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Some Council members object to Flannigan’s new role at ACE

Tuesday, March 9, 2021 by Jo Clifton

City Council approved a resolution last week granting consent for Austin Convention Enterprises to apply for a federal loan to help front-line employees working at the downtown Austin Hilton Hotel. Assistant City Attorney Lee Crawford made it clear that if the Paycheck Protection Program loan is approved, the city would have no liability for payment.

Austin Convention Enterprises, or ACE, is a public facilities corporation that was created by the city to own, finance and operate the downtown Hilton. In early January, ACE’s board of directors hired former Council Member Jimmy Flannigan as the group’s president at a half-time salary of $140,000 a year. Flannigan is the entity’s only employee, having neither an assistant nor an office.

Council Member Mackenzie Kelly, who defeated Flannigan in his bid for reelection to the District 6 seat, told her colleagues she wanted to make sure that the PPP loan would not be used to cover Flannigan’s salary. Crawford affirmed that it would not.

Kelly then asked whether it would be the ACE president’s role to oversee the administration of PPP loans. Crawford said that the president “would have very, very little to do with that.” He explained that under the terms of the bond indenture, “the responsibility for administering all of the revenues that come into ACE by virtue of operating the hotel, the overall oversight of those is the charge of the trustee.”

Before the pandemic, the Hilton had about 500 employees and now has about 200. If ACE is able to secure the PPP loan, its hope is to avoid laying off any more staff.

The Hilton, which is backed by bonds, paid the city about $2 million in January 2020, from revenues generated in 2019. But now, the hotel is losing money because of the pandemic.

Council Member Ann Kitchen also wanted to make sure that none of the federal loan money would be used for other expenses, such as utilities.

Kelly and Council Member Kathie Tovo both seemed uncomfortable with the hiring of Flannigan, with Tovo saying at last week’s Council meeting, as reported by KXAN, “It is an unusual thing for the board of an (organization) that is like a local government corporation to extend an offer of employment to a Council member while that person is still a member of Council.”

According to Austin City Code § 2-7-67, former city officials are not allowed to receive pay for representing a person or entity “within 12 months of leaving the city concerning a case, project or matter over which the person exercised discretionary authority” as a city official.

Phillip Schmandt, chair of the ACE Board of Directors, told the Austin Monitor that the board had consulted with the Winstead law firm before offering the position to Flannigan and found no legal problem with hiring him. He said the city’s lawyers confirmed it was not a problem.

Schmandt, an attorney, told the Monitor, “When I was appointed I sent a letter to every Council member,” asking them to contact him if they had any concerns. “More than 60 days have passed since Jimmy Flannigan was hired, I have not heard one concern … that’s not fair to ACE, not fair to Jimmy and not fair to me. This is now officially above my pay grade. The bylaws provide if the City Council wants to, they can remove Jimmy. If they want to, make a motion. Otherwise it’s empty grandstanding.”

Flannigan said he woke up on Dec. 16 thinking about the fact that he needed to find a job. Later in the day, he said Schmandt called him and asked him to apply. Flannigan, who has an MBA, interviewed with the board on Dec. 29. When they offered him the position – which he says is certainly more than part-time – he accepted.

Schmandt is one of three directors currently serving on the ACE board. When he started in late 2019 two city employees were also serving on the board, but they quit after being personally sued by the owners of the 5 Fifty Five condominiums. Schmandt and the two other board members, Jolsna Thomas and Sherri Greenberg, were informed in June that they would have to become officers, so Schmandt took over as chair.

At that time, he said ACE was paying a part-time consultant in Dallas $110,000 a year and was also paying an attorney in Austin. Deciding that ACE needed a president to oversee the business of the corporation from Austin, the board asked for permission from City Council, and that was granted in July, he said.

Schmandt said they put out a call for resumes and received quite a few, but most of those who applied were not qualified for the job, and some balked at the idea that they would not have an assistant and would be responsible for everything. They finally interviewed two candidates in October, he said, and offered one person $140,000 a year, which was in the low- to mid-range of what a consultant recommended.

The person who was offered the job accepted, but called back the following day to withdraw his application. That left the board wondering who they might hire. Schmandt said he thought of Flannigan because of his knowledge of city workings.

“This is a city-owned asset,” he explained. “The person needs to understand city of Austin politics, and community values need to be taken into consideration. … We’re not just about maximizing profits, but this is also about community values; familiarity with public finance and forecasting – which he has through an MBA and his service as a City Council member. Technology expertise, and a difficult threshold to cross – you’re going to be a one-person band … no administrative assistant, no office, no nothing. We’re not going to be spending any other money … a lot of people wouldn’t have understood that.”

He concluded, “Quite honestly, Jimmy Flannigan met those criteria better than any other candidate.”

Flannigan said he signed the contract with ACE the day after Kelly was sworn in.

In addition to getting legal advice about hiring a former Council member, Schmandt said, “I’m also aware that we have long experience of former Council members being hired and returning to the city. ACE is a separate entity and a lot of finger-wagging is counterproductive to ACE and to the city. All this brouhaha is likely … causing a lot of pain for the voluntary board and undeservedly so.”

Photo made available through a Creative Commons license. This story has been changed to reflect the fact that Tovo’s remarks took place at the City Council meeting last week. 

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