KTSC Claimed Economic Impact From Events It Didn't Actually Book

In some cases, Gloria Ray got paid bonuses for events that local organizers say KTSC had nothing to do with

There are a lot of pages in the Knoxville Tourism and Sports Corporation documents released late last Wednesday night, so many pages that now, a week later, we still haven't read through everything. There are contracts and board meeting minutes and financials and stacks and stacks of spreadsheets. We know KTSC CEO Gloria Ray gets bonus payments for reaching certain goals, in terms of press coverage and economic impact for events booked by KTSC. But what does that mean, the "economic impact" of the events? And what events?

It turns out, when you look at the documents carefully, not all the events listed were booked by KTSC.

There is no question that KTSC has brought events to town, and there is no question that those events have had an economic impact. However, there are questions over whether all the events that KTSC claims as examples of its success at driving economic impact are ones that it actually had anything to do with. Despite just picking a sampling of events at random from KTSC's list, we found a number of organizers who say they had no assistance at all from KTSC.

Take the Big Ears Festival of avant-garde music, held in February 2009 and March 2010. The event was created by Ashley Capps of AC Entertainment, and according to him, KTSC did nothing to help with the festival, nor did it make any special effort to promote the festival. Yet KTSC documents used to calculate Ray's job performance bonus (see "The Bonus Structure" sidebar below) from 2009 and 2010 list both Big Ears festivals as events that had $866,640 and $324,990 in economic impact, respectively—numbers which Capps laughed at on first hearing them, as if in shock.

"I really don't know what to say," Capps says, sounding nothing less than flabbergasted. "We created Big Ears completely ourselves. … It's pretty upsetting. I really don't understand how someone could take credit for something we did."

Capps was also aghast to learn that Ray had been paid bonuses—at least $250, according to our calculations—for media coverage of Big Ears; at least eight mentions in national and regional print counted towards Ray's bonus. Capps says he hired his own, paid, national publicist to get that kind of attention.

"[KTSC] had absolutely nothing to with The New York Times coming to town. This is kind of a little bit of a shock," Capps says.

Kris Lutz at Community Shares had a similar reaction when told that the Brewers' Jam is listed as a KTSC event for the past three years, each year with an estimated $433,320 in economic impact from 1,200 attendees.

"Oh my god! I had no idea at all!" Lutz says with a stunned laugh. "They don't have anything to do with putting it on." Lutz says not only does the Brewers' Jam have 5,000 attendees, not 1,200, but very few of them stay in hotels. She estimates that about 90 brewers come in from out of town and some do stay two days, but that's about it.

In the 2009 bonus calculation spreadsheet, Furrow Auction Company's Great Smokey Auction is listed as an event at Chilhowee Park four times: March 7, May 30, Aug. 1, and Nov. 17. Each auction was estimated to bring in 150 people and have an economic impact of $54,165 each time. Blake Wilson of Furrow Auction says KTSC had nothing to do with any of the events.

"We've been doing that sale for, like, 10 years," Wilson says. "I don't know anything about KTSC, other than what I've read in the papers lately." He says he has no idea why those auctions would have ended up on KTSC's list of events booked.

Even with events (big or small) that KTSC did help with, there is some question over the accuracy of their numbers. Public radio station WUOT brought in the StoryCorps mobile trailer in October of 2010 and turned to KTSC to help find a location to park it. (It ended up on Market Square.) The KTSC figures say that five delegates stayed a total of 43 days. In fact, only four StoryCorps employees came to Knoxville, and only three stayed the entire six weeks.

The biggest event listed as booked in the most recent bonus spreadsheet is the Church of God International's 2012 Winterfest, which happens at Thompson-Boling Arena March 9-11. A representative of the Church of God confirmed working with KTSC ("They've been a great help," she says) but she added the majority of the 15,000 middle- and high-schoolers would only be staying two nights, not three as KTSC reports, and that they will be staying in hotels spread out from downtown to Gatlinburg—hotels that cost $137 for two nights, according to the registration form, not the $84 per night estimated by the DMAI average (see "The Economic-Impact Formula" sidebar below). KTSC's calculations assume all 15,000 people are staying three nights, and at $230 a head (see sidebar), that's a grand total of $16.25 million in economic impact. But take away the third night—the event ends Sunday morning—and there's only $10.83 million in estimated economic impact. And are middle-schoolers likely to spend $230 a day on housing, food, and shopping, as the KTSC estimates?

Ray's lawyer, Chad Hatmaker, says the lists were prepared by KTSC's Kim Bumpas. "That's who can answer these questions," Hatmaker says.

Bumpas was named KTSC's acting president on Tuesday, while Ray's status remains in limbo. "I can't speak to that, because I'm not Gloria Ray," Bumpas says about the lists of events. "I don't want to get into any adversarial—today is a new day," Bumpas says.

Bumpas did say that she suspected KTSC was involved with Big Ears and the Brewers' Jam, although she couldn't recall any specifics. "I don't want to get into any he-said-she-said," she says. "We're going to be reviewing everything we've done in the past."

Bumpas says any discrepancy with Winterfest numbers is likely due to numbers the event has had in the past. "We've done that for years to be super-conservative," Bumpas says. "We do our research. ... We do not include set-up or tear-down days."

The Bonus Structure

According to the terms of Ray's latest contract, signed July 1, 2007, and extended on Oct. 13, 2008, she is "entitled to receive bonus payments if certain benchmarks are met … calculated in accordance with the Bonus Plan attached hereto in Exhibit A." That subsequent document states that Ray "will receive a performance bonus of $25,000 if the benchmark of $100,000,000 of projected economic impact is reached as a result of the definite business booked during the year for future years." In the 2008 contract extension, this bonus was increased to $75,000, based on $110,000,000 of projected economic impact.

In addition to a performance bonus, Ray can receive an incentive bonus worth up to 50 percent of her base salary. One portion of this is based on hotel/motel taxes, one portion is an operating-surplus bonus, and one portion is a Knoxville Convention Center-revenue bonus. The remaining two portions are the economic-impact bonus and the media-coverage bonus. The former "will be based on the projected economic impact on the community for events booked during the year … calculated … upon the following schedule: … Impact over $100 million will yield a bonus calculation of 1/10 of 1%." The media-coverage bonus values media coverage of "KTSC events" from $250 for a radio story to $750 for a national print story to $2,000 for a dedicated program on national television.

The Economic-Impact Formula

To estimate economic impact, the KTSC uses the DMAI Economic Impact Formula, in which, according to a document from March 22, 2011, the number of event attendees is multiplied by event days, and that total ("delegate days") is multiplied by an average daily expenditure ($230), which is multiplied by 1.57, which KTSC says in an April 7, 2009, letter "references the number of times $1 spent turns in the city. We use a conservative estimate of 1.57…[sic] some cities go as high as 6!"

DMAI stands for Destination Marketing Association International, a trade group described on its website as the "world's largest and most reliable resource for official destination marketing organizations … [and] is dedicated to improving the effectiveness of over 3,300 professionals from 600 destination marketing organizations in over 20 countries." The KTSC is a member.

The breakdown KTSC uses budgets $84 for lodging, $9 for incidentals, $62 for food and beverage, $5 for tours and sightseeing, $2 for museum admissions, $2 for recreation, $1 for sporting events, $25 for retail, $3 for local transportation, $7 for auto rental, $5 for gas and parking, $5 for other, and $20 for association spending per person, for a total of $230.