Tuesday, April 28, 2009

Why Don Welsh Left Seattle

During a presentation by the ICVA to the City-County Council's Economic Development Committee recently, Councilor Robert Lutz asked ICVA Executive Director Don Welsh to explain why he left a similar job in Seattle to move to Indianapolis. Welsh responded that he was drawn to the City of Indianapolis because of the financial commitment it had made to developing its convention business with the construction of Lucas Oil Stadium, the expansion of the convention center and the construction of a world-class airport. While Welsh didn't mention what had just transpired in Seattle when he departed his old job for his new, it is equally instructive in explaining why he left. Welsh mentioned in his answer that Jim Morris is one of the community leaders who convinced him to take the job here. Keep in mind that Morris is the former Indianapolis Water Company executive who made off with a $6 million golden parachute payment after its parent company, NiSource, convinced city leaders to purchase it for at least twice its actual value. Morris has now been hired as high-paid executive of the Indiana Pacers, primarily to convince the CIB that it should pick up $15 million a year in costs supposedly being paid by the Simons to operate Conseco Fieldhouse.

In 2006, Howard Schultz of Starbucks fame, agreed to sell the NBA Seattle SuperSonics team to a group of Oklahoma City investors headed by Clayton Bennett. Schultz claimed that Bennett assured him the new owners planned to keep the team in Seattle. The deal actually required the new owners to commit to Seattle for only a year while the new owners attempted to get the City of Seattle to do what Schultz couldn't convince the city to do--spend $300 million to renovate KeyArena. Seattle's lease, however, obligated the team to stay until at least 2010. Schultz' ownership team claimed they had been losing $60 million a year on the franchise because it had to share suite and concession revenue with the city according to the Seattle Times. Local activists in Seattle successfully blocked attempts back by folks like Don Welsh to spend hundreds of million renovating KeyArena. When Bennett met with Welsh's board to explain what it would take to keep the team there, he backed his efforts. The Seattle Times wrote in 2007, "Don Welsh, president of the convention bureau, called Wednesday's meeting with Bennett a 'healthy exchange' and said business leaders hold out hope for a deal that could keep the Sonics and Storm here." "I hope we as a community exhaust every political and private opportunity to keep them in the region as long as it makes viable economic sense," Welsh said.

Unlike Indiana, Welsh couldn't count on pawns like Gov. Mitch Daniels, Luke Kenley and Bill Crawford to carry his water in the Washington legislature. Their counterparts in Washington refused to step in and provide the money for an expanded arena and the NBA team headed to Oklahoma City, after briefly considering opportunities in Kansas City and Las Vegas.

Under a deal brokered with the City in its lease dispute with the Seattle SuperSonics' owners, Bennett agreed to pay Seattle $30 million if the City fails to find a new team by 2013, and if the City failed to obtain funding for the $300 million in renovations to KeyArena this year. Well, guess what? The Washington legislature just concluded its legislative session without funding the renovations for the arena. The similarities in the Washington legislation that would have funded the $300 million KeyArena renovation to the proposed bailout of our own CIB are striking. The legislation attempted to remove a sunset date for several taxes levied in King County, Washington state's largest county where Seattle is located and established a "special purpose fund" into which those revenues would be deposited. This included a 2% hotel tax, a 1% tax on car rentals and a 0.5% food and beverage tax. Some of these taxes are scheduled to sunset when bond debt for the construction of Seattle's baseball stadium has been paid off. Heard that one before? KeyArena proponents wanted to extend the life of these taxes and deposit the money into the "special purpose fund" to pay to renovate KeyArena with the hope of luring a new NBA team to town. To sweeten the pot, the legislation said funds deposited into the account could be used to fund the arts, promote tourism, community development and even low-income housing.

Against that backdrop, Welsh's reason for leaving Seattle to come to Indianapolis makes a lot more sense. Little did Welsh know what he was stepping into when he accepted his new job. He believed that he had arrived in a community that was sports happy to such an extreme that people would sell the shirt off their own backs to support his endeavors here. Because our own legislature has another 24 hours to go before it concludes its work, it is too soon to say that Welsh had us pegged incorrectly. Regardless of what the legislature decides, you couldn't watch Welsh's performance before our council's Economic Development Committee without wanting to throw up. Welsh really has the powerpoint razzle dazzle 'em thing going on. There were plenty of holes that could be poked in his presentation, but as you might have expected, there wasn't a sole on the committee capable of doing that.

