Behind the Headlines — Jan. 10, 2014

Behind the Headlines — Jan. 10, 2014


(female announcer)
This is a production
of WKNO – Memphis. Production funding for “Behind
the Headlines” is made possible in part by.. Why the city bought Autozone
Park tonight on “Behind the Headlines.” [theme music]
♪♪♪ I’m Eric Barnes, publisher of
The Memphis Daily News. Thanks for joining us. We are joined tonight by a
number of people from the Memphis City Council. Wanda Halbert, thank
you for being here. Thank you. Herald Collins,
Memphis City Council, thank you for being here. Thank you for having me. Ted Evanoff is business
editor of the Memphis Commercial Appeal. Thanks for being here. And Bill Dries, senior reporter
with the Memphis Daily News. The council voted
this week to pass, to buy Autozone Park, the
baseball park where the Redbirds play. Both of you voted against. I’d say from the outset that we
try to get some folks from the city on who had advocated for
this deal and some other folks from city council
who voted for it. We couldn’t work that out. So if you’ll forgive me as I
channel some of the other points of view. But let me start with
you, Wanda Halbert. Why did you vote
against this deal? Well you know it was really
interesting because we were in a serious quagmire. Either we are going to have a
facility that is left empty, not sure what to do with it,
or we were going to enter in to this arrangement. I think a couple of the
major challenges for me.. One — over the last few years,
the mayor has come to the city council and the citizens
of Memphis and said look, we’re financially strapped. We’ve got to reduce jobs. We’ve got to reduce
services, raise taxes. And the people are saying well
how are we consistently finding money to do some of these other
projects when we can’t pave streets like we need to. The blight remediation — even
though some of those things have started, we’ve been struggling
with those issues for a long time. The lack of jobs, the high
unemployment and poverty rate in Memphis. There are a
number of challenges. And then the other issue that
really glared out to me was the fact that the administration
did not share with me that we jointly owned the property that
the stadium sits on with the county government. They’re still trying
to work out that deal. Not sure where that’s gonna go. You know growing a fan base
and including teh citizens of Memphis — that portion of
it has not been discussed or finalized. So there are a lot
of open questions. What if the deal falls though? Then what? That was a specific
question that was asked. And the mayor said
we really don’t know. So when you come to the
table with this kind of issue, in my opinion we need
to come full circle. We need to be able to tell where
we are and wherer we’re going. Alright. We raised a bunch
of good points. Let me get Herald Collins in
to just get your perspective on voting against it. I just have two reasons. One — Should the Cardinals or
the Redbirds leave after year five, there was really no
financial penalty except for to file a lawsuit
against them for claims. And we all know that major
league sport franchises get up and leave with —
because they want to, because the owners
make different deals. And so I don’t think that
the state of Tennessee has any recourse to keep the Cardinals
here to make them pay a bill because we are the
ones who signed the debt. And the second one to
me was very obvious. The Cardinals wouldn’t even
accept the fact that should they leave, they paid their debt and
it’s on the stadium just like the Grizzlies. What seperation makes the
Cardinals different from what the Grizzlies have done? I mean the Grizzlies
moved here from Vancouver. They immediately said
yeah, we’ll do this. We love the Grizzlies. We love the Cardinals. I mean we.. Some of us do
love the Cardinals. But at the end of the day,
they’re no different than anybody else. And we should not have in my
opinion got in to a realtionship like that. Yeah. And Bill, let me.. Check me as I walk through
just the terms of the deals I understand. The city is going to issue bonds
through the center city revenue finance corporation. 19.5 to buy the
stadium — 19.5 million. Four million in
improvements and changes. Then the Cardinals
have bought the team. So the entities
are separate now. The Cardinals will have
signed a lease or an agreement, 17 years I believe to
have the team there. They’ll pay about $300000 a year
to lease the stadium from the city. And then there’s some backstop,
some — if revenue falls short through sales tax
revenue and so on, the Cardinals would put up
$100000 and then Autozone Incorporated, the comapny
headquartered Downtown, would also put up $100000. Did I get that right? Right. Those two are backstops in the
event that the sales tax rebate revenue does not meet the
mark or hit the mark that it’s supposed to do. And that’s the largest single
factor in paying off the debt from the bonds in this. And some of the council members
who voted for it said that extra $200000 of that contingency was
what changed their attitude on this, so to speak. Because you have a number of
council members who if they weren’t opposed to it, were
