Thursday, July 14, 2011

With Charlotte Knights, commission makes an error

Four years ago, Mecklenburg County commissioners participated in a complex exchange of parcels and buildings with the city of Charlotte and Charlotte-Mecklenburg Schools. The big swap was largely for the benefit of a minor league baseball team – one that couldn’t fill half its stadium in South Carolina and wasn’t required to provide much assurance that it could afford a new center-city home.

But it was Charlotte, and it was early 2007, and back then we dealt in a prosperity that made risks seem hardly risky.

In the four years since, however, we’ve endured a recession and its suffocating residue. Some of our tax-supported risks have turned out worse than expected: The NASCAR Hall of Fame gets a third of its original attendance projections. The U.S. Whitewater Center makes money only if it doesn’t have to pay its debt.

As for the Class AAA Charlotte Knights – they’re no closer to getting the funds they need to build and live uptown.

So why is our county commission behaving like it’s still 2007?

Commissioners voted 7-2 Tuesday to take the next step toward extending the Knights lease agreement on an uptown plot of land for another year. The extension comes with a few new conditions – such as $100,000 in earnest money – that are designed to make the commission look tougher this time around. But it’s essentially the same deal – except better for the ballclub.
This time, commissioners decided to waive an important safeguard requiring the team to show its long-term financial viability within 10 days of signing the lease.

That clause was a part of two original agreements that gave a sweet deal to the Knights. The team got a patch of uptown land worth millions, plus some more millions worth of infrastructure work. It had “sole discretion” about any loans and financing it would use, and it didn’t have to provide details upfront about sponsorship and naming rights, which can account for up to half of a ballclub’s financing package.

That means the team got everything it needed for an uptown stadium, without having to prove it could actually build one and survive in it.

In Charlotte 2007, that wasn’t such an outrageous proposition. Uptown had decided that minor league baseball would improve its curb appeal, and when center city’s power brokers historically gave the nod to that type of venture, the money eventually followed.

The recession changed all that – not only for the Knights, but for the city. We’ve spent the past few years thinking smaller, not bigger. We’re reevaluating budget priorities. We’re looking harder at the risks we want to take with our money.

Or at least we should. But instead of requiring the Knights to provide signed agreements upfront for naming rights and two top-tier sponsorships, the county now proposes allowing the Knights to buy their way out of that mandate by paying another $100,000 to escrow. (Which might seem like a lot until you consider the team has been collecting years of parking revenue off that uptown parcel.) And instead of requiring the Knights to prove with audited financials that they could weather attendance falling short or costs swelling, the county is again leaving that requirement vague.

Commission chair Jennifer Roberts, among the seven who voted this week to move toward a final vote next month, says the lease extension is appropriate. The land won’t be used in the next year anyway, she says, so why not give the Knights another year to figure things out. If they do, it would be a good thing for uptown.

The thing is, she’s right. It’s not difficult to picture walking to a Third Ward ballpark after work, watching some quality baseball, looking out to see uptown’s skyscrapers draped over the outfield walls. But as we’ve learned, attendance isn’t always what we think it will be. Revenues fall short. Bills still have to be paid. If the Knights find uptown wasn’t their cure after all, they’ll likely come asking for public help, no matter how clearly a lease agreement says the county has put its wallet away. Will the commissioners choose a big, empty ballpark then?

Better to get assurances now, instead of getting caught up in how good uptown baseball might be, which is what the commission did this week, all over again. In 2007, that might have been the visionary thing to do. Now it’s just irresponsible.

55 comments:

Anonymous said...

What about the line from the movie - "if you build it, they will come"? It COULD happen!

Anonymous said...

I would buy season tickets if they had an Uptown stadium... I am not sure who the current one is supposed to appeal to, but its a pest for anyone from Charlotte, not far south like Ballyntine.

Anonymous said...

I haven't attended a Knights game in over two years, but I work downtown and would definitely buy season tickets if they were to move to Third Ward.

Anonymous said...

Peter was channeling Jerry Reese when he wrote this piece. An uptown ballpark is a no brainer.

J said...

You make a valid point about attendance, particularly with the NASCAR HOF. I believe there are 2 major factors hindering the Hall - the asinine decision to only allow 5 inductees every year (should have been 10 for the first 5 years, then reduced to 5), and the admission fee. You have to pay $20 a head just to get in the door, then there are exhibits you have to pay an additional fee to see.

