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City slickers snookered.

City Slickers Snookered

The Story Of How A Man From The Country Wore Down And Eventually Outfoxed The City Slickers

If it were on Broadway, you could title the story "Big MAC II, The Sequel."

It has all the elements of high drama--conflict, controversy, strong personalities whose interests differs.

In this drama, a single politician took on the central Arkansas business community. And the politician won.

The leading man: John Miller, a thin but powerful state representative from Melbourne in the hills of Izard County. A little man from a little town with the high-pitched voice of an Ozark mountaineer. Having come to the Legislature in 1959 at age 29, Miller has reached the peak of his legislative powers at age 61.

The supporting actors: Little Rock brothers Dickson and John Flake. Dickson, the elder brother, heads the real estate firm Barnes Quinn Flake and Anderson. John heads the competing firm Flake Tabor Tucker Wells and Kelley.

They are two of Little Rock's most influential real estate figures. They successfully led the opposition when Miller tried in 1987 and 1989 to convince the Legislature to finance construction of a massive state office complex on the Capitol grounds known as Big MAC II.

This time around, Miller cut a compromise with the Flakes last spring and summer that allowed Big MAC II to sail through the legislative process without organized resistance from an exhausted real estate community.

While the Flakes came away from Miller's bargaining table satisfied, colleagues and political experts who have watched the wily Miller operate at the Capitol say that on this one, the country boy outsmarted the city slickers.

This is the story of how it happened.

Miller's Crusade

First, the other key members of the cast:

* Bill Clinton, the waffling governor who allowed this year's version of the Big MAC II bill to sit on his desk for a week before reluctantly signing it. If Clinton had not signed the measure before midnight on Feb. 25, it would have become law without his signature. Shortly before 7 p.m. on Feb. 25, he issued a statement claiming that while the bill authorizes Big MAC II, it does not require that it be constructed.

* The legislators, the vast majority of whom dared not cross Miller at this point in the legislative session. The House passed the bill 73-15. Senate approval came by a vote of 22-11.

* The members of the executive committee of Little Rock's Downtown Partnership, whose stories vary wildly concerning who told what to whom. To paraphrase the famous Howard Baker question of the Watergate era, "What did the Flakes say, and when did they say it?"

* The dissenters, members of the Little Rock real estate community such as Jim Hathaway of the Hathaway Group and J.R. Thomas of the Danny Thomas Co. who mounted a late but futile effort to derail Miller's legislative freight train.

The original Big MAC battles were fought in 1987 and 1989. "Big MAC II, The Sequel" began soon after the 1989 legislative session when those in Little Rock's real estate power structure began discussions among themselves about how best to stop Miller in 1991. They knew he would be back. Miller is nothing if not tenacious, and the drive for approval of Big MAC II had become almost a crusade for him.

Miller, who chairs the Joint Budget Committee, is not accustomed to losing and was determined not to lose this time. In the words of one legislator, "John looks on Big MAC II as his monument, the thing people will most remember him for."

Act I of "The Sequel" involved the dealings between the Flakes and the Downtown Partnership, a Little Rock business group.

Act I Begins

Stephen Chaffin, executive director of the Downtown Partnership, says minutes reflect that the executive committee discussed Big MAC II at its Dec. 8, 1989, meeting.

John Flake says he didn't attend the meeting. Dickson Flake says he doesn't remember such a meeting, but adds, "I'm sure whatever they have in their minutes is correct."

At the time, the executive committee consisted of Downtown Partnership President Tom Prince, Chairman Dick Herget, then Executive Director Jack Turner, Tuck Morse, Sterling Cockrill and George Wells.

Prince remembers discussions with Dickson Flake in 1989.

"Dickson had been our point man on this issue for a number of years," Prince says. "You have to remember that the Downtown Partnership is not just a real estate organization. We represent varied business interests, and on this issue we needed a real estate expert. Dickson agreed to keep the lines of communication open with Miller."

No one denies that the Flake brothers met with Miller several times during the spring of 1990. Also attending those sessions was Eugene Levy, an architect with the Little Rock firm Cromwell Truemper Levy Thompson Woodsmall. Levy, who has advised Miller for years on the project, came at Miller's request.

During the summer of 1990, the Flakes reported back to the Downtown Partnership executive committee -- at least part of it.

"Dickson's opinion was that Miller might have the votes to approve Big MAC II," Prince says. "The executive committee chose to allow Dickson to work out a compromise in which Miller would build the project over 10 years rather than at one time if we, in turn, would withdraw opposition."

"We saw the freight train coming," says George Wells, a partner with John Flake and the current Downtown Partnership president. "If I had it to do over again, I wouldn't do one thing differently. I think the Flake brothers are to be commended. If they had not worked out this compromise, John Miller would have gotten the Legislature to build Big MAC II in one phase rather than five."

Different Stories

Not everybody, however, recalls the dealings between the executive committee and the Flakes in the same way.

