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Carolina Panthers prosper, Charlotte helps

Team’s rising profits raise questions about the need for city subsidies on stadium

  • http://media.charlotteobserver.com/smedia/2013/09/07/22/21/Yy4gx.Em.138.jpeg|320
    Jeff Siner - jsiner@charlotteobserver.com
    Jerry Richardson owns 47 percent of the Carolina Panthers.
  • http://media.charlotteobserver.com/smedia/2013/09/07/22/21/fN6SK.Em.138.jpeg|308
    Jeff Siner - jsiner@charlotteobserver.com
    Joe Miller with Joffie Contracting power washes one of the giant Panther statues that welcomes fans to Bank of America Stadium last month. Joffie Contracting maintains the windows and interior/exterior cleaning of the stadium.

More Information

  • Full Panthers coverage
  • Concussions remain threat to NFL’s success

    Despite the National Football League’s popularity and rich coffers, experts say a dark cloud looms over the league: concussion-related injuries.

    Last month, the league agreed to pay $765 million to settle lawsuits brought by 4,500 retired players. But the NFL still faces questions about how it will protect the health of current and future players.

    The settlement, which will cost teams about $1.2 million annually over the next 20 years, is a “drop in the bucket” for a league with annual revenues around $10 billion, said Andrew Zimbalist, a Smith College economics professor who writes about the business of sports.

    But the agreement doesn’t solve the problem going forward, he said. The American public could sour on the sport if injuries continue to pile up, or the NFL could lose fans if the league goes too far in minimizing big hits, he said.

    “The settlement is a positive for the NFL and its teams,” Zimbalist said. “But the larger question is what will the league do about concussions going forward. I don’t think they have any answers yet.” Rick Rothacker


  • Who owns the Panthers?

    The Carolina Panthers franchise and stadium operate under the umbrella of Richardson Sports Limited Partnership, according to documents obtained by Deadspin. Here is a breakdown of the partnership’s owners:

    47%

    Jerry Richardson and family members

    53%

    Carolina PSLFC, which is owned by business elites, mostly in the Charlotte area. Following are the minority owners, and their percentage ownership in Carolina PSLFC.

    Family Dollar founder Leon Levine and his wife, Sandra, and daughter, Amy Beth: 19.5%

    Jerry Wordsworth, food distribution industry: 16%

    Steve Wordsworth, food distribution industry: 16%

    Derick Close, of the Springs Industries textile family: 9.8%

    Elliott Close, Frances Close, Crandall Bowles and Katherine Close, of the Springs textile family: 9.8%

    Donald Keough, former Coca-Cola president: 7.8%

    The estate of John M. Belk, Claudia Belk, Mary Claudia Belk Pilon and the John M. Belk Trust, of the department store family: 5.2%

    H.C. “Smoky” Bissell, Ballantyne developer: 4.9%

    Katherine McKay Belk, Katherine Belk Morris, Tim Belk (CEO of Belk department stores), McKay Belk (Belk director), John R. Belk (Belk president): 4.6%

    Cameron Harris, insurance: 2.4%

    Johnny Harris, developer, 2%

    Erskine Bowles, former UNC System president, investment banker: 1.8%

    SOURCE: Deadspin.

    NOTE: Carolina PSLFC ownership stakes do not equal 100 percent due to rounding.



The Carolina Panthers, who are finalizing a stadium renovation plan paid in part by Charlotte taxpayers, are winning financially nowadays and are about to fare even better under a new television contract that kicks off next year.

Like most teams, Charlotte’s National Football League franchise doesn’t publicly disclose its financial statements. But documents leaked this year to the website Deadspin, the latest report from the publicly held Green Bay Packers and estimates by Forbes magazine suggest pro football teams are enjoying flush years after settling a labor dispute two years ago.

The average NFL team’s operating profit was $44 million during the 2012 season, up 7 percent from the previous year, Forbes estimated last month. The Panthers were the 16th most profitable of the 32 teams, making $28.9 million before interest, taxes and other charges.

This is good news for Panthers majority owner Jerry Richardson and 12 minority owners representing a who’s who of Charlotte business elites. The team opens its season Sunday at home against the Seattle Seahawks.

But the league’s strong performance also raises questions about whether the city of Charlotte needed to contribute $87.5 million toward $125 million in renovations at Bank of America Stadium, including new video boards and escalators.

The Panthers’ share of the project is $37.5 million – less than two years’ worth of pre-tax operating cash flow, which the team said totaled a combined $66.5 million in 2011 and 2012.