Prices are better with the Knights. The most expensive seats at Knights Stadium are $12. Concessions prices are fairly reasonable (unlike the gouging at TWC arena). Plus, consider location. It is far away for many Charlotte residents. If you don't own a car, you aren't going to a Knights game, period. An uptown stadium makes the games accessible to everyone. While I'm sure the prices will be higher in an uptown stadium, it will still be an affordable evening.

Should the BOCC have given them a blank check? No. But that's to be expected from our uber-liberal BOCC who think the ONE and ONLY solution to EVERY problem in the universe is more government. I think that's why they approved the documents as they did - they want the Knights, like they want all the citizens, completely dependent on government for everything.

I will remain hopeful that the Knights can work this out on their own and that they will be playing uptown one of these years.

Dennis said...

I have been in Charlotte since 1996 and that land I believe was originally owned by one of the banks that sold it to the county as they were trying to amass land for what was then proposed to be an arena for the Hornets.

If the Knights are collecting revenue from parking, I am assuming they pay a parking tax to the county, at least now it is providing revenue.

The location of a ball park at that site will deliver a destination for people, and therefore draw people to a location that has no natural appeal.

A park by itself will not draw there, see Marshall Park. Nothing else is anywhere near ready to fill that spot.

I am quite surprised that the Observer would take such a negative stance.

Wiley Coyote said...

Good grief Pete.

Are you just now figuring this out? Waste is waste. Overspending is overspending. Frivolity is frivolity. It doesn't matter whether you're flush with money or not.

This goes back way beyond 2007 with Parks Helms' throw money away at all cost for "quality of life projects". His prodigy Jennifer Roberts is the latest Parks Helms "mini-me".

That led to the Whitewater and NASCAR debacles. It's the Democrat mindset, spend all the money you want because it isn't yours anyway.

The sad fact is, nothing will change.

pstonge said...

Good morning.

Thanks for the early thoughts. Want to make clear that I think having the Knights uptown would be great, and I think we're better suited for minor league baseball at this point than major league baseball.

The point I'm trying to make in the column is that we still should be careful about the conditions we set for the Knights. The team should have to show us they can actually afford to live uptown. The commission isn't doing that.

Thanks...

Peter

Anonymous said...

Peter,

Enjoyed your questions and points. Nice to see some thoughtful journalism from the CO...would have been helpful with the TWC, UWC, NASCAR HoF, etc.

Anyone who has visited a downtown minor league stadium knows how much fun they are. Even Memphis - about the same size as Charlotte but dramatically less prosperous - has a great, fun downtown stadium.

Fans in general are getting a little tired of the big time major league money and lockouts and players that seem to care less. Minor league ball is a lot of fun with players playing because they love the game. Count me as a season ticket holder.

Anonymous said...

An absolute no brainer. Should be putting as much energy into getting the Knights uptown as getting the NASCAR HOF built. Knight's attendance will explode if they played uptown.

Anonymous said...

I'd buy season tickets. Lived here for 25 years and never gone to fort mill to watch a game

Anonymous said...

@J - you mentioned that Knights game concessions are now reasonable. Do you REALLY think they won't jack up the prices with a new 3rd Ward ballpark? If you don't, please pass on whatever you're smoking to the rest of us.

Anonymous said...

I am naive. I'll say it. But I just can't understand why everything is always about money. All of this Knights stuff is not about our "life" here in Charlotte. It's about who will collect our money as we go through our life. Everything in Charlotte is that way - everyone is a part-time Real Estate mogul in this city - even the city itself. Do something for the people FOR ONCE. Make a choice about what will make life better - not make the most money.

Anonymous said...

So Peter, why no mention about Jerry Reese and his antics that have held up this ballpark? Your article reeks of negativity associated with the County Commission and the decision to place the ballpark in Uptown. It makes us wonder if you're on Jerry's side or are truly on the side of what positive things may come by having the ballpark in the middle of where the action is?

Anonymous said...

Peter,

Have you thought about these items: How much property tax revenue does the county receive from the property (that they presently own)? How much property tax revenue will they receive when a $50m stadium is sitting on it? How much sales & income taxes will be generated for the county and the state with the stadium vs. a SC stadium? I believe that in the long run, the county & state will receive a positive return on their investment.

pstonge said...

Anon, 8:39: I've written about Reese in the past. Again, I think an uptown ballpark is a great idea, and I'd be among those walking to a game. The commission needs to better protect us from it not working out for the Knights.

