Convention center projections continue to sink in a bog of broken promises

The new convention center is struggling to meet the projections its marketers set in order to sell the most expensive capital project in Nashville's history to Nashvillians. Sometimes I really hate being right. Indeed, I would have relished being wrong about Music City Center. But the red flags we waved continue to flip to red spreadsheet numbers. Promises continue to be broken.

You may remember that Goldman Sachs said that if convention consulting firm HVS projections are off 25% between adoption of the proposal and 2017, then our General Fund for dedicated Metro services has to kick in $5.29 million in 2017 alone. That's less money for Nashvillians and more money for tourism industry obligations.

And don't forget that HVS already dramatically low-balled projections on the utility bills of the behemoth convention venue during its first year to the tune of $4 million. Its inaugural debt is already worse than imagined.

So, of course we find out more bad news from the very newspaper that donated money to the Mayor's marketing campaign to hawk the lumbering, ponderous beast:

According to [the HVS] study — updated in September 2010 to take into account the addition of the Omni headquarters hotel — Music City Center during the 2013-14 fiscal year would generate 49 convention and trade shows, a category distinguished by producing considerably more overnight hotel stays than consumer shows, conferences, banquets and other smaller events. Conventions and trade shows would account for 418,950 hotel room nights, the study found.

But current CVB numbers for this stretch — July 1, 2013, through June 30, 2014 — are 22 conventions and trade shows that would produce 134,921 hotel room nights. Tourism and city officials point out the center’s adjoining hotel won’t open until three months into this period, and thus they discount the projections as no longer applicable.

Buoyed by the consulting firm's serial exaggerations, Karl Dean, the Conventions Mayor, and his tourism industry patrons are dragging us down the path that Goldman Sachs warned us we could go: toward funding a looming Music City Center debt at the expense of the General Fund that provides for services including our infrastructure, our schools, our police force.

I fail to enjoy saying, "I told you so", on this one.

The only game in town: lay odds that Nashville was scammed by the banks, too

I've been a critic of the new convention center project in the past because the Mayor's Office was unwilling to go the extra mile to incorporate a 24/7 neighborhood south of Broadway into the project and because Metro funds for our services were obligated as insurance to get financiers to approve the project. Since the bank-induced recession set upon us a few years ago, I've also warned that the Music City Center's main financier, Goldman Sachs, should be suspect in its handling of financing for the project. Where is the caveat emptor?

June's Rolling Stone politics piece by Matt Taibbi on the conspiracy by the banking "cartel" to pilfer wealth from municipal bonds issued out of places like Nashville makes me even more concerned about our capital projects, and especially the largest capital project ever launched here, MCC:

these three Wall Street wiseguys spent the past decade taking part in a breathtakingly broad scheme to skim billions of dollars from the coffers of cities and small towns across America. The banks achieved this gigantic rip-off by secretly colluding to rig the public bids on municipal bonds, a business worth $3.7 trillion. By conspiring to lower the interest rates that towns earn on these investments, the banks systematically stole from schools, hospitals, libraries and nursing homes – from "virtually every state, district and territory in the United States," according to one settlement. And they did it so cleverly that the victims never even knew they were being ­cheated. No thumbs were broken, and nobody ended up in a landfill in New Jersey, but money disappeared, lots and lots of it, and its manner of disappearance had a familiar name: organized crime ....

In the years since the economic crash of 2008, we've seen numerous hints that such orchestrated corruption exists. The collapses of Bear Stearns and Lehman Brothers, for instance, both pointed to coordi­nated attacks by powerful banks and hedge funds determined to speed the demise of those firms. In the bankruptcy of Jefferson County, Alabama, we learned that Goldman Sachs accepted a $3 million bribe from J.P. Morgan Chase to permit Chase to serve as the sole provider of toxic swap deals to the rubes running metropolitan Birmingham – "an open-and-shut case of anti-competitive behavior," as one former regulator described it.

