Charlotte committed $110 million to attract pro soccer. Is it too late to back out?

To help bring a Major League Soccer team to Charlotte, the City Council set aside $110 million from tourism revenues.

But even after officially securing the 30th franchise, city leaders have failed to explain exactly how the money will be spent — and haven’t offered taxpayers an opportunity to give feedback on the investment.

City Council members emphasize that at this point in negotiations, they still aren’t legally obligated to hand any money over to MLS or billionaire Panthers owner David Tepper, who has led the push for soccer in Charlotte.

Yet critics says it’s too late for the city to renege — formal deal in place or not.

“It would be horrible to go back on your word ... I don’t see how they can back out,” said Kenny Smith, a former Republican City Council member. “They were awarded the franchise based on the spending of this money.”

Council member Tariq Bokhari heralded the MLS deal as “incredible, if not record-breaking,” emphasizing the city has not spent a single taxpayer dime so far — despite the expansion team officially coming to Charlotte.

The Charlotte City Council is now expected to negotiate in “good faith” with MLS and Tepper Sports to reach a “mutually agreeable outcome,” Bokhari said in an interview Wednesday.

“Good faith is we know the components of this deal that have to be figured out,” Bokhari said, “and we firmly believe that based on the conversations we’ve had, we can work toward making this not about a subsidy to purchase a soccer franchise but about an economic driver.”

Still, the council hasn’t revealed much about those incentives to the public.

Charlotte has yet to fulfill an Observer public records request for the minutes from closed sessions, though city spokesman Jason Schneider said Wednesday evening, “We are actively working to produce all responsive records.”

Critics call for transparency

Critics have rebuked the city for its lack of transparency surrounding MLS.

“I look at the deal and really struggle with it,” Smith said. “To have a publicly funded incentive of this size and to not have to hold a precursory public vote or hearing — which is standard protocol for incentives — is unconscionable.”

Eric Heberlig, a professor of political science and public administration at UNC Charlotte, said that with the city relying on tourism money — rather than its general fund that could support affordable housing and infrastructure, for example — less public input is required.

The city generates tourism revenues from hotel/motel, rental car and prepared food and beverage taxes.

Charlotte’s Convention Center Fund — one of the city’s main tourism streams that can be used for upgrades to Bank of America Stadium — was expected to raise about $55 million in fiscal year 2019, according to Charlotte’s fiscal year 2020 adopted budget. The amount comes from a 3% hotel/motel tax and 1% prepared food and beverage tax — and it can be used for tourism-related purposes, including “debt service, maintenance and operation of convention center facilities, and promotion of tourism,” the budget outlines.

“For these tourism taxes, since they’re largely paid by visitors to the city, public officials then argue that since our residents aren’t paying directly to this, there’s less need for them to comment,” Heberlig said. “Obviously, the money can’t be used for everything — you can’t shift the tourism money over to pay for police.”

Mayor Vi Lyles told MLS Commissioner Don Garber that the city, in coordination with Tepper, is willing to set aside the $110 million from hospitality funds, according to a letter dated Nov. 21.

Addressing the media Tuesday, Lyles clarified the money is being held “in reserve” and won’t be committed to any entity until more rigorous negotiations around economic development are solidified.

That includes plans for the former Eastland Mall site — which will be transformed into the team’s headquarters and practice facilities, among other retail and residential spaces — and an entertainment area linking uptown and the Gateway District.

“The money is not irrevocably committed,” council member Ed Driggs said in an interview Tuesday. “The way I interpret this is it’s a down payment on a larger vision that we have with Mr. Tepper. It’s also an opportunity to address the problem of Eastland.”

Allocating hospitality funds

Calculations underlying the $110 million bid, as well as the anticipated economic impact for Charlotte, are murky.

Lyles and council members said they are still exploring the best allocation of funds across upgrades to Bank of America Stadium, where the soccer team will begin play in 2021, in addition to Eastland and the proposed entertainment district.

“I don’t know why Charlotte-Mecklenburg is so giddy to get Major League Soccer that they’re willing to bypass the process, open the pocketbook and hand out as much money as we have,” said Jim Puckett, a former county commissioner who’s running to reclaim his seat. “It sounds like we’re really desperate for a date to the prom. It’s really irresponsible.”

The city’s Convention Center Fund posted an end balance of almost $75 million for fiscal year 2018, according to Charlotte’s comprehensive annual financial report.

It’s unclear how much of that money is already earmarked for future capital projects, including the Charlotte Convention Center expansion underway. But the City Council isn’t planning to pursue alternative funding mechanisms, such as bonds, to pay for MLS-related projects, council member James Mitchell has told the Observer.

Heberlig said the city’s commitment probably reflects the flexibility of its tourism streams, rather than a cost analysis of the different projects tied to MLS.

“I suspect what we’re doing here is reversing that process,” he said. “We’re saying this is the amount we have to spend, and we’ll figure out the details later. It may not actually cover the expenses when they come up with their ideal vision.”

Critics say Charlotte has entangled itself in an awkward — and, potentially precarious — negotiating position with MLS, straddling opposing business philosophies.

From one perspective, Charlotte comes across as too eager to woo multi-million-dollar projects backed by billionaire investors, Puckett said. An Observer analysis of recent MLS expansion teams shows that Charlotte’s public bid far outpaces what other cities have offered the league.

“The taxpayer was hurt because the negotiation was so egregiously one-sided,” Puckett said. “It’s mind-boggling. I see no risk that Major League Soccer was not going to come here if the public was on board from the very beginning.”

But from a different viewpoint, if Charlotte were to pull out of its $110-million pledge — which appears unlikely, though still possible in the absence of a formal contract with MLS or Tepper Sports — the reverberating impact could harm future development in the city, Smith said.

“That’s not how business is conducted,” Smith said.