|Elvis Express Radio News
|EPE THREATEN TO SUE THE CITY OF MEMPHIS
November 16, 2017 - Commercial Appeal / WREG Memphis / Elvis Express Radio
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|The Memphis news of the day is the odd decision by Elvis Presley Enterprises (shorthand: “Graceland”) to go to court to contest Memphis and Shelby County’s FedExForum Use
and Operating Agreement with Hoops LLC (shorthand: “Grizzlies”) as it pertains to proposed new venue at Graceland.
The 9:01 comes in late with some thoughts and, hopefully, some clarifications on this subject:
It’s not the “non-compete,” it’s the “non-participation”
Colloquially, the city/county agreement with the Grizzlies/FedExForum is always called “the non-compete,” but the section of the FedExForum lease that pertains to other venues is
divided into two sections, “non-competition” and “non-participation,” and it’s the latter, not the former, that applies here. At least initially.
“Non-competition,” for now at least, only applies (or applied) to the Pyramid and Mid-South Coliseum. “Non-participation” pertains to city or county involvement in new facilities and is
the clause that is at issue.
Think of it this way: “Non-compete” applies to venues, which might compete with FedExForum. “Non-participation” to government, which might participate in the funding of these
venues. (If a facility that met the criteria of the non-participation was approved for public funding, then the non-competition cause would likely apply to it,though from the phrasing of
Graceland’s statement it seems like maybe they’re contesting that too.)
Public funding is the issue
The City of Memphis and Geoff Calkins both beat me to this clarification – the perils of having a column called “The 9:01” when news breaks at 1:30 or whenever it was – but the city’
s lease agreement with the Grizzlies doesn’t stop Elvis Presley Enterprises or any other private entity from doing anything.
As I implied above, “non-participation” applies to city and county government, not to private venues or their operators. It requires consent for city or county funds to be used on
certain facilities. The Grizzlies aren’t blocking Graceland’s plans, except as it pertains to the pursuit of public funding. Even then, it seems like the issue here isn’t withholding
consent as much as a disagreement over the terms under which consent might be granted.
Elvis Presley Enterprises is free to build whatever kind of theater or arena it wants with its own money on its own property. The lease agreement with FedExForum only comes into
play in regard to public funding.
5,000 is not a magic number
This number gets thrown around whenever the non-competition/non-participation agreement is mentioned – and usually incorrectly – so let’s review: That number does not apply, at
all, to the non-competition portion of the agreement.
The number "5,000" is not even mentioned in the non-competition clause. The range of 5,000-50,000 is mentioned in the non-participation as the type of event venue where public
funding would require consent but even then it’s not an ironclad threshold. An event venue seating 4,000 might well be deemed subject to the non-participation clause.
Fairgrounds vs. Graceland
In their lawsuit, EPE apparently cites unfairness in the city potentially funding a youth sports complex at the Fairgrounds, without Grizzlies objection, but requiring consent for public
funding of the Graceland venue. I asked city planners recently whether the proposed youth sports facility would, as a technical matter, be subject to the non-participation agreement
That bridge apparently has not actually been crossed, but they did not believe it would apply. It’s a youth-sports building with no fixed seating and a max spectator capacity of
probably less than 2,500. And, as a practical matter, it seems no-one thinks the Grizzlies would deny consent even if it were required. It’s probably a moot point anyway. Remember:
The non-participation does not preclude public financing of venues subject to the agreement, it only requires written consent from Grizzlies.
For the Grizzlies to give consent (which, again, may not be required anyway) to public funding on one project but not another may be annoying to some, especially if you’re the one
trying to get public funding for the second project. But that’s the way the agreement is meant to operate.
The non-participation agreement doesn’t determine what new venues can or can’t get public funding. It determines what new venues do or don’t require Grizzlies/FedExForum
consent for public funding. This judgment was granted, as should be well understood by now, in exchange for the Grizzlies absorbing operating losses – and they are losses, in the
millions – from FedExForum.