More recently, a major international investigation has been launched into the manipulation of Libor, the interbank lending index that is used to calculate global interest rates for products worth more than $3 trillion a year. If and when that case is presented to the public at trial – there are several major civil suits in the works here in the States – we may yet find out that the world's most powerful banks have, for years, been fixing the prices of almost every adjustable-rate vehicle on earth, from mortgages and credit cards to interest-rate swaps and even currencies.

Taibbi goes into detail describing the charges that cities and towns were gored for revenues slowly and deliberately for years. As the federal prosecutor put it, banking grifters colluded to lie to and cheat municipalities through a bidding process that was supposed to protect the latter.

So, I ask again, should we just blissfully assume that Nashville, especially during Karl Dean's tenure of breathless capital spending and bond issues, has not been the mark in the banks' confidence game? Why does Goldman Sachs get the benefit of the doubt, given their checkered past?

Music City Center financier facing a "public relations disaster"

Photo credit: The Petrelis Files

Goldman Sachs is getting hit again with a round of charges about its treatment of customers, only this time the criticism is coming from a Goldman insider, and devastatingly so. Greg Smith, a primary recruiter and intern manager who was with Goldman for the past 12 years quits the "bulge bracket" investment bank and explains why:

I believe I have worked here long enough to understand the trajectory of its culture, its people and its identity. And I can honestly say that the environment now is as toxic and destructive as I have ever seen it.

To put the problem in the simplest terms, the interests of the client continue to be sidelined in the way the firm operates and thinks about making money ....

When the history books are written about Goldman Sachs, they may reflect that the current chief executive officer, Lloyd C. Blankfein, and the president, Gary D. Cohn, lost hold of the firm’s culture on their watch. I truly believe that this decline in the firm’s moral fiber represents the single most serious threat to its long-run survival ....

Today, if you make enough money for the firm (and are not currently an ax murderer) you will be promoted into a position of influence.

It makes me ill how callously people talk about ripping their clients off. Over the last 12 months I have seen five different managing directors refer to their own clients as “muppets,” sometimes over internal e-mail ....

You don’t have to be a rocket scientist to figure out that the junior analyst sitting quietly in the corner of the room hearing about “muppets,” “ripping eyeballs out” and “getting paid” doesn’t exactly turn into a model citizen.

This alleged lapse of moral integrity is being spun as a "public relations" disaster in the media, but it is more than a failure of protecting the brand. If Goldman really is acting like a predator, this is a profound moral failure underneath the fickle veneer of flackery.

Or "Muppet City Center"?

Mayor Karl Dean selected Goldman Sachs to be the primary financier of construction of the new Music City Convention Center, set to open in 2013. Metro Nashville is effectively a Goldman Sachs customer. Might Nashvillians also be among the "muppets" getting eyeballs "ripped out" by Government Goldman?

Music City Center financier among the "10 Most Hated Companies in America"

Despite their rank reputation for ill-gotten gains at the expense of ordinary people, Nashville Mayor Karl Dean no doubt sees Goldman as golden:

Goldman Sachs’ ... poor reputation was cemented when the government sued it for fraud in 2010. The firm settled with the government for $550 million, but this was viewed as little more than a slap on the wrist because of the bank’s immense wealth. And the fraud accusations have not stopped — they have actually accelerated. Goldman faces a set of suits over mortgage instruments it sold worth a total of $15.8 billion. The Federal Housing Finance Agency in September accused Goldman of misrepresenting the quality of $11.1 billion worth of residential mortgage-backed securities. In the cases in which Goldman has settled claims, the press has not always been favorable. According to a Wall Street Journal report, Goldman agreed to forgive 25% of principal balances on 143 mortgage loans to borrowers in New York, or $13 million of a total principal balance of $52 million. The $13 million is less than a senior banker at Goldman might make in a year. Perhaps those homeowners are part of the Occupy Wall Street protests against big banks, for which Goldman is the poster boy.

