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Clear Channel Entertainment Sues Over Q Prime NYC Shed

Clear Channel Entertainment filed a lawsuit December 21 challenging New York City's decision to award the contract for a new 19,200-seat amphitheater on Randall's Island to Quincunx LLC, a subsidiary of Q Prime, Inc. CCE is alleging both a flawed bidding process and significant economic and environmental problems with the Q Prime proposal, and is seeking to reopen the bidding process.

"First and foremost, we want people to understand that the city has entered into a poor deal both economically and environmentally, and did so without following state and city law,'' said Ron Delsener, executive vice president for Clear Channel Entertainment, which has drafted a proposal that could guarantee the city $27 million more than Q Prime's proposal. "Q-Prime's proposal would result in a financially substandard project with significant public safety and environmental consequences for both Randall's Island itself and a number of neighboring communities.

"What is more," Delsener continued, "because the city has decided to allow Q Prime a 35-year term — a length of time exceeding historical performance venue concessions in this market — the reverberations of this project would remain with us for decades. We are certain that it is in the interest of all New Yorkers to put a halt to or reopen the process for developing an amphitheatre on Randall's Island.''

In its lawsuit, CCE focuses on two principal charges:

1) With the Q Prime contract the City is disposing of 9.2 acres of dedicated parklands for a private venture on a for-profit basis without having received the legally required approval from the State Legislature for such a project; and

2) That the City has approved the Randall's Island project without following its own rules of procedure for entering into concession agreements. The original Request for Expressions of Interest (RFEI) distributed by the City in 1999 describes one vision of the Randall's Island concession — that of a small concert stage in front of a meadow-like parkland — which was then materially altered for a project of vastly greater scale without the City opening the process as its own rules require to afford others the opportunity to submit competitive proposals for the new project.

Clear Channel asserts that had the City reopened the bidding process through a new RFEI or Request for Proposal (RFP), it could have attained far better terms than it will receive through its deal with Q Prime. Public funding in the amount of $27.5 million is being allocated for infrastructure improvements essential for the proposed amphitheater ($10 million from the Triborough Bridge and Tunnel Authority and $17.5 million from the city).

According to CCE, a comparison of Q Prime's proposal vs. that of its own, illustrates the city would receive approximately 40 percent more ($27 million) if CCE's 25-year term proposal were taken to 35 years, as opposed to the Q Prime proposal, as detailed below:

Q-Prime would be responsible for paying only minimal rental payments for the first seven years of its deal (starting at $50,000 in year one and slowly increasing thereafter), reaching a base rent of $1 million per year in year eight and a total of approximately $67 million during its 35-year term.

If the terms of Clear Channel Entertainment's current 25-year proposal (which calls for a much smaller venue of 7,000-10,000 seats and base rent to the city of $1.75 million per year beginning immediately) were taken to 35 years, the city would receive an approximate return of $94 million. (The 25-year proposal would return $60 million.)

Given that Q Prime has no previous experience in developing or operating a venue such as its planned amphitheater, CCE's complaint states that Q Prime's plan could present serious pubic safety and environmental problems for a facility of this size. It greatly underestimates the number of parking spaces – only 2,800 spaces — approximately 5,000 spaces fewer than the standard design criteria of 2.5 people per car; insufficient plaza areas which would negatively impact the ability for emergency vehicle to get in and out of the site quickly; the venue's size would encroach upon endangered area wetlands and create sound pollution; traffic congestion, which already plagues the area, will become even more unmanageable on show days. Q Prime proposed five -to-10 events a year for 25,000-50,000 attendees.

"Delsener stated, "We are confident that if the bidding process were carried out in a more appropriate manner, the multiple advantages of a proposal such as that from Clear Channel Entertainment would be clear and overwhelming. The fact is that a proposal which envisions a smaller and more environmentally friendly amphitheater while at the same time affording the city millions of dollars of additional revenue demands a reopening of the bidding process.''