By Bruce Dobie and Liz Murray Garrigan
Russ Simons is a burly, lovable, hardworking guy who looks like he was born in a hard hat. He runs the Nashville operations of Leisure Management Inc., the company that manages the downtown arena. Simons—and his office employees—have been in town a little over two years overseeing construction, booking events, and doing whatever else is necessary to make sure the arena will open on time. Last week, his company was abruptly informed that its job was, in effect, finished.
Simons had had many bad weeks on the job, but the worst moment ever came last Thursday night when he got a call from his attorney, Byron Trauger. Trauger informed him that the mayor, who happens to be one of Trauger’s best friends, was going to propose the next day the hiring of a new management company for the arena. The new management company was Gaylord Entertainment, working in conjunction with a controversial firm called Delaware North.
In interviews this week, Simons said he planned to “take the high road” and go about doing his job. Nevertheless, sources described him as, if not stunned, then at least perplexed. Since signing on as arena manager in May 1994, Simons, with a mind-boggling swiftness, has enmeshed himself in downtown’s best-connected circles. He enjoys a reputation as one of the most knowledgeable arena managers in the country, and he has a Rolodex chock-full of players in stadium, sports, and arena circles.
During the city’s courtship of the Houston Oilers, Simons helped the mayor churn out reams of numbers on stadium management. On occasion, he called his staffers in to work on Sundays to assist in the Oilers effort, a project that promised no direct benefit for him. His ties to the courthouse were also bolstered by the fact that, not only was Trauger his attorney, but Bredesen intimate Mike Pigott was his public relations man.
In recent weeks, Simons had been meeting with top Metro officials, including the mayor and MDHA head Gerald Nicely, to help the city figure out a way to pay for the remaining work on the arena. According to one source familiar with the negotiations, Metro appeared relatively pleased with the plan LMI had developed.
When the ax fell, shoulders shrugged across the city. The move highlighted the latest in a series of mishaps to befall the downtown arena. Notwithstanding the fact that the arena is a huge undertaking in which a certain number of foibles can be expected, it is growing increasingly apparent that portions of the construction are behind schedule. The contractor for the project is being accused of inadequate performance. As it turns out, the price tag is not $120 million—it’s $145 million. And some people who are expected to occupy the arena—namely the Tennessee Sports Hall of Fame and the Convention and Visitors Bureau—are being hit with bills they never anticipated.
Some say the problems stem, in part, from the fact that the arena has had to play second fiddle to the Oilers stadium project for many months now. For instance, critics say, the city should have planned to undertake the sale of $50,000 suites in the arena last October. But that was the time when the mayor was preparing his pitch to Metro Council on the Oilers deal. And so the sales pitch for arena suites was delayed, and has still not taken place 10 months later.
But the other reason so many decisions at the arena have been stalled is Gaylord Entertainment. In addition to being the 900-pound gorilla in the city’s local tourism industry, Gaylord Entertainment has also controlled the fate of our downtown arena. In short, the whole situation simply boils down to one word: hockey.
When the mayor first broached the idea of an arena some four years ago, he insisted that it would be a self-sufficient facility with, or without, a pro sports team.
But over at Gaylord Entertainment, the relatively new CEO Dick Evans has made professional sports a primary corporate concern. It is no secret that Evans, who once managed Madison Square Garden, is interested in acquiring a National Basketball Association or National Hockey League team. It is also no secret he wants them to play in the arena.
While Nashville’s chances for a pro basketball team are relatively remote, pro hockey is a possibility. When the city began construction of the arena, Bredesen and Gaylord struck a deal. Even though an outside management firm would be hired to run the arena, the city would automatically get rid of that outside firm and hand Gaylord the arena management contract if Gaylord were to buy a pro basketball or pro hockey team. The deal made sense. After all, if Gaylord landed a big tenant, it would earn the right to run the place.
When LMI got the management contract for the arena, that stipulation was written into the deal. If Gaylord got a team, LMI was out, and Gaylord was in.
