Whether or not the Grizzlies take over construction of the $250 million arena, some well-connected folks are jockeying for position as it comes time to award lucrative contracts.
The Grizzlies made the big news at last week's meeting of the New Memphis Arena Public Building Authority (PBA) by offering to take responsibility for any cost overruns in exchange for control over the project.
"It is an incredible advantage to the city and county if somebody stands up and says, 'We'll pay the overruns,'" said Stan Meadows, senior corporate counsel for the Grizzlies.
Overruns are a gray area in the biggest public-building project in city and county history. Since last May, the city and county and the Grizzlies have had an uneasy agreement laying responsibility on whichever party is responsible for busting the budget.
"It was a compromise neither of us liked," said Tom Jones, special assistant to Shelby County mayor Jim Rout.
If the proposal flies, it could leave the PBA in something of an advisory capacity, depending on how the details are worked out.
That doesn't suit vice chairman and state Sen. John Ford.
"You're asking me to abdicate my responsibility," Ford said, insisting that the project involved state funds and other public money and, hence, should be controlled by the PBA.
Ford is among a host of Memphis politicians, consultants, union leaders, and construction firms that either closely observed or took part in last week's meeting.
Among the others:
* Cecil Jernigan, brother of Dean Jernigan, who until two weeks ago was one of the driving forces of the PBA and chairman of its construction committee. Dean Jernigan resigned his duties to devote more time to his business, Storage U.S.A., which is in the process of being acquired by another company.
Cecil Jernigan is helping Beers Construction Co., which is bidding to be the general contractor. In November, the construction committee chose Beers, Flintco, and Bricks Inc. to do pre-construction services on the arena. Dean Jernigan abstained from the vote, citing a financial relationship with Beers from the construction of AutoZone Park, which Jernigan and his wife spearheaded as cofounders of the Memphis Redbirds.
Cecil Jernigan could not be reached for comment. Chuck Winstead, group president of the Beers home office in Atlanta, said "he has worked with us in the past." At last week's PBA meeting, Jernigan signed in as a representative of Beers/Flintco/Bricks. Winstead said Cecil Jernigan "offered his assistance" as a friend of the project director and superintendent and "is not being paid."
* Franketta Guinn, head of the consulting company Monguinn Enterprises, which is working with the PBA on minority participation. Guinn is chairman of the board of Memphis Light Gas & Water. Monguinn Enterprises has a $125,000 contract with Tennessee Valley Authority to assist in minority contracting.
* Carol Crawley, Guinn's partner in Monguinn Enterprises. Crawley was chairman of the board of the Center City Commission until last July.
* Michael Hooks Jr., chairman of the Memphis City Schools Board of Education. Hooks is working as a consultant to local trade unions trying to get the PBA to agree to a "project agreement," which would essentially mean getting labor from union hiring halls. As chairman of the school board, he also has a voice in school construction contracts.
* State Rep. Larry Miller, chairman of the Minority Participation and Partnership Committee of the PBA. Miller's committee attempted to get the PBA to adopt a policy of giving "maximum practicable opportunities" to businesses owned and controlled by women or racial and ethnic minorities. But the PBA sent the proposal to its lawyers instead, supposedly to ensure its constitutionality.
Arnold Perl, chairman of the PBA, said a decision will probably be reached on the Grizzlies' offer to become what he called "the at-risk developer" before the next meeting in February. Perl said the overriding mission of the PBA is to build the arena on-time and within budget with minority participation and community involvement.
"That is going to be achieved whether this proposal is adopted or not," Perl said.
Perl and Meadows put a new spin on the arena as a facility that will be used as much for concerts and other events as it is for basketball. Perl said it will need 250 event dates a year to be viable. The Grizzlies can only promise 45 to 60, depending on whether or not they make the playoffs. Architectural drawings of the arena emphasize its connection to Beale Street and its attractiveness as a music venue.
In contrast to The Pyramid, where the acoustics had to be overhauled two years after the building opened, "this is going to be right for both," said Perl.
The goal of 250 events is ambitious. Alan Freeman, general manager of The Pyramid, said it would be "difficult" to significantly increase the number of concerts that come to Memphis because of competition from Tunica. Freeman said The Pyramid averages 15-20 concerts a year, with a high of 24 during his tenure.
Meadows said the budget, including $220 million that will actually be spent directly on the arena, is "adequate."
"It's not the budget, it's how much you get for the budget," he said.
