After a big score, deals sour and Utah station pulls back

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A small-town Utah public-radio outfit that expanded into Salt Lake City thanks to its founders’ deal-making acumen — and stirred controversy over their compensation — is now pulling back, planning to sell both the Salt Lake station and its costly AM booster.

Community Wireless of Park City Inc. will shrink back to its hometown, the Sundance-and-ski resort of Park City, Utah (see map above), where it operates the sole NPR News outlet, KPCW.

Neither the Salt Lake station nor its AM booster was as financially beneficial as the sweet deal that partially financed the expansion of Community Wireless. In 2001, the licensee sold a commercial FM license in Coalville, a valley town east of Salt Lake, for nearly $3.6 million — a whopping return on its $18,812 purchase price a decade earlier.

The 2001 sale and subsequent bond-financed AM purchase in Salt Lake were negotiated and engineered by Community Wireless co-founders Blair and Susan Feulner, who in the 1980s began building a community-licensed Utah pubradio empire with entrepreneurial flair and competitiveness uncommon among public broadcasters.

Blair Feulner, g.m. in both Park City and Salt Lake, became something of a legend in Utah broadcasting circles for spotting and seizing opportunities, according to pubcasters and other observers. Working with his wife Susan until she retired in 2005, he made deals, hosted a morning talk show, engineered technical plans and served as the public face of Community Wireless. Several sources credited him for building a solid Park City operation with a community-radio flavor and jumping into the Salt Lake market in the early 1990s to eventually compete with the University of Utah’s KUER.

But Feulner’s tactics and decisions increasingly have come under scrutiny. In 2005, extensive reporting by Glen Warchol in the Salt Lake Tribune revealed generous compensation packages for both Feulners.

Community Wireless paid the Feulners $895,000 for their role in acquiring and negotiating the resale of the Coalville frequency, in addition to six-figure salaries that put their total compensation at $1.1 million in fiscal 2004, according to an audited financial statement that also reported a $675,253 operating deficit for the year.

The licensee booked a $609,366 loss in ’05, when the Feulners’ combined compensation approached $230,000, and a loss of $413,250 the next year, when Blair Feulner was paid more than $150,000, according to financial statements and tax records. The station said audits of its fiscal ’07 statements aren’t complete and declined to release the figures.

The Tribune coverage heightened attention to the licensee as it launched the AM booster for its Salt Lake news service and began debt payments on the $2.5 million in bonds that financed the purchase and technical buildout of the booster.

Community Wireless’s board announced last month its plan to sell the two KCPW stations originating from Salt Lake, noting that it would prefer a buyer that would keep the NPR news and information format.

That buyer may be a spinoff led by KCPW General Manager Ed Sweeney. Community Wireless gave Sweeney until March 15 to assemble a new nonprofit and financial plan to purchase the stations while the licensee considers other options.

One may be Utah Public Radio in Logan, Utah State University’s hybrid news/classical station that reaches much of the state except Salt Lake City. Cathy Ives, g.m., said if Sweeney can’t raise funds to purchase KCPW as an NPR station, “we’re hoping that it would go to another station with an NPR news and information mission.”

But Ives would be interested in acquiring only the FM station because her station’s network of translators already covers the area of the AM signal.

It’s time for a spinoff of Salt Lake’s KCPW, according to Joe Wrona, a board member and attorney who represents Community Wireless in the transaction. “The Salt Lake station has grown in size and complexity to the point where we feel it now needs a management and owner’s group that can devote its attention exclusively to that audience,” he told Current.

Wrona said the board wants to focus on its Park City operation, which is preparing to move out of its longtime headquarters in a municipal building. “Part of the headache of the relocation made the board reflect on whether it had the energy and resources to keep growing KCPW and making that station succeed in the way that it should,” he said.

Wrona is the designated spokesperson for Community Wireless. Neither Blair Feulner nor board President Bill Mullen responded to requests for interviews.

The sales come at an inopportune time, as the credit crunch slows sales of broadcast licenses, according to media brokers. This is especially true for AM stations, which are less valuable than FMs and less attractive to increasingly risk-averse media investors.

Pressure for a competitive edge

Community Wireless’s big success in frequency flipping began in 1992 with just a piece of paper — an expiring construction permit for a commercial FM frequency in Coalville, an agricultural area off of Interstate 80. Coalville sits some 30 miles east of Salt Lake City but is walled off from the city’s big population by a mountain ridge.

Blair and Susan Feulner and Community Wireless were named as license holders in the 1993 Broadcasting & Cable Yearbook. They acquired the license from its previous owner for $18,812 in June 1992. Community Wireless built KCUA in Coalville as a booster of its Park City signal.

That was also the original role of its Salt Lake station in the early 1990s, though it was later tailored for the metropolitan audience, establishing an NPR news-talk format while its rival, KUER, was still splitting its day between news and music.

The move was smart and opportunistic, said pubradio observers, including KUER General Manager John Greene, who’s had a difficult relationship with Feulner for years.

“I never hesitate to tell my staff that KCPW, regardless of the odd moves by their management, has provided a huge amount of public and community service,” Greene said.

Through its combination of NPR news and local programming, and competition for ears with KUER, KCPW helped to expand Salt Lake’s public radio listenership. “Our audience wouldn’t be what it was without them,” Greene said.

KCPW has sometimes taken its competitiveness to extremes — as when Feulner complained to state legislators about KUER’s 2001 switch to an all-news format, arguing that the state university’s station had an unfair competitive advantage. Greene had to justify KUER’s programming decisions and public funding to lawmakers.

“Blair was behind the appeal to the legislature,” said Greene. “He sought, through a combination of public and political pressure, to have the format decision overturned.”

Big players, big sale, big payout

Greene stuck with the all-news format, and the state legislature gave KCPW no relief from news competition. But Community Wireless found relief in Coalville.