As construction began on the arena, Gaylord continued to seek out a professional team. LMI continued to go about the business of preparing the arena for an opening in December 1996. LMI began lining up cash-rich sponsorships for the site. Miller Beer, for instance, was lined up to contribute $1 million to become the official arena beer. First American Bank began negotiating for “naming rights.” NationsBank said it wanted the scoreboard, and a struggle between the two financial institutions ensued.
None of these agreements was ever signed. The city was still holding out hope that Gaylord would come up with a hockey team. Then Gaylord—and not LMI—would be responsible for deciding who got which sponsorships. Gaylord, for instance, might prefer to go with Budweiser rather than Miller Beer at the arena. So LMI was forced to slow-walk certain decisions, while Opryland remained in the background trying to find a team.
As Bredesen looks back on his decisions, he defends the city’s handling of such items as sponsorships, saying the strategy is specifically designed to make sure the city comes out ahead in the end.
“LMI would like to stay in the contract as long as possible,” Bredesen says. “So they’re busy trying to say, ‘Let me sign up Coca-Cola or whatever for the scoreboard.’ We’re saying, ‘What’s the last time you have to commit on signing for a $1 million scoreboard,’ because we’ve got all this other stuff working in sports. I don’t want to do these things sooner than we need to.
“There’s been no question that we’ve been sort of saying we’re not going to make these decisions until we have to make them. We want to wait until the last minute to make those decisions.”
In recent weeks, top city officials debated how best to raise additional funds to pay for the arena’s completion. Some $10 million is needed to pay for all the concession stands. Another $5.5 million is needed for the video scoreboard. Furniture and equipment will cost $4 million, and a parking garage is going to cost $3.6 million. From the beginning, it was known that all these pieces, with the exception of the fancy scoreboard, would have to be financed at some time if the project were ever to be completed.
LMI has consistently advised Bredesen to sell more than $20 million in bonds to pay for it all. The bonds themselves would be paid back by food and beverage sales, suite sales, advertising, and other revenues generated by the arena.
But Gaylord was offering Bredesen what looked like a much sweeter deal, so the mayor decided to go with Gaylord.
Bredesen says that doesn’t mean he’s been displeased with LMI’s performance. In fact, he says, just the opposite is true.
“I think Russ [Simons] has done a very good job at what he was hired to do, which is, basically, to come in and oversee a lot of the decisions that are made during the construction process and the marketing of the arena.”
Bredesen says the contract between the city and LMI will run its normal course and that he is not terminating it early.
“We are, under the original contract, able to give them notice, starting this October, that we’d like them out in six months. So we’re not talking about an early termination,” Bredesen says.
This is how the deal with Gaylord works: Gaylord and its partner, Delaware North, would give the city $10 million to help finish the arena. The city itself will put another $5 million in available funds into the arena. And the city will issue another $10 million in bonds. Part of the deal with Gaylord also stipulates that, if Gaylord doesn’t deliver a team in four years, the city can cancel the agreement. Bredesen’s reasoning goes like this:
“The conclusion I came to, first of all, was, while you can get things done in the way LMI describes, it is a very expensive way for the city to do it.”
Last Friday, the mayor told the Sports Authority about the two plans. He said he hopes Metro Council will vote for the Gaylord plan in September, although he will also submit the LMI option to Council. Among elected officials, Gaylord always causes some grumbling around town, but usually the company gets what it wants. At the present time, it is expected that Metro Council will ultimately favor the Gaylord plan.
But the grumbling continues nonetheless, and it is beginning to spread to the arena.
Some skeptics are concerned about giving Gaylord the contract to manage the arena, when the arena has to operate so closely with the city-owned convention center across the street. That downtown convention center, after all, competes with Gaylord’s massive convention operation out at Opryland. Will Gaylord look out for the city’s best interests—or for its own?
Some are also concerned about the firm with which Gaylord is proposing to comanage the arena. Delaware North is the concessionaire at numerous pro sports arenas in the country, but, as The Wall Street Journal explained in a lengthy 1994 front-page story, the company has a “darker” side that includes allegations of mob connections and brutal business dealings. In 1972, the company, then known as Emprise Corp, was convicted of a felony “stemming from mob-related business deals.” The father and brother of the company’s current top executive were both named as unindicted coconspirators in the case. The company, meanwhile, likens the Mafia stigma to “a ghost that won’t go away.”