certainly on the fence about it and didn’t want to vote on it
the previous two times that it was delayed by the council. And going back to
you Wanda Halbert, you talked about, you know,
the troubles the city has and difficulties with, you
know, it’s a tough economy. And you know the city
is financially strapped. Were you also — I mean I think
you said — concerned that if the deal didn’t happen,
a deal didn’t happen, you’d have this in
the ehart of Downtown, you know, some
500000 people a year, give or take, come
down to Downtown. They spend a
certain amount of money. They go to restaurants. They buy, you
know, Redbirds gear. They help to, you know,
stimulate the economy to some degree. Were you worried
about leaving that empty? Well in my mind, I think when
you have a situation that exists like that, you
have to get crafty. We have a number of
colleges and universities, schools, junior
high, high schools. We have R-B-I teams. We have little league teams. There are a number of ways that
we could have tried to utilize the stadium. Not to suggest that they would
have brought in the kind of revenue that you would hope for. But at what point do you make
all of these issues about the citizens of Memphis and
not just about the dollar? Because just as Herald said,
sometimes your intent maybe good. There maybe some good efforts
and good faith efforts made. But just as the
Cardinals representatives said, they can’t guarantee
that they’re gonna stay. So then what? We’ll find ourselves back in
that very situation where we have to be creative and figure
out what we’re gonna do with that stadium. Let’s go to a soundbite of I
believe this is Paul Morris of Downtown Memphis Commission
speaking to you all at the council talking about — for the
project and then Kenneth Whalum speaking against it. We’ll all kind of
comment on that. Let’s go to the soundbite. Redbirds are a big part of the
property value Downtown which is why we generate more
property taxes Downtown. Redbirds bring more
people in Memphis. We’ve got to grow as a city
and the Redbirds are part of the package that Memphis has
to offer to the citizens. The redbirds ultimately increase
property values and therefore increase property taxes. Thank you. Why relieve $24 million to buy
a ballpark when you still owe a judgement of $57
million to your own children? It’s exactly like a dead beat
dad refusing to pay for child support order so he can
buy himself a vehicle. Let’s talk about the first part. Paul Morris talking
about property taxes, about theimportance that
from his point of view, the Redbirds stadium,
the Redbirds team plays in attracting people Downtown. I mean your take on that from
a pure business point of view. Well I think from the
business point of view, Eric, any facility that
brings 5000 people a night in to Downtown is an
economic generator. I think right now Downtown
businesses would say there isn’t enough of these economic
generators to really support what they have. We’ve seen a number
of businesses close. So I think that from the
standpoint of bringing people in to the center city, the
stadium is fulfilling that goal. And your take on that Herald? I mean you must have
looked at it and said look, I don’t want to take
500000 people out of Downtown. I mean that’s not a mission
you’ve been elected to do I assume. Absolutely. I weighed heavily on
that very same subject. Remember I represent Graceland. And so Heaven forbid that we
have to make a decision about that knowing what they
bring to the community. But at the end of the day, we
have to make a decision based on what kind of revenues that the
city and the citizens of Memphis would be exposed to. And my whole vote was based on
one answer that the Cardinals or the administration said. And they could not guarantee
that they were gonna be here or cover the debt
should they leave. And to me, that was very simple. Yeah. Are you comfortable with the —
Let’s take out the possibility that they leave for a second. The way the numbers work in
terms of the sales rebates. And basically what it is is the
sales tax at the stadium and so on goes back to paying
down the debt every year. It’s a roughly two million
dollars a year that would be paid towards that. So it’s not a huge
insurmountable number. Are you comfortable with the
projections year-to-year as they were presented. I’m comfortable from
maybe year one to year seven. Okay. But as we get
further down the line.. And remember, we won’t be here. It will be another council and
another adminstration trying to figure this out. But year seven, year eight, year
nine — those numbers just get wider. And I’m not certain
that we can do that. That’s why we were
concerned about the later years. Oh, no. I knew year one through
five would be fine because the Cardinals general manager said
as soon as this deal goes down, we’re gonna sign a four
year contract for player redevelopment or
player development. So we knew they were here
at least for four years. My concern was
year seven, eight, nine and ten and
going forward after that. Then who’s gonna be responsible. We’re gonna continue to be a
city that’s struggling to get the streets paved. As Wanda says, are going to be a
