“No public reporting and no accounting of the millions of taxpayers dollars that will continue to subsidize the McMorran under the Icehawks.”

The first form of payment to KMG that the city would have been responsible for in this contract was a two year annual compensation agreement. Year #1 was to be $259,000, and year #2 was $91,500. The total amount for the first two years of the four year contract would have been $350,500. This is, by the way, only $15,000 more then what is spent to subsidize McMorran each and every year. After year two, the city would not have any annual compensation to KMG. Each renewal by KMG also would have had no annual compensation included. 

This first form of compensation to KMG is what I believe was the biggest sticking point for some in the accounting dispute. The quarrel was that there should be some sort of accounting for what KMG does with the money in the first two years.

I disagree with the above argument. The money spent in the first two years to hire KMG is written in the contract as compensation for services provided by KMG. When the city hires a private contractor to fix our roads, does the city require the private company to provide full public accounting for all things that the company spends that money on? The answer is no! The city uses the finished product as the accounting measurement.

Next, the city would have been responsible for any maintenance/repair cost over $86,601 each year. This also happened to be one of the last minute changes of the contract which was requested by the council. The change was included to adjust the $85,601 in maintenance cost with the Consumer Price Index each year. Ordinary maintenance cost such as incidental painting, washing/waxing floors, resealing floors, bathroom supplies, cleaning supplies, lime paint, painting of ice surfaces, light bulbs, snowplowing, cleaning of curtains/drapes, and others were not included in the $85,601, and would have been the responsibility of KMG.

The accounting for the maintenance expenses was written in section 3.4 of the contract.  This section states “The Manager(KMG) will provide an accounting of all amounts expended on repairs required of the Manager(KMG).

Finally, the last expense to the city would have been for Capital Improvements and Capital Equipment purchases as provided in the agreement. These cost would not have been included in the maintenance and repair cost. Capital Improvements are defined as “improving buildings, equipment, parking lots or other property associated with the operations of the business costing more than $5,000.” Capital Equipment purchases are defined as “any purchase of equipment for any single item of equipment costing more than $5,000.”

Again, this also would have had an accounting measure in place. The city council is responsible for voting on any expense to the city over $5,000. As a consequence of this accountability measure, if anything major went wrong at McMorran, or if any major purchase were to be needed at McMorran, the city council would have needed to approve the money for it.

“No escape clause for the city similar to the Icehawks for the 16 years of the contract.”

While the contract with KMG did not come right out and say there is an escape clause for the city, there is one in the contract. Like any other contract, this one had provisions to cancel the terms upon default of either party. If either party did not live up to its end of the contract, the agreement could have been terminated by either party.

Also, the city could have refused to pay for a repair or purchase, and that would have put the city in default of the contract. I could not imagine KMG wanting to stay around if things are not working, or if the city did not want to help make needed improvements to the facility for KMG to be successful. I know that this is a ruthless way to get out of an agreement, but if things ever became so bad with KMG that the city wanted out of the contract, it had an escape clause. If things were going well with KMG and McMorran, I could see no reason the city would have wanted to terminate this contract. 

”No written transition plan and no protection for employees close to retirement.”

The people who work for McMorran are McMorran Authority employees, and not city employees. The McMorran Authority has known that this day has been coming, and they should have been the ones responsible for implementing an employee transitioning plan. I am very confident that if they would have asked the city for help in this area, they would have received it.

KMG could not say which employees they were going to keep for continued employment until the contract was signed. This is one reason I, as a council member, wanted to get this contract done as soon as possible. If the McMorran Authority would have approved the contract, the city and the McMorran Authority would have had almost a month to develop a transitioning plan for the employees that would not have been kept on by KMG.

“While the authority appears to remain, there is no clear explanation as to its role -- or power.”

Why would this be included in the contract? The contract between the City of Port Huron and KMG to run the day to day operations of McMorran would not spell out the purpose of the new McMorran Authority. That responsibility would be written in the form of bylaws, which would have been drawn up if the contract would have passed.

Essentially, the McMorran Authority would really only have been needed for three reasons. First, to approve the contract between KMG and the Icehawks or any other company related to KMG or Mr. Kinney. Secondly, the McMorran Authority would have brought to the city council recommendations for Capital Improvements and recommendations for purchases of Capital Equipment. Lastly, they would have handled the disputes related to the agreement of the contract.

Section 11.1 of the contract spells the above out a little. It reads “The owner designates the Henry McMorran Auditorium Authority Board to act as its agent an all matters of interpretation, implementation and disputes related to this Agreement which matters shall be handled between the Manager(KMG) and the Authority Board; PROVIDED, however, the Authority Board shall not have authority to commit the Owner(CITY) to expenditures of money or funds not currently in their possession or under their control.” IF KMG and the Authority Board could not agree on matters related to the contract, it would then and only then end up on the desk of the City Manager. If the City Manager and KMG could not work something out that was in dispute, then and only then, would it end up in front of the City Council.

”The Icehawks sold this to the community as a deal to keep hockey in Port Huron, but nothing in the contract addresses what happens if the team leaves.”

The contract that was to be signed was between the City of Port Huron and KMG, not the City of Port Huron, KMG and the Icehawks. Not once in the contract will you find the Icehawks mentioned. If the City Council would have chosen Venu Works or SMG, there would have been no guarantee that the Icehawks would still be around. Even if the Icehawks were to leave Port Huron, KMG would have still have been responsible for fulfilling their obligations of the contract that was agreed upon.

When the people from the Icehawks spoke at the City Council meeting, they never said that they would pull the Icehawks from Port Huron if they did not get the contract. What they said was that it would be hard to remain in Port Huron if one of the larger companies should get the contract. I am positive that they said this because they did some research into what the larger companies charge for rent to teams similar to the Icehawks. I am also sure that they understand that hockey alone, most likely will not be profitable in Port Huron. To make a profit they would need to manage the entire facility and for the entire facility to make a profit they will need the Icehawks. That just seems like common sense to me.

“Oh, yeah, the liquor license transfer to KMG would be illegal.”

They did get this argument right I guess. However, there were provisions in the contract in case the Liquor License could not be transferred to KMG. In section 4 of the contract, it has a LEGAL provision that would allow KMG and the city to apply for a participation permit with the Michigan Liquor Control Commission, which would have KMG added to the city’s Liquor License as a co-licensee. The contract also included terms in which the city would have received the full Liquor License back if the contract was canceled.  

“This contract was still being written up until the last minute”

All parties involved received this contract on the Friday before the last City Council meeting. Other Council Members and I called or emailed some concerns to Karl Tomion that weekend. The City negotiating team and KMG hammered them out on Monday and the contract was brought before the council. None of the items that were changed had major implications to the contract. As a matter of fact, all the changes benefited the city. The changed items were as follows;

• In Section 3.2 i, the naming rights of the McMorran Complex itself cannot be sold without the written permission of the City.
• Section 3.2 j now provides that the $85,600 in maintenance and repairs per year will be adjusted by the Consumer Price Index (CPI).
• In Section 6, additional language has been added to the paragraph on the liquor license that provides cooperation between the parties while the license is in transition.
• Section 8.3 a now provides a reciprocal commitment by the City to assume all booking contracts for events or usage of the McMorran facility at the termination of KMG's contract.
• Section 8.3 f language provides force majeure in subcontracts between KMG and McMorran users to limit the City's liability should a catastrophic repair be necessary.