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After making money for others, Sam Katz heads out on his own

Second of three parts

By Tom Infield
and Larry Fish
Golf courses. Ice skating rinks. Family entertainment centers. A racetrack for sports-car enthusiasts.

These are among the ventures into which Republican mayoral candidate Sam Katz has sunk his time and money over the last five years with the aim - as yet unrealized - of becoming independently wealthy.

After 18 years at Public Financial Management Inc., a leading financial consulting firm of which he was co-chief executive, Katz decided in late 1994 to risk his career by starting over.

He was tired of long hours and constant travel. As a financial adviser, he had often worked for wealthy sports-team owners, whom he helped make wealthier. The experience whetted his appetite to strike out on his own as an entrepreneur.

Katz is best known to the public as a bookish-seeming finance expert who ran unsuccessfully for mayor and governor. His entrepreneurial side is less familiar. It is marked by intense drive, ambition, hustle and risk-taking - and by a readiness to use his political connections to advance his business aims.

Here are a few of the projects he is involved in:

Katz and former Philadelphia mayoral candidate Joseph M. Egan Jr. are trying to build a golf course on an uninhabited, publicly owned island in the Delaware River off Burlington City. Last month, they signed options that gave them two years to come up with a plan for financing and development.

With other partners, Katz is seeking to build a country club for performance-car enthusiasts in a wooded corner of Berks County - complete with a pool; a clubhouse; and a winding, 3.2-mile track. Katz has struggled to arrange financing.

On his own, Katz is attempting to develop ice-skating rinks in several locations, including Mount Laurel and the Far Northeast. In Mount Laurel, he hopes to build within months. In the Northeast, he hopes to acquire a 20-acre site on the grounds of the former Byberry state mental hospital.

So far, Katz has seen no return on these investments. Success or failure in some cases could depend on decisions by government officials.

Katz said these varied projects would pose no conflict with his mayoral duties if he was elected. He said he would bring in someone to run his business interests in return for an ownership share, while he would hold "a minority, passive interest."

Three of his proposed ventures - the sports motor park, the Byberry rink, and the island golf course - have been helped by state officials in Harrisburg and Trenton.

In Harrisburg, Republican leaders tucked $20 million into the state capital budget in June for the sports motor park that Katz is trying to develop in New Morgan Borough. The money, either a grant or loan, would cover half the cost of building the Formula Motorsports Park.

House Majority Leader John Perzel, a Philadelphia Republican who is backing Katz in the mayor's race, said he put the $20 million in the budget at Katz's request. "I'm sure Sam called about it," Perzel said.

It is far from certain whether the park will ever get the money. Most items in the capital budget, a kind of wish list, do not get funded. Nevertheless, two legislators from the New Morgan area have cried foul, saying they were told nothing about the proposed state funding.

Also in Harrisburg, state officials moved recently to advance Katz's plan for an ice rink on the grounds of the former Philadelphia State Hospital in the Byberry section of the Northeast.

The state plans to give the 153-acre site to the city for development. In a proposed agreement with the city, the state Department of General Services requires that 20 acres be set aside for American Skating, a Katz company.

Gov. Ridge said in an interview that two Republican legislators from the Northeast, Sen. Frank A. Salvatore and Rep. George T. Kenney Jr., had lobbied on Katz's behalf. Neither legislator returned phone calls seeking comment.

In Trenton, the legislature voted a year ago to relax a lease restriction that had hampered development of Burlington Island, just off the City of Burlington.

In lobbying for the vote, Katz and Egan had the solid support of local and state officials who saw their proposed golf course as a boon to the beleaguered Route 130 corridor. Katz said he and Egan together had about $140,000 invested in the project.

These are not the limit of Katz's ventures.

A golfer with an 18 handicap, he joined various partners beginning in 1995 to invest in four golf courses in the Pennsylvania suburbs and New Jersey.