He said the figure of 250 event dates is probably high because it includes low-revenue producers. Realistically, he said, the arena needs 150 "good dates."
The construction schedule is important because the Grizzlies would like to leave the cramped seats and low-budget suites at The Pyramid after one more season, not two, as some projections say.
The matchmaker in the biggest sports story of the week -- Steve Spurrier taking the coaching job for the Washington Redskins -- was none other than Pepper Rodgers.
The Redskins and owner Daniel Snyder signed Spurrier to a five-year contract for $25 million after firing Coach Marty Schottenheimer Monday. Spurrier was introduced at a live press conference on ESPN Tuesday evening.
"Dan has told everybody I had a lot to do with it," Rodgers said Monday. "I'm sure I did, plus a lot of money."
Rodgers talks frequently to Spurrier and said he "gave him a comfort level" with Snyder. Rodgers and Spurrier go back almost 40 years, when Rodgers was an assistant coach at Florida and Spurrier was quarterback. Spurrier later was an assistant at Georgia Tech when Rodgers was head coach.
"I paid Steve $30,000 to work for me," Rodgers said. "He's come a long way."
Rodgers left Memphis two years ago to work for FedEx CEO Fred Smith in the corporate sky box at FedEx Field in Washington, D.C. He became close friends with Snyder and now works for him, with the title of head of football operations. Unofficially, he is Snyder's sidekick and walking Rolodex, thanks to his half century in football, including the years he and Smith spent trying to bring the NFL to Memphis.
Snyer's courtship of Spurrier began a year ago. "We tried to hire him when we hired Marty," Rodgers said. "I thought he was going to come here then, but he thought he could win the national championship and his family wasn't ready to move away from Florida."
Rodgers and Snyder talked to Spurrier after he announced his resignation from Florida following the Orange Bowl. Rodgers won't say where they met but says it wasn't Gainesville, as the national media have reported. He was also at Snyder's house Sunday afternoon and evening when the decision was made to fire Schottenheimer.
Schottenheimer got $7.5 million in severance on his four-year contract.
"Don't feel sorry for Marty," said Rodgers, who was fired three times as a college coach. "When I got fired I sure didn't get $7.5 million."
Shocker! Politics involved in arena bond financing deal.
Divvying up the city and county's bond business is normally about as boring as an auditor's fine print. A few public officials get wined and dined, the same old financial firms get the business, some salesmen make a nice commission, and another road or power plant or municipal sewer gets built.
But when a bond guy with 23 years' experience in Memphis says the bond financing of the biggest public project in city and county history is also "the most political deal I have ever seen," that's news.
That's what Rob Baird, head of public finance at Morgan Keegan, told the Sports Authority last week when it chose New York-based Goldman Sachs, which closed its small Memphis office last October, as headliner on the $250 million arena deal. Morgan Keegan got second billing. In financing etiquette, this is like putting one of your blue-chip corporate citizens in the upper deck at The Pyramid instead of courtside.
The issue isn't money. The underwriters will split about $2 million. "It's prestige," agreed Baird and the city and county's financial consultant, Marlin Mosby.
Mosby said a national firm like Goldman Sachs had more clout, more experience in supposedly exotic financial instruments, and would get a lower interest rate by half a percentage point, which he said is worth $2.5 million in interest savings over 30 years. Baird insists Morgan Keegan has plenty of expertise and could get just as good a rate. Over 30 years, $2.5 million in interest works out to a whopping $83,333 a year or about what hot dog vendors will probably be making at the new arena in 2035.
Qualifications aside, politics is about people and relationships. On that score, Morgan Keegan is not everyone's darling.
A few years ago, Morgan Keegan and Mayor Willie Herenton floated an ill- fated proposal to sell MLGW. About the same time, Rodney Herenton, son of the mayor, went to work for Morgan Keegan.
The MLGW idea bombed but left some politicians feeling that Morgan Keegan was greedy and out of touch. With a majority-black population, diversity is a lot bigger issue to local officials than whether a silk-stocking brokerage firm gets its feelings hurt. Coincidentally or not, Rodney Herenton and Mark Yates left Morgan Keegan last year, where they were among a handful of black professionals, for rival First Tennessee. Neither the Herentons nor Yates have ever publicly indicated any dissatisfaction with Morgan Keegan, but minority participation is clearly the name of the game in all aspects of the new arena. Minority firms got 46 percent of the bond business. The selection of law firms, architects, PR firms, and general contractors has been similarly balanced.