Bredesen says he learned of Delaware North’s past business dealings only after Gaylord brought the deal to him.
“I’ve become aware of those reports since then, and that’s being talked about,” the mayor says. “I have no desire to be involved with a company that’s got a problem. It is all old stuff, but it is stuff that I’m making sure [Gaylord is] comfortable with.
“[Delaware North is] a big company that runs a number of big facilities. They’re involved with some big public projects, so that gives me some comfort that that’s been sanitized.”
To be sure, the arrangement with Gaylord has numerous advantages. The company’s reputation is solid, and it already handles mammoth entertainment-related events out at Opryland. Gaylord knows how to serve lots of food, it has a TV operation that might mesh well with arena events, and, of course, it is ponying up $10 million, which is more than LMI has offered.
Some observers, however, are concerned.
“The mayor is betting that a team will come,” says one player who has been intimately involved in the process. “He is betting Gaylord will get a hockey team, when that is far from certain.”
As construction continues on the arena itself, some are describing it as nothing short of an architectural jewel. Few dispute the notion that it will be a huge asset to a downtown already in the midst of an entertainment explosion.
In recent months, however, the grumbling about the arena’s construction has only grown louder. Massachusetts-based Perini Building Co., the arena’s contractor, has received much of the blame for the pace of the project. Perini got the contract by being the low bidder, even though, shortly after construction began, the firm revealed to Metro that the bid was in error—it was $7 million too low. (To Perini’s credit, the shortfall was corrected through “value engineering,” or through the use of less expensive materials where appropriate.)
Communications were not always good either. Two of the facility’s big tenants, the Convention and Visitors Bureau and the Tennessee Sports Hall of Fame, were less than happy when they realized they would have to spend hundreds of thousands of dollars to build out their spaces.
Butch Spyridon, who runs the Convention and Visitors Bureau, says his office is supposed to have a space in the tower in front of the arena, so that the bureau can provide assistance to tourists. Spyridon says he is now being told he will have to complete some of the build-out, which was not his initial understanding. “I’m having to come up with about $100,000,” Spyridon says. “I’ll just have to make cuts elsewhere.”
The Tennessee Sports Hall of Fame, meanwhile, recently learned that it was going to be responsible for the whopping $1.5 million build-out of its space. According to sources familiar with the situation, the entire project has been put on hold as officials with the Hall of Fame consider their options.
Meanwhile, Spyridon and others are generally concerned about the leisurely pace of the construction. “From the standpoint of selling the building to future clients, the arena needed to be further along than it is at this particular time with regard to suite sales, advertising, and other amenities like food service,” Spyridon says.
Construction was in a state of perpetual delay before the mayor’s announcement on Friday, but not much has changed since. In fact, all of the variables, such as suite sales and advertising contracts, remain on hold. Matters are, in fact, even more uncertain, since a new arena manager cannot come on board until Metro Council votes on the new arena management contract.
If he has not done so already, Simons is going to have to talk to Miller Beer and tell them their sponsorship is not necessarily a done deal. He will probably hold the same conversation with First American Bank and NationsBank. At some point in time, he very likely will also have to talk to Gaylord’s Dick Evans to find out whether LMI can stay on in some capacity—or at least to figure out how a smooth transition can be made.
LMI’s management contract includes financial penalties that Metro must pay if it breaks off its deal. It is not known if these penalties—which amount to over half a million dollars—will come into play. Simons says, however, that’s not what he’s looking forward to.
“I’ve just told everyone here to go about doing their jobs,” he says. “This is a first-class arena, and I want them to be proud of it.”
“I’ve just told everyone here to go about doing their jobs,” he says. “This is a first-class arena, and I want them to be proud of it.” n
Tears in my eyes, Donna. Merry Christmas to you, too.
I'm aware it intends to be comprehensive, including food (which is included post-K) and medical/dental…
There are too many pressing problems in this world for me to get upset about…
The hypocrisy on both sides of this kerfuffle is astounding.
fork, you sound as if you don't know what the additional interventions Head Start brings…