A father of four, he invested in family entertainment centers - places that are popular for birthday parties and that include attractions such as miniature golf, go-carts and bumper boats.

After giving up the security of his job at Public Financial Management, Katz dreamed big. He said he envisioned not one ice rink, but 20; not one motor park, but a whole circuit; not a handful of golf courses, but "maybe 25."

Trying to build ventures from scratch appealed to his ego. He said: "I thought they were more complicated and more interesting - and maybe in some instances more lucrative."

He had hoped to have gotten his ventures well off the ground by the time the 1999 mayor's race rolled around.

It has not worked out that way.

A partnership with six other men

seeking to make it as entrepreneurs

At PFM, Katz had worked from the 16th floor of a gleaming office tower in Center City.

His new place of business was a third-floor suite in Bala Cynwyd. The offices sat on the suburban side of City Avenue, just beyond reach of the city's high business taxes.

Katz had decided to go into partnership with six other men - all in mid-life, all from the world of banking, development and finance - who also sought to make it big as entrepreneurs. They called themselves Stafford Capital Partners.

The plan was for the partners to pool their talents to develop clusters of businesses. They would capitalize them, nurture them - then sell them off or issue stock.

Not every venture had to be a success. If only one or two hit it big, the partners could make out handsomely.

"You know the theory," said Carl Hirsh, a former Spectacor executive who worked with Katz on development of the First Union Center in Philadelphia. "Throw a lot up, and you never know what sticks."

Samuel Greenblatt, formerly CEO of Meridian Mortgage Co., led the Stafford partners in hooking up with Matrix Development Group, of Cranbury, N.J., to buy the Commonwealth National golf course in Horsham; and to take over management of two other courses: Ashbourne, in Cheltenham, and Forsgate, in Jamestown.

Stafford's role was to raise the money; Matrix managed the courses.

The Stafford group joined with other partners to buy the Valley Brook golf course in Blackwood, and to acquire three family entertainment centers: Pine Canyon, in Voorhees; Pine Canyon at the Falls, in Mount Laurel; and Sports 'N' Games, in East Hanover.

This was to be the beginning of a cluster of golfing-related businesses. But instead of buying more, the partners eventually sold nearly all of what they had.

"Some were profitable; some were not as profitable," Greenblatt said. "We did not make a whole lot of money on our golf ventures."

Developing businesses was risky and time-consuming. In the meantime, the partnership needed cash flow.

Katz helped meet that need by returning to what he knew best: financial consulting.

In 1995, he was hired by German shipbuilder Meyer Werft to work on its plan to refit the old Philadelphia Naval Shipyard as a place to build cruise ships. The plan, drafted in part by Katz, called for $167 million in government subsidies. After lengthy negotiations between Meyer Werft and state and city officials, the deal collapsed.

Together with Hirsh, Katz continued to pursue an old specialty: advising on sports arena financing. Their clients included Broward County, Fla., which paid Stafford $1 million for helping develop a $212 million hockey arena near Fort Lauderdale for the Florida Panthers.

By 1997, it was clear to the Stafford partners that their plans were not working out as they had hoped. They decided they could do just as well on their own. So they parted.

Katz saw this as an opportunity for another new start. He took over office space at One Bala Plaza that Stafford no longer needed, and established himself under a new name: EnterSport Capital Advisors.

Now, truly, he would rely on himself.

Scaling down The Katz Method

to sell at the community level

You could call it The Katz Method.

As a financial adviser on stadiums, Katz had come to believe that public gain and private profit could go hand in hand. He decided to sell a scaled-down version of this idea at the community level.

The supervisors of Whitpain Township in Montgomery County were thrilled a year ago when Katz approached them with an offer that seemed too good to pass up:

If officials provided a piece of land for $1 a year, Katz said, he would build a skating center for the township, free.

Katz said he would establish a nonprofit corporation to build an $8 million skating center with two rinks, each on the scale of National Hockey League arenas.

