Is another taxpayer-funded sports facility in Charlotte worth it?


Using taxpayer subsidies to fund sports facilities has never been without controversy in Charlotte, and a plan to bring the city its first Major League Soccer team has some questioning the economic perks touted by the deal’s supporters.

Others question whether public funds should be used to help a wealthy family’s sports ownership bid. The city and county are considering a proposal under which each would pay $43.75 million toward a $175 million MLS facility on the site of county-owned Memorial Stadium in Elizabeth.

Marcus Smith, CEO of Speedway Motorsports, and his family would pay the other $87.5 million for the stadium, as well as the $150 million fee to join the league. The county would also finance $75 million of the team’s half of construction costs and be reimbursed over the term of the 25-year agreement.

Smith describes public-private partnerships like the Spectrum Center where the Charlotte Hornets play as “great assets” for the community.

“Charlotte has a successful track record, even if they’re met with controversy,” Smith told the Observer on Tuesday. “A community can’t stop investing in the positive elements because if you do that, things start to go backwards.”

At a public forum Tuesday, several people questioned whether a soccer stadium is the best use for public funds in Charlotte, a city that in one 2014 study from Harvard University and UC-Berkeley ranked dead last in economic mobility in a list of 50 U.S. communities.

“We have many community needs that are urgently needed, but a soccer stadium isn’t one of them,” said Jessica Miller, an area resident who pointed to needed maintenance on older schools.

Supporters point to the expected return on a public investment.

The Charlotte Regional Visitors Authority has estimated that the stadium would produce $41.5 million in new spending, from both locals and visitors. The CRVA estimated nearly $10 million of that would come from non-MLS events, such as concerts, festivals or other sports events.

In its calculation, the CRVA assumed that the stadium would attract 21,692 fans a game, the league average. There are currently 17 regular season and three pre-season games, but the CRVA assumed the MLS would add a few more games with new teams being added to the league.

The tourism group assumed that 25 percent of the fans would be from out of town, and that those fans would each spend $242 per game. Based on those estimates, the CRVA believes the city/county will receive $2.3 million in new tax revenue a year.

There are questions as to whether those assumptions will hold up:

▪ Will non-Charlotteans coming to games actually spend $242 per person? That would assume they would likely spend the night in a hotel and eat a few meals in the city. Or will they be day-trippers coming from Greensboro, Spartanburg or other places within a day’s drive?

▪ Another question is whether local fans are adding to the Charlotte economy, or whether they are spending money on soccer instead of going to see the Charlotte Knights baseball team or going to the movies.

▪ The CRVA’s estimate of $41.5 million in new spending is also higher than some other stadiums. Sacramento, which is also trying to win an expansion team, commissioned a study by Capitol Public Finance Group in 2015 that estimated a new stadium would produce $30.5 million in new spending.

Sacramento’s study was also more conservative than Charlotte’s in other ways.

It projected overnight visitors would only make up 5 percent of the fans attending games – not 25 percent like the Charlotte estimate. It projected those fans would each spend $112 on hotel, food and souvenirs.

In San Jose, a study by SportsEconomics LLC last decade estimated direct spending from a new soccer stadium would range from $30.8 million to $38.7 million.

Smith has acknowledged that investors haven’t commissioned a study of fan interest in soccer in Charlotte, though he has cited events like the friendly matches at Bank of America Stadium as evidence of the sport’s popularity here.

Others say interest may be stronger in Raleigh, another one of the 10 cities vying for a team. Raleigh is close to universities that boast some of the strongest soccer programs in the country, and it just got a professional women’s team that will begin playing in Cary this April

A controversial history in Charlotte

In June 2001, voters rejected a non-binding referendum on a $190 million plan for an uptown Hornets arena. City Council ignored the referendum and approved the arena deal in late 2002, a move that officials saw as a chance for Charlotte to boost its standing in the ranks of pro sports.

“I hope 10 years from now, we’ll look back and say, ‘I’m glad we made this decision,’” said then-mayor Pat McCrory.

The $195 million NASCAR Hall of Fame is another facility that drew questions. In its first year, from May 2010 to April 2011, the uptown attraction drew in 278,046 visitors, according to the Charlotte Regional Visitors Authority, which operates the NASCAR-licensed hall. For fiscal year 2016, attendance had fallen about 39 percent to 170,500 visitors.

To build BB&T Ballpark for the Charlotte Knights, the city and county each spent $8 million toward the cost of the $55 million stadium. In 2014, the team’s first full season at the uptown ballpark, attendance surged to nearly 687,715, a jump of about 170 percent from the prior year, the Knights’ last at its old Fort Mill stadium. In 2016, attendance declined to 628,173, though it remains the second-highest in the league.

John Vrooman, a sports economist at Vanderbilt University, calls the expansion fee the MLS requires of bidding markets “overinflated” and not worth the taxpayer subsidies in the long run. That fee – $150 million for this round of bids – should be “at the very most” $100 million.

“This shortfall is why even the most high-rolling and civic-minded ownership hopefuls are seeking soccer specific public stadium subsidies,” Vrooman said. He contends that there is “no real justification for public funding” for such stadiums.

“The external net economic impact of MLS soccer specific stadiums is zero-sum at best because the economic architecture of most venues is designed to capture all economic gains within the stadium.”

Smith, who has also expressed interest in buying the Carolina Panthers after current owner Jerry Richardson dies, said he can’t say whether his family would apply in the MLS’s second round of expansion bids if the current bid falls through, since the expansion fee is likely to increase.

Whatever the fee, other cities have invested less on MLS facilities. Minnesota United, one of the league’s expansion teams, for example, reached a deal last March to build a new stadium in St. Paul, with the team agreeing to pick up the $150 million tab in return for $18.4 million in city improvements around the stadium.

Katherine Peralta: 704-358-5079, @katieperalta