Bruce Murphy
Murphy’s Law

The Arrogance of Summerfest

Why the tax-exempt, city-supported non-profit should be transparent about its director’s salary.

By - Apr 9th, 2013 11:49 am
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Henry Maier must be rolling over in his grave. The Milwaukee mayor created Summerfest in 1968 with the idea it would be a people’s festival, a non-profit that served the entire community. And city taxpayers contributed many millions to build it into “the world’s largest music festival.” But the festival has in recent years been taken over by business leaders who seem to think they are running a private company.

Milwaukee Journal Sentinel columnist Dan Bice recently reported that the compensation of Summerfest executive director Don Smiley has ballooned from $280,000 in 2005 to $772, 575 in 2011. That is completely out of line with salaries paid in the past to Summerfest directors.

But perhaps more striking than this huge pay hike was the response of Summerfest officials, who basically suggested it was none of the public’s business. Smiley refused to talk to Bice. Summerfest board chair Ted Kellner claimed a national compensation study showed Smiley’s salary wasn’t out of line, but declined to provide the study. Kellner also refused to disclose how much Smiley made in 2012.

The salary was never shared with the full board of Summerfest but was approved by a four-member committee of insiders. And when an outraged Mayor Tom Barrett suggested more transparency about such raises is needed and the full board should have to approve any raises, Kellner “sounded very unenthusiastic” about the idea, as Bice put it.

Kellner suggested that “in the business world, Don’s salary is very fair.” Indeed, for private businesses, stratospheric pay and massive raises have become commonplace and controversial. But Summerfest is a not a private business. It is a tax-exempt non-profit, which means we taxpayers help subsidize it. It is also the beneficiary of huge amounts of charitable gifts from the community: Summerfest’s annual federal tax forms show that from 2007-2011, the festival got more than $19 million in gifts, grants, contributions.

Is it possible some of these donors might give less if they knew what a lucrative pay package Don Smiley gets? Is that why Kellner and the board wanted to keep this a secret?

While he refused to talk to the Milwaukee Journal Sentinel, Smiley did share his thoughts with WTMJ radio host Gene Mueller. In an email to Mueller, Smiley arrogantly dismissed the entire issue as something that is none of the public’s business.  “We receive -0- tax dollars and I’m not an elected politician,” Smiley wrote. “So……who cares what the Board decides to pay me or anyone else?”

Actually, Smiley is required by the federal government to disclose this salary. All non-profits are required to file an annual 990 tax form, which provides detailed financial information on the organization, including the top salaries paid. The reason is obvious: the taxpayers who subsidize and donors who help support tax-exempt non-profits have a right to know how these groups spend their money.

As for idea that Summerfest receives zero tax dollars, one of the things Smiley did to earn his big raise was negotiate a deal that that gave Summerfest $25 million in revenue bonds from the Redevelopment Authority of the City of Milwaukee. Using the city’s authority means the bonds are exempt from state and federal taxes — another subsidy from the taxpayers.

Summerfest also uses 78 acres of city land, land adjacent to downtown and Third Ward, which is doubtless worth a lot of money. Summerfest pays a gradually escalating annual fee to the city that was $1.3 million in 2013. That’s laughably low. My guess is Summerfest earns that much leasing the land to all the ethnic festivals, who pay Summerfest, not the city, for its use. In which case, Summerfest gets the land for nothing.

The full amount of money the city has spent on Summerfest over the years has never been calculated. In the early 1980s I co-wrote a story for Milwaukee Magazine which reported on a city-created TIF plan which allocated $42 million for improvements to the Summerfest area. At the time, 22 of 25 members of Summerfest’s Technical Advisory Board were city-paid technicians, and the heads of both the City Department of Development and Department of Public Works spent many hours on city time overseeing festival improvements.

Today, Summerfest estimates the value of its facilities at $88 million. The vast majority of that was paid for by either the city or by charitable donations from businesses, foundations and individuals in the community. The rest came from increases in ticket prices which were paid by the people who support Summerfest. None of it, I’m guessing, was financed by Don Smiley.

When Smiley was hired back in 2004, he seemed thrilled to get the job with its salary of $225,000. If that salary had risen at the rate of inflation, it would have been $265,000 in 2011. The fact that it instead rose to more than $772,000 seems rather newsworthy to me.

