Determination
99
Minnesota
News Council
In the Matter of the Complaint of
St. Paul Port Authority against City Pages
Attending the hearing were Mike Strand, vice president
of communications and marketing for the St. Paul Port Authority and
Robyn Hansen, attorney with Leonard, Street & Deinard, the Port
Authority's bond counsel, and from City Pages, Steve Perry, editor,
and Monika Bauerlein, managing editor.
The St. Paul Port Authority complained that a June
30, 1993 article:
- Misled the public through disregard for technical
precision on matters of public financing in general and the Port
Authority in particular. The article repeatedly misinformed and
misled readers about the prospect of a bond default and improperly
used legal and financial terminology. The article stated that a
bond default was imminent and that the Port Authority was doing
nothing to solve the problem. And it continually linked the future
of the 876 bond fund to that of the Port Authority at large, and
failed to distinguish between the two.
- Presented an unbalanced, alarmist and snide view
of the agency and an irresponsible report of the City of St. Paul's
financial exposure as a result of Port Authority activities. The
876 fund has no impact on the City of St. Paul, its borrowing capacity,
or bond rating. The City is not obligated to repay the bonds and
no tax money has been lost or spent on repossessed projects or on
efforts to restructure the 876 fund. The Port Authority contends
that the article was the journalistic and moral equivalent of yelling
"Fire!" in a crowded theater just to watch the reaction.
- Contained numerous factual errors, specifically:
- Paragraph 6 statement that negotiations had
not yet paid off.
- Paragraph 23 implication that the Galtier Plaza
retail center was unloaded at a loss.
- Paragraph 35 statement that the Port Authority
wanted large investors to take hefty cuts in interest payments
and to write off some of the principal on their investments.
- Paragraph 39 statement that bondholders should
be prepared for a default with no interest and no refund of
principal.
- Paragraph 48, which quoted Mayor Scheibel that
the Port Authority had turned the corner, providing no justification
for the conclusion reached later.
- Paragraph 54 makes clear for the first time
that the main bond fund is not the Port Authority as a whole,
and that a default of the 876 fund may not bring down the entire
organization.
- The Port Authority complains that its letter to
the editor was cut so drastically as to be unrecognizable.
Response of the news organization: City Pages
asserts, in general, that its article was correct and that disagreements
could have been avoided had an official of the Port Authority granted
the reporter's requests for an interview. (The Port Authority said
it declined requests for an interview because it was in the midst
of negotiating with bondholders of the 876 fund and did not want to
compromise that process.)
City Pages responses to the specific complaints:
"The default scenario has been discussed by investors,
politicians and Port Authority officials since at least the late 1980s.
Last year the main bond fund rating was lowered to CCC (a rating bond
traders characterize as "among the junkiest of junk bonds")
specifically in response to concerns of default. The story does link
the future of the 876 fund to that of the Port Authority, but it is
hardly the first time this connection has been made. The 876 fund
makes up the vast majority of the Authority's portfolio, and practically
every story published about the P.A. for the last five years treats
876's future as the most important issue facing the Authority as a
whole.
"The story never claimed that the city was legally
obligated for repayment of the bonds, but it would be disingenuous
not to acknowledge the political and economic impact the Port's situation
has had, and will continue to have, on the City as whole. Back in
1991, City Council member Bob Long proposed a council takeover of
the Port because, as the Star Tribune put it, 'the Port Authority
might have to levy a tax to raise operating funds in the near future.
Having a non-elected board levy a tax, Long said, amounts to taxation
without representation.'
"The Port Authority is taking umbrage at issues
that are neither new nor implausible. If City Pages is guilty of yelling
"Fire!" in a crowded theater, so are many other reporters,
politicians and observers."
Specific errors:
- Paragraph 6: "It's public knowledge that the
first restructuring proposal was flatly rejected by bondholders.
A second proposal was being negotiated at the time the article appeared;
specifics did not emerge until November 10, 1993. Since Port Authority
officials would not speak to us, all we had to go on in characterizing
the negotiations was information from bondholders and experts, who
assured us that no agreement had been reached."
- Paragraph 23: "The article does not say that
the Port lost money on the retail portion of Galtier Plaza. It specifically
distinguishes between the retail and housing parts of the project,
in paragraph 24."
- Paragraph 35: "It is not a misstatement of
fact to say that the Port wants institutional investors to take
cuts in interest and principal. Whether both were included in the
Port's original plan or not, the plan eventually put forward by
the Port had three options, which included cuts in interest, cuts
in principal, or both."
