EXECUTIVE WARREN C. EVANS REMARKS ON DEAL FOR NEW WAYNE COUNTY CRIMINAL JUSTICE COMPLEX

TODAY, I am submitting to the Wayne County Commission and the Wayne County Building Authority for approval of a "Development, Purchase and Sale Agreement" between Wayne County and Rock Development Corp.

This Agreement provides for Rock to build the County a "Criminal Justice Center" comprised of a new jail, criminal courthouse, juvenile detention facility and administrative offices for the Prosecutor and Sheriff.

This is a good deal for Wayne County.

I. HISTORY: FAILED JAIL FIASCO COMPOUNDED BY FISCAL CRISIS

It's been a long road trying to solve the Gratiot jail fiasco. It's had twists and turns and more curveballs than I want to count.

Before we talk about the terms of this agreement, it's important to discuss how we got here and all the steps we needed to get a deal done.

As we know all too well, Wayne County poured $150 million of taxpayer dollars into a failed-jail project. Cost overruns led the previous administration to suspend construction in 2013.

This eyesore of a partially-built jail has been sitting since 2013 with everyone knowing it would take hundreds of millions of dollars to solve this fiasco. It's been an albatross around the County's neck weighing us down both financially and mentally.

From the time construction was suspended until I took office in January 2015, alternative solutions were discussed.

None were feasible because the underlying fundamental problem had not been dealt with: Wayne County's finances were a mess. The cost over-runs on construction of this jail did not create Wayne County's financial problems. It just made them worse.

When I took office, it was clear that solving the jail problem would require borrowing a great deal of money.

We needed to strengthen Wayne County's finances before we could solve our jail problem.

At the same time, we needed to determine the best solution, so we could proceed expeditiously once we addressed our fiscal crisis in a manner that would put us in a position to borrow the money necessary to solve this problem.

In addition, the County was embroiled in expensive and protracted litigation arising from the construction of the "failed jail." Millions of dollars had already been spent in attorney fees litigating this case. We realized, it would have been difficult, if not impossible, to pursue a solution while this litigation was pending.

Let's start by talking about the finances.

II. IMPROVING WAYNE COUNTY'S FINANCES WAS NEEDED BEFORE JAIL FIX

To solve our financial crisis, adequately, I had to find out how deep the County's financial hole was.

External auditors from Ernst and Young gave me the answer: A structural yearly deficit of about $50 million, an accumulated deficit of about $80 million, unfunded future health care benefits of $2.4 billion and a pension system with only 44% of what it needed for future obligations, almost, $900 million short of being fully funded.

The County needed a "Recovery Plan" which I issued in April 2015. Then, we needed a Consent Agreement with the State to provide us with adequate authority to implement the "Recovery Plan."

Through the significant help of the Wayne County Commission, we implemented the "Recovery Plan" and significantly improved the County's finances.

We eliminated BOTH the accumulated and structural deficit and have achieved significant surpluses the last three years.

We reduced our health care liabilities by over a billion dollars and improved the funding of our pension system from 44% to 54%. As a direct result, Wayne County received numerous bond rating upgrades.

Wayne County is now in a much stronger financial condition and we can now borrow the money needed to solve our jail problem.

III. IMPROVED FINANCES CLEAR WAY FOR JAIL SOLUTION WE COULD AFFORD

As Wayne County's finances improved, we needed a realistic assessment of the possibility of finishing the partially built Gratiot jail.

Accurately analyzing the site was not possible considering the key players in the "failed jail" with key information were embroiled in complex litigation.

Consequently, after months of discussions, in July 2016, the County settled the jail construction litigation with AECOM and Ghafari.

We then entered into a consulting contract with CGL to determine the feasibility of a design/build to complete the Gratiot jail.

We then issued a request for qualifications to identify companies who would be qualified to respond with proposals to complete the jail project.

We received one response to our request from Walsh Construction.

However, prior to Walsh's response, we received an unsolicited proposal from Rock proposing to build a new criminal justice complex for the County.

Simultaneously, we began evaluating the Rock proposal while Walsh prepared their response.

We thoroughly vetted the Rock proposal and Walsh's response.

After a deep dive into the Walsh proposal, it became clear that finishing the Gratiot jail would not only be cost prohibitive but would require the County to remain at risk for cost-overruns, which was the death knell of the failed Gratiot jail.

Pursuing the Rock proposal was the only viable option for a new criminal justice center. Rock and its consultants worked tirelessly with my executive team, the Wayne County Sheriff's Office, the Wayne County Circuit Court, the Wayne County Prosecutor's Office and the Wayne County Clerk's Office in order to develop a program and understand exactly what the County needed in buildings that would adequately serve the County's criminal justice system.

Thousands of hours were spent in an effort to reach this agreement. It is complicated and complex, but it is a good deal for Wayne County and its taxpayers.

The effort to reach this Agreement took over a year and countless negotiation sessions.

Often, attempts at reaching an agreement looked bleak. However, through the perseverance of my team and the Rock team, an agreement was reached.

