Flying blind

With the mayor and city manager leading the charge, the city council moves full speed on an arena deal that doesn't even exist yet

It had been an embarrassing week of missed deadlines: no master agreement, no arena site, no substantive communication from the teams.

City Manager John Ware had spent all day last Wednesday pacing the council chambers, nervously popping nuts into his mouth, waiting for the phone to ring--waiting for a green light from the teams that at least an arena site had been selected.

Finally, the big moment arrived. On Friday, the last day the council could vote to put an arena deal on the January ballot, council members got their much-awaited arena briefing. All the players descended: the throng of reporters, the overworked city staff, the pro-arena political consultants, the handful of City Hall gadflies who couldn't wait to see the fireworks.

Lights, cameras, action.
The briefing began.
Zoom to Councilwoman Barbara Mallory-Carraway, sitting privately--or so she thought--in her elevated seat at the council horseshoe. As debate swirled all around her, Mallory-Carraway stared intently at a document on her desk--not a schematic of the just-revealed arena site, but a bright red Christmas catalog called "Hostess," filled with pictures of blessed mangers, jolly Santas, and festive wreaths. She turned each page slowly, soaking in all the delicious holiday treats, her attention only occasionally diverted--usually to her hands, where she spent a good bit of time picking interesting bits of things from under her fingernails.

"I'm looking forward to Christmas..." she chirped gaily into her microphone at one point, when it was her turn to comment on the arena. "I'm looking for Christmas gifts while you all are doing this!" (Standing there watching this, I think everyone thought she was kidding.)

Then there was the Hon. Charlotte Mayes--a veteran councilwoman of six years who, unlike many of her less-experienced colleagues, had worked on this massive public project since the beginning. But here is what Mayes contributed to the debate last week:

"The city of Dallas still currently owns Reunion Arena, is that correct?" Mayes said, her face registering total confusion as she looked to John Ware for clarification.

Assured that the city did, in fact, own Reunion, Mayes offered this advice in all seriousness: "The current arena would be a good site for a mini-shopping center," she said. (Mayes is clearly a powerful shopper--shortly after she made this recommendation, she leaned over to Mallory-Carraway and borrowed her "Hostess" catalog.)

Then there's Deputy Mayor Pro Tem Steve Salazar. A lawyer by profession, Salazar somehow managed to sit through three public discussions of the arena deal last week, and all he had to say was how much he really likes the project. In fact, he likes it so much that at the October 6 arena briefing, he began his remarks by saying, "This is like the movie, It's a Wonderful Life..."

Try as I did, I could never come up with any connection between the movie and the arena--and got no help from Salazar. A pearl of wisdom from Salazar just last Friday: To those anti-arena folks who label the city's $125 million contribution "corporate welfare," Salazar says, "I think the people who use the term 'corporate welfare' should look at where they work."

Actually, Salazar, I suggest you take a harder look at where you work: Because last Friday's city council performance confirms the taxpayers' worst fears that the sports teams are toying with them--reneging on commitments, blowing deadlines, asking for more and more and more money.

Worse, John Ware and Mayor Ron Kirk think it's just fine, and the majority of the city council is too weak to put a stop to it.

Read their lips. Because what Ware and Kirk and the teams are saying changes every week--and if you start pulling all their statements together, you'll quickly see lots of contradictions.

Councilman Bob Stimson has been trying to warn the others. He implored his fellow council members last Friday to vote against calling for a January special election on the arena. "I want everyone on this council to take a strong position that a deal's a deal when you sign it," Stimson said. "Stick to it."

But the teams aren't sticking to it, and nobody else seems to care. The letter of intent that the teams signed last month has turned out to be virtually worthless--many of its supposedly ironclad points are already being ignored or renegotiated.

"The City and ArenaCo shall enter into a master agreement on or before November 12, 1997, subject to approval of the City Council and ArenaCo," the letter of intent clearly states. (ArenaCo is the company that the Mavericks and Stars are forming to build the new arena.)

But there was no master agreement on November 12, as promised, and there is no master agreement today. In fact, there won't be one until December 10--unless that's just the next deadline to be missed. There was also no announcement of a site by November 12, another promise the teams made to the city when they signed the letter of intent.

And, to add insult to injury, the teams have now decided that the gaggingly generous $125 million in tax dollars the city manager and mayor agreed to fork over isn't enough--the teams are now asking for $22 million in additional street improvements, expanded trolley service to the site, a DART station on premises, millions of dollars in tax abatements, and no doubt plenty of other goodies that will only become evident once the dirt is flying and the teams have the city over a barrel.

Only two council members--Stimson and Donna Blumer--see how ludicrous it is to ask the voters to consider approving an arena deal in January when we don't have one. (Al Lipscomb joined them in voting against the ballot initiative, but his vote was suspicious. A rabid pro-arena supporter, Lipscomb went off on a bizarre rant last week about not wanting to offend his South Oak Cliff constituents by choosing the wrong downtown arena site.)