Despite identifying the fact that close to 80% of the ICVA's funding comes from taxpayers, Councilor Lutz thought it operated on revenues it generated from fees. Although it was clear to me that I know a hell of a lot more about these matters than Councilor Lutz, he attempted to convince people watching him on WCTY that they should stop listening to the misconceptions being spread in the community and listen to him. Councilor Jeff Cardwell, who chairs the committee, didn't even attempt to hide his "in the tank" attitude. He said is own business, a Do It Best franchise, has a great working relationship with the convention center and thinks they're doing a bang up job. My councilor, Doris Minton-McNeil, poorly articulated a salient question on Lucas Oil Stadium. How much does Jim Irsay get? Despite the tortured manner in which she posed the question, I understood what she was asking. Unfortunately, Welsh and his CFO pretended not to understand. At one point, the CFO insisted all of the LOS revenues generated from convention activity flow into the CIB's coffers and nobody on the committee attempted to correct the record. In actuality, Irsay's Colts franchise pockets $3.5 million a year, which is supposed to represent 50% of the revenues generated from non-game events. His franchise also pockets 100% of the concessions the CIB is obligated to operate at LOS game-related events. Let's not even get into the hundreds of millions in advertising rights the Colts pocket from LOS.

I'm not sure how this thing will shake out in the end. If we succeed in blocking this ill-conceived bailout plan for the grossly mismanaged CIB, it will be but for the grace of God. I have so little confidence in our elected leaders. Clearly, all of the key decision-makers have relations with the key players that clouds their judgment on these issues. I feel like I'm beating my head against the wall to get any of these people to understand the facts and not just the bullshit p.r. crap people like Grand, Early, Welsh and Mayor Ballard have been feeding them. Lutz reasserted the 66,000 phony job claim, suggesting that all of those jobs will disappear if we don't bail out the CIB. Welsh fed into that argument, responding to a question from Lutz on the fallout if the bailout fails. Welsh, not surprisingly, predicted the fallout would be "catastrophic." Just like Seattle, right?


Paul K. Ogden said...

Gary, I think Lutz is the worst Republican counselor there is. I think he's even more of a sell-out than Ryan Vaughn which is really saying a lot.

No, we're not going to win the battle in the legislature. The place where victory might come is in the CCC. I can't imagine that every Repubilcan councilor is going to sell his soul and his/her political future for these tax increases.

Of course, another commentator is now suggesting that the proposed deal in the works, which involve expanding the sports district to include Circle City Mall, raising the innkeeper tax and the rental tax by two cents won't have any political effect at all. It certainly will, and becoming one of the highest hospitality taxes in the country will assure that we lose not gain convention business. So much for protecting downtown with this deal.

Gary R. Welsh said...

It's never enough, Paul. Welsh's point to the committee was that he will need more than his $10 plus million budget to compete with other cities. He had a slide showing how many cities spend more than Indianapolis on promoting conventions. He pointed out that after the big convention expansion, which I believe is our third now, we'll still only be 16th in size. He talked about bringing on board the J.W. Marriott with its 1,000 plus rooms, a requirement missing now for many conventions. Our city had opportunities to double the Westin or the Hyatt capacity to meet that requirement and it turned those down. Instead, it wanted a brand new hotel at a $60 million cost to the city. Our current convention center has a ballroom. The new one will not have one. The new hotel, however, will have one. This forces local groups to rent the ballroom from the J.W. Marriott for their events instead of renting space from the convention center. The fact is that the convention center only wants it used for out-of-town conventions. Everyone locally can find their own space. It doesn't matter how much we spend, how big our convention center is, how big our stadiums are, etc., it will never be enough.

Gary R. Welsh said...

