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Wednesday, May 7,2014

Uncovering common ground

A closer look at the financial triangle behind Common Ground Music Festival

by Andy Balaskovitz

This story began in April 2012, shortly after a source suggested City Pulse poke around the finances of Common Ground Music Festival — how it’s paid for, what the city is on the hook for and what it gets in return.

It started as a fairly straightforward Freedom of Information Act request asking for festival budget details, staffing levels, artist fees and net and gross revenues. The request, delivered to the City Attorney’s Office, was denied because “the City does not possess the records you seek.”

City Pulse simply wanted to know: Is Common Ground profitable? And is a city subsidy necessary?

Next came a series of more requests that revealed a system of intentional secrecy to hide the way money — in this case, some of it public — is spent on Common Ground.

Also after that original request came resentment from the head of the Lansing Entertainment and Public Facilities Authority, Scott Keith, that City Pulse would seek  such information through the FOIA. After the original request, an arrangement between City Pulse and LEPFA, in which advertising was traded for tickets, was halted by LEPFA without a word.

Five more FOIA requests with the city and LEPFA were filed since April 2012.

Some were denied because it wasn’t clear which entity — the city or LEPFA, the quasi-governmental authority that helps organize Common Ground — owned the records.

City Pulse met with officials from the Bernero administration and festival organizers on multiple occasions. At one meeting last summer, a discussion about a City Pulse column with the headline, “Lansing balks at releasing finances for taxpayer-subsidized Common Ground Festival,” devolved into a shouting match between my editor and Randy Hannan, Mayor Virg Bernero’s chief of staff, in the city attorney’s conference room. Hannan contended the city was cooperating with the paper’s request for budget details all along.

But the months-long back and forth led to uncovering a unique arrangement between the city, which budgets about $130,000 annually for Common Ground support, a tax-exempt entity called Center Park Productions run by Keith and the for-profit entertainment company, Meridian Entertainment Group.

To funnel money to Common Ground, the city established Center Park Productions, a 501(C)3 nonprofit subsidiary of LEPFA that exists solely to transfer money to Meridian. As a nonprofit, it isn’t subject to the state’s Open Meetings or Freedom of Information acts. Its fivemember board of directors is self-appointed and made up of LEPFA officials. There has been no movement to include outsiders on its board. Keith said Center Park Productions compiles an annual report that he said is presented to LEPFA’s finance committee, but he declined to release it to the public.

The chairman of the finance committee, fomer City councilman Tim Kaltenbach, said he was unfamiliar with Center Park Productions.

As the festival enters its 15th year, details about the financial arrangement is no more clear to the public, and even to some indirectly involved in the festival, than it was in the beginning. Indeed, the festival has come to be one of the city’s biggest gatherings of the year, and organizers say a growing percentage are coming in from outside of greater Lansing. No one is particularly disputing the financial benefits Lansing sees. There is also no suggestion of malfeasance.

But what is glaring is the lack of transparency the festival offers and the entirely unique model that keeps audited financial information for an entity run by public employees out of view of the public.

what is center park productions?

Outside of Keith, no one interviewed for this story had a strong sense of how Center Park operates or what exactly the city gets in return for spending $130,000 a year supporting Common Ground. Economic spinoff is cited in the $50 million neighborhood since it started in 2000. But it is unclear whether the festival would pack up and leave Lansing without the city’s financial contribution.

“Common Ground is important to the city. It’s synonymous with Lansing in the summer, a magnet that brings people from all over Michigan to Lansing,” Mayor Virg Bernero said. But as for the financing: “In general, that’s over my head. I leave entertainment things to the folks at LEPFA or the (Convention and Visitor’s Bureau). I am paying attention to more important things like police.

“I am told that this is how festivals are done,” Bernero added. “I will admit that I have not applied a mayoral microscope to it. But if it isn’t broke, don’t fix it. I’d have to be convinced that there is a problem to look into it.”

Kevin Meyer, who runs Meridian Entertainment Group, said the city’s contribution is less than 10 percent of the festival’s overall $1.8 million budget — and the city gets a “world-class event” out of it. Meridian finds the artists to play, administers contracts and coordinates the overall production of the event. He said the festival would have to replace the revenue from somewhere else if the city didn’t provide it. The arrangement also shields Meridian Entertainment Group from disclosing the firms’ profits and for what price acts are booked. “We’re just barely breaking even,” Meyer said.

“Or another municipality comes in to make a better deal,” Keith said, suggesting that the city risks losing the festival without its contribution. As the head of both a public authority and a tax-exempt nonprofit, Keith said his roles “are not something I take lightly. The (Center Park) board, LEPFA board, mayor, City Council hold me in high regard that I’m doing the right thing. I am taking the high road, keeping it on the up and up,” he said.

The inaugural festival in 2000 opened with a combination of regional and nationally touring acts with a decidedly modern and classic rock lineup. This year’s festival, July 8-13, is a scaled back version compared to past years with a new emphasis on rock music geared toward a younger generation. Organizers say the event has attracted one million visitors over the past 14 years.

Each year, the city contracts with Center Park Productions. It outlines a series of services across multiple city departments that the city will provide, including information technology support, fleet services, electrical installations, plumbing and onsite medical and fire services. According to the contract, the city will also “provide financial assistance to (Center Park Productions) in the event that ‘Common Ground’ does not reach a breakeven point … and must use reserves beyond capability to keep CPP from bankruptcy.”

While the language requires the city to keep Center Park whole, “This provision of the contract has never been invoked,” Hannan said in an email in August. “CG deficits in prior years have been carried forward and offset by surpluses in subsequent years, eliminating the need for the city to provide the referenced financial assistance. If this clause were invoked in the future, the City would require an audit of CPP to verify the shortfall.”