Goldman Sachs exec sponsors opulent party in troubled times

Goldman Sachs is the primary financier for Music City Center construction and an adviser to the Karl Dean's office on the funding the project. Because the local news media did very little questioning of Goldman's background or their checkered history in the bursting of the housing bubble, it has been left to bloggers to write about the shady and embarrassing news on Goldman.

That we can trace stories on the low ethical character of major company players continues to be Goldman's walk of shame even if it is not directly related to the Music City Center. The caliber of the company Metro hired matters. We should not divorce the pattern of hubris of this company from their business dealings with Metro. Each Goldman misstep elsewhere should be localized at least with the question of whether they might be prone to so misstep here, especially when we have a news media who are prone to ignore bad news in favor of the press releases issued from the Mayor's Office.

The latest news is that a Goldman Sachs executive held an obscenely opulent tween party for his daughter in Denver:

[Jeffrey Verschleiser] ... heads Goldman’s mortgage division now. And after cutting a mile-wide swath of losses through the American economy, helping destroy two venerable firms in Bear and Ambac, bilking the taxpayer for untold millions more (he is also named in a lawsuit filed by the Federal Housing Finance Agency for allegedly speeding bad loans onto securitization before they defaulted), Verschleiser is now living the contented life of a proud family man, renting out a 94-room hotel for three days for his daughter’s Bat Mitzvah.

It’s certainly heartening that Verschleiser is spending this money on his daughter instead of, say, hiring a busload of Jamaican hookers to spend the weekend lounging with him in a hot tub full of Beluga caviar. People ought to give their children the best, I guess. But there’s this, too: at a time when one in four Americans has zero or negative net worth, renting a 94-room hotel for three days for a tweenager party might already be pushing the edge of the good taste/tact envelope. Even for the most honest millionaire in Aspen, it would seem a little gauche.

We will see whether any lapses of good taste manifests around Nashville's trickle-down convention center project, a mechanism designed by and for elites without deep connections to the local community.

"The governments don't rule the world. Goldman Sachs [Music City Center financier] rules the world."

A trader describes how the big financial institutions believe "the market is toast" and how Goldman Sachs does not care, but is prepared to make a lot more money off the coming crash:





If Goldman Sachs believes "the market is toast" and they don't care about the victims of the carnage, might they be hedging and betting against subsidized capital developments here in Nashville?


UPDATE: Ray Medeiros underscores the problem. Goldman Sachs is like a plague of locusts that comes in so bent on devouring what they can get that they destroy links in the food chain vital for everyone:

Companies like JP Morgan and Goldman Sachs, hold more influence on a company than the consumer or the small investor, like average people that have a 401(k). Wall Street firms are in the business of investments, and they need to make as much money as possible, even if it ultimately ends up destroying the manufacturing sector of the United States economy.

Even if it ultimately ends up destroying various local economies in Nashville, TN.

These are the companies that the Mayor's Office, and Metro Finance Director Rich Riebeling in particular, are looking to for guidance on large-risk finance decisions like the new convention center. Supporters of Mayor Dean tell us to trust the process and that we don't have any choice but to work with companies like Goldman Sachs if we want Nashville to grow.

But every once in a while we get a glimpse like in the video above of how far out on a limb the Dean administration may have stuck us. For their part, Goldman Sachs wagers on when that limb could break, reserving the privilege to walk away with Metro dollars either way. This is all too precarious.

It tolls for thee

Let's hope Nashville won't have to go the way of Puerto Rico with "Government Goldman".

Puerto Rico raised infrastructure (toll roads) revenues by borrowing money from bondholders, coordinated by our old friend, Goldman Sachs. Puerto Rico agreed to pay Goldman a set interest rate over a defined period. The debt and interest piled up as Puerto Rico could not pay back Goldman by the end of the finance period.

