Content provided by Paul Vaaler of the Carlson School

Greetings to ‘CCO listeners around the state, region, and this week, down in sunny Florida. Dave Lee and company are down in Ft. Myers watching the Twins limber up for the 2018 season. Given that he’s down in Florida watching Grapefruit League play, it’s worth thinking about how much the Twins and other major league teams bring in the way of economic impact to Florida. The answer may surprise you. According to the Florida Sports Foundation (FSF), a non-profit organization boosting sports tourism, 1.5 million fans flocked to Florida in 2017 to watch Grapefruit League games. My son, Ben, and I were two of those 1.5 million. Last year, we saw the Twins, Yankees, Tigers and Phillies play. We had a ball. According to the FSF, those fans and the players entertaining them generated more than $750 million in economic impact: direct effects from buying tickets, hotdogs, and hotel room nights; and other indirect and derivative effects that likely double the actual retail sales. Here’s where you can learn more about the FSA’s claims: I In any case, it’s a big number, even in Florida where the state GDP is about $750 billion. But are the tourists really there for baseball? Ben and I went to the beach in addition to watching the Twins. Guess what? Florida’s beach tourism is the number one attraction for tourists, while sports tourism is a distant sixth. And sports stadiums for those teams are a pretty bad investment for the sixth place leisure draw. Here’s where you can learn more about that: According to Holy Cross College sports economist Victor Matheson stadiums return about 30 cents for each state-invested dollar in a Grapefruit League stadium. A public dollar invested in a Florida state beach yields about $5.40. But state beaches don’t have the FSF and the army of consultants FSF and the Twins and others hire to come up with ridiculously high estimates of economic impact associated with baseball in Florida. Let’s just say it’s a net positive impact, but the number is likely not $750 million but one tenth of that, nearer to $75 million. That’s good, but maybe Florida cities can prosper more by spending more on the beaches than the batting cages. Byron Buxton will do just fine either way.

Let’s work our way from Florida north to the Twin Cities by way of Atlanta and Memphis. Two airlines in those two cities are in the news this week. In the wake of the tragic school shootings in Parkland, Florida, many businesses have been breaking their ties with a National Rifle Association (NRA) that many Americans think too extreme in defending rights to AR-15s and other semi-automatic firearms. Last week, Atlanta-based Delta Airlines joined other major airlines (e.g., United Airlines) deciding to drop discounted airfares for NRA members. Memphis-based Fed Ex did not. Delta’s decision has drawn the ire of state politicians in Georgia where the legislature has been working on a bill to exempt jet fuel from state taxation. The bill valued at $50 million is now in jeopardy, at least according to Lt. Gov. Casey Cagle, who leads the Georgia State Senate, and who is running for governor this November. Cagle sees Delta’s decision as a partisan political decision discriminating against “conservatives” in Georgia. “I will kill any tax legislation that benefits @Delta unless the company changes its position and fully reinstates its relationship with @NRA,” Cagle tweeted. “Corporations cannot attack conservatives and expect us not to fight back.” Delta’s decision and Cagle’s response illustrate the complex challenge of defining what it means to be a socially responsible corporation. Firms have beliefs and take stands on social and political issues, whether it’s Chick Fll A’s decision to close on Sunday’s for religious reasons (, Target’s decision to support a Republican gubernatorial candidate in Minnesota (, or Delta’s decision to cut ties with the NRA ( Delta may pay a price in Georgia this year. Perhaps Fed Ex will pay a price elsewhere in the country for sticking with NRA. So, too, could Georgia. Delta’s base may be in Atlanta, but there are plenty of other hubs where Delta can re-deploy planes and personnel, starting with MSP Airport.

Speaking of guns, firearms manufacturers are in the news this week. Madison, North Carolina-based Remington Outdoor Company is in bankruptcy after almost six years of declining sales and price margins. Remington, founded in 1816, is the maker of the AR-15 (Bushmaster), the gun used in the Parkland school mass shooting of high school students and staff, and in the Sandy Hook elementary school mass shooting in 2012. Remington’s owner, Cerberus Capital, has been trying to divest itself of Remington since 2012. Chapter 11 bankruptcy appears to be their last resort, even if it will zero out the Cerberus investment. Interesting, Remington in bankruptcy still has access to a $200 million dollar credit line funded in part by Minneapolis and San Francisco-based Wells Fargo –not exactly great optics for a bank that already has bad optics. The US firearms industry has been in decline since 2012. After years of growth fueled by fear that a Democratic president would take away access to guns, the firearms industry saw a decline in investor interest after Sandy Hook. The California State Teachers’ Retirement System and the California Public Employees’ Retirement System sold stakes in Sturm Ruger and Smith & Wesson, two other firearms producers. After Parkland, teachers there demanded that their pension fund dump its investments in gun companies. With Trump’s election, demand faltered since gun-owners aren’t buying on any fear of a Trump initiative to limit gun purchases. Here’s where you can learn more about these industry trends: When investors and buyers flee, businesses fail. That’s Remington’s story, and it might not stop with Remington.

Back in snowy Minneapolis, the biggest business buzz is probably in the US federal courthouse, where the Starkey Technologies fraud trial is heading for closing arguments. Here is where you can read about the latest developments: The US District Attorney’s office is prosecuting several former senior executives, including the former President Jerry Ruzicka, at the Eden Prairie-based hearing aid manufacturer for alleged fraud over several years enriching those senior executives by more than $20 million. The latest development came Tuesday when US District (Chief) Judge John Tunheim concluded that Starkey CEO and principal owner, Bill Austin, had perjured himself in testimony touching on when and how certain employment contracts involving Ruzicka were drawn up and signed. Austin claims that he was duped by Ruzicka and others, while the defendants say Austin authorized it all, including the $20 million the executives apparently allocated to themselves. Austin’s credibility matters. Tunheim isn’t yet declaring a mistrial let alone a dismissal of the case as the defense has requested. He has directed the prosecution to divulge all instances where Austin may have contradicted himself in conversations with the FBI and prosecutors. Austin is one of three “star” witnesses for the prosecution. The other two are former CFO Scott Nelson and former COO Jeff Longtain, both of whom have already pleaded guilty to crimes and testified against the others now on trial. Closing arguments are next on the agenda. Then the jury will start deliberations about whether the accused senior executives stole from Starkey and Austin, who owns about 90% of the company, or whether Starkey gave those senior executives broad discretion to complete the transactions that netted them the $20 million. Either way, the Starkey story will become a case study in corporate oversight and governance of a closely-held company gone off the rails.


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