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The Arena Chronicles — Part II — How We Got Here

In Part I, I provided an overview of the current issue the Blue Jackets face with ongoing operating deficits, the reactions to the initial disclosures, and related tidbits.

This installment focuses on the historical background that got us to this point. In putting this together, I spoke with more people, dug through archived materials and did a lot of reading. My companion piece for Inside Hockey can be found here.

For simplicity’s sake, I will approach this chronologically, as the sequence of events is both interesting and significant. Before that, however, we all need a reminder as to the key players in this saga. So, here are the Dramatis Personae:

  • John F. Wolfe, Columbus Dispatch
  • Dimon McFerson, Nationwide
  • John H. McConnell, Worthington Industries
  • John B. McCoy, Banc One
  • E. Gordon Gee, The Ohio State University
  • Ron Pizzuti, Pizzuti Company
  • Greg Lashutka, Columbus
  • Lamar Hunt, Owner, Columbus Crew
  • Pete Karmanos, Jr., Owner, Hartford Whalers (now Carolina Hurricanes)
  • Richard Sheir, political activist

Pre-1994: The efforts that culminated in Nationwide Arena were by no means the first foray into expanded athletic venues for Franklin County. Various arena/coliseum issues had been proposed and rejected by voters in 1978, 1981, 1986 and 1987. So there was a significant historical hurdle of public skepticism to overcome before the campaign ever started.

1994: The long and winding road begins, with three divergent interest groups commencing exploration of possibilities for new revenue-producing facilities in Franklin County. The groups lined up as follows:

  • Franklin County Convention Facilities Authority (FCCFA) — responsible for the Columbus Convention Center, and supported by a number of key local business moguls, including Pizzuti, Wolfe, McCoy and McFerson, the FCCFA wanted an arena close to the Convention Center to attract more visitors. This bloc also envisioned a professional sports team, likely in the NHL, to put Columbus on the map.
  • Columbus Crew/Lamar Hunt — in June, the MSL is announced, with Columbus being one of the original ten franchises, owned by Lamar Hunt, owner of the Kansas City Chiefs and the Dallas MSL franchise. Hunt is focused on public funding for a soccer stadium to host the Crew
  • The Ohio State University — President E. Gordon Gee and Athletic Director Andy Geiger are looking for an arena of their own, both to replace the fading St. John Arena and to provide a supplemental revenue source to fund the massive facilities expansion they sought for the athletic program.

As the Hunt and FCCFA camps were not strictly in direct competition, they quickly formed an alliance, as the prospect of the professional soccer club could serve as a catalyst for the arena as well. The vision soon transformed into an arena and soccer stadium in the area then occupied by the abandoned Ohio Penitentiary.

The same could not be said for the OSU interest. Clearly the prospect for “dueling arenas” just a few miles apart could be problematic, both in terms of economic viability and saleability to the electorate. So, representatives of what were now two distinct camps conducted a series of negotiations over the summer of 1994, seeking to determine whether a common ground could be found that would satisfy the interests of all concerned. Ron Pizzuti represented the FCCFA interests, and trustee George Skestos represented OSU. By September, the negotiators reported that no agreement appeared possible, and the race was on.

OSU had been lobbying the State Legislature for an appropriation toward the design of their facility, and the 120th General Assembly came through with $15 million, provided the university consulted with the City of Columbus over siting, operations and similar issues. At the same time, the legislature turned down the FCCFA bloc’s request for $1 million to peform feasibility studies and such. The state indicated, however, that further funding could be available if local voters passed an income tax to provide local support for the proposed facilities. So, the eventual vote was truly a necessary step to gain significant state participation in the long term funding.

A disputed element involves representations attributed to OSU to the effect that they would not compete with a downtown arena, that an OSU arena would not have luxury suites or other “premium” features, and that no more than 10% of the available dates would be devoted to outside events. OSU denies that there were any binding commitments made to that effect.

1995 — OSU kicked off the year by beginning a bold advertising campaign, vending seat licenses for the arena and promising premium events for public consumption. The Hunt/FCCFA camp cried “Foul!”, and OSU pulled the campaign. Nonetheless, the OSU campaign was in full gear by this point.