city that continues to have 30% poverty rate? Are we going to be
a city that when.. And I don’t want to divert us
but Electrolux is looking for qualified applicants right now
to work in their new faccility. Where are we gonna be
in the years seven, eight and nine, ten trying to
figure out how to make this work? Yeah, yeah. Another part of this Bill that
we’ve talked about on the show was the
presentation, the timing, the way that this was brought
to council didn’t go over real well. There was a lot of criticism oer
the administration that it was rushed through, that it was
going to have to be voted on before Christmas or
before the first of the year. And with all the priorities
that the council folks here are talking about — wasn’t that
part of the problem from your perspective that they rushed it? And why did they do that? Well initially the
administration told the council that they had to have a decision
by the end of the year — by the end of 2013 that this could not
wait that they absolutely had to vote on it. Our guests can tell you this
is something the council hears quite frequently. And in this case, the bulk of
council members if not all of the council members were at
least highly skeptical of it. The other thing was and I’ll
ask both of the council members about this is there were
other factors that were in the committee room as
this was discussed. This came up the same council
day that the council got a monumental presentation on
the city’s unfunded pension liability. It also came up the same day
that the council was beinga sked to approve $15 million in
funding for the Crosstown project. Right. And so let me segue and just
get both of your thoughts on how much of this was about the
ballpark deal and it’s terms. And how much of it was about the
other larger issues and where the ballpark fit in to them? And one other major issue that
you didn’t mention was the fact that we had just voted down the
one percent sales tax fo pre-k funding. And so I think for
members of the council, it’s so frustrating to continue
to see and hear and know that we have some very serious
challenges ahead of us. But then even with those
important challenges and initiatives, here comes a
ballpark out of left field. But what I said to the
individuals in the room that I met with, because I got a
chance to meet with the team. There were several
partners and the mayor. And I said to them I understand
and value the fact that the mayor has to behind the
scenes negotiate on any deal. I understand that. Someone in that group — I guess
they call themselves being ahead of the game — went and
leaked it to the media. And then they started drumming
up the citizens to support it. That was the wrong move to make
because you have to allow the amyor and his administration in
fairness to discuss the issue, figure out whether it’s
something that’s worthy of bringing it to the
council and to the public. But if you step ahead of that
process — and that obviously happened — but the mayor took
responsibility for it of which he should have. But when you step
outside of that arranagement, then you start
stepping in to murky waters. Because we all saw the mayor on
television saying I don’t know anything about it. And within a week he had to
come back and admit that it was actually on the table. Herald, when you hear the
statement we need a vote on this today or we need to vote on this
by the end of the year which is at that point I think
two or three weeks away? Or they’re gonna
start taking apart. Well number one — we had been
down this road before with this administration. I mean this wasn’t the first
time that they brought something to us at the eleventh hour and
told us we had to vote on it in 30 minutes. But here, this is what
made me really suspicious. When the administration began to
lay out where the funding would come from for the Crosstown
Project and they had things, some conservative energy revenue
bonds that we had never heard of. An M-L-G-W $500000
for street lighting. And so in particular, I asked
for documentation that would show that this was legitimate
spending for us to do. And I asked Jerry Collins
of Light Gas and Water. I said Jerry, tell me where
you’re gonna get this $500000 from in your budget. And Jerry Collins
gets to the microphone, which I give him a lot of
credit for saying this. He says councilmen, this is
the first time I’ve seen this. And I couldn’t believe that. That took a lot from him for him
to stand up and say that in an open forum with the
mayor in the room. But for them to just throw
a line item in there to say M-L-G-W is a part of this and
no body talks to the president, that shocked. And to clarify that was
on the Crosstown deal. But again, I think there were
six or seven when that passed. We had it on the show. Six or seven
different, you knwo, obscure funding sources. And I wonder if
I’m not mistaken. Back in the fall when the state
comptroller raised some red flags about city finances. It was on part, this kind of
shifting of form source to source. And let me say this just to kind
fo pick up on what Herald said. Just last night I was driving
down 385 and there are a number of lights on 385
