In the last six years, Charlotte and other nearby local governments have invested hundreds of millions of dollars in sports and recreation-based economic development projects. Far from being a slam-dunk, the projects have badly underperformed versus expectations.
The most notable of the projects is Bobcat Arena, a city-financed building for the NBA’s Charlotte Bobcats. The series of events leading to the construction of the arena dates back many years.
Charlotte’s first NBA team was the Hornets, an expansion franchise that entered the league in 1988 in the then-state-of-the-art Charlotte Coliseum. The team proved a success out of the box, selling out all but eight games its first season and all games for the eight seasons thereafter.
Eventually, the luster wore off, in part fueled by animosity surrounding owner George Shinn’s desire for a new city-financed arena having more luxury seating. Hornets’ attendance sagged badly and the team threatened to move elsewhere.
Charlotte City Council eventually did agree to a new arena for the Hornets, subject to referendum. Despite being packaged with a number of other more-popular arts projects, voters rejected the proposed arena for the Hornets by a 57 percent to 43 percent ratio in the June 2001 vote. The Hornets moved after the 2001-2002 season to New Orleans.
Undeterred by losing the Hornets, Charlotte quickly entered into a deal with the NBA to land a new expansion franchise that would be called the Bobcats. At the center of the deal was the city building a $265 million arena.
While building the arena did not per se involve property tax money, the city committed all of its motel-hotel tax receipts, which by law must be used for tourism related purposes, to the pay for the building. As a result, all subsequent tourism-based economic development projects must be funded through additional taxes of some sort. So when the city landed the rights to house the NASCAR Hall of Fame, it had to raise its hotel room tax to pay for its share of construction costs. To pay for a bundle of arts infrastructure projects, the car rental tax in Mecklenburg County was increased.
The Bobcats are privately owned and don’t release financial results, but it has been clear since early in their existence that they have badly underperformed compared to their original projections.
The Bobcats figured the new building, with fewer seats but many closer to the action, could justify a steep price increase. The team overestimated demand for tickets and was forced to lower ticket prices its second and third year in the new building. Despite the lower ticket prices, the team ranks only 23rd in the 30-team league in attendance at an average of just under 14,500 per game this season, drawing nearly 10,000 fans a game fewer than during the Hornets’ heyday.
Two and a half years after opening, the new facility is still called Bobcats Arena. The Bobcats have been unable to sell the naming rights to the building, depriving the team of several million dollars a year in revenue.
Not helping matters is the team’s on-court performance.
Despite playing in a weak conference in which several teams with losing records will make the NBA playoffs, the Bobcats were never in serious playoff contention all season.
The Bobcats’ current situation comes as sports franchises have had difficulties in other medium-sized markets. The National Hockey League’s Nashville Predators renegotiated its lease agreement with the city of last year, and the NHL’s Carolina Hurricanes would like to do the same.
In 2003, Jeff Wise, a Charlotte-area businessman and whitewater rafting enthusiast, proposed the creation of an artificial rafting complex on the Catawba River on the border between Mecklenburg and Gaston counties.
The business case for a whitewater center could not, however, be made without public involvement. In order for the nonprofit that would operate the center to get the $38 million in financing needed to build the facility, six local governments — Mecklenburg and Gaston counties, and the cities of Charlotte, Gastonia, Belmont, and Mount Holly — agreed to provide up to $12 million over five years to cover operating losses.
In addition, the center was built upon Mecklenburg County parkland under a 40-year lease and includes pre-existing public mountain bike trails in its range of attractions.
The center’s outdoor adventure center opened over budget and late in August 2006, with the retail store and restaurant opening three months later. Access to the facility continues to be over side streets because the center’s main access road has not been completed.
The U.S. National Whitewater Center was unable to make quarterly interest payments due on July 31, 2007, Oct. 31, 2007, and Jan. 31, 2008. It has also informed lenders that it was unlikely to be able to make scheduled principle payments during its current fiscal year.
Most local officials now expect that they will have to pay out the entire $12 million committed to the center.
The city has also approved two other sports-based projects. It’s pledged millions of dollars toward the NASCAR Hall of Fame. And the city and Mecklenburg County also just agreed to a complicated land-swap agreement that frees land for a minor-league baseball stadium in Uptown Charlotte.
The class AAA Charlotte Knights hope to move into the facility in 2009 from their current home just across the state line in Fort Mill, S.C. The transaction is subject to the team being able to arrange financing to build a 10,000-seat stadium on the land, which it will lease for $1.
Michael Lowrey is an associate editor of Carolina Journal.