In March, the Hunt/FCCFA bloc formally established a ten person committee to study the feasibility of a joint arena/soccer stadium project. The committee submitted its recommendations in November, suggesting that two separate ballot initiatives be placed on the ballot in the Fall of 2006, allowing time for obtaining the 20% private financing the Franklin County Commissioners were going to require as a prerequisite for a ballot initiative. This would also provide enough time for a proper campaign in favor of the two facilities.

1996 — Activity kicks into high gear for the OSU effort and the downtown arena/stadium proponents. Early contact with the NHL (specifically Gary Bettman), gave the downtown proponents cause for optimism that an NHL franchise could land in Columbus. This led to the formation of Columbus Hockey Limited, consisting of Pizzuti, Wolfe, McConnell, Hunt and Jay Schottenstein, with some participating through companies they owned or managed. Ameritech also participated at this stage.

In the meantime, Ohio State broke ground on the Schottenstein Center on April 2. The NHL formally announced the availability of four expansion franchises on June 15. On November 1, 2006, Columbus Hockey Limited submitted the $100,000 application fee to the NHL, formally placing Columbus in the expansion team sweepstakes.

By year end, the private financing required to secure a ballot slot had been committed. Bank One pledged $35 million, in exchange for naming rights for the new Arena. Nationwide added $17.5 million to the pot, while Worthington Industries committed $5 million toward the initial arena effort. Lamar Hunt was tabbed as the manager of the combined stadium/arena effort.

As 1996 came to a close, few of the participants could have imagined the bizzare twists and turns that 1997 would bring.

1997 — January kicked off the year on a positive note, as Columbus Hockey Limited made its initial presentation to the NHL, which, by all accounts, was well received. However, more serious decisions needed to be made — decisions that would ultimately determine how the entire Arena campaign would be waged.

Specifically, CHL needed to decide whether to include both the arena and the soccer stadium in a single voter initiative, or pursue separate ballot measures, as the original task force had suggested. Next, they had to decide whether to go to the voters in the fall of 2007, or accelerate the process and go before the voters in the S

pring.

Complicating the situation was the fact that the NHL established May 9, 1997 for the official awarding of the expansion franchises. There were fears that not having a decisive arena commitment would jeopardize the franchise bid, and further concern that a crowded Fall ballot could distract and divide the electorate. Accordingly, in early February, CHL decided to present a unified ballot proposition to the voters, covering both the arena and the soccer stadium, and to do it in the Spring. On February 18, the Franklin County Commissioners voted unanimously to place the initative, to be known as Issue 1, on the May 6 ballot. The battle was on, and only ten weeks remained to convince an electorate that had a track record of defeating similar measures. The difference this time, however, was the very real prospect of a true professional hockey team as the prime tenant.

From stage left enters Richard Sheir, a then-local political acitivist who made a living stirring up opposition to public spending projects that he believed not to be the proper subject of tax dollars. He led opposition to $200 million in parks spending in the northeast section of the state, various other arena/stadium initiatives and generally served as a thorn in the side of governments and their agencies around the state. In Columbus, he found a fertile feeding ground for a strange mix of liberals and conservatives, ranging from environmentalists/preservationists who feld the Pen site was inappropriate to anti-tax, anti-government zealots, to die-hard OSU football fans who apparently believed either than another sport could not possibly succeed, or that an NHL franchise posed an undesireable threat to Buckeye Nation.

Although the local media charcterized the opposition as “ragtag”, Sheir was very good at striking nerves among voter segments who perceived themselves to be disaffected. Columbus was particularly good for such an effort, as its historical annexation initiatives had ballooned the city’s size to 191 square miles, with 45% of the metropolitan population residing in the city itself. Demographically, that urban core is more likely to oppose public spending and taxation not directly attributable to benefit programs. In contrast, Cincinnati and Cleveland, who both were successful in obtaining public backing for stadium and arena efforts, each occupy approximately 77 square miles, with only 22%-23% residing in the core city. (Shortly after the campaign, Sheir decamped for the more politically friendly confines of Montpelier, Vermont)

With only a short time to shape public opinion, the arena/stadium proponents made the intriguing decision to have OSU President E. Gordon Gee lead the public relations campaign in favor of Issue 1. While one can certainly appreciate the logic of appearing to present a united front, even as the framing of the Schott neared completion, this was a curious step, and one that proved to border on disasterous. Gee’s tepid commercials played poorly on the public stage, and it appeared clear that his heart was not in it. When the Columbus City Council condition performance of infrastructure improvements on a positive vote for Issue 1, Gee’s wife penned an acerbic Letter to the Editor in the Dispatch, which most viewed as hurting the effort.

