a stop to it. … It’s not working out,” Gutierrez added.
Jennifer Bubany said, “What you’re about to vote on is not in the best interest of Lubbock County.”
Corley responded to the public comments in his conversation with Lubbock Lights.
“They didn’t like the location. Now they don’t like the contract. They didn’t like the agreements. They didn’t like moving forward. It’s the same sour grapes we’ve heard from the beginning,” Corley said.
