When the longtime owners of a Florida newspaper pledge $13-million for an arts center, they're sued.
By KRIS HUNDLEY
Published June 1, 2004
[Rendering courtesy of Farmer Baker Barrios Architects, Orlando]
The Daytona Beach News-Journal has agreed to pay $13-million to have its name on the arts center for 26 years.
[Times photos: Bob Croslin]
The Davidson family lobbied Volusia County's council members before a vote to boost the county's grant for the arts center. Joe Jaynes, above, the lone dissenter, says he has lost a major financial backer since and faces re-election challengers.
The Daytona Beach News-Journal's board, from left: publisher Georgia Kaney; assistant secretary Julia Truilo; assistant treasurer Robert Truilo; president, CEO and co-editor Herbert "Tippen" Davidson Jr.; vice president and CFO David Kendall; secretary and general counsel Jonathan Kaney Jr.; and treasurer Marc Davidson.
Jay Smith, president of Cox Newspapers, says the paper could perform better.
DAYTONA BEACH - In cities like Atlanta and Austin, where Cox Newspapers owns major dailies, the media giant is a force to be reckoned with.
Here, in this beach town best known for fast cars and bikers, Cox is a minority shareholder in the local Daytona Beach News-Journal. And as such, for 35 years the newspaper powerhouse has been politely but routinely ignored by the Davidson family, which controls the daily.
But no more.
Last month, Cox Enterprises Inc. filed a federal lawsuit in Orlando against the News-Journal and its family-controlled board, saying they misused corporate funds to further personal interests. At issue is the paper's agreement to pay $13-million, cash upfront, for a 26-year naming rights contract with a new arts center. The facility's primary tenant will be a local theater group run by the senior Davidson and his daughter.
Cox said that it was never consulted on the naming agreement and that it believed the newspaper's nest egg of $13-million was going to be used to upgrade the paper's operations. It also charges that the newspaper vastly overpaid for naming rights to the project, which was in danger of failing without the newspaper's cash infusion.
The Davidsons, through their general counsel and board member, Jonathan Kaney, counter that Cox could care less about the newspaper or Daytona's cultural needs. Nor have the Davidsons ever been shy about promoting the arts in their hometown, even strong-arming politicians for support when necessary.
All Cox wants to do, Kaney suggests, is suck money out of Daytona Beach back to its corporate headquarters in Atlanta.
"Cox wants every extra dollar to become an extra dividend," Kaney said. "This is why a dowdy little band of independent newspaper owners recoils at the notion of selling out to a chain. It comes down to a value judgment about what a newspaper ought to be."
Jay Smith, president of Cox's newspaper company - which owns 47.5 percent of the News-Journal, said the paper fails to live up to its potential, editorially and financially.
"We're not saying they should put the $13-million in Cox's pocket," he said. "We're saying they should put it into their newspaper. . . . The disrespect, disregard and disdain of giving away the equivalent of two years' net income without even the courtesy of asking or informing us is very worrisome."
While the two sides await their day in court, construction is under way at the theater complex, at the base of the sweeping International Speedway Boulevard bridge connecting Daytona Beach's downtown to the beach. Groundbreaking took place in March; opening is planned in December 2005. A placard on the construction site shows a gleaming white building with curved glass front: "The future home of the News-Journal Center."
* * *
It was 1928 when Julius Davidson, a retired commodities broker, and his son, a reporter with the Chicago Daily News, bought majority ownership in the daily newspaper in Daytona Beach. The News-Journal then had about 33 employees and a circulation of 4,000. Daytona Beach's population was about a quarter of the 64,000 it is today.
"It was a rinky-dink little newspaper in a rinky-dink little town," said Kaney, whose law firm has advised the Davidsons for more than four decades.
The original partner soon sold his shares to R.H. Gore, who owned a competing paper. In the early 1940s, Gore took the Davidsons to court, saying they were paying themselves excessive salaries. The court ordered the Davidsons to return a portion of their pay.
By the 1960s, minority ownership in the News-Journal had been sold to Perry Publications, owners of the Palm Beach Post. In 1969, when Cox Newspapers acquired the South Florida paper, Kaney said it assigned $5-million of the purchase price to its share in the Daytona Beach daily.
The News-Journal is now run by Julius Davidson's 78-year-old grandson Herbert M. Jr., known as Tippen. The paper's management includes Tippen's son Marc, daughter Julia Truilo and son-in-law Robert Truilo. The publisher is Georgia Kaney, wife of the lawyer who sits on the newspaper's board.
This tight-knit group, which included Tippen's wife, Josephine, until her death in 1995, has built a paper that has a daily circulation of more than 112,000, about $80-million a year in revenues and nearly 900 employees, including 150 in the newsroom. It is one of fewer than two dozen family-owned newspapers of its size nationwide.
(The St. Petersburg Times, once family-owned, now is owned by the independent, nonprofit Poynter Institute, a school for journalists in St. Petersburg.)
