Live Nation music venue $3.2 million over budget
Montgomery County to transfer unused construction money to Fillmore project
A long-awaited music venue in downtown Silver Spring is $3.2 million over budget, Montgomery County officials said.
County officials have taken unused construction money from other county projects to help fund the Live Nation project. The groundbreaking for construction is scheduled for next week.
The construction of the Live Nation venue was expected to cost $8 million, with the state and county each paying $4 million. In a memo sent Aug. 18, David Dise, director of the county Department of General Services, said the cost has escalated to $11.2 million.
Diane Jones, the county's assistant chief administrative officer, said the county will transfer about $2.6 million in unused construction funds from other county projects to the concert hall. The rest will come from a construction contingency fund for the project or from Live Nation.
However, Councilman George L. Leventhal (D-At large) of Takoma Park is questioning whether County Executive Isiah Leggett's office should have told the council before transferring the funds.
The county charter allows Leggett to make the transfer without asking the council, which has final fiscal authority, county spokesman Patrick K. Lacefield said.
Council President Nancy M. Floreen (D-At large) of Garrett Park said Monday that Leggett's office was technically within the law. She said she was unsure whether the council would discuss the matter when it returns from recess Sept. 21.
Groundbreaking for the Live Nation concert hall is scheduled for Sept. 2, Jones said.
The $8 million estimate for the Live Nation venue was an eight-year-old figure that was not adjusted for inflation or the rising costs of construction materials, she said. The plans for the project have not changed.
"The cost of the project is still very reasonable," Jones said. "It's still a great project."
Councilman Marc Elrich (D-At large) of Takoma Park said the County Council asked county officials more than a year ago whether the $8 million figure was accurate.
"They assured us it wouldn't go over," he said. "If those numbers were eight years old, they should never have given them to us."
County spokesman Patrick K. Lacefield said Monday that the council was aware that the estimate was outdated.
Plans for the site include a renovated Fillmore music hall that will be operated by Live Nation, a California-based concert promotion company. Live Nation agreed to spend $2 million toward the interior of the building and any construction overages.
Those overages were to be deducted from Live Nation's rent $90,000 annually paid to the county.
"The public investment in this is limited to the $8 million," Chief Administrative Officer Timothy Firestine told the council in 2008, according to a transcript. "So, if there are additional cost requirements beyond that, those will be the responsibility of Live Nation. And we've made it clear that we are not putting any more than $8 million into the deal."
Lacefield said that because the cost of the project had changed, the county's investment in it has as well.
"At that point, that was the amount we estimated it would be, based on the 2002 estimate," he said. "Now, the bids are in, and now that we figured out what the final cost is, that would be the amount."
The Fillmore project also is the focus of a lawsuit that, if successful, would prevent the state from paying its portion.
The lawsuit filed in June against the state by It's My Party Inc., a Bethesda-based firm that owns the 9:30 Club in Washington, D.C., claims Montgomery County did not meet two criteria needed to receive the state money for the Fillmore music hall.
The lawsuit is still pending, according to Audrey Schaefer, an IMP spokeswoman.
In his memo, Dise said the county saved money on several county recreation projects and will spend $2.6 million from those projects to the Fillmore construction project.
The other projects include the White Oak Community Recreation Center, Upper County outdoor pool, MAC diving tower in Rockville and Wheaton Community Recreation Center, the memo states.
Lacefield said all but one of those projects were completed under budget, and the Wheaton recreation center ($109,400) project was canceled.
Jones said the county learned the project was over budget Aug. 5, when Lee Development Group received a project bid from its general contractor, Davis Construction.
Lee Development Group currently owns the building and is overseeing construction. Eventually, the building will be given to the county.
Bruce Lee, president of Lee Development, deferred all questions on the project to county officials.
The bid from Davis Construction, which is based in Rockville, totaled $8 million, according to Dise's memo. The project includes another $2.2 million in what is known as "soft costs," including money for staff, permits, attorneys and other expenses not associated with building.
The project also has a contingency fund of $973,296, which would be used for any overages that occur during construction. Jones said that contingency, if unused, could make up for the increased bid amount.
If not, Live Nation has agreed to pay the remaining $724,926. That would mean the concert company would not pay rent for the first eight years it occupies the building.
"They ought to go back to the negotiating table, because this deal no longer makes any sense whatsoever," Elrich said.