Blumer and Stimson could have taken things one step further--turned up the temperature a bit. They could have called for a vote to terminate the arena deal entirely. According to the letter of intent, they have every right to do so: "This Letter of Intent may be terminated...by any party, if the Master Agreement is not executed and delivered by the City and ArenaCo on or before November 12, 1997."

Instead, the city council voted to proceed with the deal at full speed--with no solid information.

Let's take the simple issue of what will happen to Reunion if we build a new arena.

The letter of intent says Reunion Arena is coming down with a wrecking ball. Period. "You can't have competing facilities and make this work," Kirk snarled at the council members who questioned him about it last month.

Last week, though, was a different story--Kirk and Ware were talking about saving Reunion after all. (One thing the $1 million pro-arena campaign is learning through its phone polling is that people don't like the idea of demolishing a 17-year-old building for which they still owe $28 million.)

"The teams have backed off their previous position and have indicated they would like to see if they can operate Reunion Arena and see if they can make it a viable situation," Ware told the council last week.

An "indication" is not a commitment--but try telling that to our city council, so eager to be on the team. Both Don Hicks and Larry Duncan swallowed Ware's comments whole--good, Reunion Arena will be saved, they said. Then, as the pro-arena people no doubt expected, The Dallas Morning News published a lead editorial the next morning that precisely echoed the councilmen's misinterpretation of the facts. "The Mavericks and Stars no longer insist that Reunion Arena be torn down," the editorial stated triumphantly. "Instead, the teams will manage the facility. That resolves a significant criticism about building a new arena."

But nothing could be further from the truth. Nothing is resolved. Nothing.
Just ask John Ware--ask him directly and firmly, blocking his attempts to wriggle away from the truth by using weasel words such as "indicate."

"Are you saying that the master agreement is going to specifically state that Reunion Arena will not be torn down--that the teams will manage it instead?" I asked him immediately after last Friday's briefing. (I rushed to the horseshoe so fast that a City Hall employee tried to have me ejected from the area--"for security reasons," she said.)

"Don't know," Ware said with a shrug as he tried to walk away. "That's part of our negotiations."

OK, so let's move on--to a question that had been asked repeatedly during the briefing, one that Ware repeatedly dodged. "The city promised to contribute $110 million for arena construction and $15 million in infrastructure," I said. "Now that the teams are asking for an additional $22 million in infrastructure improvements, will that be in addition to the $15 million the city already promised?"

"Not sure," Ware said. "We're negotiating that right now."
And how about this: Ross Perot Jr. says he's buying 13 acres from TU Electric for the arena and a parking garage. He's also buying an additional 15 acres from TU for surface parking. Then there's another 15 acres he wants from two other landowners--all of which is needed for surface parking, according to maps Perot has provided to the city.

So if all the land Perot hopes to buy--those magical 43 acres he keeps talking about--is needed for parking, where is he going to put all this fabulous private development he promises to build around the arena? (I'll give you a hint: Perot initially promised $1 billion worth of private development around the arena; once that got him in the door at City Hall, the $1 billion quickly shrunk to $472 million; and then once it was time to commit a number to paper, the promise disappeared altogether.)

If there's going to be any ancillary development--apartments, office towers, shops, restaurants, hotels--evidently, it will have to be built in the middle of Stemmons Freeway.

Right, John Ware?
"That's something we're negotiating right now," he said. "Everything's being negotiated."

Well, you can forget any private development. Just do the math--I'm sure Perot has. If he gets the 43 acres he wants, the total number of parking spots he'll have if every bit of that land is used for the arena and parking is 6,110 spots, according to David Morgan, the bureaucrat in charge of the city's arena effort.

That might sound like a lot, but, as I pointed out to Morgan, Reunion, which is much smaller than the proposed arena, currently boasts 6,300 spaces. Oops.

"I don't think I know where the ancillary development will go or what the plan is," Morgan said. "That's what we're discussing with the teams right now."

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.

"Do you have any projections as to what the net income the team would be deriving from this agreement on an annual basis?" Stimson asked.

The response from Cohen's boss at Deloitte & Touche that day, with Ware looking on, was: "No; we weren't asked to calculate that."

But they had calculated it anyway--and they faxed that information to the city on September 19 at 1:48 p.m. It just never made its way to the city council. After all, why show the new, city-owned arena netting $86 million a year in income when the deal you just cut with the teams gives them all those revenues? Why not present figures--however unrealistic--showing that net income to be a much more palatable $15.4 million?

By the way, thanks to the ever-helpful, refreshingly honest Cohen, I can report to you that the net income to the teams will be even more than the $86 million a year estimated by Deloitte & Touche.

"For some reason, we left out [gross] parking revenues," Cohen told me, studying the figures on his computer screen. "That's an additional $5.3 million a year."

Which, at this point in the open-ended arena negotiations, is starting to look like chump change to the taxpayers.

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