Hazlehurst’s Blog
Insight and commentary from John Hazlehurst

Commission votes, mayor gloats

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As predicted by many, the two-member Independent Ethics Commission cleared Mayor Lionel Rivera of any violation of the city Code of Ethics, as alleged in the complaint filed by Ron Johnson.

The report is carefully crafted, fair, judicious and as complete and accurate as it could be, given the limited scope of the inquiry.

As the report states: “the commission’s investigation was limited to a review of the Mayor’s actions concerning the project as they relate to the allegations contained in the complaint and its supplement.”

Such limitations were proper and necessary.  Johnson’s allegations should not, and did not, trigger a witch hunt, in which the commission might have interviewed dozens of witnesses, who might have made further allegations of unrelated misdeeds, which would then have been investigated, and so on ad infinitum.

Instead, the commission interviewed only the Mayor, Ray Marshall (accompanied by his attorney John Cook), councilmember Scott Hente, assistant city manager Mike Anderson, former councilmember Margaret Radford, and USOC consultant Jim Didion.  All witnesses appeared voluntarily, without subpoena.

The commission declined to interview any other individuals suggested by Johnson or his attorney, noting that “the information allegedly possessed by those individuals was either duplicative or not germane to the issue of the Mayor’s involvement in the USOC project.”

It’s pretty clear that none of the individuals interviewed held any animus toward the Mayor.  To the contrary, every one of them had powerful reasons to present the Mayor’s actions, and by extension their own, in the best possible light. 

During the time that the interviews were taking place, LandCo, the city, and the USOC were in the midst of renegotiating their deals with each other, in the wake of the disastrous collapse of the initial EDA.  Didion’s present role with the USOC, if any, is unknown, but Marshall, Anderson, Hente, and the Mayor have all been deeply involved in restructuring the deals.  Radford’s involvement ended with her council term last April, but she has long been an ally/admirer of the Mayor.

The city’s current spin on the collapse of the previous agreement is this: forget all the lawsuits, allegations, and angry words-it was all the economy’s fault!  In a presentation to council, Mike Anderson cited the “world financial meltdown” as the sole reason for the deal’s demise.  In other words, it’s nobody’s fault, so let’s all move on.

Based on the testimony of these individuals, the commission concluded that the mayor had no part in choosing LandCo as the designated USOC developer, did not take positions or actions that favored LandCo, and that any subsequent contacts with LandCo were made for the purpose of advancing the city’s interests, not LandCo’s.

The most significant omission on the list of witnesses may be that of former USOC CEO Jim Scherr, who, the report noted, had been quoted in “news reports” as saying that the LandCo selection had been made by the city, not by the USOC.  The commission chose not to interview him, both because of “overwhelming evidence” that the choice was made by the USOC, and because of Jim Didion’s statement that Scherr had little or no involvement in the process.

The omission is disturbing, because the “overwhelming evidence” that the report cites presumably comes from the testimony of the six interviewees.  One would think that possibly contradictory testimony would be welcome, even if it presented the two commissioners with the tiresome task of figuring out the truth of the matter from differing accounts.

The most interesting paragraph in the seven page report is this one, in which the commission gingerly tackles the question of Rivera’s failure to disclose a financial relationship with LandCo CEO Marshall

“Finally, the commission wishes to address the issue of whether the Mayor should have disclosed his prior business relationship with Mr. Marshall.  The Mayor’s explanation for not making the disclosure has been that it would constitute a breach of the UBS policy of respecting the confidentiality of its clients.  Had the Mayor disclosed the prior relationship it would probably have negated the suspicions that ultimately led to a request for an investigation.  In the Mayor’s view, it would also have been a serious violation of a business and ethical responsibility.  Whether the Commission agrees with the Mayor’s decision is not pertinent(italics added).  As noted previously, at the time the Mayor had the business relationship decisions were being made as to which developers would receive requests for proposals and, possibly, which developer should be selected to participate in the USOC project.  The Commission could find no evidence that the Mayor participated in any manner in these decisions.  Nor was there any evidence that the Mayor attempted to exert any influence, direct or indirect, in these decisions.  For these reasons the Commission does not believe that the Mayor’s failure to disclose constituted a violation of the Code of Ethics.”

Not even a slap on the wrist!  The commission simply decided that an apparent conflict wasn’t a conflict, since Rivera had, to the best of their knowledge, taken no actions that might unduly benefit LandCo, or disadvantage other applicants.