In addition to publishing the daily News-Journal, which has four bureaus and four regional editions, the company owns Volusia County's legal review, three phone directories and six area Pennysaver shoppers. Publisher Kaney says firmly, "We own this market."
As the local media dynasty for 75 years, the Davidson family has built a reputation for liberal editorial views, penny-pinching in the newsroom and boundless generosity toward the arts.
The paper's headquarters, a few miles north of the Daytona Beach's racetrack, may have been a showplace when it was built in the mid 1960s. Now it is so overcrowded that the paper's chief financial officer works out of a trailer on the back parking lot. Members of the art department share a space the size of a master bathroom. Reporters' desks are jammed into a newsroom with aging computers and concrete block walls painted institutional blue.
Georgia Kaney brags that Tippen Davidson has always insisted on cutting-edge technology in the presses and photo lab. But they haven't placed a premium on appearances. The publisher and Tippen, the paper's chief executive and president, operate out of offices that look like sets from That '70s Show, with worn striped furniture and dated wood paneling. Tippen's daughter, who has a community relations job with the paper, works out of a space that would work as a broom closet.
The Davidsons' only visible concession to wealth and power has been their love of good food and fine arts. Former reporters remember getting Christmas cards from Tippen and Jo, with pictures of them enjoying lavish feasts in far-away places. Staffers, who received Winn-Dixie certificates from the owners for the holidays, dubbed these not-so-subtle reminders of the paper's hierarchy the "Things you'll never get to do, you peasants" photos.
The Davidsons' paternalistic attitude toward the newsroom extended to its community, which Jon Kaney said has suffered from a poor self-image. Seeking to polish that image, the Davidsons have ruthlessly championed the arts. In the 1940s, Julius Davidson pressured the City Commission to put up $3,000 for a civic music event. In the 1960s, the paper pulled off the astonishing feat of bringing the London Symphony Orchestra to town by initially bankrolling the pricey biennial visits.
In 1977, Tippen Davidson, who had attended Julliard School of Music before becoming a reporter, founded Seaside Music Theater. Housed in a renovated movie theater on Daytona Beach's Beach Street, Seaside puts on about 180 performances a year with an operating budget of more than $2.5-million. Davidson volunteers his time as Seaside's producer; his daughter Julia is managing director.
Since 1997 the Davidsons have been leading a campaign for a new home for Seaside. Plans were drawn for a 98,000-square-foot performing arts center to include an 860-seat auditorium, a 260-seat theater and classrooms. In addition to housing Seaside, the center will be the home of the University of Central Florida's Master of Fine Arts program.
The project got a sweetheart lease from the city on land along the Halifax River despite concerns by environmentalists. But fundraising was stymied when community donations came up short and UCF's state allocation was trimmed.
In August, after six years of pushing, the project was $14-million short of its goal. And Tippen Davidson's buddies on the center's board - including a prominent car dealer and the owner of the Daytona International Speedway - refused to break ground before the center's estimated construction cost of $26-million was in hand.
Kaney, who sat on the fundraising board, said that's when he suggested the News-Journal could make up the difference by buying the center's naming rights. In a letter in late August to Tippen, Kaney said that by putting the newspaper's name on such a strategically located center, it would not only be reasserting its commitment to the arts. It would gain goodwill in a community where it is "a dominant and feared (and loathed) medium."
Using rough estimates, Kaney advised Davidson that the exposure and goodwill from putting the News-Journal's name on the theater would be worth $500,000 a year. By September, the paper had agreed to a 26-year contract, with all money upfront, despite Kaney's admission that such arrangements usually involved annual payments. (The St. Petersburg Times, for example, is paying $2.1-million annually for 12 years for naming rights to the St. Pete Times Forum in downtown Tampa.)
With the News-Journal's commitment of $13-million, the Daytona project had one final hurdle last fall: boosting a grant from Volusia County to $2.4-million from $500,000. Kaney said that before the vote, council members were invited to private chats in Tippen Davidson's office. "They needed a "Come to Jesus meeting,' " he said.
One council member, Joe Jaynes, said he had never before been subjected to such heavy-handed lobbying on any topic. "These are the big power brokers, the make-or-break people in the community," said Jaynes, a self-employed computer consultant who has been on the council since 1999. "I left there thinking, "Wow, talk about pressure!' "
Despite the lobbying, Jaynes said he opposed increasing county funds, especially since he believes there are plenty of existing theaters in the area, including a new auditorium at nearby Bethune-Cookman College. "I really don't even think we need it," he said.
When the funding matter came up for a council vote in mid October, Jaynes was the lone dissenter. Kaney was furious at what he considered a betrayal.
"I told him he broke his word and that meant he was a dead man walking," Kaney said recently. "I was threatening him with political extinction. But I probably shouldn't have said any of that."
Jaynes, who still shakes when he recalls Kaney's violent outburst, said since that vote he has lost a major financial supporter. Several new challengers have entered his race for re-election, with the primary in August.