As March turned to April, conventional wisdom had the issue as a close one, with the opponents likely sporting a slight lead. Enter Peter J. Karmanos, Jr., the Chairman of Detroit-based Compuware Corporation and the owner of the NHL Hartford Whalers. Pete breezed into town in April, professing substantial interest in relocating his club to Columbus, and apparently willing to have the team play in temporary quarters, including an aircraft hangar, while an arena plan could be formulated. In response, Hunt presented a Letter of Intent to the FCCFA, promising to execute a 25 year lease for both the stadium and arena, pay rent of $3 million, and guaranteed profits of $200,000 per year for the full term of the lease, in exchange for 100% of the revenues from each of the venues.

Of course, Karmanos vanished as quickly as he appeared, having persuaded the folks in Raleigh that he could take his club anywhere, and obtaining further concessions for what would soon become the Carolina Hurricanes. The net impact on the campaign, however, was devastating. The electorate, already skeptical over theoretical promises of franchises that did not exist or were in their infancy (the Crew had just played its first season in Ohio Stadium), now had the impression that Columbus was the rope in a tug of war game between Kansas City’s Hunt and Detroit/Hartford’s Karmanos. Despite the further promise of urban revitalization, polls took a nosedive. Hunt confided in Bettman that if Issue 1 failed, he was done with the Columbus effort.

Predictably, Issue 1 failed, 56.3% against to 43.7% in favor. However, amid the gloom of the election night results, two heros emerged from the ashes: Dimon McFerson and Mr. Mac. Both shared the belief that an NHL franchise, and a first-class arena, were the logical next step for a city they both loved. Even before the vote, Mr. Mac had told Bettman that, even if the issue failed, they would find a way to get the deal done.

McFerson saw opportunity in the wake of defeat. He flew to New York immediately after the election and met with NHL officials, outlining the skeleton of a plan to build an arena with private funds. Seeing merit in his approach, and already knowing that McConnell was on board, the NHL delayed the final decision on the new franchises until June 25. They warned McFerson that a signed lease would be essential for a successful bid.

With a bit more time, McFerson got to work. He sketched out the things he would need, outlined the terms of a lease, and got the wheels in motion. The framework was presented to Hunt, who did not respond. With no time for indecsion or gamesmanship, McFerson counted McConnell and Wolfe as principal allies. While McFerson finalized his effort to get necessary cooperation from the City, working closely with Mayor Lashutka, who shared the vision, McConnell set up COLHOC, another limited partnership, and JMAC Hockey, to serve as the managing partner for COLHOC, should it become necessary. By this point, Bank One had pulled out, taking its $35 million out of the pot.

On June 2, McFerson’s proposal was put before the Columbus City Council. They key points were as follows:

  • City to provide street, access and other infrastructure improvements
  • City to do any necessary cleanup of Penitentiary site
  • Nationwide to get 10 year lease of development site, with option to purchase
  • Development area to be declared a “blighted area”, enabling FCCFA to use eminent domain to acquire necessary parcels, which would then be leased to developers for 99 years
  • Extended tax abatement for properties developed

With some minor amendments to insure continued revenue to school districts, the City Council approved the plan. Pressed to climb on board, or at least make a decision one way or the other, Hunt, who died in 2006, demurred, predicting that the lease would result in $25 million annual losses for the term of the lease. Thereafter, he personally funded the $28.5 million cost to build the existing Crew Stadium.

Feeling that they were free of Hunt’s involvement, the Columbus contingent re-crafted the NHL application, submitting it on behalf of COLHOC and JMAC Hockey. Mr. Mac signed the lease based solely on McFerson indicating that it was a fair deal. To the day he died, he claimed never to have read the lease.

On June 4, 1997, McConnell submitted the signed lease and revised application to the NHL, and on June 25, the NHL formally awarded conditional expansion franchises to Columbus, Atlanta, Nashville and Minnesota. Mr. Mac took the offensive and filed a declaratory relief action in Franklin County, seeking to establish that Hunt had no interest in the franchise. Hunt countered with a lawsuit of his own agains

t the NHL, Nationwide and COLHOC in New York. The local heros prevailed in both cases, and the rest, as they say, is history.