But here’s the crux of the matter: no person can serve two masters.  The Mayor can either serve his employer, or the people of this city.  He can’t just walk a tightrope, and pretend to serve both.  If his employment is of such a nature that he can’t reveal possibly conflictual actions, he should resign either from UBS or from elected office.

That may seem unfair-but too bad.  It may be that you can’t both be Mayor of Colorado Springs and an ambitious go-getter at the same time.

Clearly, neither the Mayor’s enemies nor the opponents of the USOC deal will be happy with this report.  Too bad for them-game, set, and match to Lionel.

There will still be questions and whispers, as in: How much did the Mayor make from his business relationship with Marshall?  Were there other accounts?  Was all the testimony truthful?  What really happened-surely seven pages of dry legalese can’t close the book on all this juicy gossip?

But from now on, it’s all pointless speculation. We’ll never know.

 In a few hours, the curtain will rise on what may be the final act in the USOC saga, when council is expected to approve the new USOC deal in all of its sleek, gleaming perfection.  It’ll cost the hapless taxpayers $40 or $50 million-but who’s counting?  Not I-I’ll be there, hoping that I can get USOC boss Stephanie Streeter to autograph my copy of the agenda…

 

 

 

 

 

 

 

 

Posted by John Hazlehurst on August 11th, 2009 :: Filed under Blog
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USOC a done deal?

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Last night’s “town hall” meeting, wherein the hapless public was invited to come to City Hall at 7 p.m. and comment about the U.S. Olympic Committee deal, had all the elements of Kabuki theater.

Councilmembers (excluding Messrs. Glenn and Heimlicher) drifted slowly to the dais and, stone faced, took their seats. The mayor opened the meeting by announcing that members of the public who wished to comment would be allocated a generous six minutes, instead of the miserly three minutes usually permitted to folks who speak about non-agenda issues.

Assistant City Manager Mike Anderson then made his way to the microphone and proceeded to give a 25-minute overview of the deal, aided by a PowerPoint presentation, copies of which were unavailable to the public.

In his presentation, Anderson said that the USOC’s annual economic impact is more than $350 million, and that it and related sports organizations account directly for 910 jobs and indirectly for 2,600 more.

He emphasized the dire consequences that would, in a worst-case scenario, result from the departure of the organization. These consequences include the loss of all USOC-related jobs, as well as the disappearance of the sales and property tax revenue associated directly and indirectly with the organization.

I’ve never been comfortable with so-called “economic impact analyses.”  At best, they give you a crude, but useful, snapshot of the economic impact of a particular business, class of business or economic activity. At worst, they’re deliberately designed to overstate economic impact and benefit organizations which seek preferential treatment from government entities that can hand over the goods.

The problem with Anderson’s analysis is that it presents a static, deterministic view of the USOC, and an equally rigid view of the possible consequences of its departure.

Anderson stated, for example, that the city might lose all of the 910 “direct” jobs, and that most of the folks now employed by the USOC and other sports-related organizations might leave town.

In the real world, individual behavior is much more dynamic and unpredictable.

People who lose their jobs (particularly those lucky enough to live in the “Best City in America”) are as likely to look for new employment or start their own businesses as to pull up stakes and leave town. And it’s worth pointing out that the USOC deal, if approved by council, guarantees only that the USOC will keep its headquarters in town.

It’s silent concerning the national governing bodies and the Olympic Training Center, which together account for most of the direct jobs.

Moreover, regional economies are far more resilient than such models indicate.

Schumpeter’s classic description of capitalism as a process of “creativedestruction,” wherein new business and business models shoulder aside the old, applies regionally as well as globally. Businesses, be they Intel, Apple or MCI, grow, thrive and fade away, and others arise to take their place.

In his presentation, Anderson also attributed $4.6 million in annual property tax revenue to the USOC and associated entities. That might be true, but remember that property tax collections do not depend upon ownership. Real estate is real estate — and whoever owns it pays the bill — or doesn’t.

In fact, all the land and improvements that comprise the Olympic Training Center at 1750 E. Boulder, which have a 2008 assessed valuation of $44,154, 258, are classified as “exempt charitable,” and are thereby exempted from those pesky property taxes.

As the evening wore on, it seemed clear that city officials see no alternativeother than to approve the deal. Councilmembers, it appears, believe that the USOC holds the whip hand, and that they have little choice but to vote “yea.”