Smiley’s email to Mueller implies that we should feel fortunate he’s still here because he’s such a highly valued commodity. “My life is not about money,” he declared. “If it was, I would have been gone 10 job offers ago where I could have made a lot more money.”

Smiley suggests these raises weren’t his idea but were simply offered by the board. If that’s true, I think we’re entitled to ask why the board isn’t negotiating more aggressively on the behalf of taxpayers and charitable donors who support Summerfest. The festival was a great success under Bo Black, who never made more than $206,000 and never saw the kind of raises Smiley got. Nor has Wisconsin State Fair Park ever had to hand out such raises: its executive director Rick Frenette earns just $119,000.

Smiley’s outraged email suggests Bice and the Milwaukee Journal Sentinel have created a “contrived drama.” On the contrary, they simply did their job, writing a newsworthy story and in the process serving the community. I hope Bice reports the new salary every year, and if he doesn’t, Urban Milwaukee will.

Smiley also trots out the old “Milwaukee is bush league” trope suggesting that this kind of controversy “wears people out on the topic of ‘Milwaukee’ and the branding of same. We, as a city, are forever trying to recruit talent to move to Milwaukee. This kind of parochial ‘news’ surely is anti productive.”

The idea that only Milwaukee would report on the salary of an official at a tax-exempt, donor-supported organization is preposterous. Indeed, the issue of the compensation of executive directors at non-profits was the subject of U.S. Senate investigation led by veteran Republican Senator Charles Grassley and provoked calls for tighter regulation of non-profits.

Perhaps the most egregious of Smiley’s fulminations to Mueller was this one:  “It’s not like we charge $40-50 admission to fund my salary. Our most expensive ticket is $16 !!!!”

When you earn $772,000 a year, a $16 ticket can seem a small thing. But for a low-income family, or even middle income family of four, the total cost of one day at Summerfest, with food and drink purchases, can quickly add up. Shouldn’t Smiley do all he can to keep ticket prices low?

Yes, Summerfest costs less than many other festivals. That was Maier’s vision from the beginning. That’s why the city spent untold millions to create and improve its infrastructure. That’s why countless donors contribute to Summerfest, to keep it a festival for the people.

If Smiley doesn’t understand that after nine years on the job, then he is truly out of touch with the community he serves. Both Smiley and Summerfest’s top board members might want to rethink their attitude about this. They are not running a private business, but a community trust. And without transparency, trust isn’t possible.

Short Take 

Many readers may remember that the salary of Black was regularly reported by the media. How is that it has become less newsworthy under her successor, and hasn’t been reported for seven or eight years? Part of that might be the decline in the media and the number of reporters in town. But I can’t help thinking that it’s also because Black is a woman and a double standard has been at work.

Categories: Murphy's Law

20 thoughts on “Murphy’s Law: The Arrogance of Summerfest”

  1. stacy moss says:

    O M G !

  2. Johnny says:

    Does the city still provide free police services to summerfest?

  3. jeff says:

    I don’t think this author knows what he’s talking about… that reported high salary was because of the bonuses that were in his contract. He had performance goals and he met them… big flipping deal. If anything, we should be happy for the guy. By the way, Summerfest is a private entity— it should be none of our business how much he makes.

  4. The Danimal says:

    Sometimes I just love you, Bruce. Great piece!

  5. Kevin Ronnie says:

    Once again you do justice to an issue related to a not for profit charity – good piece, good analysis, great last paragraph summary of why the attitude of the Summerfest insiders is dead wrong.

    P.S. Your thoughts re. why no one has reported on Smiley’s salary after yearly reporting on Black is to the point. . .

  6. Casey says:

    “All non-profits are required to file an annual 990 tax form, which provides detailed financial information on the organization, including the top salaries paid. The reason is obvious: the taxpayers who subsidize and donors who help support tax-exempt non-profits have a right to know how these groups spend their money.”

    Bruce- my question is where is this info available?

  7. Bruce Murphy says:

    To Johnny, yes the city provides free police services and the cost, when it was computed in past years, is considerable. To Casey: you can find 990s for most non-profits at guidestar.com

  8. Bob says:

    Bruce, thank you for the background and insight. When I had read the original article about Don Smiley’s salary I was astonished. Now I am more outraged than anything. That Smiley and Summerfest officials have no problem running rough sod over the same people that keep the show running is unexceptable. I feel it is time to reevaluate what they do and how they do it…abviously they need more oversight and an awakening to who they are serving, which at the moment appears to be only be themeselves.

