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