"I never attended any meeting at which a compromise was either debated or voted on," Morse says. "I didn't realize those kinds of talks were going on, and I'm not aware we ever authorized the Flakes to make a settlement.

"I was in the dark. And we're not talking about something minor. We spent a lot of time and a lot of money fighting this in 1987 and 1989. For the Downtown Partnership, this marked a major change of direction. All I've been told is that the Flakes were tired of fighting this thing. But the general membership didn't know what was going on, and that's unfortunate."

Herget also says he attended no executive committee meetings during which instructions were given to the Flakes.

"My understanding is that the Flakes took this upon themselves," he says. "They were looking at their third consecutive session of fighting this thing and felt they had done about all they could do. Nobody else seemed willing to step forward. Miller's perseverance had paid off. There weren't any lobbyists willing to take this on for us. They told us that unless the governor actively opposed it, it would pass."

One Little Rock developer calls it "insane to leave an issue of this much importance to two men."

"They were our first line of defense," says Hathaway, who is not a member of the Downtown Partnership. "With the Flake brothers having changed their position and the media saying it was a done deal, there were few people who felt they had the power to halt Mr. Miller. I'm just mad this wasn't debated openly."

Both Flakes insist they represented only themselves and their firms, not the downtown business community or the Little Rock real estate sector as a whole.

"We had lobbied hard on behalf of real estate interests in 1987 and 1989," John Flake says. "That obviously meant something to John Miller. But we did not represent ourselves as speaking for everyone."

In reality, there was no one left with the knowledge or resources to fight Miller.

"People always think someone else is going to fight the battle," Herget says. "By the time they saw that was not the case, it was too late."

Act II

With no organized opposition in sight, Act II of "The Sequel" started on Jan. 23 when Miller made a presentation to the full Downtown Partnership board. Following Miller's departure, the board debated the compromise and decided not to take a vote either supporting or objecting to the bill.

For Miller, the lack of objection was tantamount to a stamp of approval.

"Based upon the advice of John and Dickson Flake, the bill in question was the best compromise that could be negotiated," Wells wrote in a Feb. 21 letter to Hathaway. "If we elected to publicly oppose the proposed bill, Representative Miller might construe it as an act of bad faith."

But legislative watchers say Miller got the best of the Flakes. In a sense, it was cornbread beating caviar, polyester triumphant over silk.

Negotiation is the essence of real estate. It also is the essence of politics, and there are none better at it than John Miller.

If Miller had the votes to build the entire complex the same year, friends say, he never would have agreed to meet with his past opponents. In essence, the man from Melbourne would have told them, "Come on. Give it your best shot. I'll beat you."

Those who know Miller best say that by agreeing to compromise, he was admitting he didn't have enough support to complete the complex in a single stroke. The Flakes, they further contend, didn't realize that and decided not to mount a third fight.

"This thing could have been stopped in the Senate with another organized, all-out effort," says Sen. Jay Bradford of Pine Bluff.

The operative adjectives are "organized" and "all-out." A handful of letters and phone calls once the session began weren't enough. The time for action was before the session began.

With the Flakes out of the picture, why did another member of the Little Rock real estate community not pick up the ball and run with it?

"John Miller was dealing with an opponent that was confused and weak," says one real estate broker. "Confused because not many of us realized what the Flakes were up to. Weak because the real estate market is so bad. When you're worried about feeding your family, you have neither time the time nor the energy to worry about long-range issues."

J.R. Thomas and Jim Hathaway agree.

"People in the real estate business are shell-shocked," Hathaway says. "They're working 70 hours a week to stay afloat."

"We were all busy trying to get leases signed," Thomas says. "Business hasn't been such that anyone can afford to baby-sit the Legislature. We all threw our hands in the air, decided the deal had been cut and went into a damage-control mode."

Critics point out that Wells, the Downtown Partnership president, works with John Flake as does Henry Kelley, the legislative chairman of the Arkansas Realtors Association who lobbied hard against Big MAC II in 1989. Neither man, they say, could be expected to publicly oppose the Flakes on the issue.

In January, Dickson Flake explained the compromise to members of the Greater Little Rock Chamber of Commerce board. The chamber, which had opposed Big MAC II in 1987 and 1989, decided to take no action.

"The bill had not even been introduced at that time," says Chamber President Barnett Grace, failing to note that most everyone in the business community knew it was coming. By the time the Chamber of Commerce board voted on Feb. 21 to reaffirm its past opposition, it was too late. The bill already had cleared the Legislature.

Such a lack of opposition was exactly what Miller was counting on. With opposition neutralized and the two generals -- Dickson and John Flake -- having defected, Miller introduced House Bill 1540 on Feb. 4. The measure would authorize the construction of 591,000 SF of office space in one of the country's softest real estate markets during the next decade.

Act III: The Hurry Up

Act III of "The Sequel" had begun.

Eight days later, the House approved the bill. Sen. Nick Wilson of Pocahontas, a Miller ally, introduced HB 1540 in the Senate, and on Feb. 14, the Senate State Agencies and Governmental Affairs Committee approved the proposal 4-2.