Analysis

To those who are looking for villains, it is a difficult search. We are where we are today due in part to some villainy, true, but overwhelmingly due to some well-intended decisions and actions that did not pan out, some unforseeable intervening events, and, ironically, to the very heroism that brought the Blue Jackets to Columbus.

Sure, Karmanos was working solely for himself, and the timing could not have been worse. Business is business, and Karmanos had no reason to show any loyalty to Columbus. The locals could have done a better job of pointing that out at the time, but hindsight is great.

Hunt assumed the role of both hero and goat. He brought the MSL to Columbus, but spearheaded some bad decisions, such as combining the arena and stadium initiatives, and delayed at key times in the process. Still considered an outsider, the fact that he was perceived as the leader of the effort, combined with the confusion injected by another outsider, Karmanos, fed the already existing paranoia of the electorate.

Gee and OSU did little to help the situation, but it is also tough to characterize them as true villains in the scheme of things. As one expert phrased it — “Columbus is a “B” market with two Class “A” facilities.” Very true. Columbus is not on the prime circuit of New York, Chicago, L.A., San Francisco for concerts, plays, etc. It is up and coming, but still not in the “A” league. Both facilities do reasonably well in terms of attracting outside events, with neither one holding a clear advantage. It is doubtful, however, that either arena could host all of the OSU, Blue Jacket, Destroyers and other functions. So we are really caught in the middle in terms of supply and demand.

Lashutka was also right in assessing the impact of the Dot Com collapse, 9/11 and the NHL work stoppage. At a point in time when you are trying to build interest, develop cohesion and bring economic revitalization, such events stall progress and set back younger franchises far more than established clubs.

Nationwide was put in a box. Sure, it gained some concessions in terms of tax relief, and preferential ability to acquire the involved properties, but it also assumed all of the risk , not only for the Arena, but for the Arena District as a whole. The $35 million for naming rights from Bank One was significant, but ultimately represented a small part of the ultimate funding. Contrast this with the S.F. Giants ballpark, where almost half of the cost was covered by the naming rights. (The Giants also own the ballpark, unlike the Jackets). Nationwide is not a charity, folks. It needed to appropriate things like the naming rights, some luxury suites, and other revenue sources to make the initial construction viable. Without McFerson and Nationwide, there is no Nationwide Arena and no Blue Jackets franchise.

Bottom line is this: there is a very good reason that there are no other arenas in professional sports that were privately built and privately operated. Arenas are more expensive, per square foot, than a stadium. They are vulnerable to economic downturns. However, they are also essential to the modern city, as the revenue they bring to the community more than compensates for the cost. However, those resultant benefits are seen by the community and the other businesses, not private owners.

In 1997, the voters were asked to buy a dream — an NHL franchise that may or may not have been awarded — an Arena District that may or may not appear — a soccer stadium for a franchise and league that may or may not prosper. The Columbus electorate is cynical on its best day, but asking them to go for so many unknowns, seemingly run by outsiders, was ultimately too much.

Today, we know that the hockey operation is sound, that the Arena District flourishes, and the economic impact is far beyond anything represented to the voters. The hockey team is on the rise, is firmly under local control, and is attracting increasing interest. The time is ripe for that public-private partnership to go forward. The City simply cannot afford to lose the Blue Jackets, the Arena or the District.

Fortunately, there are lots of viable options for a solution to the Blue Jackets problem. In the scheme of things, the gap to be narrowed is not huge, and there is a will to get it done from all sides. In the final installment, I will examine these options and where we are in finding a long term solution.

4 Comments

  1. Anonymous

    August 1, 2009 at 3:45 am

    Excellent…simply excellent.

  2. snappy

    August 1, 2009 at 2:50 pm

    Super summary. I lived through it here in C-bus. Your article brought back lots of memories, frustrations, and the feeling of elation when the NHL franchise was finally awarded to the city. Great job!

  3. Anonymous

    August 1, 2009 at 2:58 pm

    Nice work, What's scary is that when I read this from a macro perspective I wonder where the cynical Columbus electorate is today? Given the income tax issue on the table and the sour economy I've got to believe any solution will once again have to be heavily weighted toward the private sector. The question; is there another hero waiting in the wings?

  4. JAL

    August 2, 2009 at 2:03 am

    I think the Columbus electorate is scary when it comes to these things, and I discuss that more in Part III. However, I don't think the ultimate solution will depend on a vote.

    Stay tuned . . . ;-)

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