Florida okays WXEL deal

Seller will clear roadblock,
giving state $1 million

Originally published in Current, March 6, 2006
By Karen Everhart

The proposed sale of South Florida’s WXEL-TV/FM to New York City’s WNET cleared a major hurdle Feb. 21 when the state Board of Education unanimously approved a license transfer agreement that was modified to meet its terms.

The state required Barry University, the private university selling the Palm Beach-area broadcaster, to pay a $1 million administrative fee — one fifth of the total price to be paid for the stations — when the sale closes.

The buyer also added something to please the state: WXEL Public Broadcasting, the Florida nonprofit controlled by WNET, signed a 10-year radio programming contract with Florida Atlantic University, the nearest state university and one of three unsuccessful bidders for the stations in late 2004. Florida Atlantic will program one of the station’s digital FM channels, supplementing WXEL’s news and classical music service while covering monthly operating costs estimated at $8,000 to $15,000, according to an agreement presented to state education officials.

Barry University, which is run by Dominican nuns and primarily serves disadvantaged and minority students, rescued WXEL from financial insolvency in 1997, taking over the licenses, paying its debts and providing oversight. The university hoped to enhance its educational programs and create goodwill in affluent Palm Beach by providing local public broadcasting services. But with roughly 40 miles separating WXEL headquarters from Barry’s Miami Shores campus, the school never established the student internships and other synergies it had envisioned between station and campus. While WXEL stabilized financially, pubcasting’s fiscal ebb and flow required the university to continue subsidizing operations.

WXEL and WNET are 1,200 miles apart — but major donors to the New York licensee are among the “snowbirds” who reside in the WXEL service area every winter. When Barry University solicited bids for WXEL, WNET saw it as an opportunity to maintain a relationship with those donors year-round. Following the successful 2001 merger with WLIW on Long Island, WNET wanted to extend that experience into another market. They also sought a facility for making lower-cost productions, according to an analysis prepared by consultants to Barry.

With the state’s approval in hand, Barry and WNET now must apply for FCC approval of the license transfer, a process that will take at least three months.

State approval has been pending since April 2005, when Barry announced its intention to sell the stations to WNET and a local foundation established by the station’s supporters. Because the state paid for WXEL’s facilities and contributed annual operating grants to the stations — as it does to all Florida pubcasting outlets — it had substantial say over whether the deal could go forward.

The state declared its interest in creating a role for Florida Atlantic last summer, when the state budget unexpectedly directed the Department of Education to give “priority consideration to in-state public postsecondary institutions” in reviewing the sale. No one publicly claimed authorship of the language, but the directive clearly pointed to Florida Atlantic University as the favored bidder among state policy-makers working behind the scenes.

WNET had already reached out to FAU and other bidders for the WXEL licenses, but the official language was an added nudge, said Carmen DiRienzo, WNET’s v.p. of corporate affairs and now president of WXEL Public Broadcasting Corp. “The strong suggestion of the Department of Education that the state university in the community should play a role in the public broadcasting stations in their area encouraged us to move forward with that,” she said. “But frankly, I think that would have happened anyway.”

FAU’s communications program is “extremely interested in civic engagement — that’s part of our mission as a department,” said Susan Reilly, head of FAU’s communications department. “Our focus is on new media, and we train students to move between platforms.” Operating the digital radio station will allow students and faculty to work with an emerging media platform while also reaching cultural groups not served by WXEL, she said.

Negotiations over the state’s demand for $1 million from Barry University were testier. In an exchange of letters late last year, the Education Department cited the state’s $19 million cumulative spending on WXEL, including the $8 million provided since Barry Telecommunications, a subsidiary of the university, became licensee of the pubcasting stations in 1997. Barry University, by contrast, hadn’t invested any cash in the stations, though it acted as a guarantor for a line of credit, wrote Daniel Woodring, the department’s general counsel.

Barry University has contributed some $6.6 million toward WXEL, a sum that included the cash value of the time spent by its managers who supervised the stations, responded the school’s president, Sister Linda Bevilacqua. The state’s annual grants to the stations were “properly spent” on the public broadcasting services provided by WXEL each year, she asserted, and its investments in broadcasting facilities and equipment will not be lost to taxpayers because the buyer will continue to deliver pubcasting services to the region.

In the end, the university agreed to the state’s request for $1 million. “They felt there was some remuneration to be expected from the sale of the stations,” said Sister Bevilacqua in an interview.

The sale contract would let either buyer or seller drop the deal because of the state’s fee requirement, but university officials chose not to exercise it. “It was the board of trustees’ intention that we stay the course and bring this matter to a successful conclusion,” Bevilacqua said.

“There is recognition that the state has an interest in the health and well-being of the stations,” said DiRienzo. “Both the seller and we were satisfied with the outcome of the negotiations and would like to go forward with the transaction.”

When Bevilacqua succeeded Sister Jeanne O’Laughlin as Barry’s president in 2004, the university hired Transformations Consulting Group to examine whether it should continue operating the stations or sell them.

Transformations recommended that Barry chose the latter course because its relationship with WXEL hadn’t enhanced the university’s educational services as school officials had hoped. In addition, erosion of WXEL’s membership base and problems with its fundraising program made financial self-sufficiency unlikely, according to TCG’s August 2004 analysis.

Consultants saw more promise in selling the stations to another public broadcasting entity such as WNET or WPBT in Miami, both of which submitted bids. Nova Southeastern University in Fort Lauderdale also bid.

A group of WXEL donors seeking to protect local pubcasting services, the Community Broadcast Foundation of Palm Beach and the Treasure Coast, also sought to buy the station but later partnered with WNET.

The community foundation will appoint three of 13 directors who will eventually serve on the WXEL Board of Directors, WNET told state officials. Nine of the 13 directors will be Florida residents.