With questions unanswered, county races toward soccer deal

With the host city on the sidelines, Mecklenburg County and the son of racing magnate Bruton Smith are now teamed in pursuit of a Major League Soccer franchise.

But the county’s split vote last week advanced only the broad outlines of a deal to replace dilapidated Memorial Stadium with a $175 million facility. Mecklenburg would invest nearly $120 million upfront but key details, including the extent of more county spending in future years, are still to be negotiated.

And the county will be partnered with a racing family with a history of being combative with local government.

Marcus Smith, 43, has been the public face of the MLS bid. His father, Bruton, 89, has not made any public comments about getting a team. Mike Burch of Speedway Motorsports said that the elder Smith is not involved at all in trying to land the team.

Some still believe that Bruton Smith – the flamboyant and outspoken recent inductee to the NASCAR Hall of Fame – will be involved in the project, if only because he built the race track empire that allows Marcus Smith to pay the $150 million MLS expansion fee.

An MLS team would be the latest of the Smiths’ efforts to grow their Charlotte sports entertainment conglomerate. Marcus Smith also spearheaded efforts to try to bring the X Games to Charlotte, and both he and his father have expressed interest in buying the Carolina Panthers after current owner Jerry Richardson dies.

“Anything that happens around Bruton is Bruton. Whether it’s his car dealership or soccer or buying the Panthers. Whatever it is, it’s all him,” said Humpy Wheeler, the former president and general manager of Charlotte Motor Speedway.

Wheeler worked with Smith for over three decades until the two had an unceremonious falling out in 2008, after which Wheeler retired. Smith soon appointed Marcus to Wheeler’s old post. Wheeler said he has not spoken to Smith since then, though he keeps in touch with Marcus.

In discussing Charlotte, MLS officials have repeatedly referenced the “Smiths” as leading the bid.

“When we look at a family like the Smiths, we’re impressed by the experience they have broadly in sports entertainment, and we think that could be a real asset to us,” Mark Abbot, league president and deputy commissioner, said in a call last week with reporters.

Bruton Smith has in the past fought local governments, most recently over a years-long fight with Concord and Cabarrus County over incentives for Charlotte Motor Speedway.

Ten years ago, Bruton Smith fought Concord over plans to build a drag strip next to the speedway. Smith said he might move his entire speedway out of the county, which would shift hundreds of millions of dollars of visitor spending out of the area.

Smith and Cabarrus County fought a years-long legal battle over how and when the county would give Smith $80 million in incentives. Cabarrus won the lawsuit.

“He’s pushed the button a few times,” Wheeler said of Smith. “That’s just him ... He’s always been that way.”

In 2004, Bruton Smith feuded with Charlotte and Mecklenburg County over his decision to cut down hundreds of trees to make way for a parking lot near the speedway. The local governments said Smith didn’t have permission to do so.

Charlotte City Council declined last week to even vote on joining Mecklenburg County in the stadium proposal. Democrat Claire Fallon said she is opposed to spending $43.75 million on the stadium in part because of Bruton Smith’s history with local government.

Marcus Smith has not been lobbying council members to approve the soccer deal – an apparent change from Bruton Smith’s tactics with elected officials.

Concord council member Lamar Barrier said Marcus Smith is known for being less combative than his father.

“Sometimes Marcus is a lot easier to talk to than Bruton Smith,” Barrier said. “But I’m sure his dad will say ‘yes’ or ‘no.’ He’s dealing with Daddy’s money – and I don’t mean that to be ugly or anything.”

A spokesman for the Smiths said they were not able for an interview this week.

County money

The term sheet for the Smith’s $175 million stadium deal, made public two weeks ago, is a starting point for negotiations. Commissioners would have to approve a final, binding agreement on what the stadium will look like and terms of the team’s tenancy.

The terms of the proposal have the county contributing $43.75 million toward the stadium. The county would fund $75 million of the Smiths’ $87.5 million half of the project, to be repaid at $4.26 million annually over 25 years.

Those numbers could change during negotiations but would come back before county commissioners for approval, county manager Dena Diorio said Friday.

The county would continue to own the site and manage the stadium’s design and construction. The soccer team would have full operating control of the facility, but allow the city and county 20 days’ free use a year and charge “reasonable” rental fees for nonprofit groups.

Still to be negotiated, and so unknown at this point, are several key details:

▪ What assurance will back the team’s guarantee to repay the county’s $75 million?

▪ How would damages to the county be calculated if the team leaves the stadium before 25 years?

▪ What criteria would define whether the team is no longer “economically viable,” allowing it to end the agreement after 15 years?

▪ What would be the cost of major upgrades to the stadium that the county agreed to pay for in the 11th and 21st years of operation?

The county modeled some aspects of the proposal, including future upgrades and terms for the team to leave the stadium prematurely, after the city’s relationship with the Charlotte Hornets at the city-owned Spectrum Center, of which the NBA team is the tenant.

The agreement between the city and the team calls for the arena to be among the most cutting edge in the NBA. Two years ago, City Council agreed to spend $33.5 million on arena improvements, which included a new scoreboard, seats and lighting.

The improvements came 10 years after the $265 million arena opened.

If the $175 million soccer stadium needed a similar amount of work, the county could be required to spend $23 million. That could conceivably mean more seats if the soccer team was a success. Other possibilities could be new scoreboards and improvements to suites and concession stands.

Return on investment

County Commissioner Dumont Clarke, a retired attorney who practiced corporate law, advised Diorio to hire outside lawyers with experience in public-private partnerships. Diorio said that’s likely to happen.

Clarke said those experts could make sure the county’s right to damages if the team leaves Charlotte is enforceable, and that guarantees the team makes to repay the $75 million in construction costs the county would finance are solid.

“If I could pick the private party to help put in money to rebuild Memorial Stadium, I might have picked somebody else,” Clarke said. “But if you’re motivated to do this, certainly nobody else has stepped forward and you can’t always pick your partner.”

Republican commissioner Bill James, a retired CPA, calculated that the county would lose money under the repayments set out in the term sheet because they don’t reflect the variable cost of capital.

James also wants the Smith family to individually guarantee, or provide a letter of credit, for repayment of the $75 million the county is fronting. The county could otherwise be left with an obsolete stadium a few years from now, he said.

“The Smiths have no risk other than the $12.5 million” they would pay upfront toward construction, he said. “If they’re the ones doing the deal, then they should be on the hook for making it work.”

Diorio, and some county commissioners, reason that the county’s $43.75 million investment will leverage $110 million in spending by the team owners. “I think there’s only upside for the county and the community,” she said.

Diorio said the county calculated the $75 million payback on a 4 percent interest rate, or about the return the county would expect if the money were invested elsewhere. But she noted that the new stadium will still have value to the county after the money is repaid, and said its benefits go beyond the financial.

“We think there are economic advantages to Mecklenburg County by having the franchise and a positive economic impact on hospitality and tourism,” she said. “We think there is some validity to arguments that it adds to quality of life. Having it here will make us a more desirable place to live, work and recreate.”

County board chair Ella Scarborough served on Charlotte City Council when the Carolina Panthers and Charlotte Bobcats (now Hornets) came to town. Scarborough, who voted last week to move forward with the soccer proposal, said she’ll base her final vote on what comes out of negotiations.

“The tax dollars we’re receiving now from the Hornets and the Panthers, no one can argue to me that they haven’t made the city and the county better,” Scarborough said. “I’ve been through this before, and so I would not put this county in a position where the county won’t gain taxes to do the marvelous things we need to do.”

This story was originally published February 3, 2017 at 4:43 PM with the headline "With questions unanswered, county races toward soccer deal."