Suddenly, though, there appeared a bump on the road to approval. Hathaway, Thomas and others who had not been party to the Flake compromise began to speak up. The Little Rock newspapers became interested in the story.

With opposition mounting, Wilson suspended the Senate rules on Feb. 18 -- a Monday -- and brought HB 1540 to the floor. It was not scheduled to have been considered until late in the week.

"They heard footsteps," Bradford says. "They were scared people would start studying the numbers and changing their minds."

The bill passed, and the fledgling opposition movement shifted its efforts to the governor's office. Politically, Clinton could not afford to veto Miller's pet project late in the session.

The governor said he was not convinced the state needed Big MAC II. Then, he signed it.

After all these years, John Miller had won.

Or had he?

The Postscript: Technical Problems

There are technical problems with HB 1540.

Under Arkansas' antiquated Constitution, precise language is required before the state can issue bonds to finance such a capital improvement project. That's because the Constitution does not allow bonds to be backed by tax money without a vote of the people.

Miller argues that the bonds issued for Big MAC II will be backed by rental fees from state agencies.

"That's one step removed from the taxpayers, but it's still technically tax money," a Miller opponent says. "There is no way a legal challenge would lose."

A lobbyist who has followed Big MAC II for years says Miller will have to push a technical corrections amendment through the House and Senate before bonds are issued. With the help of the Arkansas Development Finance Authority staff, Miller developed such an amendment and introduced it Feb. 27.

Miller hopes to finance the first phase of construction with money from the state Public Employees Retirement System and the Arkansas Teacher Retirement System. He introduced legislation Feb. 26 authorizing the Teacher Retirement System to spend up to $12 million on the facility in exchange for office space.

Since bonds are not required for the first phase of construction, Miller might wait until 1993 to introduce additional technical corrections in the Legislature in hopes that the late-charging opponents of Big MAC II will be quiet by then.

"There's not a bond attorney in the state who will issue a favorable opinion based on what's in the bill now," says one source close to the debate. "Miller and Wilson should have amended the revenue section of the bill before it ever went to the governor, but they got in a hurry when the press started snooping around. Clinton knows that."

Another potential stumbling block is that the bill gives State Building Services the authority to issue bonds for Big MAC II rather than ADFA. While that's not unconstitutional per se, it would be unprecedented. The amendment introduced Feb. 27 would transfer the authority to issue bonds to ADFA.

"Half the bond attorneys you talk to say SBS has the authority to issue bonds and the other half say they can't," says the lobbyist.

Bob Nash, the ADFA director, admits there are "problems," but he is not specific about what those problems are.

"We're still studying the bill," Nash says. "We're attempting to get a feel for what's in there."

"Bad Misjudgment"

While there are rumors of all types concerning Big Mac II, those who know the Flakes say they can put one whisper to rest--the brothers would not have sold out to Miller for financial gain, they say.

"I think it was just a bad misjudgment on their part," Hathaway says. "They came up against a man determined to fulfill his dream, and he outmaneuvered them."

Ramsey Ball of AMR Real Estate Inc. worked for Dickson Flake as a financial analyst for seven years.

"I don't know of anything Dickson could gain from this compromise," Ball says. "He has as much integrity as any man in this town."

No, associates contend, this had more to do with ego than money. The Flakes saw themselves as deal makers, inside players in the Arkansas political process.

Did they settle for too little, though?

"For those of us in real estate, it was kind of like counting your blessings for having cancer instead of a heart attack," Ball says. "Either way, you're done.

"This was a bad deal four years ago. It was an even worse deal two years ago. Given the state of today's market, it makes no sense at all."

What appears to have happened is that two cycles collided at precisely the right moment -- Miller reached the height of his political power just when Little Rock Realtors were weakest due to a prolonged downturn in the market.

"Ten years ago, John Miller wouldn't have had enough power to push this through," one colleague says. "Ten years from now, he would be too old. In politics, timing counts. And the time was right for Big MAC II." [Graph Omitted]

PHOTO : SALES JOB: Rep. John Miller of Melbourne speaks to a House Committee during his attempts to gain legislative approval of the Big MAC II state office complex on the Capitol grounds. Gov. Bill Clinton signed the bill Feb. 25, but opponents say there are problems with the measure's revenue section.

PHOTO : BIG MAC II: The new state office complex approved last month by the Legislature would add 591,000 SF of office space in one of the country's softest real estate markets at an estimated construction cost of $50 million. The legislation authorizing the project calls for it to be built in five phases, one every two years for 10 years.

Rex Nelson Arkansas Business Staff
COPYRIGHT 1991 Journal Publishing, Inc.
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1991 Gale, Cengage Learning. All rights reserved.

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Title Annotation:Rep. John Miller gets approval on construction of state office complex on the Capitol grounds
Author:Nelson, Rex
Publication:Arkansas Business
Date:Mar 4, 1991
Previous Article:Things get garbled.
Next Article:Revving up the industry.

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