Abdul has audio clip of both Pat Bauer and Brian Bosma from this evening discussing the CIB issue. Bauer says the bailout is up to Mayor Ballard, the GOP council-controlled council and Gov. Daniels to make happen. He's focusing his attention on the budget and a rescue plan for the State unemployment insurance plan. Bosma said he is opposed to the UI plan because it raises taxes on businesses instead of cutting benefits to the unemployed. At the same time, he thinks the CIB bailout is in great shape. He thinks it is just dandy if we raise a few taxes here and there to shore up their budget gap. Rest assured that Bosma's position will reward his law firm. As for his Republican caucus, count on another two years in the minority. The Rs like to beat up on Pat Bauer all the time, but he's been Speaker all of these years because he's smarter politically than Bosma. When will the GOP caucus figure out that his gig is to make money for his law firm? If that happens to coincide with the party's interest it is only coincidental. It sure has nothing to do with party principles.

Paul K. Ogden said...

Essentially the legislature is just passing the buck to the CCC. The legislators probably have a clean conscience for what they're going to do. They should not.

Gary, can you imagine what these next few months will be like - Mayor Ballard trying to twist arms, the council meetings with people mad as hell.

I can imagine right now, Bob Grand and Joe Lofuts will try to rig it so that the supporters of the bailout are the ones let into the council chambers. Hmmmm, this sounds familiar.

artfuggins said...

Do the GOP councilors pay any attention to Ballard? No one else does.

MissouriDemocrat said...

Is Joe Loftis the same Joe Loftis that I used to read about when Goldsmut was mayor? That is digging up a lot of politicians to get these men back in power isn't it?

Unigov said...

Those who forget the past...

Bob Bedell had been head of ICVA until recently, and pushed us close to the precipice.

He'd done the same thing in his previous job in St Louis, a city still coping with debt from the failed Convention Strategy that Bedell pushed there.

How Indy ends up:

1. Much higher taxes to cover the CIB etc
2. Loss of convention business, since few people really want to come to Indy
3. In the end, an overbuilt and underpopulated mile square, surrounded by blight, surrounded by overbuilt affluent white suburbs.
4. The insanity metastasises (sp ?) with Westfield aiming to spend $1.5 billion and Speedway half a billion on 'economic development', aka, graft.

Jeff Cox said...

I'm not sure you interpreted the NBA situation in Seattle correctly.

Clay Bennett bought the SuperSonics for the purpose of moving them to Oklahoma City. He's from Oklahoma City, as are some of his business partners. He never considered Las Vegas or Kansas City or even Seattle, for that matter. His rather felonious agenda was confirmed via e-mails released through discovery in Seattle's lawsuit to keep the Sonics.

While you may believe that politicans should tell gredy sports teams to walk away, the Seattle city administration is now in deep political trouble because of the loss of the Sonics, not only because the team was, in effect, stolen but because Seattle dropped its lawsuit to keep the team without receiving anything in return. When a major pro sports team moves, the local politicians usually pay a political price.

That was the calculus Bart Peterson was facing. The Colts were going to move to LA, with the NFL's encouragement, unless the City gave them the moon. Because they freely admit the Colts cannot make money here unless they have those revenue streams. You draw your own conclusions about why NFL franshises can succeed in cities like Cleveland, Pittsburgh and Minneapolis without such streams but one in Indianapolis cannot.

Downtown Indy said...

ProCynic - it is because despite the reality they are in a 'small market' the owners have 'big market' tastes (and egos).

So the taxpayers are sold a bill of goods for rainbows and lollipops intended to make them feel guilty if they don't provide the ridiculous subsidies.

We see this in real life with people who buy cars and houses they can't afford, so they can 'look good.'

Unlike with cars and houses, there's no way to reposess and resell the stadium to someone else to recoup the loss now, that the CIB can't make the payments.

Gary R. Welsh said...

ProCynic, Schultz said he turned down offers for the team from other buyers because the OKC was the only group that expressed an interest in keeping the team in Seattle. "I'm going to take them at their word that they want to stay and we'll work with them ," [Gov] Nickels said. "We think they will play in the Seattle Center until 2010. The new owners tried to shake down Seattle for more money and the key decision-makers said no. The team left.

Jeff Cox said...


Either Schultz was an idiot to believe that or he is playing CYA. The suspicions about Bennett's intentions were there from the start among the public and the political class. Bennett did exactly what Irsay did -- ask for the moon, under the strategem that if the city did not give it to him, he had cover to move. Read the e-mails. Bennett never intended to keep the team in Seattle.