I wish to thank the professionalism and hard work of the Rock team and Dan Gilbert, for pushing them to stay engaged when success seemed remote.

IV. AGREEMENT WITH ROCK: A GREAT VALUE DEAL FOR WAYNE COUNTY

This Agreement requires Rock to build the County an entirely new "Criminal Justice Center" on land the City of Detroit has agreed to swap with the County, pending Wayne County Commission and Land Bank approval.

The budgeted cost to build this "Criminal Justice Center" is $533 million.

The County will invest $380 million of the budgeted amount and transfer ownership to Rock of the County Parcels occupied by the County's Division I and II Jails, Juvenile Detention Center and Frank Murphy Hall of Justice.

Rock will cover all costs above the County's investment and be responsible for all cost overruns.

If the cost of constructing this "Criminal Justice Center" is less than the budgeted amount, the County and Rock will share those savings based on a schedule included in the Agreement.

While we've had to wait far longer than I wanted to reach a deal, the County is getting significant value.

In a Broker's opinion by Colliers International, the pre-demolition valuation of the County Parcels was between $62 million and $84 million, and the demolition costs could be upwards of $30 million.

Consequently, the difference between Rock's financial commitment to build this "Criminal Justice Center" and the value of the land they are receiving from the County is considerable.

PAYING FOR A HALF BILLION DOLLAR DEVELOMENT DEAL: WE GOT CREATIVE

Negotiating this deal was extremely complicated. We had to be creative.

The County will pay its portion of the construction costs with bond proceeds remaining from the failed-jail project on Gratiot, new bonds specific to the current project and some general fund dollars.

Wayne County's bond counsel has advised the administration that the transaction, as structured, will satisfy applicable federal tax requirements based upon discussions with the IRS.

The County expects to obtain the appropriate bond issuance for the project this summer and believes our improved financial position will lead to a lower interest rate, ultimately, saving the County and its taxpayers millions of dollars.

The County and Rock, also, have agreed to a parking concession for certain parking spaces on the criminal justice center site and nearby lots.

Rock will operate and collect parking revenues from these sites until $30 million in present value net revenue is collected by Rock. At that point, the County will take over operation of the parking lots.

Under the parking concession agreement, the County retains complete control of approximately 119 secured parking spaces for use at the County's discretion without cost.

The parking fees charged to the public by Rock are controlled by the terms of the Agreement and Rock is required to make available for County employees 800 spaces at the monthly rate set out in the Agreement.

HOLDING ROCK ACCOUNTABLE: WE HAVE OVERSIGHT

In negotiating this deal, we needed to ensure that the County has proper oversight, not only of the construction, but also the investment of funds.

Inclusion of Wayne County suppliers and workers as much is allowed was also very important.

Not only have we built in requirements in the development of Gratiot but also in the over a half billion dollar project to ensure that Wayne County businesses and employees benefit from its construction, but also efforts to ensure participation by disadvantaged businesses.

The County reserves the right to audit Rock's records with respect to the construction costs of the "Criminal Justice Center", Rock's investment and development of the transferred County Parcels, and Rock's revenue collections under the parking concession agreement.

After conveyance of the County Parcels, Rock will lease them back to the County for $1.00 per year until the Criminal Justice Center is complete and the County can fully transition to the new facilities.

As part of the deal, Rock has agreed to a number of requirements for the development of the County parcels, including:

a. constructing a first-class, mixed-use development;

b. investing at least $250 million in the development of these parcels;

c. performing extensive outreach to County based businesses for their participation in the development of the County parcels; and

d. employing at least 51% Wayne County residents in the jobs required for the development of the County parcels.

e. contributing $500,000 to parks located in Wayne County and $250,000 to support career and technical education programs for previously incarcerated citizens.

Many of these same requirements apply to the new criminal justice project, including requiring performing extensive outreach to County-based businesses and employing at least 51% Wayne County residents.There are extensive requirements to work with employment organizations, such as the Detroit Employment Solutions Corp and SEMCA as well as the County.

The master schedule expects Rock to complete the Criminal Justice Center in the spring or summer of 2022. That, of course, assumes starting in October 2018.

The Criminal Justice Center is required to be designed and constructed in accordance with "Outline Specifications" approved by the County.

The County retained the authority to approve the design as it moves from schematic design documents, to design development documents, and finally to construction documents.

GRATIOT: A SYMBOL OF FAILURE IS COMING DOWN THIS SUMMER

Based on the project schedule, Rock expects to commence demolition of the failed Gratiot jail shortly after approval of the deal and likely this summer or fall.

This will mark the end of our region's most notorious symbol of government failure and allow us to enter a new era in Wayne County.

This has been a long, arduous process, and we are still a long way from the finish line. For the first time, however, since construction was suspended in 2013, we have an achievable path forward and the outlook is positive. There is a light at the end of the tunnel and there is no incoming train.

We will continue to do everything within our means to build the Wayne County government our 43 communities deserve - and soon, we'll no longer have to drive by a rusty, stalled jail every day as we chart out the future of our County and City.