So, Goldman enabled this debt issuance on tollway now slipping through Puerto Rico's grip, and who is there to pick up the pieces and provide a 40-year solution but the very same Goldman:

Nashville is also one of Goldman Sachs' clients thanks to convention center construction

It does not help local consumer confidence to know that there is a chance a major Metro financier could be designing things to enable its own profits while its clients lose:

A prosecutor in New York has subpoenaed Wall Street powerhouse Goldman Sachs for information related to the financial crisis, a person familiar with the development said Thursday.

The broad request from the Manhattan district attorney, issued last month, stems from an April report by Senate investigators that accused Goldman Sachs of abusive behavior, according to the source.

The report said Goldman Sachs contributed to the financial crisis, partly by designing mortgage-related investments that enabled the firm to profit while its clients lost money.

We do have Rich Riebeling's word that Goldman would never do to convention center-related investments what it did to mortgage-related investments. Is that good enough for you?

About my Twitter fight with a SouthComm editor

Same Twitter stream in which the City Paper editor sized me down to a kid with Mentos and Diet Coke after I suggested that journalists accusing bloggers of conspiracy theories is pot-meet-kettle. It's actually club soda or nothing for me, thank you.

Local news editors continue to show that they just do not get it. Down these years I have been blogging, one editor after another has at one time or another taken swipes at certain bloggers who do not merely link their editorializing but who dare to question their balance, who raise the question of bias.

In spite of the fact that blogging has made its own contributions to understanding local politics, over and over it seems a remarkable number of editors cop a tone of arrogance whenever a blogger dares charge bias and self-interest in reporting and "analysis."

Being a blogger who will not blindly promote or otherwise genuflect to the corporate generation of pro journalism, I'm now catching heat from Nashville's newest editor, Stephen George, who hasn't even been here a year but already knew enough about the local convention and tourism industry (as well as risks of encumbering Metro's General Fund to support that industry) to write a shill editorial in support of Music City Center construction months ago.

After I challenged his support of the Davidson County branch of "Government Goldman" (a term that captures the pandering, patronizing relationships that governments develop with finance industry brokers like Goldman Sachs, which is the primary financier for Music City Center), the editor characterized my views as conspiratorial. I did not ask, but I'm sure that branding was meant to lump me in league with those society lampoons with references to black helicopters, UFO probes, and the grassy knoll.

As if criticism of the lop-sided power of the banking and lending industry, which undeniably brought this country well-nigh to its knees, amounts to paranoid speculation or a lunatic fringe.

Frankly, that's rich from a local journalist. The news media here has not given a second thought to performing conspiratorial hatchet jobs on out-spoken opponents of Mayor Karl Dean's policies. Courthouse class savaging of Mike Jameson for speaking out on East Bank Riverfront development and of Emily Evans for questioning broken funding promises on the convention center was abetted by the media echo chamber.

Both were rumored to be over-politicizing opportunists. Both have been generally above reproach. They just were bold enough to dare to block the bandwagon, unlike Nashville's newspapers.

Moreover, it is not conspiratorial for me to challenge self-interested "4th estate" promotion of Music City Center within this constellation of government power and private, special-interest wealth. We live in a world where the journalists we used to read and listen to end up as communications directors in government and information officers in industry or they move to start their own public relations firms with intentions of using connections to garner deals with government and industry. We live in a world where journalists are coached by PR flacks to write columns and where newspapers donate money to the cause of Metro launching its largest capital project ever to serve the smallest number of Nashvillians ever.

It is entirely reasonable and realistic common sense to argue out loud and in print that journalists' motives in promoting Music City Center fail objectivity and neutrality tests given the rewards for so shilling. Mr. George would have acted more honorably by not writing an editorial following the chatter class crowd down the road of growth and development.

Because, you see, the insider access the news media enjoys at the Courthouse also seems to bind them to pass on unchecked, speculative innuendo that damages reputations even when refuted. And their guild gives them a sometimes unearned cloak of balance and fairness. They end with the mantle of official gatekeeper for news even when they behave more like Courthouse information curators.