With the influx of new TV money, which is expected to bring the league $27.9 billion over nine years, NFL teams will see revenues “going through the roof” in coming years, said Dennis Howard, a University of Oregon professor emeritus, who is an authority on sports finance.

“Should the city commit those kind of dollars (to renovations) when the team clearly has the capability to make those capital investments?” Howard said. “It’s hard to make that argument.”

During negotiations with the city this year, Richardson said he didn’t want to add to the team’s debt in paying for the renovations. City leaders expressed concern that the team could be sold or wooed to another city.

In return for the city’s financial commitment, the team agreed to be “tethered” to Charlotte for as many as 10 years. During negotiations that resulted in an agreement in April, the city never asked to see the team’s financial statements, Deputy City Manager Ron Kimble said.

“The issue wasn’t can they pay,” Kimble said. “The issue was the tether. We wanted to make sure the team was tethered to Charlotte for as long as possible. If a city wants to be an NFL city today, it’s not going to get a tether without a public-private partnership.”

In addition to the tether, Kimble noted that the city will also own the improvements to the stadium and receives five rent-free days at the stadium, which can be used to bring events to the city.

In a statement, the Panthers said the deal with the city was reached to tie the team to Charlotte and keep it competitive with other NFL franchises. The team noted that it has privately financed the stadium until now, while other teams have had considerable taxpayer support.

Among 20 NFL stadium construction and renovation projects since 1997, Charlotte’s public contribution would be fourth-lowest, according to a study conducted by CSL International, a Dallas-based consulting firm. The public contributions ranged from no money for the $1.6 billion MetLife Stadium in New Jersey to $619 million to cover 86 percent of the cost of Lucas Oil Stadium in Indianapolis.

The final agreement between Charlotte and the Panthers is expected to be signed by both parties in the next couple of weeks, Kimble said. But it’s possible another round of negotiations may not be far away.

Under the deal, the city and team can consider lengthening the tether, if the city secures $50 million in additional public funding by Aug. 1, 2015. If not, it’s likely talks could begin in four or five years, Kimble said. That’s because the first six years of the tether carry more penalties if the team moves.

Richardson has said he has no plans to move the Panthers. But the team and its representatives have hinted other cities would like to host an NFL team.

In a closed-session City Council meeting in January, Richardson emphasized that he wasn’t threatening to leave Charlotte, according to the minutes. But he noted it requires 24 owners to approve a move.

“I know this is on record and probably going to get me in trouble,” he said, “but I can get votes and that is an important part.”

Profits of new labor deal

The finances of NFL teams are being buoyed by a 2011 labor contract that handed a bigger percentage of revenue to team owners – and are set to soar under a new TV contract that starts in 2014.

Take the Green Bay Packers, which reported record revenues and profits in the fiscal year ending in March. The team is quasi-public – it has shareholders but its stock doesn’t trade on an exchange – so it releases financial statements once a year, providing a window into the health of the other 31 teams.

In the two years since the labor contract, the Green Bay team has brought in $97.3 million in operating profits, nearly five times as much as the $21.8 million in profits during the previous two years.

“In the second full year of the new collective bargaining agreement, we are seeing the benefits of the agreement and long-term labor stability,” Packers CEO Mark Murphy wrote in the team’s latest annual report, released in July.

The Panthers bring in less revenue than the Packers, one of the NFL’s oldest and most popular teams. But documents obtained by Deadspin this year showed Charlotte’s franchise remained profitable even amid the league’s labor strife, which included a player lock-out before the 2011 season.

During 2011 and 2012, the Panthers posted total operating income of $112 million before interest expense, helped by the team’s decision to shed expensive player contracts ahead of the labor negotiations. The team’s partners received about $15 million in distributions from these profits over the two years, which are subject to state and federal income taxes, according to the documents.

The Panthers said the Deadspin documents create an “incomplete picture” of the team’s profitability and offer an “isolated snapshot” of its finances during an unusual period for the league.

“The team’s actual operating cash flow, even before federal and state tax payments were made, was significantly less than the accounting income reported in the story,” the Panthers said in a statement. The team’s operating cash flow ranged from pre-tax figures of $26.7 million in fiscal year 2011 to $39.8 million in fiscal year 2012, the team said. Officials declined to comment further on the team’s finances.

The Panthers and other NFL teams, however, should receive a major bump from national TV contracts that start next year. Three networks will pay about 60 percent more on average to broadcast games under the deal, according to published reports.

The new contract will likely mean about $65 million to $75 million in additional revenue each year for each team, said Howard, the Oregon professor. Under the new labor deal, players receive about 47 percent of revenue.

