New agreement reached between B.P.C. Authority and Asphalt Green

BY TERESE LOEB KREUZER | More than a year later than planned, a 52,000-square-foot community center may soon be opening in Battery Park City under the management of Asphalt Green. The opening was delayed in part by permitting problems but largely by a contract inked early in 2009 during the Battery Park City Authority administration of chairman James Gill and president James Cavanaugh that subsequent B.P.C.A. management found unacceptable.

The B.P.C.A. has paid nearly $60 million to build the shell of the center at 212 North End Ave. and furnish it with exercise equipment. Asphalt Green, a nonprofit fitness organization with a location at 555 E. 90th St., was hired to manage the community center under a 10-year contract.

At the B.P.C.A. board of directors meeting on Tues., Oct. 23, B.P.C.A. chairman Dennis Mehiel announced that a new contract with Asphalt Green had been proposed and tentatively agreed upon. Subject to approval by the B.P.C.A. board and a sign-off by Asphalt Green, the community center may open on Sat., Dec. 1.

Mehiel, who became B.P.C.A. chairman last July, said that the previous contract was untenable because it put the B.P.C.A. in a position of placing taxpayer dollars in the hands of a private enterprise without adequate transparency and supervision. That contract called for an “unending, no-cap commitment to subsidize any and all operating losses at the community center,” he said.

“If the community center made money, there would be a division of those profits — 60 percent to the Authority, 40 percent to the operator. That didn’t make any financial sense to me and it didn’t make any financial sense to the members of this board.”

In addition to the financial issues, the two parties had to reach an agreement on the terms of access to the community center facilities and to the B.P.C. ball fields. Asphalt Green runs a summer camp that is essential to its profitability and would need to use the ball fields for that purpose. But historically, during the summer, the Manhattan Youth Downtown Community Center (at 120 Warren St.) has used the ball fields for its programming.

The B.P.C.A. had previously considered simply defaulting on its contract with Asphalt Green, issuing a new Request for Proposals (R.F.P.) and bringing in a private commercial operator to run a health club, according to Mehiel.

But that plan was ultimately deemed impractical. Converting the center into a health club would have required millions more dollars and would have delayed the opening of the community center until the early part of 2014 at best. Mehiel also noted that the $900,000 of unused exercise equipment purchased by the Authority would have begun to deteriorate.

Moreover, the B.P.C.A. was advised by legal counsel that if it defaulted, it would lose in court, incur millions of dollars of legal fees and end up with a fine of somewhere between $3.5 million and $13 million.

“So what we faced,” said Mehiel, “was what seemed to be an irreconcilable conflict between a contract that had functional aspects that were inconsistent with protocols that we need to observe, and financial arrangements that were unreasonable from our perspective against a legitimate operator who can do a good job, who negotiated a contract in good faith and felt they were entitled to perform under that contract.”

Asphalt Green could have enforced the existing contract and thereby forced the B.P.C.A. to pay up, but it chose not to. “I just want to say publicly that I found the Asphalt Green chairman and the senior management of that group to be excellent people to work with,” said Mehiel. “They spent a day or two to think it over. They came back and said, ‘Let’s make a deal that’s fair.’”

The new contract, which is still in draft form and has to be reviewed and approved by the B.P.C.A. board before it goes to Asphalt Green, stipulates that Asphalt Green can spend its revenues from the community center as it sees fit without accounting to the B.P.C.A.

“We have no oversight as to what they spend, why they spend it or how they spend it,” said Mehiel. “It’s none of our business. It’s not public money. They get their revenue stream. They have to run their operation.”

The B.P.C.A. will receive a portion of the center’s revenue starting in year six of the contract, he noted, and if Asphalt Green’s revenue projections should turn out to be less than 90 percent of what is anticipated, Asphalt Green would have to write a check to make up the difference. “If they cannot or do not write their check, their lease will be terminated,” said Mehiel, “so the risk for the Authority has been eliminated.”

He also said that anticipated costs for the B.P.C.A. under the new contract constitute a cash outlay during the first five years of the contract amounting to less than half of what had been envisioned under the original contract. Also, the B.P.C.A.’s contractual expenditures for utilities have been reduced, and an estimated $225,000 a year to replace and refurbish equipment, originally for the life of the contract, has now been capped at three years.

 Read a longer version of this article consisting of the community’s reactions to the new contract in next week’s print edition of the Downtown Express.


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