The city of Charlotte has proposed making a one-time payment of $5 million to Bank of America and Wells Fargo on a construction loan for the NASCAR Hall of Fame – but the banks would be required to write off the rest of a $19.1 million loan.
In addition, NASCAR has agreed as part of the plan to waive $3.2 million in past royalties it was supposed to receive from the racing museum. The Charlotte Regional Visitors Authority, which operates the city-owned hall, hasn’t been able to pay NASCAR any royalties on ticket sales, merchandise, and food and beverages because the hall has been losing more than $1 million a year since it opened in 2010.
The proposal is part of a city plan to get out of about $22.8 million of NASCAR hall obligations. If the deal is approved, the hall would also be given a break from future payments owed to NASCAR.
“The whole goal is to bring the hall into a break-even position,” said Deputy City Manager Ron Kimble.
The City Council, which heard the proposal Monday, will vote on the loan modifications next week. But even if the agreement is approved, the hall is still estimated to lose between $200,000 and $500,000 a year in the future.
The hall was supposed to attract 400,000 visitors a year. Last year, it attracted 170,000 people. CRVA chief executive Tom Murray said he’s confident that annual financial losses can be eliminated eventually.
The city’s proposal comes as Charlotte is considering another private-partnership project to increase tourism – a possible $37 million investment in an amateur sports complex near Bojangles’ Coliseum. Kimble, who is also working on that project, said he’s still confident in that and other projects despite the hall’s poor financial performance.
“We just have to do the best (financial) modeling possible,” he said.
When the hall was built, the primary source of funding was a new 2 percent hotel/motel tax. But the city also took out two loans from Bank of America and the former Wachovia that were about $20 million each.
The hall sold far fewer bricks than expected. And the value of sponsorships has also declined, the hall acknowledged Monday.
The city hasn’t yet paid any money toward that $19.1 million loan, and $3.5 million in interest has accumulated. The city said the value of sponsorships is now about $500,000 a year. That could decline if sponsors declined to renew their contracts.
As part of the deal, the CRVA would give Bank of America and Wells Fargo free corporate sponsorships, which the city said are worth $250,000 a year for each bank.
The two loans were “no-recourse loans,” meaning the banks couldn’t seize assets if the loans weren’t paid.
The two sides were in a standoff. The banks could accept whatever sponsorship money trickled in. And the city could continue to have nearly $20 million in obligations it wasn’t paying, an embarrassing situation.
The banks and NASCAR have agreed to the proposal, Kimble said.
The city and the CRVA could have chosen to pay off the loans from other sources, including hospitality tax reserves. Tom Murray of the CRVA said he felt the tourism authority had already contributed to trying to solve the hall’s deficits.
Council member Ed Driggs, who supports the loan changes, said the banks had made a bad loan.
“This is not a $14 million gift from the banks,” Driggs said. “They were looking at (a loan) that was uncollectable otherwise.”
The $5 million payment to the banks would come from the city’s hospitality taxes, which are levied on hotels and motels, as well as restaurant and bar tabs.
Under the original agreement, NASCAR was supposed to receive as much as 10 percent from hall revenues. Because the hall wasn’t making money, those payments haven’t been made.
In addition to wiping out past royalty payments, NASCAR agreed that its future royalty payments would be cut to 3 percent of revenues. But those royalties are only paid on hall revenues over $10 million.
That may not occur for a while. Hall revenues have been less than $9 million annually, the city said.
Kimble, Murray and hall director Winston Kelley all said Monday that the racing museum was a key part of the city’s overall tourism strategy.