Bruce Murphy
Murphy’s Law

Summerfest Got $48 Million in Gifts

Total donations from 2010 to 2018 helped pay for CEO Don Smiley’s "caviar lifestyle"?

By - Nov 21st, 2019 01:29 pm
Long Lines at Summerfest's Opening. Photo by Alison Peterson.

Long Lines at Summerfest’s Opening. Photo by Alison Peterson.

Annual federal tax forms submitted by Milwaukee World Festival, the parent organization of Summerfest, show the festival has received nearly $48 million in gifts, grants and contributions from 2010 through 2018. 

More than 12 percent of total revenue for the festival came from charitable donations during that period, the tax forms show.   

During that same period Summerfest CEO Don Smiley averaged at least $750,000 in annual compensation. Summerfest also pays for Smiley’s membership in two expensive private clubs, at a cost of more than $14,000 per year, the most recent federal tax form shows. 

Smiley’s total compensation jumped to $772, 575 in 2011, nearly tripling his first full year as Summerfest’s leader in 2005, when he earned $280,000. By 2017 his total compensation had risen to $917,000, but Smiley’s total award that year was $2.3 million, which included $1.3 million in deferred compensation earned in prior years which was paid that year.   

City officials were “shocked” by these figures, as Urban Milwaukee has reported. Smiley’s compensation is seven times more than the annual salary of State Fair director Kathleen O’Leary, which is $137,000, but the fair is part of state government.

Alderman Mark Borkowski, who serves on the Harbor Commission, which is Summerfest’s landlord, called the $48 million in charitable support an “impressive” figure but added that this financial support “makes it even more important that Milwaukee World Festival be absolutely transparent when it comes to executive compensation.” 

As for Smiley’s private club fees, Borkowski said: “Maybe it’s time Smiley traded in his country club membership for Sam’s Club.” 

Milwaukee Ald. Michael Murphy has criticized Smiley’s salary as out of line “compared to other non-profits, which pay substantially less.”

Officials with Summerfest did not respond to Urban Milwaukee’s request for comment.

Milwaukee World Festival Inc. (MWF) is a tax-exempt non-profit, meaning it pays no local, state or federal taxes, meaning taxpayers indirectly subsidize it. The organization also created a second non-profit, the Summerfest Foundation, which also collected charitable donations. That organization was folded back into MWF in 2018 and may account for some of the nearly $48 million in donations it lists as having received since 2010.  

The fact that non-profits like Summerfest are tax-exempt and collect charitable donations has raised concerns about the rising pay for top executives, with both state and federal officials scrutinizing top executives’ pay.

A 2016 study by Charity Navigator analyzed executive salaries at 4,587 non-profits in America and found that only 10 rewarded their top executive with $1 million or more in compensation and just 66 charities paid their CEOs between $500,000 and $1 million. About 98.3 percent of the non-profits, or 4,511, paid their top executive less than $500,000 in compensation, with the median well below $150,000.

But Howard Sosoff, chairman of the board of MWF, has defended Smiley’s compensation, telling Urban Milwaukee “the position held by Mr. Smiley goes far beyond the production of a music festival” and includes “fund raising, construction management, facilities management and the production or hosting of over 35 events.”

Sosoff said the board “retained Mercer, an independent global firm which provides executive compensation consulting, to attest to the fairness of the President/CEO’s compensation when compared to other similar positions throughout the country.” 

But Sosoff declined to provide a copy of the report, calling it “an internal document related to personnel matters.” When asked to simply provide a list of the executive pay at comparable organizations used to determine Smiley’s pay, he declined to do so.

Summerfest has long been secretive about Smiley’s compensation. When the issue first arose in 2013, it turned out the salary was never shared with the full board of Summerfest but was approved by a four-member committee of insiders.

Smiley has refused to discuss his compensation with the press and once told WTMJ radio host Gene Mueller that his salary is none of the public’s business. “Who cares what the Board decides to pay me or anyone else?” he said. In 2013 then-Summerfest board chair Ted Kellner claimed a national compensation study showed Smiley’s salary wasn’t out of line, and declined to provide the study.

City officials are particularly concerned about the issues of Smiley’s pay and transparency by the festival because the city has been stuck paying the cost of police services for the festival. The estimated cost of that was $813,297 in 2019, but under Summerfest’s lease with the city, Milwaukee World Festival will pay only $134,392, leaving a difference of $678,905.

The lease, which runs until 2030, was signed in 2009, back when police services for the festival were much cheaper. In 2011 the cost was just $313,000, but the costs have risen by 160 percent since then, leaving city taxpayers to pay millions of dollars to Summerfest since 2009 for uncompensated police services. 

“That’s hard for taxpayers to swallow,” Borkowski tells Urban Milwaukee. “Many of us are still shell shocked over Don Smiley’s jaw-dropping 2017 $2.3 million compensation package. The board of directors of Milwaukee World Festival are delusional, tone deaf and blind to the optics if they don’t believe City of Milwaukee taxpayers are tired of picking up the tab for Don Smiley’s caviar lifestyle.” 

City officials see Summerfest is a partnership with the city, which founded and has spent countless millions over the years subsidizing the festival, but Sosoff rejected that idea in comments to Urban Milwaukee. “Milwaukee World Festival, Inc., is not a public-private entity,” he said. “It is a private corporation.”

But if Summerfest is a private corporation, then it should be charged as one for the 75 acres of prime lakefront land it leases from the city, longtime Harbor Commission member Ron San Felippo has warned. If Summerfest was charged the same per-acre fee as the Harbor House restaurant, it would be paying $9 to $18 million per year rather than the nominal $1.8 in annual rent it currently pays. 

Back in August, when Mayor Tom Barrett raised the issue of uncompensated police costs, Summerfest officials responded by telling the city to take the money out of its rent payment. But in the wake of Urban Milwaukee stories about Smiley’s salary and Summerfest officials blowing off a scheduled meeting with the Harbor Commission, the festival’s leadership has begun to meet with city officials to discuss the uncompensated police costs, as my colleague Jeramey Jannene has reported.

“It’s a work in progress,” said MPD chief of staff Nick DeSiato about the ongoing negotiations. “I want to publicly acknowledge that we’re trying to work that out.”

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