News: Charlotte Exclusives

Racing Against the Tide

Public money for a NASCAR project uptown is one bad ride

Just because you can see a wreck coming a mile away does not make the impact any less jarring. Such is the case with Charlotte’s sadly predictable pursuit of a NASCAR hall of fame for uptown.

As expected when the idea was floated last year, the NASCAR project has vaulted to the top of the city’s arts and cultural wish list with all the usual suspects – the Chamber of Commerce and Center City Partners – out-front declaring the project a once-in-a-lifetime type thing.

A city-owned site adjacent to the convention center and valued at $13.5 million has already been identified as a possible location. And a $64 million hike in the hotel tax would help fund construction. The bump from 6 percent to 8 percent is needed because the new NBA arena is consuming the existing tax revenue.

NASCAR, that fantastically profitable, multi-million dollar entity, is also following the practiced sports-league script of pitting city against city looking for the best deal, which invariably means the most public dollars. Daytona Beach has already bid $30 million in state money. Of course, there is a May 31 “deadline” by which city proposals must be received. It is an ancient sales tactic that in this case also has the effect of limiting public debate on the concept.

There is already a big name attached to the project, just like when Hollywood studios try to get financial backing for a production. Architect I.M. Pei has been hired on as designer of Charlotte’s bid in the NASCAR sweepstakes. But here is where abstract predictability veers into the cold, hard reality that even project boosters cannot ignore.

Pei also designed Cleveland’s Rock N Roll Hall of Fame, one of the big ticket public works projects, along with light rail, that was supposed to jump-start that city’s economy. But as late as 2003 the hall required a $350,000 federal grant to supplement its operation and has seen the promised glittering induction ceremony decamp to New York City. (The Cleveland City Council passed a resolution in March begging for the party to come back.)

The $84 million Cleveland project was built using tax increment financing, which until it was approved by voters last November, was an unconstitutional form of public debt in North Carolina. Now a TIF component for Charlotte’s NASCAR project is a live option. In effect, TIF “earmarks” revenue increases from a developed property to pay for bonds issued to build the project. As such, revenue that might have flowed into public coffers is diverted to pay for the building itself.

So how has this route worked for Cleveland? Not so well. For 2004 the city topped the Census Bureau’s poverty statistics while staring down budget gaps that forced the layoff of teachers and delayed garbage collections. Taxpayers now face both state and local tax hikes to help provide basic services as yet more plans are drawn up for big public works projects that are supposed to magically reverse the dire trends. By every measure the steps that Cleveland took in the 1990s have not panned out. Why would Charlotte repeat them in 2005?

At this point there can be no doubt that the big “destination” cultural projects undertaken across the United States were tremendously oversold. The May issue of Reason magazine, in an article demolishing sports-project welfare, notes that contrary to claims of a $7 billion gain made by boosters of a new stadium for the Dallas Cowboys, the city of Arlington actually will lose some $235 million over 30 years as a result of the project.

Rosy-scenario modeling for such projects invariably omits several key facts. One is the negative effect that tax increases or fees associated with the project has on the private economy. Another is the tax increment financing effect of eroding your tax base by tying revenue from a development back to debt for that development. And most importantly, the fact that publicly-financed cultural projects cannot increase the amount of disposable income available to spend on recreational or cultural activities.

The track-record speaks for itself. If NASCAR wants to finance and build a $138 million hall of fame in uptown, great — it makes a ton of sense culturally and historically. But the notion of public funds for the project needs to crash and burn in spectacular fashion.