So, after so many months of “sturm und drang,” it’s almost time for the play to come to an end.

Will LandCo, the city and the USOC go off into the sunset, hand in hand in hand, and live happily ever after?

Will Mayor Lionel Rivera, as a senior councilmember predicted last night, just get “a slap on the wrist” from the ethics commission and walk away unscathed?

Will Ray Marshall dodge the district attorney’s bullet and remain unindicted?

And will USOC boss of bosses Stephanie Streeter show up for the final act on Tuesday afternoon, and at least smile gracefully as council hands her organization $40 million or $50 million?

I’ll be there — at least until the ADD kicks in …

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Posted by John Hazlehurst on August 7th, 2009 :: Filed under Blog
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Groucho, Karl and the USOC

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“History repeats itself, first as tragedy, second as farce.”- Karl Marx

Last week, councilmember Jerry Heimlicher vowed loudly and publicly that, joined by a majority of his colleagues, he would insist that council be updated on the USOC deal in open session.

That didn’t happen. 

Yesterday during the informal City Council meeting, avisibly chastened Heimlicher made only fleeting reference to his former devotion to the public’s right to know,  saying that “the press has reported that we’re within days of a new EDA (economic development agreement), and we promised the public that it wouldn’t be done behind closed doors.”

Assistant city manager Mike Anderson, who introduced himself as “assistant city attorney Mike Anderson,” gave a brief presentation on the progress of the deal.

A grim-faced Anderson characterized the negotiations as “complex,” involving as many as 13 lawyers representing the interests of the city, LandCo, and the USOC.  He noted that the USOC had not yet “staffed this to their board,” and that, since the organization’s board members are dispersed throughout the country, meetings are more difficult to plan than those of city council.

Mayor Rivera chimed in, saying that “I’ve been very cautious (about forecasting the date of a new EDA).  (But) the intention of Scott (Hente) and myself and Mike is to have a very public (process).”

Anderson finished his presentation by, in essence, saying that the “finalized agreement” would be brought to council for a public unveiling as soon as it was…well, agreed and finalized.

Councilmembers, having nothing of substance to talk about, then ruminated at length on what to call the document that they so yearn to see.  “Finalized agreement” sounded too much like a take it or leave it backroom deal-how about “finalized draft”?  Or maybe “coordinated draft?” 

Then, as if actors in Kabuki theater, councilmembers fell into long-practiced rituals, praising city staff, and condemning the evildoers of the media.

Vice mayor Larry Small sorrowfully sympathized with Mike Anderson.

“I see the anguish on your face,” he said, “and I hope when this is over you can go back to looking 20 years younger than your age.”

And councilmember Tom Gallagher’s often-tangled rhetoric reached new highs.

“So we need to mitigate the malcontents,” he said, referring to the ink-stained wretches of the fourth estate, “you ignore ‘em, they just grow and fester.”

“Growing and festering”- that’s us! 

Despite the happy talk, it seems clear that the proposed deal has hit some major snags.  If your mortgage broker tells you that your application is “very complex-but we’re making very good progress,” that means you’re not getting the loan.  If your attorney-or your assistant city manager-looks like death warmed over as he announces that 13 attorneys are working on your “very complex” business deal, you’d better hire a bankruptcy lawyer.

What’s holding up the deal?  We don’t know, but we can guess.

Holdup # 1: LandCo can’t perform according to the terms of the original EDA, but they can prevent a new deal from being done.  It’s simple: pay ‘em, and they’ll go away.

Holdup # 2: The original deal called for LandCo to give the USOC  16 million big ones.  LandCo can’t do it-but the USOC still wants the $-show us the money!!

Holdup # 3: The city is broke, and getting broker by the week.  The usual suspects-El Pomar, the state, local philanthropists aren’t stepping forward.  So where’s the money?

Holdup # 4:  The city doesn’t want anything in writing when it comes to the $16 million-no use getting those unmitigated malcontents all riled up!  The taxpayers just wouldn’t understand…but the USOC wants cash, or a firm commitment to provide the cash at a date certain.  Money talks, BS walks.

Actually, the deal’s simple.  Just find lots of money, and give everybody some!  That’s fine-but don’t ask the taxpayers.

“Those are my principles, and if you don’t like them… well, I have others” - Groucho Marx

 

  

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Groucho Marx

Posted by John Hazlehurst on July 14th, 2009 :: Filed under Blog
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