Bid High, Bid Low 

Gaylord and the mayor cut a deal

Gaylord and the mayor cut a deal

Over the past few years, Mayor Phil Bredesen’s wheeling and dealing has sometimes threatened to bring an end to his honeymoon with the Metro Council and the media. His latest arena deal with Gaylord Entertainment may have done the deed.

Bredesen’s love affair with Gaylord and his rush to turn over management of the publicly financed arena to the entertainment giant has left many wondering, “What’s the hurry?” Once again, Bredesen is being accused of operating the mayor’s office as if it were the board room of a private corporation.

With Gaylord chief operating officer Dick Evans at his side, Bredesen told the members of the Sports Authority two weeks ago that the two had cut a deal that would cover the arena’s final $25 million in costs. Bredesen and Evans had agreed to bump the arena’s current manager and transfer management to Gaylord and its partner, the Buffalo-based concessions-management company Delaware North.

As usual, few had been warned about the impending announcement, and few had been involved in formulating the plan. Ironically, Bredesen also stood to alienate two of his closest allies, attorney Byron Trauger and PR guru Mike Pigott, both of whom represent Leisure Management Inc. (LMI), the company that would be ousted by Gaylord.

The resulting buzz around town is that many of Bredesen’s normal allies—even some of his employees—are marveling at what he’s been able to get away with, and they’re wondering if this is, at long last, the deal on which the Metro Council and the media will call his hand. “He just doesn’t get the public sector,” says one courthouse insider.

Even-tempered Metro Council members, including Ronnie Steine, who is normally on the same side of the aisle as Bredesen, are pausing to question the deal and to ask whether it’s a good idea. If Council collectively decides it’s not a good idea, it can choose another option that would keep LMI in the arena for the time being.

Bredesen has characterized the latest arena twist as simply cashing in early on a deal to which the Metro Council has already agreed. He’s referring to the so-called “hunting license” the city gave Gaylord more than a year ago. That document says that, if Gaylord ever brings an NHL or NBA team to the city, the entertainment company can contribute several million to the pot and take over the arena’s management. It seems like a fair enough deal. Gaylord hands over a sports team, and the city gives something back in return.

The “hunting license” document was drafted and approved last year when the NHL’s New Jersey Devils were considering a move to Nashville. Those talks eventually collapsed. Reportedly, no negotiations are taking place between Gaylord and any team at this time.

Without a team, the Metro-Gaylord deal is a gamble at best. At worst, it makes a mayor who instituted a citywide ethics policy when he took office look hypocritical for promoting a no-bid contract potentially worth millions to Gaylord.

Ten other companies from all over the country were interested in providing concessions, and possibly management, at the downtown arena. They all came to Nashville to participate in a pre-bid conference last year. But not one of the companies was ever encouraged to bid on the business because the city and Gaylord itself let it be known that Gaylord would get the contract. All the while, Gaylord was promising, “We’re getting a team. We’re getting a team.” Nashville will never know what other companies, such as Host Marriott or Fine Host, would have contributed in capital costs to get the concessions contract for the arena.

Still, Bredesen justifies the deal on the basis of top-secret information that leads him to believe an NHL expansion to Nashville is imminent. “Based on a number of conversations, I have a fairly high degree of confidence in the hockey team,” he says. “As I said to the Council, you’re going to have to trust me a little bit on that.”

He also says his plan makes for good fiscal policy.

“Anytime we get a major-league team here, we’re going to have to be giving them significant pieces of revenues on things like concessions. That’s just the way it works.

“If we go borrow money now, based on having all of those revenues, and if a team comes, we’re going to have to unwind all of that stuff. If in fact we got approval for a team in September or October, the ink is hardly dry on what you’ve done with the bonding before you’re back trying to figure out how to undo it all and go with an approach like the Gaylord approach.”

Evans, who, to his credit, says he will step down from the Sports Authority if Metro Council approves the deal, says it makes sense for Metro to enter a partnership with a company that has extensive experience in the concessions business.

“What LMI and what Gaylord do are very similar,” Evans says. “It was the [concessions] expertise that we were really looking for, and that’s what Delaware North has.”

The deal has led to a confusing situation at the arena. While a fleet of executives from Delaware North were in town last week drafting contracts, arena employees were wondering who was really in charge.

Here’s an example: Concessions equipment had to be ordered this week for the building to open as scheduled in December. At the Scene’s press time, the equipment had not been ordered and no one knew who was going to be responsible for ordering it. For the arena to stay on track, the equipment should be installed at the end of August. Weeks of testing are supposed to follow.

There’s also the entire issue of the arena’s cost. Bredesen, who has insisted for several years that the arena is a “$120 million project,” seems to be physically incapable of mouthing the words “$145 million arena.” That figure promises to be the final cost, although he doesn’t like to say it.

The direct taxpayer share is $125 million—the $120 million plus the $5 million the city will put up for a fancy scoreboard. Gaylord and Delaware North are contributing a total of $10 million. Under Bredesen’s plan, the Sports Authority would borrow against those two revenue streams to get the rest of the money needed to open the building.

The final potentially problematic element in the Bredesen/Gaylord plan is the reputation of Gaylord’s partner, Delaware North. The concessions company has contracts all over the country. It was chosen in 1993 as the concessionaire for Yosemite National Park. Its top executive, Jeremy Jacobs, is respected and well-liked. He is a major philanthropist.

But the company had some serious problems in the past. In 1972, the firm was convicted of a felony stemming from mob-related business deals. Jacobs’ late father and brother Max, who no longer works for the company, were both involved.

The company subsequently changed its name, and there have been no convictions against it since that time. In recent years, however, regulators have wondered about the way the company has handled the millions in cash it generates every year from pari-mutuel gambling operations. The money has been impossible to track, since cash receipts from various states have been delivered to the company’s home base in New York.

But Bredesen says not to worry. “Whatever the issues were 20 years ago aren’t issues anymore,” the mayor insists. “[Delaware North is] now a big company that runs a number of big facilities. They’re involved with some big public projects, so that gives me some comfort.”

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