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June 27, 2006

Fait accompli: Is it time to raise the white flag on the arena issue?

In retrospect, the temptation is strong to compare the breathtaking campaign to build a new multi-purpose arena at the E.ON U.S. site, more commonly known as the LG&E site, with Germany’s conquest of Poland in 1939, and not only because E.ON, the world’s largest energy provider, is based in Stuttgart.The capitulation of Poland in less than a month introduced the word “blitzkrieg” to the international vocabulary. It means “lightning war.” The campaign for the LG&E site lasted only a year, give or take a few weeks, but that’s definitely a blitzkrieg by the glacial standards that measure progress in Louisville (for reference, see “Ohio River bridges” and “painting”).The battle unofficially ended last Tuesday, June 20, when Humana co-founder David Jones and Papa John’s Pizza founder John Schnatter sent a letter to the Metro Council that was, in effect, a white flag of surrender.“While we think the arena plan as currently proposed remains very risky,” the letter said, “we feel we have fulfilled our promise to the community of providing the decision-makers with all the relevant facts before they have to decide.”(Strangely, The Courier-Journal ran a front page story about the letter on Friday, giving the impression that the Jones-Schnatter letter came after a Thursday C-J editorial that was critical of arena skeptics. That impression was furthered as local TV news channels picked up on the Friday C-J story.)Earlier this year, Jones and Schnatter spent some $220,000 of their own money for a study that compared the E.ON U.S. site with the downtown alternative on the old Water Company property. The study concluded, among other things, that a 22,000-seat arena at the E.ON U.S. site would cost $114 million more than a virtually identical building at the old Water Company site.That caught the attention of the Jefferson County delegation to the state House of Representatives, which recommended that the state pony up $75 million for the arena only if it were built at the old Water Company site. The General Assembly approved the appropriation, but only after the Senate removed the site specification.Given the power arrayed against them, Jones, Schnatter and their supporters were doomed from the start. They had no shot against a mighty E.ON U.S. coalition that included the most powerful Republicans in the state and city, plus Democratic Mayor Jerry Abramson, University of Louisville President Jim Ramsey and professional civic do-gooder Ed Glasscock of the law firm whose influential client base includes E.ON U.S.Most amazingly (and distressingly), the coalition even included the former publisher of The Courier-Journal, the first person to publicly endorse the E.ON U.S. site. From that point on, the once-great newspaper slanted its coverage outrageously and threw in the towel as far as trying to turn up pertinent information. And The C-J’s editorial board went to great lengths to vilify and ridicule anyone who opposed the E.ON U.S. site, most notably Jones, Schnatter and State Rep. Larry Clark.The E.ON U.S. coalition has been skillfully marshaled by W. James Host, the former Lexington business mogul and Commerce Cabinet Secretary. By playing fast and loose with the facts, and while conducting most of his arena business in private even as he was publicly pledging transparency, Host single-handedly saw to it that the E.ON U.S. site was approved almost unanimously by Governor’s Arena Task Force.His reward was appointment as Chairman of the Arena Authority, the public agency (although Host fought that designation) that’s entrusted with selling $351 million worth of bonds to finance the arena, overseeing construction and operating the arena once it is built. Suffice it to say that Host’s arm-twisting and back-slapping tactics so far have been every bit as effective with the Authority as they were with the Task Force.Easily the most powerful non-elected official in the state, Host has been leading campaigns on two fronts. While heading up the campaign for the E.ON U.S. site on the Western front (Louisville), he has been whipping and driving the World Games 2010 Foundation on the Eastern front (Lexington). This is the group charged with overseeing the World Equestrian Championship when that two-week international extravaganza — it’s expected to bring more than 250,000 tourists and their dollars to Kentucky — comes to the Horse Park in 2010.Originally, the estimated cost of hosting the event was about $33 million, primarily for a new arena at the Horse Park. That figure did not include a privately financed, $30 million hotel that will be built near the Horse Park entrance.However, in an April 27 interview with the Lexington Herald-Leader, Host said it’s going to take “a lot more money” than originally thought to put on the Equestrian Championship in a first-class manner. Host so far has declined to say how much more he’s talking about.A new hotel, of course, is integral to Host’s convoluted financing plan for the Louisville arena. Although the city’s downtown hotel occupancy is well below the average for other major cities in the region, and although a hotel (the Marriott) already is in place across from the old Water Company site, another hotel must be built to make the E.ON US site work, just as $63 million must be paid to E.ON U.S. to move the company’s power equipment across the street.Between now and the very big year of 2010 — that’s when the arena is expected to be completed in Louisville, and also the year when the World Equestrian Games will be held in Lexington — the public at least should get the answers to some very important and puzzling questions.Who’s the mastermind giving Host, Ramsey, Fletcher and others their marching orders?Why is E.ON’s presence in the United States confined strictly to Kentucky, and what’s the nature of the relationship between E.ON, the Bush administration and Prime Minister Tony Blair of Great Britain?Will E.ON U.S. be one of the bidders for naming rights to the Louisville arena and/or the Horse Park arena? Will its parent company be one of the main corporate sponsors for the World Equestrian Games?Will the same company build the new hotels at both the E.ON U.S. site in Louisville and the Horse Park in Lexington?Who will be selected to develop the old Water Company site? (Mayor Jerry has promised that he already has three interested developers lined up.)Will Ed Glasscock’s law firm be involved in the process of selling the bonds for the arena at the E.ON U.S. site?Will John Yarmuth, the Democratic candidate for U.S. Representative from the Third District, decide to use incumbent Republican Anne Northup’s support of the E.ON U.S. site as a campaign issue?What national and local candidates will receive campaign contributions from E.ON, which last year reported profits worldwide of more than $8 billion?And, finally, how many events will be held in the new arena?This last question has been largely ignored, which is interesting considering that Host’s revenue projections will collapse like a house of cards (or Cards, if you will) if the arena isn’t filled to near capacity on a bare minimum of 110 nights a year.Actually, the consultants hired by Jones and Schnatter say 110 dates isn’t nearly enough. They say the break-even date for most arenas is somewhere in the neighborhood of 200 dates. Of course, most arenas — at least most civic, multi-purpose, downtown arenas — have at least one professional team as a tenant.But for the sake of discussion, let’s use the 110-date figure. U of L mens’ basketball will fill the place to capacity 18 or 20 times a year. Pencil in U of L womens’ hoops for another 15 or so dates, but we’re talking here about crowds of, oh, 5,000 or so, tops. So let’s say that U of L will take 35 of the 110 dates, leaving 75 to fill.With what? Concerts? Well, in 2005 Freedom Hall had seven near-sellout concerts that weren’t connected with the State Fair. You can expect that the World Championship Horse Show, the Tractor Pull and the Louisville Fire Arena Football team all will stay at Freedom Hall.So what will go downtown? Even assuming that the NCAA brings one championship event per year to Louisville, and that the city lands a couple of conventions big enough to need an arena, that still leaves a ton of unfilled dates to reach 110, much less 175 or 200.Of course, this problem would be just as crucial at the old Water Company site as it will be at the E.ON U.S. site. The difference is that the overhead at the old Water Company site would be significantly lower.But that is all history now. Jones and Schnatter fought the good fight and did the public an important service, but even they, as powerful and influential as they are, were no match for the blitzkrieg waged on behalf of the E.ON U.S. site.If you find this matter even remotely interesting, you might clip this article and save it for further discussion in the fall of 2010, if not sooner. Contact the writer at billyr@leoweekly.com