Hence, editors like Mr. George cannot without self-contradiction charge informed, engaged bloggers of "humping conspiracy" for expressing common sense suspicion toward elite power moves while defending journalism's co-dependent relationship with Courthouse sources.

In the end I do not think the news media should ignore innuendo. But raising the specter of ignorance is missing the point. Journalists should admit that they have "humped" a few conspiracy theories themselves and looked more like PR flacks than seasoned pros who refuse to stand to post at the government house threshold.

Will the Mayor be able to hold this upbeat aura when Morgan Stanley comes back for our parking meter revenues?

While Mayor Karl Dean is trying to generate some feel-good press with his latest photo-op bolting down parking meters for private-public homeless relief, news of synchronous parking meter dust-ups in other cities risks reopening old Metro budget wounds from last January. Last winter the Mayor's Office considered privatizing all parking meters to help pay for Music City Center construction. It also made clear that the Mayor deems it a viable future option, which Mr. Dean will not rule out because he would consider any "serious proposal."

Last January the proposal the Mayor's Office deemed "serious" came from Morgan Stanley, one of the brood of bailed-out banks who boorishly brought us to the brink of oblivion. You'll remember that the Mayor's Office was already making deals with the devils of Goldman Sachs, another Wall Street fencing outfit, to find financing for construction of the Music City Center. So, the idea that Morgan Stanley is "serious" only means that they are serious about making Nashvillians the mark in the next confidence game designed to separate us from our tax revenues.

Morgan Stanley was already playing Chicagoans for fools thanks to Democratic Mayor Richard Daley, who traded short-term recession relief in his 2008 municipal budget for long-term blood-letting in which Morgan Stanley walks away with increasing parking revenues tied to the Consumer Price Index for 75 years. Yet, our own Mayor Dean is willing to consider serious offers from self-serving Morgan Stanley, perhaps on Windy City terms. The latest Morgan Stanley chump is the city of Indianapolis, which has handed the bankers the revenue potential of its own public space for the next 50 years under otherwise Windy City terms. However, Morgan Stanley paid Indianapolis only a fraction of what they paid Chicago. And the bankers could walk away with $1.2 billion. They are glorified racketeers, shored by government bureaucrats.

So, when Karl Dean invites the Wall Street bankers next budget time to make serious proposals and play Nashville for meter chumps, how much lower will bailed-out Morgan Stanley set the bar to pay to set us up to take billions of parking revenues from future generations? While Mayor Dean did not finance Music City Center construction with privatized meters this year, next year he may do it just to bolster the General Fund from the hits it takes from the new convention center costs. Hopefully, today's spotty philanthropy of bolting a meter will not lend the Mayor's Office aid in that endeavor.

53 Million

That's the number of dollars that the head of Goldman Sachs was paid at the end of last year as a bonus; and he had only held the position for 6 months [Source: Jim Hightower].

Will Campbell, reflecting on the Nashville lunch counter sit-ins of the 1960s, once wrote that mostly working-class whites and blacks clashed over sitting down to have a hamburger and a coke, but they never thought to question who was eating steak and drinking champagne and pulling strings at their expense. It seems like so many current contests--from English Only to tax "reform"--pit people of modest means against their fellows. It is the ultimate politics of division. Very few bother to question the obscene incomes that occur at the top of the economic food chain that eat into base incomes below. Incomes down below get pitted against even more subterranean incomes. Hispanics get accused of taking "American" jobs. And yet, nobody bothers to question economic powers that pull the real strings in this nation.

Let's call a $53,000,000 bonus for 6 months what it is: obscene. ComPare incomes below the upper middle class level off each other; but let's be clear about the real income obscenities. Then we can talk about who is really losing ground to whom.


UPDATE: Here's a helpful NPR report after the jump out today on the "income gap" and the differences between Republicans and Democrats on the dealing with it.