In It to Win It

It took an employee on the inside going whistleblower. An audit by the city of Jacksonville’s Office of Inspector General. A review of that audit by Council Auditor Kirk Sherman. And a series of recommendations from the city’s Taxation, Revenue and Utilization of Expenditures (TRUE) Commission. But after 20 years and all of the foregoing, the city has finally decided to bid out the contract to manage its seven sports and entertainment complexes.

Facilities management company SMG has operated the city’s sports and entertainment centers since it first won the contract in 1992 — a contract the city has renewed or extended four times, but never re-bid. A Request for Proposals posted on the city’s website on March 16 opens the management contract to competitors. But the way the RFP is written, SMG would appear to have an inside track to win it. Bidders have just a month to respond — to calculate the cost of operating seven facilities, to determine staffing needs, to select subcontractors and to package their offer — information SMG can gather almost instantly. A successful bidder must also be prepared to move quickly; the city hopes to have a company in place by July for the opening of the NFL season.

But the most helpful clause for SMG is a stipulation that qualified bidders have managed a “professional football stadium” in the past three years. Although EverBank Field is just one of the city’s entertainment facilities, along with the Equestrian Center, the T-U Performing Arts Center and the Baseball Grounds — the phrase knocks one of the big names in the entertainment industry — AEG — out of the competition, and limits the pool of qualified bidders to just two.

There are basically three major players on the international market who manage arenas, stadiums, convention centers and other venues: AEG, Global Spectrum and SMG. AEG, which built and owns the Staples Center in Los Angeles, has a stake in the Los Angeles Lakers and promotes concert tours as diverse as Justin Bieber and Leonard Cohen. But the company, owned by San Francisco Examiner owner Philip Anschutz, whom Forbes ranked as the 34th richest person in the world in 2010, doesn’t manage an NFL facility.

“On the surface, it does seem to preclude us,” says Charles Steedman, senior vice president and general manager of AEG Management. “Right now, we are not managing an NFL stadium.”

The other two major players do. Global Spectrum operates the University of Phoenix Stadium, where the Arizona Cardinals play. SMG, in addition to EverBank, operates the Superdome, home to the New Orleans Saints.

Steedman hopes to convince the city to remove the football requirement. The Oakland-Alameda County Coliseum Board in California removed similar “football” language from an RFP to manage the O.co Coliseum where the Oakland Raiders play, replacing it with language requiring experience managing professional sports facilities. But after a pre-proposal meeting here last week at the Ed Ball Building, representatives for both Global Spectrum and SMG argued in favor of the football clause. “It’s a pretty big part of the puzzle, wouldn’t you say?” observed SMG representative Michael Munz. Asked if NFL experience is necessary to do the job, Todd Glickman, vice president of development for Global Spectrum, said, “Absolutely.”

Former SMG General Manager turned whistleblower Bob Downey counters that it isn’t in the city’s interest to exclude a company like AEG, but his complaints with the city’s RFP go well beyond that. Downey had asked to help the city craft the RFP (the city didn’t take him up on the offer), and he believes the city could — and should — get more from the next facilities contractor. He notes that the RFP doesn’t gauge a company’s willingness to invest in creating an arts and entertainment district, sort of like AEG’s funding and construction of L.A. LIVE, as part of the downtown Sports Complex. Nor does the RFP ask for proof that a company has had success booking big acts. Indeed, some parts of the contract don’t even seem to have any bearing on managing a venue. Downey notes that portions of the RFP appear to have been cut and pasted from construction contracts.

Asked after the meeting why the RFP includes the football stipulation, Chief Deputy General Counsel Karen Chastain said that the city’s 2010 contract with the University of Florida and the University of Georgia required “that language.” But the contract only specifies that the company that runs the Georgia-Florida game “engage a nationally recognized sports facility management company”; it makes no mention of football. Jacksonville Chief Financial Officer Ronnie Belton then observed, “We have an NFL team. We would be remiss if we didn’t have that in the contract.”

