By Stephen Young
By Stephen Young
By Stephen Young
By Jim Schutze
By Rachel Watts
By Lauren Drewes Daniels
It's so obvious what's going on here. John Ware and Ron Kirk are going to get this arena built one way or another--period.
It's no secret that Kirk serves at the pleasure of the downtown business community that's pushing this arena. They not only gave him the campaign money to get elected, they gave him a partnership at one of their big downtown law firms, which pays him a six-figure salary just to put his name on the firm's stationery. He doesn't practice law; instead, he plays golf and plays mayor and pushes for his arena.
When Kirk campaigned for mayor, he was Jimmy Carter reincarnated--an average Joe who prided himself on the fact that he drove himself to campaign events in an old, battered BMW. Three years later, Kirk not only has city security officers chauffeuring him around town in a new Lincoln Town Car, but his personal car has been upgraded too--to a brand-new BMW 750il, list price $85,000. Since he constantly complains that he took a pay cut to be mayor, I presume we should give thanks for the BMW to business leaders like Dallas Stars owner and leverage buyout specialist Tom Hicks. Hicks put the mayor's wife, Matrice, on the board of one of his companies some time back--a perk that paid $12,000 a year. (When the arena negotiations got serious, Mrs. Kirk resigned.) Mayor Kirk brings in an additional $36,000 for serving on the board of Dallas-based Brinker International.
Clearly, Kirk not only wants a new arena--he needs it if he wants to run for re-election and continue making his BMW payments.
You can believe that Kirk and Ware know this arena deal is one-sided and smelly. They know how foolish they look when Perot and Hicks dismiss deadlines out of hand. They know how greedy these two team owners are--and how much greedier they look when, on the very same day they can't be bothered to produce a site and master agreement on time, Hicks' Dallas buyout company shamelessly announces that it's bought the nation's second-largest cinema chain, United Artists Theater Group, for $300 million. No tax subsidies required.
How do I know that Ware and Kirk know all this? Because of one document--a piece of paper that the city received by fax on September 19 from Deloitte & Touche, the big accounting firm hired by the city for $50,000 to tell us what great things will happen to our economy if we build a new arena.
Deloitte & Touche's 150-page final report was presented to the Dallas City Council at the October 6 briefing. According to the report, the new arena would have a direct and indirect economic impact to the city of $300 million a year for 30 years, based largely on all that private development by Perot.
That's certainly an impressive number--so much so that it's become the rallying cry for the pro-arena campaign--and it's clearly hard to challenge, since it's based on complex formulas that utilize hundreds of numbers.
But I started to seriously question the validity of the $300 million number when I saw the fax from Deloitte & Touche. It was a single page that city officials had thrown in a box--there was no context, no fax cover, nothing--in response to a formal request I made to see any arena documents generated since July 1997.
The fax contained one chart--a chart that looked strikingly similar to one I'd seen on page 5 of the 150-page Deloitte & Touche study. Both gave projected gross revenues and net income after expenses for a new arena in the year 2001--the first year the arena would be open. But the chart in the study claimed the arena's net income in 2001 would be $15.4 million; the chart on the fax--which didn't make it into the study--showed that income to be $86 million.
So which was it? Since the teams will get all of the revenues from the new arena, it's reasonable to want to know how much the teams are going to make off this--especially when the city's cut is limited to a paltry $3.4 million a year in rental income.
Bob Stimson, who's a CPA, remembers thinking that the $15.4 million looked a tad small. He questioned the figure at the October 6 council meeting and was told that the number was, in fact, lower than what could be expected. But the city didn't know how much lower.
Last Friday, I called Deloitte & Touche for an explanation. According to a senior consultant who helped put together the Dallas study, the city wanted Deloitte & Touche to come up with those low numbers. In fact, they specifically asked the accountants to calculate the arena's 2001 income by using the bare-bones 1997 Reunion Arena lease terms between the city and the teams, which don't take into account all the expected revenues from luxury suites, premium seating, corporate sponsorships, and other new-millennium frills.
"I don't know if I want you to quote this statement...but it doesn't make any sense--an old lease in a new building," says Deloitte & Touche's Jeff Cohen, a senior consultant for the firm's sports and entertainment division in Los Angeles. "Are the [revenue figures] real-world? Probably not."
Of course they're not--$15.4 million is far too low. Which is why Stimson asked for the real numbers.