"It was an emotionally costly decision," he said of his vote against the theater. "But what I did resonated well with some voters. People have told me I'm the only one who stood up for what the vast majority of people out there felt. Everybody knows the arts center is a monument to Tippen and the News-Journal. Let them fund it privately."
Jaynes was not the only one to take exception to the project. A DeLand resident has sued the county to block the center's grant, saying the meetings with individual council members were a violation of the state's Sunshine laws.
Kaney dismisses such allegations. And he's particularly angry that his behavior at the council meeting was criticized in an article in the March issue of the Columbia Journalism Review, a newspaper trade journal.
"We were lobbying the council members, but there was no relaying messages from member to member," said Kaney, who is on the board of Florida's First Amendment Foundation in Tallahassee and serves as the group's general counsel. "No one is more passionate about the Sunshine Law than I am."
Kaney speaks without a hint of self-consciousness about the News-Journal's role as "the source of light and culture in this community." Putting its name on a new arts center - "a breathtaking edifice," in Kaney's words - is just one more way to fulfill that responsibility.
"Cox doesn't give a damn about that," he said.
* * *
Officials at Cox's headquarters in suburban Atlanta may have been among the last to know about the News-Journal's naming agreement. Though the Daytona Beach daily touted the deal in several stories starting in late September, it didn't come to Cox's attention until executives there read the Columbia Journalism Review story in March.
Jay Smith, who oversees Cox's chain of 17 daily newspapers and 25 nondailies, doesn't apologize for missing the stories in the Daytona Beach paper.
"I don't read all the Cox papers on a daily basis," he said. "If I did, I don't think I'd be doing my job."
For Smith, the $13-million giveaway was the final straw in a long contentious relationship. He also chafes at what he sees as the Davidsons' close personal ties to the main beneficiary of the new center, Seaside Music Theater.
Saying he loves coaching kids' baseball but wouldn't consider using Cox money to fund a ballpark, Smith said, "If I want to indulge in my passion, I need to pull out my own checkbook."
Smith, who has been with Cox for 33 years, said he was appalled to read about the Daytona Beach paper's pressure on county officials and Kaney's comments to Jaynes.
"If any Cox publisher, editor or attorney did that, they would not remain in those jobs," he said.
For years, Smith has been attending the News-Journal's annual meetings, making recommendations about how the paper might improve its profitability and having his advice fall on deaf ears. Smith said he once volunteered to send in a Cox manager, an offer that was firmly rejected.
Though Cox is a minority shareholder in the newspaper, it has no representation on the board and no vote on company matters.
The extent of the Cox-Davidson partnership has been that the Daytona Beach paper has purchased newsprint through Cox, a discount arrangement which may be discontinued because of the lawsuit. The News-Journal also has occasionally partnered on stories with Cox's TV station in Orlando and featured its meteorologist on its weather page. The status of both partnerships is uncertain.
But such exchanges hardly satisfy Smith.
"This is a newspaper that has not kept pace with the market," he said of the News-Journal. "It has not built the kind of solid financial foundation strong newspapers need."
He and Kaney refused to discuss specific profit margins, though Kaney agrees the paper's margin is "substantially less" than the margins at Cox newspapers. The News-Journal typically disburses 50 percent of its net income to shareholders, with Cox receiving 47.5 percent and the remainder going to the Davidsons.
Kaney said the Daytona Beach daily is debt-free. Since the paper will take a $500,000 write-off each year for marketing expenses, the effect of the naming agreement will be nil, he said.
The paper has money to invest in operations and plans to start construction in the fall on an administrative building, Kaney said. No pricetag has been put on the project.
* * *
On Thursday, the Daytona Beach paper's directors met for their official annual meeting at the News-Journal's headquarters. Jay Smith attended, as usual, and said he learned nothing new.
"I saw nothing to give me hope to believe the paper is on a new and correct path," he said.
Smith said he could find more profitable ways to spend his time than by being entangled in an embarrassing lawsuit with the Davidsons.
"I've never been party to bringing suit against anybody," he said. "But when we get into something like this, we stay the course."
Cox's lawsuit proposes a variety of remedies: The court could order the center to return the $13-million; the Davidsons could be ordered to give Cox a portion of the $13-million; the Davidsons could be ordered to buy Cox's shares.
Neither Kaney nor Smith will speculate on the value of Cox's minority ownership. Kaney said one thing is certain: Cox is not going to get the family's stock without a fight.
"It's less likely now than ever," he said, adding that Tippen Davidson hopes his two young grandsons, Julia and Robert Truilo's boys, will grow up to become the fifth generation to head the paper.
Nor is it likely that Cox will respond positively to a proposal made by Tippen in March. The center still needed $3-million for an operating fund.
Would Cox be interested in contributing?
- Times researcher Caryn Baird contributed to this story. Kris Hundley can be reached at firstname.lastname@example.org or 727 892-2996.