Montgomery County's weird deal with Live Nation
- The Fillmore, now under construction (Photo: Jay Westcott)
After Live Nation failed to find a site for its House of Blues franchise in downtown D.C., says Lee, “they were the likely party to contact. It just made sense.” When I ask Jones why the 9:30 Club wasn’t contacted, she replies, “This is who the owner of the property was willing to engage with.” And Lacefield says, “We were unable to come to terms with the Birchmere, so then what we did was basically work with Live Nation to make the same thing happen.”
Live Nation’s rent is already generous, amounting to only $3.26 million over thirty years (the length of the lease, assuming Live Nation picks up its two five-year extensions). According to the lease, however, any construction cost overruns will be paid up front by Live Nation and subtracted from their rent. The chances of overruns are high. The Strathmore in Bethesda went 100 percent over budget, at $100 million, with the county picking up nearly half the tab. The AFI Silver Theatre and Round House Theatre in Silver Spring, both publicly funded projects, were also millions over budget. It’s not unfathomable that Live Nation won’t pay a penny in rent for 30 years.
Furthermore, this project is arriving at a historically difficult time for Montgomery County. Months ago, facing a nearly $1 billion deficit, the county reduced spending for the first time in more than 40 years, by 3.8 percent. Nearly $100 million was cut from the schools’ budget, including 252 teaching positions. Middle school reform? On hold. The county’s participation in the Maryland Summer Reading Program? Suspended. The arts magnet program at Einstein High School? Gone. But spend $4 million to construct a rock club for a company with $4 billion in annual revenue? That’s economic development, and it’s different. (The planning board didn’t escape the axe: It announced in July that it would close for the first week of August to save $500,000.)
Lee says he’s had “no opposition” everywhere he’s gone. Jones says the council’s 7-2 vote in favor of the deal “speaks very highly of the public interest behind this.” And Lacefield says the Silver Spring community is “ferociously in favor of this thing going forward.” All of which may be true. The co-founders of Silver Spring Forward, which also supported the Birchmere project, are enthusiastic about the Fillmore, and even Swanson, despite all his criticism of the county’s “backroom deals” with Live Nation, says, “Look, this is a pretty cool company. This company is going to bring business to the area.”
But is the deal — as I often heard it called — “a win-win situation”? Live Nation and LDG, obviously, did OK here. But this deal is a three-way affair, the third party being the county and its residents. Rock fans in the Silver Spring area will finally have a local venue that attracts national acts like the 9:30 Club (the just announced "more adult" nightclub that Clyde's is opening downtown adds even more competition, never a bad thing for music fans). Likewise, surrounding businesses will see increased foot traffic, even if some of those feet will be tripping all over themselves at 1 a.m. But the long-term impact on the county, particularly in respect to its budget and economic development, will take years to evaluate.
“I certainly came to regret that we did a business deal with one of the largest music companies in the country,” says Berliner, the councilmember. “I didn’t feel the county got enough value back from the deal. It wasn’t clear that we needed to have a subsidized deal.” (The Fillmore that opened in Charlotte last year didn’t require public funds, and three years ago Live Nation paid for the $3.5 million renovations of the Jackie Gleason Theatre, which the company renamed — you guessed it — the Fillmore Miami Beach.) Berliner later adds, “The Lee family obviously had significant leverage in this deal, and they extracted every ounce of that leverage.”
The only certain loser in this deal is Hurwitz. Unless, of course, he somehow wins his lawsuit. It’s a long shot, but he’s not the only one who feels the county hasn’t met its obligations to the state. Sen. James DeGrange, a member of the state’s Budget and Taxation Committee, blasted the county in an April letter to the committee chair, Sen. Ulysses Currie. “No construction cost estimates were ever provided by the County to the State,” he writes. He calls the county’s cost analysis “so bogus and full of holes, not even the County itself is relying on it for an accurate estimate of their own costs associated with the project,” and says the marketing study “is scanty at and appears to be generated from mostly secondary, internet based research.”
On July 19, DeGrange — who didn’t return my calls, either — filed an affidavit in the case in which he reiterates his argument, and adds, “I recently asked Montgomery County to provide the construction budget documents and other documentation to me and it failed to do so.” In a June 30 letter to DeGrange, Leggett contends that the county "has complied with the authorization requirements for the music venue," adding that, because of the lawsuit, "it would be inappropriate to respond further to your inquiry."
The Bethesda Theatre: a cautionary tale?
On a Tuesday late last month, around three dozen people trickled into the Bethesda Theatre and, after mingling in the lobby for a while, finally took their seats in the hall. The way things had been going for the 72-year-old art deco theatre, this would have constituted a successful turnout, but it was 1 p.m. and these people, though mostly well-dressed, had not come for a concert or play. This was a different sort of show: an auctioning of the theatre itself, which was more than $4.6 million in debt.
The mood in the hall was somber, as if everyone already knew there’d be no outside bidders. BB&T bought back the Bethesda for $2 million — the exact same sum, coincidentally, that Montgomery County taxpayers spent on the theatre’s $12 million renovation three years ago. Now the bank is looking for buyers, and the only thing saving the building from becoming, say, a CVS, is a county law requiring that it remain a performance arts center.
Which means, of course, that the Bethesda could remain darkened for some time. As the auction proved, no one’s rushing to buy such a venue — not in Montgomery County, and not in this economy. But sometimes, apparently, there’s no need to buy one. If you’re lucky, the county and state might spend millions building you one, and then let you profit from it, at a fractional rent, for 30 years. Certain deals, double-dip recession or not, are just too good to pass up.
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