that are out right now. I mean literally
if you go tonight, you will see. It was so dark and that’s what
kind of drew my attention to it. I am regularly reporting street
lights out throughout the city even on major thoroughfares. And so here is
exactly my concern. How in the world are citizens
living every single day in those conditions? But then in a situation in this
where a project like this pops up and all of a
sudden we have the money. We don’t have the money for
regular everyday needs according to the administration. Let’s talk a
little about the money. You wrote a very interesting
article which we’ll kind of try to sketch out here. And it was one of the concerns
that some council members had I think. I know Lee Harris voted against
it and he voted against this Autozone deal in part becuase
I think the rough quote was I don’t want all this money
from a city that’s struggling, as Wanda Halbert has
just talked about, going to these Wall
Street hedge funds. And Fundamental Advisors is
a headge fund that owned the debts, the bonds on the stadium. And they walked away and made a
tiny little sum which is what hedgefunds are supposed to do. Tell us how that worked. Well that’s correct, Eric. Fundamental Advisors is
essentially a 44-year-old Montreal native
named Lawrence Gottlieb. And early in his career
after he graduated from Boston University, he worked for a
sports management corporation then went to work for a
large bank in New York. And when the 2007
crash occurred, he left that bank and
started Fundamnetal Advisors. And what they do is buy. They’re a vulture fund. They buy the distressed
debt of municipalities, corporations, anything
they think has some value. And I thinK lawrence
Gottlieb looked at this stadium, looked at who plays there —
the Saint Louis Cards triple A franchise, looked at what
was across the street — the Peabody. Two blocks away is Beale street. And he knew no one is going to
walk away from this stadium in Memphis. And so they spent $24 million
to essentially buy a $72 million ballpark or atleast a stadium
that was built for $72 million. They held that for
about three years. And they are coming out of
this deal with a $7 million. I don’t want to call it
profit but $7 million ahead. They’re receiving $31 million
on their $24 million investment. Some of that $7 million they’ll
say they had spent in operating costs in running the
ballpark for three years. Never the less, seven percent
or rather $7 million is a pretty good return in this era. Right. Did you have problems with that? Was that or did that
influence your vote? That did not influence my vote. I knew that the hedgefund
people were going to make money. The question for me
was, again, our exposure. Yeah, yeah, yeah. Wanda? That’s just the
nature of businees. That’s the nature of the beast. I mean he saw an opportunity. He took advantage of it. And he sat and bided his
time and it paid off for him. So that’s just the
nature of the business. But I will say this. That team when we spoke, I asked
the Redbirds how did we get here. And they admitted this was a
overzeaelous plan that wasn’t necessarily the best business
model because even when you look at the fan base, the fan base
is not there for what exists in that stadium. Yeah, I mean that goes back. I don’t know if you
want to comment on this. But that goes back
to the beginning. I mean the whole and John Wade
from Memphis Daily News wrote a story about this. You know the original plans were
that they needed some $750000 a year in attendance and they
peaked at about 900000 a year. But they’ve been more
under the, you know, 400000 to 500000 a
year since then. And so the $72 million stadium.. I mean in some ways the city got
a bragain I guess because it was built for a lot of money. It’s a beautiful ballpark if
you’re in to that sort of thing. And the city got
it for whatever, $20 million plus. But yeah, the business plan
didn’t work back to when other folks kind of
launched this thing. They had sort of lofty goals
that they never quite hit. I think one of the problems
they had in this stadium was the construction and the
opneing of FedEx Forum. There are only so
many nickels in Memphis. They tend to come out
of the same pockets. And once the FedEx Forum opened,
it detracted from the fanbase that would have
gone to Autozone Park. They probably could have done a
better job of marketing it at that point. But they didn’t. And so they had something north
of $5 million in annual debt payments every year. They simply couldn’t manage
that Under this new deal for the city, it may be a small
consoluation but the debt payments will be down closer to
$2 million a year for the city. So you don’t need 700000 people. You don’t even need 500000
people showing up in this facility. I know we’ve done
stories over the years. Bills done
stories over the years. Various managements have came
in and the problem was they only had so much money for
marketing, for events, for fireworks when they had
that crushing debt there. They had so much to pay. You know they had
an avid fan base. It wasn’t what projections were
but they had a lot of people who love the stadium
