Thanks to the secrecy surrounding the city of Charlotte’s talks with the Carolina Panthers, one essential fact has received little attention:
The City Council has thrown its early support behind a tax hike that would bring in more than double what the city would need to give the Panthers their full request. It gives the appearance of sneaking through a tax increase for unrelated projects under the cloak of keeping the city’s NFL franchise from leaving.
Whether to give Panthers owner Jerry Richardson $125 million in tax money for stadium renovations is, of course, the first question, and it’s a debate the city and Panthers have locked the taxpaying public out of. Beyond that, however, is a not-so-small detail: The proposed tax is far larger than needed to accomplish the task.
Here’s the math: The Panthers have asked the city for $125 million. If the city financed that over 20 years (a typical, reasonable term for a big capital project) at a 3.05 percent interest rate (a rate it could probably obtain with its AAA credit rating), its annual payments would be somewhere close to $8.5 million.
The City Council endorsed paying for the Panthers deal by adding a 1 percent tax on prepared foods and beverages to the existing 1 percent tax. The current 1 percent tax generates about $20 million a year within the city limits, city treasurer Scott Greer told the Observer editorial board.
The new tax would bring in close to $20 million more annually, but the city only needs $8.5 million. Even if the numbers changed a bit, a huge gap remains.
This deserves a full public airing, but no one at the city is emphasizing it, or even commenting on it.
There are at least three options if the city decides to give the Panthers the money and use the prepared foods tax to do it:
• Raise the tax by a half-percent instead of a full percent. That would bring in around $10 million annually, enough to cover the Panthers’ request.
• Impose the full 1 percent but provide that the tax is eliminated after six years, when the stadium renovations are paid off.
• Impose the full tax without a sunset provision, but be upfront with the public that it will generate $12 million or more per year for projects that no one has specified.
Of course, the prepared foods tax is not the only way to get the deal done.
The Observer’s Steve Harrison reports that the city’s annual debt payments on the convention center have dropped by more than $6 million over the past two years. Presumably, those payments will continue to drop as the debt is retired. The city and the Charlotte Regional Visitors Authority have not said how they plan to spend that windfall. It could cover about half of what the Panthers seek without raising taxes at all. Does the city have a plan for it, such as a 1,000-room hotel, that it won’t share with the public?
Then there’s the hotel-motel tax, primarily paid by visitors. Some City Council members expected it to be the funding source for the Panthers, but the city staff dismissed that idea, saying the tax, at 15.25 percent, was already high and shouldn’t be raised. Another option would be raising the tax on tickets at for-profit entertainment venues.
There are still other ways to finance the deal, none of which involves hiking taxes twice as much as needed to cover the city’s contribution to the Panthers. They should be debated, in public, without armed police blocking the doors.