Chastain also noted that the Jacksonville Jaguars, by contract, have “joint selection” authority over the management contractor, and therefore have a say in picking the company to run the city’s facilities.

And that raises another thorny issue. SMG and the Jaguars have a longstanding, mutually beneficial business relationship, and both are represented by the same powerful lawyer and city lobbyist: Paul Harden.

The cross-pollination of the Jaguars and SMG brings to the fore a conflict of interest that has been relegated to the dustbin of the city of Jacksonville’s history — and indeed, has never been reported.

The team’s relationship with SMG predates the NFL franchise, back when the city was vying for a team and SMG was looking to gain entree into doing business in Jacksonville. According to an agreement obtained by Folio Weekly, dated July 3, 1991, SMG (then operating as Spectacor Management Group) gave $300,000 to Touchdown Jacksonville Inc., the ownership group that lobbied to get a team and later morphed into the Jacksonville Jaguars ownership group. The money was supposed to help Touchdown Jacksonville woo the NFL. Touchdown Jacksonville, in turn, agreed to open doors for SMG, lobbying to help SMG get city contracts and helping the company build its local reputation. “In compensation for its services,” the contract stipulated, Touchdown Jacksonville was “entitled to 15 percent of annual revenues received by SMG.”

The deal worked. SMG got its first contract with the city the following year. For the next two years, SMG put the 15 percent annual payment toward recouping its original $300,000 outlay. But after that, SMG paid Touchdown Jacksonville a 15 percent compensation fee — roughly $130,000 year. Those payments continued until at least 2005, according to a memo from Harden to the local manager of SMG, dated Sept. 22, 2005. “I just received a call from [Jaguars partner] Tom Petway regarding payments due to Touchdown Jacksonville,” Paul Harden wrote in the brief, three-sentence note obtained by Folio Weekly. “Would you please let me know the status?”

It’s not clear from the letter whether Harden was representing his Touchdown Jacksonville clients or his SMG clients.

Asked about the arrangement after last week’s meeting, SMG spokesman Munz began to explain that the 15 percent annual payment was to resolve a lawsuit and had ceased years ago. When told the money was in fact compensation for helping SMG, Munz promised to find out if the money was still being paid, but he hadn’t provided answers by deadline. City Finance Director Belton said he’d never heard anything about the payment. “I’d find that most interesting,” he said.

It’s not clear if the Jags under Shahid Khan continue to receive a cut of SMG’s revenues, but clearly, while the payments continued, the Jaguars had a vested interest in keeping SMG in its management role. And Harden, who continues to represent the team even since its sale to Khan, likely has an interest in keeping that arrangement intact. (Harden did not respond to calls for comment.)

For Bob Downey, whose whistleblower complaint about his former employer included claims that SMG was overcharging the city for insurance costs, and had hired a subsidiary as a concessionaire (see Folio Weekly’s Cover Story, http://bit.ly/et5nNh, and Editor’s Note, Jan. 4, 2011, http://bit.ly/eForvB), the re-bid of the contract ought to be a chance to clean house. But Downey says he doesn’t see anything in the RFP that would correct the problems he helped expose.

Downey’s complaints helped form the basis for a June 2010 report from former Inspector General Pam Markham, titled “Game Plan for Improved SMG Contract Administration and Monitoring” (see http://bit.ly/GXY8lf), but not all of Markham’s recommendations made it into the RFP. That’s of concern to Tony Bates, former president of the Concerned Taxpayers of Duval County, who believes the RFP is being rushed through. He says city administrators assured him there would be plenty of time to craft the RFP, since SMG’s current contract doesn’t expire until 2013. “I wanted the City Council Auditor to do a separate audit of the current contract [before drafting the RFP],” says Bates. “I was absolutely surprised [by its release].”

City Council Auditor Kirk Sherman says he’d be disappointed if the Inspector General’s recommendations weren’t included. “We hoped that they were taking our recommendations under advisement and putting them into place,” he says, “but there is not much we can really do at this point.”

Susan Cooper E

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