  9. Richard says:

    A more important discussion that should begin to take place is Summerfest’s location. When the venue was started, that area was an old Nike site (a former military facility) and was in a run-down warehouse area filled with railroad tracks and abandoned buildings. Now that the city/state has announced development plans for the area, the subject of using a piece of property that is arguably one of the most valuable in the state for something other than an entertainment venue for 6 weeks out of the year should be broached.

  10. Ivan says:

    If it really is a private company and its none of our business, then he can pay for the police next year. He can pay market rate leases for the lakefront land and find funding for his improvements in the private world. Oh wait he’ll probably just screw over the ethnic festivals raise their rents and then give himself another performance bonus.

  11. David says:

    Arrogant, envious reporters typically take pot shots at business men who earn big money. The guy did the work and met the bonus targets. Smiley used to work in the journalism field and now makes a great income. I can see how that would iritate an envious reporter who can’t keep a job for more than a few years at a time. Get over it dude.

  12. Reader says:

    Do Jeff and David have some skin in this game? Their comments are rather mean spirited, insulting and off topic.
    Also for the 2nd year running Summerfest failed to book Weird Al. That is a tragedy.

  13. Mike Bark says:

    This is a tremendous article by Bruce.

    I’m generally not one to question what a CEO makes, but Summerfest is a 501(c)(3) meaning they receive valuable tax subsidies and as such the public has the right to know how the money is being spent. I’ve always said there’s a lot of profit in non-profit and this is a classic example.

    If $775,000 is the going rate for someone in Smiley’s position, then the board should go all out to show specifically why it is. Furthermore, they need to explain how his pay has tripled in a relatively short period of time. After all, they lured Smiley with $225,000 not that long ago. It has hardly been an economic boom time where salaries have been rising like this. They should go on the offense and explain their position.

    The other thing they need to keep saying is that it’s only $16 to get in while Lollapalooza is $200. Two key differences. Lollapalooza gives you 3 days for that price AND you do not have to pay separately to see the headliners like you do at Summerfest.

  14. Bob says:

    Someone should dig into how much Summerfest “pays” the hundreds of local bands that perform each year…

  15. Howard K. says:

    Bruce,
    Overall, this is great and well researched article. My question to you is this: What is it in the culture around here that allows the taxpayers to continually get taken advantage of, ie Milwaukee County Pension Back-Drop, and now the financial imbalances related to Summerfest?

  16. Char says:

    Time to shut it down. Summerfest causes more problems than it is worth, between the congestion, alcohol and litter, not to mention the noise pollution. The city should refuse to lease the land. Put a Real park there that is open to the public.

  17. Dave says:

    While I admit to admiring Bruce’s research and writing style I also regularly disagree with his conclusions. That is not the case in this story. The issue of Smiley’s outrageous salary increase is a legitimate public concern. As Bruce points out Summerfest is a non-profit that exists solely because of heavy public subsidies. Summerfest would not have been founded or exist today without those subsidies.

  18. blurondo says:

    Being old enough, I remember Mayor Maier’s announcement of the event. And I especially remember his directive that the festival be something easily available and appealing to everyone. The direction and focus of Summerfest turned away from those goals set by the mayor many years ago.
    One of the more harmful influences on its development has been the retention of a few long-term senior staff employees who have created their own kingdoms within a now secretly operated public/private organization. Some new blood would have been a boost to the style, design and over all impression that the event has lacked. In additon, new employees would help ease what must now be a huge pay/benefits package for these long term staff members. Perhaps Smiley’s pay was necessary in order for him to exceed the pay of those folks.

  19. Andy says:

    Don Smiley’s salary does indeed seem awefully high, especially compared to executives at similar sized organizations. However I feel like I don’t have all the information. Perhaps it is defensible? I’m not defending him per se, I’m just saying we need more. Unfortunately it seems the summerfest board isn’t going to give it to us… so in this case I guess I have to suck it up and actually agree with Bruce Murphy! This makes twice… first the county board situations… now this. What is the world coming to???

  20. jeff martinka says:

    good research and great story, B

    if Smiley’s name was Donna, we’d have heard his salary #s long ago

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