“It puts a team in a very good place,” he said.

Many Panther owners

Since he began the effort to land the Panthers franchise in 1987, Richardson, a former player-turned-businessman, has been the face of the Panthers. But he’s not the only owner.

Twelve individuals and groups currently hold minority stakes in the team. Richardson and his family own 47 percent of the partnership, while the remaining owners, through a company called Carolina PSLFC, hold 53 percent, according to the Deadspin documents.

The partners are some of the biggest names in Charlotte, starting with Family Dollar Stores founder and philanthropist Leon Levine, who owns 19 percent of Carolina PSLFC with his wife, Sandra, and daughter, Amy Beth.

Others include members of the Belk department store family; former University of North Carolina system president Erskine Bowles; his wife and textile industry executive Crandall Close Bowles; and Charlotte businessmen Johnny and Cameron Harris.

Richardson has said he and the other owners put in about $220 million to start the team, including a $140 million NFL franchise fee. The public spent $60 million on land and infrastructure for the $187 million stadium, which was paid for by the ownership group and the buyers of permanent seat licenses.

Forbes estimates the team is now worth $1.1 billion. That’s 18th overall; the Dallas Cowboys are No. 1 at $2.3 billion.

Most of the minority owners declined to comment for this story or did not return calls. Those who talked said Richardson is firmly in charge based on team governance documents, but he does seek their counsel from time to time.

The partners hold meetings before, during and after the season. Richardson decides the distributions that go to the partners. Kimble, the deputy city manager, said city negotiated with Richardson.

“It’s a wonderful dictatorship,” said Cameron Harris, who owns 2.4 percent of Carolina PSLFC. “You’re talking to one happy partner.”

The team initially proposed $250 million in renovations at Bank of America Stadium, with the city contributing $125 million and the state of North Carolina and the Panthers each chipping in $62.5 million. In return, the team would have agreed to a 15-year stay in Charlotte.

The state, however, balked and the team and city settled on a lower amount.

“I think the state made a huge mistake,” said Harris. “The state had an opportunity to put a tether on the team for 15 years. For some reason, they chose not to do so.”

In recent years, another team owner, Erskine Bowles, has teamed with former U.S. Sen. Alan Simpson to urge the U.S. government to rein in out-of-control deficits. When he promotes fiscal responsibility, Bowles said he emphasizes cutting expenses and increasing revenue to close the gap.

“The city has to make tough choices,” said Bowles, who owns 1.8 percent of Carolina PSLFC. “But the economic impact of keeping the team here is important.”

Bowles cited a University of South Carolina study commissioned by the Panthers that showed the team has an annual direct and indirect economic impact of $636 million. He said having an NFL team was “an enormous advantage” in recruiting employees when he ran a Charlotte-area investment bank.

Another minority owner, former Coca-Cola President Donald Keough, said Richardson, as managing partner, determined the need for the renovations.

“What the team is asking for is a modest amount of money and is an investment in the future of the franchise,” said Keough, a 7.8 percent owner of Carolina PSLFC.

If team changes hands

During the recent negotiations, city leaders worried that the team was talking to possible buyers.

But Richardson, who is 77 and had a heart transplant in 2009, is unlikely to sell it before his death, said Bob Willens, a New York-based tax expert. That’s because he would pay taxes on the appreciation of the team since its founding.

But if he leaves his share of the team to his heirs, they would pay income taxes only on the appreciation that occurred after his death if they sold the team, Willens said. They would still face a large estate tax bill, but the tab likely could be paid over 15 years, he said.

Kimble, the deputy city manager, said team representatives told the city that the team would be sold within two years of Richardson’s passing because of tax implications.

If the team changes hands, a new owner could consider a move if another city offers a better stadium deal. That’s why city officials say they have tried to secure as long a tether as possible.

For the first six years of the 10-year tether, the city can go to court to stop a move and receive compensation if the team does leave. If the Panthers depart in the four years after that, the city can either receive payments from the team or acquire the stadium for $1.

Charlotte has competition for the Panthers because many cities want to host an NFL team, and it’s feasible for less populated ones such as Green Bay to have a franchise because teams play only eight regular season home games, said Andrew Zimbalist, a Smith College economics professor who has written extensively on the business of sports.

Still, moving could be difficult because other teams also want to switch cities, and in today’s economy fewer communities are willing to build new homes for sports teams, he said.

“Richardson has an option to move the team,” Zimbalist said. “But Charlotte has some leverage.”

Rothacker: 704-358-5170; Twitter: @rickrothacker
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