City Blames Metro for Cash Crunch

A transit official says delayed payouts are Houston's problem

In its place Metro agreed to provide funds on a project-by-project basis for a variety of transportation-related projects. Francis Britton, Metro's vice president and chief financial officer, says the agency is simply abiding by the terms of the deal.

"The master agreement signed by the city and signed by Metro does not call for advance payments by Metro," says Britton. "The city has to certify they have completed the work before they are paid." He says that, in the first year of the pact in 2000, Metro voluntarily made a $10 million cash advance to the city and followed the next year with a $4.5 million advance.

"If somebody in the city is complaining about that," says Britton, "then it's the city's problem, because the agreement says they will pay us upon [submission of] certificates of completion."

A financial dispute may make Schechter's job of selling a transit plan tougher.
Deron Neblett
A financial dispute may make Schechter's job of selling a transit plan tougher.

Britton says that transit officials suggested the city issue bonds to cover up-front costs, but denies that would constitute a backdoor plan to let Metro accumulate debt.

"It is not Metro's problem to decide how the city is going to manage its cash flow," he comments. As for the claims that the agency has not paid money due last year, he replies that Metro does not owe money because the projects have not been finished.

"There is no $29 million due in the past fiscal year," Britton testily insists, disputing the claims of that city memo. "I don't know who wrote that, or the basis they had for writing that document. That's not a Metro document and I can't be responsible for what somebody at the city is saying in some memo they wrote."

Former Metro chairman Robert Miller attributes the situation to a continuation of the behind-the-scenes rivalry between the transit agency and its dominant member.

"Metro plays things very close to the vest," explains the attorney. "But in my experience both the city and Metro can be equally adept at trying to screw the other side."

In this case, with a crucial election approaching, the warring parties may just wind up screwing themselves.

She Got the Halfway House; He's in the Penthouse

While Hotel Six convict Betti Maldonado spends the last few months of her four-year conspiracy and bribery sentence in a Los Angeles halfway house, an unindicted player in the events surrounding the 1996 FBI sting at City Hall has done considerably better.

A previously unreported arbitration judgment awards developer Wayne Duddlesten $8.8 million from Crescent Entertainment for that company's failure to honor commitments to a partnership to build the downtown convention center hotel that was at the heart of the federal investigation.

Maldonado and former councilman Ben Reyes were indicted with three other City Hall officials and a lobbyist on charges of bribing or accepting bribes in exchange for votes for Duddlesten's hotel proposal. Only Reyes and Maldonado were convicted, and Duddlesten was never implicated in the illegal activities. Reyes is serving a nine-year federal sentence in Georgia.

Duddlesten later teamed up with Crescent to build the hotel, but Crescent never obtained the necessary financing to begin construction. The city eventually issued bonds to finance the hotel, and Duddlesten went to court against Crescent to reclaim an $8.5 million "put price" mandated by their agreement plus assorted expenses. The partnership contract required that the matter be submitted to binding arbitration.

A three-member panel of the American Arbitration Association sided with Duddlesten in late October, ruling that Crescent did not make a credible effort to find financing for the deal. The panel concluded that "Crescent failed to bring 'certainty,' 'cash', and speed to the development project."

A City Hall insider marvels at Duddlesten's ability to tap dance through the Hotel Six minefield unscathed.

"What kills me about the hotel scandal is Duddlesten is the only one that made out with anything. That guy always has a way of coming out on top."

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