Anon, 8:40: The team is leasing that land and doesn't have to pay property taxes on it.

Peter

Dan said...

So Memphis is your example of what could be? Read on:

The Memphis Redbirds Baseball Foundation, which spent $80 million building the stadium before defaulting in 2009, has operated under forbearance agreements with creditors since missing payments on its $72 million tax-exempt bond issue, according to John Pontius, the foundation's treasurer. The Redbirds' relationship with their original bondholders, a group of asset managers and regional banks, became "adversarial" after the team failed to carry out its business plan and operations suffered as it struggled to service debt, Pontius says. "We owed so much to the bondholders that we didn't have enough money to run the team properly," says Pontius, who has served as volunteer treasurer of the foundation since 2005. "We had a database of potential customers who we weren't calling and repairs we weren't making. Our new bondholders see this as a partnership and are making reasonable judgments concerning the working-capital needs of the business."

Anonymous said...

Lessons to be learned:

http://online.wsj.com/article/SB10001424052748704461304576216330349497852.html

Anonymous said...

I currently go to 5-10 Knights games per year. If they move uptown, I would easily double that. Actually, I would probably buy season tickets. The central location would be great for people in the northern sections. The only people this would inconvenience would be south Charlotte and York county. But, considering we are not the Fort Mill Knights, I don't really care!

Anonymous said...

Can't compare NASCAR HOF to a ballpark. A ballpark comes to life with a game being played. It has action and movement. A hall of fame just sits and waits. People will show up to see a game played, not to history sitting on a shelf.

Wiley Coyote said...

Pete,

Just because you keep repeating "I think having baseball 'uptown' would be great" doesn't necessarily make it justified.

The BOCC thought it would "be great" to have the Whitewater Center where it is and all of the hotels and businesses to follow.

We all saw how everyday average citizens told Parks Helms and the rest of the BOCC to shove it when they tried to run roughshod over them saying the road to the center was "theirs".

The stupidity and arrogance of Helms and Wise (wise, oxymoron) was proven by this debacle.

The WWC still owes the TAXPAYERS money we will never see and just like the NASCAR fiasco has cost us money.

I think it would be great to be able to attend an event downtown without fear of getting shot or have a cotton candy vendor on each corner.

Can we have that too, Daddy?

Anonymous said...

If they do move uptown, I hope the Knights are able to continue some of their promotions. Thirsty Thursdays, Saturday fireworks, and all the other various promotions are great to draw attendance!

I look at what the Durham Bulls have done with their downtown stadium. People from all around go to the DBAP. When I lived in Raleigh my friends would go 3-4 times a year. Now, the DBAP has helped revitalize that part of Durham into one of the nicer areas of town. Knights stadium uptown could do the same for Charlotte!

Wiley Coyote said...

I have a great idea.

In the spirit of baseball, let's do a trade.

We'll trade SC one Whitewater Center and one NASCAR HOF for one baseball stadium downtown.

Sounds like a Babe Ruth trade from the Sox to the Yanks if there ever was one.

Anonymous said...

Peter, good job on writing a more balanced article that unfortunately many of your colleagues fail to do. It's refreshing to see a less slanted piece of journalism from The Charlotte Observer.

That said, we once again see a county commission failing to do the proper due diligence and set appropriate fiscal guidelines to protect the taxpayers wallet should this venture fail to meet expectations. Given their track record of projects they promised us would work, I can't see how anyone would want to move forward without better controls and contractual obligations.

Anonymous said...

I concur with a lot of people that I would go to more games with an Uptown stadium...UNLESS they jacked all the prices up. Baseball is affordable now, just like the Hornets used to be. If they expect (like the Bobcats did) to pay off all their costs quickly with pricing (8 dollar water?), then it will be another HOF.

John said...

Peter you're dead wrong...the Knights will pay taxes on the new stadium.

But the real point is this - no lender is going to give $40 million to the Knights to build the stadium unless they are confident the Knights can generate enough revenue to pay it back. Its that simple. Thats the real security for the County.

pstonge said...

Wiley,

I get it. You think a ballpark is a bad idea under any circumstances. I think it's a bad idea if we're not sufficiently protected. But if the Knights can show us that they can afford to build the stadium - and operate it - then it becomes an asset to me.