The former head of the Sports Authority, Reggie Barnes of Morgan Keegan, resigned to avoid any conflict of interest. Barnes hosted an NBA-related meeting at all-white Memphis Country Club last year which ticked off Shelby County Commissioner Walter Bailey. Then Barnes cavalierly dismissed Bailey's objections. A little payback may have been another factor in the bond allocation.
Richard Fields, the attorney for plaintiffs in both the city and county school desegregation cases, gave his support this week to the controversial Gateway tests for graduation, charter schools, merit pay for teachers, and firing principals and teachers at failing public schools.
Fields has been a political adviser and personal attorney for Mayor Willie Herenton and is a supporter of Shelby County mayoral candidate Harold Byrd. He currently represents plaintiffs in a lawsuit that threatens to stop construction of a new county high school in Arlington.
At the age of 54, the genial champion of liberal causes in Memphis for the past 30 years seems to be moving comfortably into the mainstream. His old ally, former NAACP executive secretary Maxine Smith, has left public office, and Byrd faces an uphill battle against A C Wharton for the Democratic nomination for county mayor. In a speech to the Memphis Rotary Club this week, Fields had kind words for the Hyde Family Foundation, the Memphis Grizzlies, and the daily newspaper. He took a hard line on standardized testing in contrast to black state lawmakers who have said the tests should be deferred or done away with.
"We must have the highest standards possible," Fields said. "It's unfair to students and taxpayers to lower standards. And the kids can do it."
If anything, Fields said, schools should test more, not less, provided students are being taught what they're being tested on. "It can't just be a once-a-year deal in elementary school," he said.
He encouraged the business community to set up a $100 million educational trust, part of which would be used to pay more money to teachers who agree to work in failing inner-city schools. He didn't specify an amount but noted that one well-publicized stipend, the Milken Family Foundation National Educator Award, is worth an extra $25,000. In the present system, teachers are paid based on years of service and level of education.
"Our leaders must tell teacher organizations that teachers should be rewarded not simply for serving time but for taking on the toughest educational challenges in high-poverty schools and succeeding," he said.
Asked if that was a dig at the teachers' union, the favorite scapegoat of Republicans, Fields said indeed it was.
He also urged local leadership to embrace high standards and accountability, "including changes in the personnel of failing schools and choice for children at those schools for transfer to more effective schools."
There were 64 Memphis public schools on the state's list of failing schools last year. In an interview, Fields said the choices should include charter schools like the ones being sponsored by the Hyde Family Foundation and county schools as well as other city public schools.
The unstated assumption of the Fields theory of public school reform is that parents and students will vote with their feet, leaving supposedly "failing" schools for better ones. In practice, this has boosted enrollment in Shelby County and DeSoto County (and private) schools, but Memphis City Schools still have 118,000 customers.
The city system has an open enrollment program as well as the optional program for high-performing students. Some of the better schools fill up quickly, but others, including one that Fields singled out for praise, Lincoln Elementary, have had space for more students.
"The parents don't know about it," Fields said. "It is up to the parents. The system has to assist the parents in making that information easily available. Whatever it takes to get them into schools producing results."
Mayor Herenton said last week he will propose freezing the boundaries of the Memphis and Shelby County school systems and creating a single source of funds that equalizes expenditures for the two school systems but provides more money for at-risk students.
"As attorney for the black plaintiffs in the Shelby County school desegregation case, this would be the minimum necessary before I could, in good conscience, approve further school construction in the Shelby County system," Fields said.
County students currently get a lower per-pupil expenditure than city students ($5,669 vs. $6,850). Was Fields therefore suggesting a big new expenditure on the county schools? He acknowledged that that would be one result, but he also wants at-risk city schools to get more money -- but for instruction, not construction.
"If the county wants to build schools then the city schools have to have a greater instructional budget," he said. "We have talked about it for years. Now it is time to cut the deal."
In the Arlington case, Fields and his clients have announced they will go to federal court unless the county submits something to their liking on school funding. Outgoing county superintendent James Mitchell has some hot-button issues of his own: overcrowded county schools, especially in the Cordova area, where 67 portable classrooms were in use last year.
"The education of these children cannot wait," Mitchell wrote in a strongly worded letter to Mayor Jim Rout last summer.
Add up all the must-haves -- merit pay for inner-city teachers, $1,181 per county student to equalize expenditures, an unspecified amount for instruction of at-risk city students, new county schools to ease overcrowding, expanded Head Start programs -- and a $100 million education trust fund doesn't look like it will go far without some tax increases to back it up.