and loved the team. But they just had so much debt. So maybe in this
sense, the Cardinals, which I think eveyrone would
say is a very well run sports organization. They seem to have this
plan to be able to do more. And speaking of the fan
base, you know many of us have proposed since the Cardinals
were not willing to take on the debt at the end, why don’t we
put a surcharge on the ticket so that those persons who would
know and go to the game would support. And they — no, we’re not. Where as the Grizzlies
charge a surcharge. Even the Tigers charge you a
surcharge for your ticket to help pay their debt. And so if you want
to go and enjoy that, that’s what you do. And we felt those persons who
typically don’t come to Memphis except for to see
a Redbirds game.. I don’t know about Ms. Halbert
but I got hundreds of e-mails from Redbirds fans as
Councilman Strickland said, as far away as Australia to say
vote for this project because when I come to Memphis, I
want to come see the Redbirds. And so my position
was that’s great. So I know you won’t mind
paying extra for a ticket. And they said no way,
we’re not doing that. Bill? Do you all think there was
bargaining by the adminsitration on the front end? Do you think the administration
bargained with the Redbirds and the Cardinals before they
came to you the first time? I really don’t think so. I mean because there were a
number of different issues that they could have considered. One of the things that I put
on the table and the mayor mentioned — his administration
mentioned it was how do I get the mother with three or four
kids living in Hickory Hill to the Redbirds game? Because she’s the
one paying for it. How do I get that family
to come and participate? Even the R-B-I program that
they’re talking about growing and expanding. You know I told them a lot of
people don’t know but I’m a baseball mom. My boys grew up playing
t-ball, little league, high school, R-B-I. And one actually went on
to college with baseball. So I’m very
familiar with the sports. But there has been no outreach
to the citizens of Memphis. And while we value and
appreciate any citizen, any individual who
comes to those games, how do you engage the
citizens of Memphis? Because that’s what’s gonna
help create the revenue that you really need to sustain. It’s a beautiful facility. But you still
don’t want it empty. And that’s something. Do you think they
did a better job? This is just me. I seem to remember
the earlier years, they did a much better job. They had more outreach in the
community and mainly because it was locally owned and people
who were like — I don’t want to call them philanthropists but
they had the city’s interests in mind that they did a better job. And then maybe it was that debt
that they just didn’t have the money to support
some of those efforts? Absolutely, absolutely. And to Bill’s point
about the negotiation, they admitted that they didn’t
negotiate with Fundamental Advisors and teh Redbirds. It wasn’t until the council got
in and began to negotiate the deal with them through
resolutions and amendments that they came back to
say well, okay. We’ll do instead of $20
million, $19 and a half million. Instead of $5
million in renovations, we’ll do four and a half. And honestly, we believe.. Well I believe that once the
council took on that role, I don’t think that the mayor and
the administration could allow a negotiation period to go through
becuase it would have looked very unfavorably upon them. Do you worry? This is a little bit
bigger picture here. I mean you mentioned Graceland. The city put a whole bunch of
money in to Graceland — 10 or 20 million dollars in the
last couple years in street improvements. Yeah, we’re doing street
improvements on Elvis Presely boulevard. And Crosstown, we’ve
talked about just 15 million. Beale Street Landing
is finally wrapping up. I mean I don’t know —
$40 million project. Bass Pro is a huge project. is the city over reaching in
terms of these investments? I’ll start with you. Well with the
Elvis Presely project, of that 43 million, 27 is
state or federal dollars. So the city is putting in 16
over the four or five year period to get the
street completed. With regards to the
Beale Street Landing, with regards to Crosstown.. I mean all of this money that we
seem to find — as Wanda would say for the projects that people
want to get done for other people. That seems to be the priority. Let me. Just 30 seconds left. Again, the all of it. From all these
projects, there’s other ones. We’ve talked about Electrolux. Is it too much? Is the city over reaching? Well I do agree. I mean I do think they are. You know there are. You got Tiger Lane
which is in my district. There are some projects that are
central to the well being of the city of Memphis. But it’s these public-private
partnerships that are starting to just grow out of control. And there’s no rhyme or reason
as to how we’re getting there. Well we will leave it there. Thank you for being
here Herald Collins, Bill Dries, Ted Evanoff. Thank you all for being here. Thank you for joining us. Join us again next week. Goodnight.

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