Are there better for uses for that land? Maybe. Commissioner Cooksey wants a significant city park, which he thinks would be used more often than a baseball stadium, and he has a point. Or the county could sell the valuable patch of land.

You have a preference?

Pete

pstonge said...

John,

Yes, the Knights will pay taxes on the stadium. I was making the point that they don't own the land, so they won't pay taxes on that.

Peter

Anonymous said...

Me & my friends would attend 10-15 games a year easily if the stadium was uptown. Out in Ft. Mill we get to 2 a year. This is a NO BRAINER. Build a cool old school feel park and it will work.

Wiley Coyote said...

Pete,

You're mistaken.

I have never said baseball downtown was a bad idea. Never.

What IS a bad idea is the machinations of the BOCC and the city trying to get things like these passed at all cost.

The WWC and NASCAR HOF are two perfect examples.

There are NO hotels near the WWC and there has been NO development and they can't pay the taxpayers back one dime.

The NASCAR HOF in my opinion will never be what everyone salivated over in order to get it in Charlotte. As was reported this week, more cuts are imminent.

If baseball can be put downtown and sustain itself without taxpayers losing money, then go for it.

Anonymous said...

Great article and right on track. I see lots of posts of people who say they will come to games. If that's the case why don't the Bobcats and Checkers sell out? I'm not against a team uptown, I just don't want to see another Whitewater, HOF, etc. that shift the burden to the taxpayers. If this is such a great place to have a team, you would think team owners would be tripping over each other to built this stadium and operate it.

pstonge said...

Wiley,

Then we agree!

Peter

Anonymous said...

I would seriously consider season tickets if they were playing in a downtown stadium.

Anonymous said...

You can get tickets for $7, and on some nights a beer or a hot dog for $1 each. If the stadium were to move uptown, all that would change and get a lot more expensive.

Anonymous said...

Jerry Reese is the sole reason the Knights aren't uptown yet. If not for him the stadium would've been up and ready for the 2008/2009 season.

Wiley Coyote said...

Money money money money, money
Some people got to have it
Some people really need it
Listen to me y'all, do things, do things, do bad things with it
You wanna do things, do things, do things, good things with it
Talk about cash money, money
Talk about cash money- dollar bills, yall


April 21st.....

The deal commissioners will decide on extending would lease county owned property in Third Ward to the Knights for one dollar a year.

The Knights would also eventually receive $8 million in county tax money for road improvements to the area around the stadium.

But the Knights would be responsible for paying for the stadium itself, which is what's proving difficult.

The Knights says they'd love to be playing in uptown by 2013 or 2014, but admit that's far from a sure thing.


http://www.wbtv.com/story/14302455/knights-still-want-uptown-stadium-how-to-pay-for-it-uncertain?redirected=true

John said...

Peter - way to ignore my other point! Its really at the crux of your blog post.

Anon. 10:27 - You know this to be a fact how, exactly?

Anonymous said...

Tickets for a Knights game may be $10-12 now but if I know Charlotte they'll quickly become $20-25 with an uptown stadium.

Anonymous said...

How do you figure that? Just blind assumption things cost more because the land is worth more? You have to remember it still isn't MLB its a bad product people wont pay much for Triple A.

John said...

Anon 12:06 - Tickets start at $7 now. If the cheapest ticket at the new stadium is $20, I'll buy you season tickets.

pstonge said...

John,

I'm not ignoring your other point, which is valid, just clarifying one part of your comment, which was incorrect. But to address the other points: I don't know that taxes on the stadium and revenue would be more or less than the property tax and/or millions that the land would fetch from a buyer.

I'm not trying to build an argument against a stadium, just against unnecessary risk.

Thanks!

Peter

Anonymous said...

An uptown stadium is going to be a huge hit. I grew up in Dayton Ohio and when they built the Dayton Dragons stadium (Single A), many of the same economic concerns were raised -- especially in depressed Ohio. The stadium has been sold out for years and its been one of the only bright spots for Dayton over past decade. Season tickets? COUNT ME IN!

Anonymous said...

I dont know the answer, but what did the Checkers' prices do when moving uptown?

Also, I cant see people leaving work and coming back to a game. It will lose families, but replace them with more company tix.

Anonymous said...