- Paragraph 39: "According to our sources...
there is no way to establish for sure just what any given bondholder's
'allocable distribution of cash flow' would constitute..... Few
of our sources feel there would be sufficient reserves to pay out
a great deal of principal, and some claim there might not be enough
for interest payments either..... We would have been happy to include
the P.A.'s own predictions for the default scenario; unfortunately,
that was not possible due to the Authority's refusal to grant our
reporter an interview."
- Paragraph 48: "The Port's disagreement with
the sources' and the writer's conclusions would have been properly
addressed through your making comments in the article itself."
- Paragraph 54: "...Investors perceive the fate
of the P.A. and the fate of 876 as linked, officials do, reporters
do, and even P.A. managers probably do. According to the latest
financials we had access to, 876 makes up close to $300 million,
or 68% of the P.A.'s total $441 million in outstanding loans. That's
why it is typically referred to as 'the Port's major bond fund."
Managing editor Monika Bauerlein said that the letter
the Port Authority sent to City Pages was eight single-spaced, typewritten
pages... longer than their entire letters column. She didn't feel
the complaints were substantive enough to deserve the entire column,
but she did try to edit it to preserve the essence of the complaints.
Discussion: The financial matters under discussion
in this article were very technical. The reporter had prior business
experience and contacted numerous sources, but did not receive an
interview from any Port Authority official. Strand said that he offered
to send background material to the reporter's home and offered help
with technical matters but would not go on the record. He said he
never heard back from the reporter once he turned him down for the
interview. Bauerlein said that the reporter understood that there
would be no discussion, on the record or off. There appeared to have
been a miscommunication between the Port Authority and the reporter.
Strand was asked if it was the Port's public obligation
to give information. He replied that as a quasi-governmental organization,
it is required to make information public in a timely and appropriate
manner. In this case, an absolute information blackout was in place
until negotiations were complete.
The Port Authority charges that the story focused
on ancient history and ignored positive recent steps. City Pages was
asked what steps it had taken to ensure balance and to get rebuttal.
Perry said the paper didn't feel that it needed "he said, she
said" rebuttal on this kind of story. It was analysis, not investigative
news reporting. While fairness is still important, so is the analysis.
"This is what we do... it's news with an attitude." He pointed
out that the article did include a paragraph about new directions.
City Pages did, in the next issue, correct an error regarding Bandana
Square after it was cited by the Port Authority.
Strand was asked if he really expected his entire
lengthy letter to be published as is, and he acknowledged that he
did not, but he said he did expect better. City Pages publishes four
letters a week, averaging 300 words, but does not publish a letters
policy. When Bauerlein was asked if it would not have been more appropriate
to return the letter and ask for a shorter version she said that that
would have been a good idea.
Determination: Complaints 1, 2 and 3 - misleading
the public, presenting an unbalanced, alarmist picture, and publishing
specific errors of fact - were combined. The Council voted unanimously
to deny the grievance that the article was unfair in presenting the
role and financial status of the Port Authority. Council member Barry
Cytron found the headline "The Junk Bonds that Ate St. Paul"
to be inaccurate because it referred to St. Paul and not the Port
Authority. It was generally agreed that the silence of the Port Authority
contributed to the likelihood of errors occurring.
Concurring: Cytron, Graham, Handberg, Hoben,
Keirnan, Kostouros, Parker, Pennock, Pumarlo, Reeder, Smith, Sorensen,
Stanley, Thompson, Wicks
Abstaining: LeGrand
Determination on Complaint 4: The Council voted
to uphold the grievance that the letter from the Port Authority in
response to the article was treated unfairly. A significant article
needs space for a rebuttal. Council member Kate Stanley, Star Tribune
editorial writer, said that papers run letters columns very differently
and that City Pages' standards were reasonable and not unfair. Council
member John Kostouros, freelance writer, suggested that the best way
to deal with a very long letter is to send it back to the writer and
request a shortened version. Editor Bauerlein agreed that this was
a good alternative, particularly considering the time and effort it
required to edit the eight-page letter.
Concurring: Cytron, Graham, Handberg, Hoben,
Kostouros, Parker, Pennock, Pumarlo, Reeder, Thompson, Wicks
Dissenting: Keirnan, Smith, Sorensen, Stanley
Abstaining: LeGrand
December 9, 1993
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Determination 100
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