On events/venues, our eyes are bigger than our appetites
We seem to spend a lot more time talking about where me might host events than we do actually going to events, and if you say that’s because we don’t have enough events to go
to I’d say it’s more about the chicken than that particular egg. The Memphis metro area has lots of venues, as imperfect as some of them may be. FedExForum, Landers Center,
Snowden Grove, Mud Island, Orpheum, Cannon Center. Most of them are empty most of the time. For the most part, more venues won’t create more events, only further disperse
them. More ticket-buyer demand will. The city’s issue, from small clubs to major arenas, is more about demographics than venues.
Would a larger venue at Graceland be a practical problem for FedExForum?
I suspect in real-world terms a Graceland venue would be competing more with Landers Center or especially Tunica. But FedExForum is concerned with further dispersing the
limited major events the city draws given that they’re losing money on arena operations as is. Are they right to have this concern, re: Graceland? I'm not sure, but you also sense a
lack of trust that Graceland wouldn't seek direct competition with FedExForum.
Grizzlies ownership uncertainty is a backdrop
EPE’s statement contains this nugget that I’m sure many weren’t happy to see tossed out there:
The City of Memphis insisted that it have the ability to sue Elvis Presley
Enterprises for any damages caused to the City if the Memphis Grizzlies
were to leave Memphis and blame their departure on the use of the multi
-purpose facility on the Graceland campus.
The City of Memphis insisted that it have the ability to sue Elvis Presley Enterprises for any damages caused to the City if the Memphis Grizzlies were to leave Memphis and blame
their departure on the use of the multi-purpose facility on the Graceland campus.
Local institutions, out-of-town owners
On the surface, this spat pits two Memphis institutions, one legacy (Graceland), one a modern creation (Grizzlies), and both central to the city’s identity, and that’s not fun. But it’s
also a reminder that these two institutions are two private companies primarily controlled by individual out-of-town owners in Pera and EPE’s Joel Weinshanker, each of whom’s
public diplomacy has perhaps been a little lacking. (Graceland itself is still owned by Lisa Marie Presley.)
What does a lawsuit achieve?
This is the part I really don’t get. Even if a legal challenge determined that the non-participation clause in the FedExForum lease agreement did not apply to what Graceland is
pursuing, that still doesn’t mean the city or county would grant it public funding.
They certainly would not be required to do so. And you would think suing would put local government in an even less generous frame of mind. The tone of the city’s response
seems to indicate that. It might not seem this way – it seems like people want tax incentives to put up a lemonade stand these days – but public funding or subsidies for private
development is not a right. Graceland, like the Grizzlies, has already gotten loads of public funding. Not giving even more for this is no outrage.
The fine print
If, for some reason, you want to wade into the legalese of the “non-participation” clause in the FedExForum lease for yourself, here it is: LINK
Otis Sanford: If city dollars involved, Graceland should follow the rules
WREG - MEMPHIS
A significant legal battle is unfolding that pits one of Memphis' top tourist attractions against the city's only major league sports franchise, and the local government is caught
squarely in the middle.
The issue involves the long standing non-compete agreement that the Memphis Grizzlies have with the city in exchange for managing FedEx Forum. The agreement prevents any
other large venue in Memphis that receives public dollars from staging events in competition with the FedEx Forum.
That is not sitting well with Elvis Presley Enterprises - the entity that runs Graceland and its surrounding properties. EPE wants to build a 6,200- seat concert hall with public dollars
in the form of tax incentives, but both the city and the Grizzlies issued a gentle reminder that the non-compete clause prevents such a thing.
Now EPE is taking the matter to court and the outcome could have major public consequences.
The non-compete agreement was a smart move by the city when FedEx Forum opened in 2004. It means the Grizzlies - not taxpayers - are responsible for financial losses, so it's
only fair that the venue has exclusive rights to large entertainment events.
The people at Graceland have every right to build any size arena they want. However, if they use taxpayer dollars to do it, they need to follow the rules.
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