Didn't know anything about Memphis' baseball financing problems, but I was only talking about the experience I had. Memphis is a dirt poor city and poorly run with lots of corruption. The experience I had at the ballpark, however, was phenomenal. The experiences I've had at the Durham Bulls' old and new parks have been great. Don't compare the NBA with minor league baseball. The NBA product is not so hot, the prices are "world class" and the team's management has been incompetent. So, my advice to the Knights: run your team and organization like the Bobcats and charge outrageous prices for an awful fan experience and you will not be successful. To the Naysayers: I always thought the UWC and HoF would struggle. A minor league ballpark would have enormous built-in goodwill if the Knights didn't screw it up.

John said...

Peter, my other point (which iI either failed to articulate well or failed to understand) is that the lending institution's due diligence effectively removes almost all the risk for the County. Whoever loans the Knights tens of millions of dollars to construct the stadium is going to make sure the Knights are in a position to pay the loan back. The County's exposure (and thus risk) is much smaller than that lenders.

pstonge said...

John,

That's absolutely true. But the loan will cover only however much of the stadium the team wishes to finance beyond all the other it will project to come in. (Or how much the lender allows the team to finance.) And that doesn't include the cost of year-to-year operations.

Peter

Anonymous said...

Durham Bulls ticket prices are between $7 and $14 dollars currently. Basically the same as the Knights tickets now. I don't really see how a AAA baseball team could charge $20-25 a ticket. Heck, you can get tickets to most Major League teams for that kind of money. I've only been to three sellouts at Knights Castle. The past two July 4th games and last year's game against the White Sox. I think we could get attendance figures up much higher with an uptown stadium.

Anonymous said...

I think they should stay right in SC. If you look at most major cities rarely do they have there stadiums downtown. It's just a waste of money on the Knights part. They already have a nice stadium. As far a NASCAR, I think they would have been more profitable if they would have built it in Concord, but that's just my opinion.

John said...

Peter - You're not getting my point, so I'll make it extremely simple. Whoever the Knights borrow from to build the stadium is doing the County's financial due diligence for the County. If the lender doesn't think the Knights can stay in business, they won't make the loan.

John said...

Anon 1:27- Ever heard of Durham, Greensboro, Winston-Salem, Indianapolis, Memphis, Norfolk, Oklahoma City, Sacramento, Louisville, Chattanooga, Jacksonville, Toledo, Montgomery, etc., etc.? Nah, nobody builds baseball stadiums downtown.

pstonge said...

John,

I do understand your point. But you're assuming that a lender's due diligence on a loan for a part of stadium contruction puts the county in the clear, comfort-wise. What if the loan wasn't for a particularly large amount, given projections for other kinds of revenue? And what if Don Beaver's other holdings provided the lender with enough comfort for that small loan amount?

Let's say, though, that the loan would be for a significant portion of the stadium. As a couple of commissioners have wondered, why do the Knights need another year to secure it? They knew the deadline was approaching.

The commission could get answers to this type of question by seeing the Knights audited financials. I think that would be appropriate.

Peter

David said...

The Charlotte Knights are the best bargain in entertainment at any level in the metro area. With a downtown stadium, it will only increase the value, bring more people in, creating more business, a healthier tax supply, and be attractive to other businesses coming to town. These things matter. Why do you think businesses aren't moving to Midlothian, VA?

Anonymous said...

If the Knights are certain they will be successful, have them sell season tickets to the uptown stadium in advance. That will truly demonstrate how successful they will be....at least in the short term.

Anonymous said...

I have been a proponent for the stadium coming to the third ward since it was first presented. Then again, I am a huge baseball fan. If the stadium is actually built, I will buy season tickets (even in advance if it gets them more money). With that being said, I think the future of sports in Charlotte and the surrounding area is going to explode. Don't forget about America's park in Mooresville. 20 million worth of baseball fields. They are projecting it to be the next Williamsport because of the accessibility with Charlotte-Douglas, I77 and I85. Also boasting weather the middle of PA can't produce.

Nascar hall of fame=failed
Whitewater Center=failed big time and continues to bleed money.

Baseball won't. Look at the teams from around the state (even AA) that have produced a profit after opening a stadium.

I cannot wait for this to happen! Good write up!

Not only will this venue host AAA games, but UNC will play there, Little Leaguers will play their play off games, concerts, trade shows. Possibilites are ENDLESS.

Anonymous said...

The uptown stadium was be a great investment. Not only would it be a great home for the Knights but we could also land events like the ACC baseball tournament. How about a yearly Charlotte 49ers vs UNC Tar Heels match up?