Nonprofit status would permit issuance of tax-exempt revenue bonds by the Montgomery County Industrial Development Authority to cover most of the cost. The lower interest rate on tax-exempt bonds would make the ice rinks cheaper.

Katz would make his money from holding the management contract for the rinks, and from owning the athletic shop and concession stand.

In his major-league-arena projects, Katz helped develop the idea of using revenue from seat licenses and luxury suites to pay off bonds. Here, Katz planned to use revenue from skating fees and shoe rentals.

The Whitpain supervisors jumped at the idea. The trouble arose when it got down to particulars: Where would the skating center be built? No neighborhood seemed to want the center.

The project stalled. Katz has not withdrawn his plan, but he said he might have to look elsewhere.

Of Katz's other proposals, the one that appears closest to becoming a reality is a skating rink just off Route 38 in Mount Laurel.

Here, the town is not involved. Katz is creating a nonprofit "community recreation association" to own the rink and 13 acres of land purchased from a private owner.

The rink has received approval from the Mount Laurel planning board, and Katz hopes to have it open next summer.

It will be paid for mostly by $7.75 million in tax-exempt revenue bonds issued through the town, plus $1 million contributed by Katz's investors.

Katz continues to look for other skating sites.

The sprawling Byberry site on the city's Bucks County border is one of at least two in Philadelphia that he has been considering. He said the second was in South Philadelphia, but declined to say exactly where.

Byberry is one of a number of former mental-hospital sites around Pennsylvania that the state plans to turn over to communities or private interests for development.

A proposed agreement of sale with a development arm of the city calls for Katz to get a no-cost lease on 20 acres along Southampton Road west of Roosevelt Boulevard.

Tim Reeves, Ridge's press secretary, said the agreement has been approved by the board of the Philadelphia Industrial Development Corp., and is waiting to be signed.

Katz said that his plan, as in many of his ventures, would be to create a nonprofit corporation to seek tax-exempt financing for the rink. His profit would come from management and concessions.

He acknowledged that, if he was elected, the project could pose a conflict: He would have a development proposal before city agencies controlled by the mayor. Katz said that, if such a conflict arose, he would not pursue the project.

One venture that has frustrated Katz is the plan to develop a motor park in Berks County.

Enthusiasm for the idea has been great among the sports-car set. Richard W. Muller Jr. of Mohnton, Pa., who conceived the project, has membership deposits from 32 car clubs and about 2,000 individuals.

Yet Katz, chief financial officer of Formula Motorsports Inc., the company developing the project, has been unable to hold up his end of the $38 million deal: to get support from banks or other lenders.

Katz said he hoped to convince lenders that, with 2,000 people willing to sign membership contracts for three, five or even seven years, debt payments would be assured.

Lenders did not buy it, Katz said. He said that he pushed for the state capital funding in hopes that it would persuade private lenders to come on board. It did not.

At any rate, Ridge said he was unlikely to approve a capital appropriation that was opposed by local legislators, as this one is.

Katz's dream of independent wealth has remained elusive.

According to tax returns that Katz has made public, he and his wife, Connie, had adjusted gross income of $176,000 in 1996 and $177,000 in 1997.

The tax returns show little income from stocks, bonds or bank savings. "All of the holdings that we have - and we have some - are in the names of our four children," Katz said. He said he soon would release his 1998 tax return, on which he took a filing extension.

He said that his net worth is between $1 million and $2 million. But, so far, his entrepreneurial ventures have paid off with only a relative trickle of income.

So he has kept a hand in sports consulting. Currently, he is advising Gov. Whitman's administration on how to deal with the desire of the New Jersey Devils and Nets for better facilities.

Katz's largest bet is riding on a planned Indian-owned casino in the San Francisco Bay area.

If that hits, the payoff could be big.

© 1999, Philadelphia Newspapers Inc. All rights reserved. Any copying, redistribution, or retransmission of any of the contents of this service without the express written consent of Philadelphia Newspapers Inc. is expressly prohibited.