Monday, Feb. 5, 2007 | The developer of the planned Chula Vista bay-front convention center and resort is part owner of a startup company the port district is poised to hire to oversee the billion-dollar project, a relationship that would leave Gaylord Entertainment — which is receiving more than $300 million in taxpayer subsidies — to be watched over by one of its own firms.

If Gaylord Phelps Chula Vista LLC is selected, the firm would advise the port on the budget, development and environmental guidelines that its Nashville-based parent company would have to adhere to, creating a dynamic that would force Gaylord to balance the project manager’s duties to the port and its own financial concern in the bay-front development.

Port staff recommended Gaylord Phelps Chula Vista LLC from among the five firms that applied for the position, and the Port Commission will consider the hiring at its March 13 meeting.

Under the arrangement, Gaylord Phelps Chula Vista LLC would be in charge of overseeing several key facets of the bay-front redevelopment, which is being built on public land with the aid of public subsidies. Port documents say the project manager “shall in all respects act and perform these functions strictly in the interest of and benefit of the Port District.”

But at the same time, Gaylord, which has a 10 percent interest in the company applying to be the project manager, will be focused on constructing a 400,000-square-foot convention facility and companion hotel housing at least 1,500 rooms on the bay-front site. As the developer, Gaylord will be bound to the Port Commission’s requirements, many of which may be recommended and enforced by the project manager.

University of San Diego School of Business law and ethics professor Mark Lampe said Gaylord’s dual role in the project potentially creates a conflict.

“If it is the job of the project manager to monitor and mange the company, and that company is or likely will be Gaylord, it appears to be a conflict of interest,” Lampe said. “How can you watch over or monitor that which you’re a part of?”

The partnership, which registered as a corporation with the state of Delaware on Dec. 4, was formed for the sole purpose of applying for the position, Gaylord spokesman Brain Abrahamson said. Along with Gaylord, Greeley, Colo.-based Phelps Development has pledged the other 90 percent to form the $10 million Gaylord Phelps Chula Vista LLC partnership, according to documents that were filed with the port. Phelps Development vice president Eric Wilson, who is listed on documents as the partnership’s president, did not return calls seeking comment.

Aside from Wilson’s position, there are few details in company filings about the make up of the company’s staff or the role Gaylord will play in the partnership.

Port and city officials are expecting the Gaylord project to kick-start redevelopment of the Chula Vista bay front, which now sits as a jumble of rugged wildlife and industrial buildings that surround a sleepy marina. With the activity expected to be generated by the development, officials are planning to upgrade the marina, build a signature park, restore wetlands, and welcome about 2,000 waterfront condos to the area.

The planned Gaylord complex sits on a site that is owned by the port, a state agency that controls the waterfronts for the five San Diego Bay-area cities. Government agencies often hire project managers to help advise them on large-scale projects such as the Chula Vista bay-front redevelopment. According to the port’s solicitation, the project manager for the bay front will consult the agency on budgeting, maintaining a project timetable and ensuring that environmental concerns are addressed and construction standards are met.

Gaylord is expected to begin construction on the project in 2008 or 2009, depending on the time it takes the proposal to clear various regulatory hurdles. Gaylord, the port and the city of Chula Vista are currently negotiating the division of a $300 million-plus subsidy between the two public agencies, and are supposed to conclude the bargaining in May.

Last year, the port and city agreed to pay $308 million between them for the construction of the convention center and the surrounding infrastructure, such as roads, parks and a fire station. Exactly how the subsidy will be divided won’t be known until the talks conclude in three months, but it will likely be comprised of some combination of the property taxes that have been enhanced because of the redevelopment, a portion of the hotel and sales taxes that are collected by the city, and discounts on the port’s lease.

If the project manager job is being used as a bargaining chip by the port in its discussions with Gaylord, the agency could be shortchanging its ability to properly monitor the project as the port and the city work out the taxpayer financing in negotiations, critics of the potential arrangement said. The port could bypass more qualified applicants if it already pledged the project manager position to the partnership, they said.

“That seems like a huge potential conflict that we would be worried about,” Environmental Health Coalition spokeswoman Laura Hunter said when told about the possible hiring of the Gaylord company. “We want to make sure there’s independent oversight.”

Paul Fanfera, the port’s senior director of real estate, said the project manager contract is not part of the ongoing negotiations. “These are two separate, distinct roles, and one will not influence the other,” he said. The partnership was chosen by a group of staff members who took into account the company’s experience, references, and whether it has performed work locally, Fanfera said. Port staff chose San Francisco-based URS Corp. and Winzler & Kelly Consulting Engineers Co. of Santa Rosa, Calif., as runner-ups to the Gaylord partnership.

Gaylord Phelps Chula Vista LLC noted on its application that Phelps Development’s parent company, Hensel Phelps Construction Co., has performed work in San Diego County for the past 20 years, and that Gaylord has worked with the port before — referring to the ongoing bay-front proposal.

Fanfera said he didn’t sense a conflict of interest existed because Gaylord would not be the firm doing the actual designing and building of the facility. He said the project manager would be prohibited from working on the design or construction of the project it will oversee, although he acknowledged that Gaylord will select and hire the company that will. “They’re involved in the design obviously, and they will be retaining design and build firm,” he said.

Others were more skeptical. “That [Gaylord] may be given a contract to manage their own project certainly seems to present a serious conflict of interest,” said Allen Shur, business manager for a local electricians union that will likely work on the project, in an e-mail. “If we want to ensure good project management and protect the interest of taxpayers we should not allow the fox to guard the henhouse.”

Fanfera said it would be an “enormous risk” for the project manager to stray from the instructions that the Port Commission gives it, and that city and port inspectors will be closely following the consultant’s work throughout the process to watch for problems.

Some of the standards that could be set for the development, such as designs that improve energy efficiency or scheduling milestones throughout the project, could be part of the ongoing negotiations. Port spokeswoman Irene McCormack said it was unclear whether the project manager, who could be hired two months before the negotiations end in May, will have any input at the bargaining table.

She said the port commissioners will have the final say on the hire.

“Those concerns will be vetted when it goes to the board,” McCormack said.

Please contact Evan McLaughlin directly with your thoughts, ideas, personal stories or tips. Or send a letter to the editor.

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