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Charlotte: Spend $33.5 Million On Arena For Hornets

Davie Hinshaw
Charlotte Observer

The city of Charlotte is prepared to spend $27.5 million in capital improvements for Time Warner Cable Arena, as well as 10 years’ worth of annual payments of $600,000 for ongoing maintenance.

The Charlotte Hornets and the Charlotte Regional Visitors Authority asked the city earlier this year for nearly $48 million in arena improvements, many of which the city and the team said are part of a 2003 operating agreement that requires the 9-year-old building to be among the National Basketball Association’s most modern.

City staff told the City Council on Monday night the money would come from two hospitality taxes: a hotel/motel tax and a car rental tax that are already in place. Council members are scheduled to vote on the deal Sept. 8.

The city’s proposal calls for the team to receive money for restaurant renovations, bathroom improvements, new lighting, visitor locker room upgrades, moving the ticket office and scoreboard improvements. The team would also replace a number of “tabletop” seats in its lower bowl with traditional seats, which would increase capacity by about 600 seats.

The proposal comes a year after the City Council agreed to give the Carolina Panthers $87.5 million, most of it for improvements to Bank of America Stadium. In exchange, the team agreed to a firm six-year commitment to stay in Charlotte.

The city’s relationship with the Hornets is different.

The city paid for and owns the $265 million arena. The CRVA helps manage the “back of the house” operations such as heating, ventilation and air conditioning as well as plumbing. The Hornets are responsible for booking events other than basketball in the building.

Credit Charlotte Observer

 After the Hornets left the city for New Orleans in 2002, the city decided to create an arena agreement that made it very difficult for an NBA team to leave. In return, the new basketball team got a favorable lease agreement.

The agreement has steep financial penalties if the team leaves Charlotte before the lease is up. The city also agreed, in its contract with the Hornets, to keep the building among the NBA’s most modern.

Time Warner Cable Arena is the third-newest arena in the NBA. Since it opened, new arenas have opened in Brooklyn, N.Y., and Orlando, Fla.

Suite negotiations

In March, the Hornets asked the city to also spend roughly $6 million to renovate suites and $600,000 to refurbish the Hornets’ locker room.

Deputy City Manager Ron Kimble said the city pushed back against spending taxpayer dollars on those expenses, even though he said the team could have had a legal case that those particular upgrades are part of the 25-year operating agreement.

“The city didn’t want to pay for home team locker rooms and suite improvements,” Kimble said. “We want to fund (improvements) that the everyday fan can enjoy.”

The Hornets agreed to pay for part of the home team locker-room improvements and suite renovations.

Just as the city agreed to spend an extra $600,000 a year for 10 years in annual maintenance costs, the Hornets are also going to pay $600,000 into that maintenance account. The team will dedicate $2.4 million of that money for the suite and locker-room improvements from 2014 to 2018.

“Our owner (Michael Jordan) made a conscious decision that he wanted to invest,” said Fred Whitfield, president and chief operating officer for the Hornets.

The city and team already make a contribution to an annual maintenance fund. Starting in 2005 when the arena opened, the city and the team each contributed $250,000 a year, with annual increases. That annual payment is now $364,000.

Next year, when the first $600,000 payment starts, the city and team will both be spending nearly $1 million on annual maintenance.

“We have exhausted all of that money,” Kimble said about the original annual maintenance payment. “To protect the investment, we will do an even bigger investment in the annual capital fund.”

Kimble said the additional $600,000 will come with strings. He said the team won’t be able to use that money for suite improvements, unless the city gives its approval.

The city’s decision not to use public dollars on suites is meant, in part, to increase support among the public for the renovations.

But City Manager Ron Carlee acknowledged in an interview that the money dedicated to the arena is “fungible.”

Kimble told council members he believes the city could not spend any less.

“I feel like this is the lowest amount (we could spend) under the contract,” he said.

Republican council member Ed Driggs said he is worried the improvements will deplete the city’s reserves of its hospitality taxes.

“It’s done at such a way that our capacity is pretty much used up,” he said. “It raises questions as to what flexibility we have for other events.”

Most council members were supportive of spending money on the arena.

Democrat David Howard said some of the renovations would have to be made anyway in order to maintain the building. Democrat Michael Barnes said he didn’t want the arena to become obsolete.

The city will oversee all arena construction, except for the Hornets’ work on the team’s locker room.

‘NBA standards’

One provision of the operating agreement is that the city wouldn’t have to pay for an improvement if the team made a conscious decision to exclude it when the arena was built.

When the arena was built, the team installed what’s known as “terrace table” seating in the lower bowl behind one goal. The team now wants to replace some of that seating with additional lower bowl seats.

That was arguably a poor decision by the team when the arena was being built. The city has agreed to spend $775,000 to rework part of the lower bowl.

The city said some of the improvements fell under a category of having to be up to current “NBA Standard.”

Other than not wanting to pay for suites and the home team locker room, Kimble declined to say whether there were any team requests that the city decided it didn’t have to fund.

The Hornets plan to bid on hosting the 2017 and 2018 NBA All-Star Games, and league commissioner Adam Silver has said that improving the arena would be key to Charlotte winning a game.

A new scoreboard is budgeted for fiscal year 2018, which begins July 2017. Kimble and Whitfield said the new scoreboard would be ready for the 2018 All-Star Game.

As part of the presentation, the city released a University of South Carolina study that said the economic impact of the area was $263 million in 2013.