Community cut a deal to sell the Coalville frequency for nearly $2.3 million, according to a contract signed in September 2001 and filed with the FCC. The sale was contingent on FCC approval of two changes to the license — a new frequency and a new city of license.

The buyer was Millcreek Broadcasting LLC, a Chicago-based company that wheels and deals in broadcast licenses, according to FCC records and observers of media-market transactions. Later FCC records show the buyer as 3 Point Coalville LLC, co-owned by the same investors involved in Millcreek.

Subsequent contract modifications, including a change in KCPW’s transmitter site, upped the sale price to $3,580,000 by 2004, when the sale finally closed, according to Community financial statements.

What made the frequency worth 190 times what Community originally paid for it?  And why did the buyer move the license to sparsely populated Naples, Utah, much farther away from Salt Lake?

One factor in the Coalville price was that Community secured the value of the construction permit by building and launching the station.

But situations peculiar to Salt Lake’s spectrum market had a big effect. The purchase by Millcreek, an active competitor with multiple stations in the region, put the Coalville frequency in play as “part of a complicated plan to reconfigure the commercial stations in the greater Salt Lake market,” said John Crigler, an attorney based in Washington, D.C., who represents Community Wireless before the FCC.

“By moving the Coalville license to Naples, it permitted another station to move in closer to Salt Lake,” Crigler said. “Community Wireless benefited from that, because they got a premium value from the station.”

AM expansion falters

Before the Coalville frequency sale closed in April 2004, Community Wireless was already moving to launch the AM channel and extend the reach of the Salt Lake station.

In late 2003, Community Wireless purchased a license to broadcast at 50,000 watts on 1010 AM in Tooele. The previous owner was bankrupt and the license held by a trustee. Community Wireless bought it for $1.2 million, financing the purchase and the technical buildout by selling nearly $2.7 million in public revenue bonds.

Wrona described the AM purchase as a way to address the competitive challenge posed by KUER’s stronger signal.

“Blair’s idea was to expand his public radio audience with an AM station that could reach far beyond what the FM signal could reach, and it just seems it hasn’t worked,” said Howard Berkes, NPR rural affairs correspondent based in Salt Lake City. “The quality of the AM signal doesn’t match quality of the FM, and so it’s kind of painful to listen to,” especially for NPR listeners accustomed to high-quality signals of the FM band.

Public Radio Capital, a national nonprofit advisor to stations, helped Community arrange for bond financing but was not involved in business planning for the AM channel, Managing Director Marc Hand told Current.

KCPW-AM simulcast the NPR news and local programming of KCPW-FM until January, when the AM became a full-time BBC World Service station. Bryan Schott, who resigned as KCPW news director last month, explained last fall that the change would differentiate the AM service and let the AM/FM pair sell combined sponsorships reaching two different audiences.

“Right now we’re not generating any sort of revenue” from the AM station, Schott said in an interview last November. “Listeners have no compelling reason to tune into it as a simulcast.” Schott resigned to take a new job and not because of the pending sale, he said last month.

The AM station was a good deal for Community when it bought the frequency out of bankruptcy, according to Crigler, but the service strategy behind the investment was not as wise. “The thinking was that people would listen to an AM station for a news and information service, and, since it had a large coverage area, they could expand and serve a good deal of Utah with daytime coverage,” Crigler said.

It didn’t take long for Community to recognize that its AM strategy wasn’t generating the expected returns. In a letter with the nonprofit’s fiscal ’06 audited financial statement, then-board President Tom Calder revealed that the licensee had listed KCPW-AM with a broker. Community attributed most of its $609,366 deficit that fiscal year to the costs of the AM station.

Community covered the losses, Calder wrote, with proceeds from the Coalville deal. More than $1 million remains from the KCUA sale proceeds, according to Wrona.

No big payday this time

When news broke about seven-figure payouts from the little Park City nonprofit, many observers were appalled. “It’s unbelievable that people would take that kind of money and say they deserve it,” Summit County Commissioner Ken Woolstenhulme told the Tribune in 2005.

Dick Kunkel, g.m. of KPBX in Spokane, Wash., told a reporter that pubradio managers must keep their pay in line with other employees’. “That sensibility grew out of years of fundraising and telling listeners, ‘Remember, you are like the stockholder of the station.’ I know that my pay is not out of line with what they consider reasonable.” He was making $55,000 a year, he said.

It’s not clear whether the 2004-05 controversy over the Feulners’ compensation has affected donations to the stations or led to the deficits consuming the Coalville windfall.

The licensee withholds detailed figures. Berkes and the Tribune’s Warchol observed that Community is unwilling to disclose the stations’ financial performance as transparently as other public radio stations.

Ed Sweeney, the KCPW manager trying to mount a viable bid and continue the existing service, deferred on the question. “Ask Blair about that. I don’t tread on it,” Sweeney said.

The big payouts to the Feulners may have roots in the early ’90s, long before Community realized the value of the Coalville license. When the seller applied to transfer the construction permit, the FCC did not permit the Feulners to remain co-owners, so Community removed their names but added a provision in their employment contracts agreeing to compensate them for their individual stakes if they left the station, according to a footnote to the nonprofits fiscal ’04 statement.

The Feulners’ $895,000 payment from the Coalville sale, equal to 25 percent of Community’s proceeds, compensated them for their role in acquiring the license, said the board president’s 2005 letter explaining the transaction to donors.

Community is not as generous with compensation today. Blair Feulner’s current salary is $75,000, according to Wrona, and he will not receive a share of proceeds from selling KCPW.

“The proceeds will go entirely to Community Wireless for the benefit of KPCW,” the Park City station, he told Current, and will replenish funds drawn down from the endowment that was to be established after the KCUA sale.

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