According to the latest available financial information Center Park is required to file with the Internal Revenue Service, Center Park ended 2012 with a negative $175,916 in net assets — a decrease by over $93,000 from the year before. In 2012, Center Park brought in $1.45 million in revenue but spent $1.54 million. Roughly half of the revenue — $788,714 — comes from ticket sales. Other revenue comes from contracts with sponsors or other parties who are obligated to provide money, trade or other services in exchange for marketing.

The organization’s mission is: “To promote and operate an annual summer event that provides a variety of entertainment and activities that enhances a positive community image, attracts visitors, and encourages unity and civic pride,” according to IRS tax filings.

The Center Park Productions board is made up of Keith; Greg Soleau, LEPFA’s vice president of finance; Heidi Brown, LEPFA’s vice president of administration; Paul Ntoko, LEPFA’s vice president for food and beverage; and Gus Pine, the vice president of sales and marketing with the Greater Lansing Convention and Visitor’s Bureau who is contracted by LEPFA to oversee sales and marketing. He said the Convention and Visitor’s Bureau is a Common Ground sponsor, but he couldn’t say how much financial support the group gives to the festival. Another Convention and Visitor’s Bureau employee, Tracy Padot, also could not specify the amount, but said it is “minimal.”

Keith said Center Park Productions is audited each year, but that report is “reviewed internally” and not available to the public.

Pine said the board meets three times a year. While Keith said an annual report is made for Center Park’s budget, Pine was unaware of one last week.

‘Interesting triangle’

Tim Kaltenbach, who chairs LEPFA’s finance committee, said he, too, has never seen financial reports on Common Ground. Keith disputes that, and said those have been provided.

“The LEPFA Finance Committee is briefed on the contract between LEPFA and CPP; including any financial obligations or items pertaining to the LEPFA audit,” Keith said in an email in response to Kaltenbach’s claim.

Kaltenbach said while the finance committee is briefed on ticket sales and “whether we’re making a profit or not making a profit,” he was unclear what role the city and LEPFA plays specifically in funding Common Ground. Kaltenbach said he has served on the LEPFA board for four years and chaired the finance committee for the past two. As for Center Park Productions: “No, I don’t know anything about them,” he said.

Kaltenbach supports the city’s Common Ground subsidy, and did so when he was the city’s 4th Ward Councilman, because of the promotion it does for the city.

Local radio personality Tim Barron, who sits on LEPFA’s board and is in line to take over as chairman next month, said the LEPFA board “keeps a strict eye on every expense” related to the festival. He said he’s been told Center Park Productions operates in an “intentional gray area” so it could be “a place the two entities (the city and Meridian Entertainment) could meet and sort things out that were from a charitable aspect, versus it having to be a city thing or a Meridian Entertainment thing.”

Barron said he has “no idea” about what goes into Center Park’s budget, saying LEPFA and Center Park are separate entities.

Barron, at the end of the day, supports the city’s contribution to Common Ground because it brings people into the city who may not otherwise visit. But he thinks the arrangement might benefit from a little bit of sunlight.

“I think a full explanation of how Center Park Productions operates would be a fantastic start,” he said. “I plan to push for that the first day I’m chairman.”

Steve Schmader, president and CEO of the International Festivals and Events Association, called the arrangement an “interesting triangle” between the city, Center Park and Meridian Entertainment, particularly because the nonprofit is administered by a group of LEPFA employees.

“That’s not terribly common. I can’t say I’ve heard of that.”

However, he said it is “not unusual at all” for cities to provide financial or technical support for festivals that draw people into the area.

“It’s always fascinating to me how people work with outside groups,” Schmader said. “The bottom line for all of them is that they’re all trying to do something good for the community in some way. … We’re certainly flying the flag to say to cities to be very careful as you make those decisions. It can literally put the event out of business.”

City Councilwoman Carol Wood, who was first elected in 2000, said the arrangement was created during the Hollister administration and that the city initially set out to provide support with security and other Public Service Department functions.

“We were assured that when this started that within three years there would be a profit and it would continue to dwindle the amount needed from the city so that within five, six years the city would not be using any General Fund dollars to help appropriate this,” she said.

In the early years of Common Ground, Wood said the Council was briefed each year on ticket sales, economic spinoff and expenditures incurred by the city. “Gradually those reports stopped coming to the Council,” she said, which happened during the Tony Benavides administration. Wood also said that the administration has promised to give the Council a Common Ground-specific presentation as part of the budget process, but that has not happened yet. At LEPFA’s budget hearing last month, Councilwoman Jessica Yorko asked questions related to Common Ground financing, but Keith declined to discuss them at that hearing. Wood still needs to be convinced why the city subsidy is necessary.

“I don’t think we’ve had a clear understanding in my estimation as to why they’re not self-sufficient at this time,” Wood said. “$130,000 might not seem like a great deal of money when you look at what the spinoff revenue is that generates from those dollars. But as I’m going down a street and see we could have used that to do some repaving on, I’m asking the question: ‘Why isn’t this group paying for it themselves instead of the city having to pay for it?’ We as politicians have to be able to answer that.”

Wood believes the arrangement as it exists today is “flawed” and that Center Park Productions, like other entities that contract with the city, should have to open its audited financials to the city.

“If you don’t want to open up, then you don’t want our dollars,” she said. “The minute that taxpayer dollars are being utilized for something, then we should have the availability for all records that have to deal with that.”

Associate publisher Mickey Hirten contributed reporting to this story.


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