Charlotte Observer
11:04 am
Wed April 24, 2013

Charlotte Leaders In February Believed Panthers Were Looking Into 2013 Sale

Panthers owner Jerry Richardson.
Credit Michael Tomsic

As Charlotte City Council debated in February whether to give the Carolina Panthers money for stadium renovations, the city attorney believed the team might be sold and moved if members turned the team down.

Transcripts of closed meetings released Tuesday also show the city and team tangled over the Panthers’ tax burden, the length of a contractual agreement to keep the Panthers in Charlotte, and even over a proposal that the city build the team a parking deck.

At the Feb. 8 meeting, the documents show that City Attorney Bob Hagemann told council members that a Panthers representative had said owner Jerry Richardson did not rule out selling the team to someone who could move the Panthers.

Hagemann told council members that Billy Moore, an attorney, told him the council could not wait until its Feb. 18 meeting to decide.

“I said, ‘Does that have anything to do with the Feb. 15 date the NFL has set (for teams to announce they are seeking permission to relocate)?’ ” Hagemann said. “Billy laughed and said I can’t confirm that, but it is very perceptive.”

Hagemann then told council members he had talked with Moore about a theory that Richardson wouldn’t sell the team because he would have to pay capital gains taxes, in addition to his heirs later paying an inheritance tax.

Hagemann said he tested that theory with Moore. “What he was telling me was, ‘Please don’t say that Mr. Richardson won’t sell the team, please don’t say that.’ ”

The Charlotte city attorney then said: “I’m convinced (Richardson) will not move the team, but I know, that as late as yesterday afternoon, their lawyers were in conversation on conference calls with lawyers for a prospective purchaser.”

Later that day, council members voted 9-1 to give the Panthers public support for renovations of 17-year-old Bank of America Stadium.

The city released the transcripts, along with hundreds of other pages of documents, one day after council voted 10-0 Monday to give the Panthers $87.5 million for stadium improvements in exchange for a firm six-year commitment to stay in Charlotte.

In an interview with the Observer on Tuesday, Hagemann said that Richardson and the Panthers never threatened the city. He said he based his Feb. 8 comments on conversations with Moore, an attorney with Moore & Van Allen.

“I never perceived it as a threat,” Hagemann said. “But I had deduced this was a possibility.”

He added Tuesday that he still believes there was a distinct possibility the team could be sold and moved.

“My job that day was to share with council what I thought was going to help their decision,” Hagemann said.

It’s unclear whether the team was entertaining any offers. Team spokesperson Charlie Dayton said by email Tuesday that the team “will not be moved under current ownership and is not for sale.”

Months of talks

Documents show that the city and the team went back and forth for seven months over how much the public should pay – and what the Panthers should give in return.

Deputy City Manager Ron Kimble said that when he first met with the Panthers in October, the team’s opening bid was for $200 million in public money to help fund $250 million in renovations. The Panthers also wanted $4 million in annual revenue guarantees from the city, as well as relief from city and county property taxes, which are more than $2 million.

Kimble said during that meeting the team didn’t offer a contractual guarantee, or “tether,” that would keep the team in Charlotte.

In February, after several rounds of negotiations with the team, council members approved a plan that would have given the team $144 million in city money, along with $62.5 million in state funds. The city would give the team $1.25 million annually for maintenance and game-day traffic control. The team would have continued paying property taxes.

In exchange, the Panthers would have agreed to a 15-year “tether” binding them to the city.

That deal changed significantly after the General Assembly rejected Charlotte’s request to increase the local prepared food and beverage tax.

The final deal calls for the city to give $75 million for stadium renovations and $1.25 million each year for 10 years. That commits the Panthers to the city for six years.

Talks over taxes, debt

Negotiation highlights included:

•  Property taxes: Kimble and Hagemann said the Panthers wanted to stop paying property taxes on Bank of America Stadium, which the team owns. Many NFL teams do not pay property taxes on their stadiums.

The team proposed deeding the stadium to the city for a certain time period, then having the city lease the stadium back to the team for a nominal fee.

The below-market lease would be subject to property taxes, but there has been discussion among legislators of modifying the so-called “intangibles tax,” which would make the lease exempt from taxes.

The Panthers made at least two attempts during negotiations to avoid stadium property taxes. But Kimble said the city pushed back, and the team dropped that proposal.

“We wanted to protect the revenue flow to the city and county,” Kimble said.

But Monday’s deal does include some tax relief for the team.

The city will spend $75 million on capital improvements for the stadium, which could include new escalators, video boards and a sound system. The city will own those improvements, in part to shield the Panthers from local property taxes.

The city will lease the improvements to the team at a fair-market rate, which isn’t taxable. The city will then pay the Panthers an annual fee to maintain the property.

The complicated ownership structure was also designed to shield the team from the Internal Revenue Service, according to the closed session transcript.

“(T)he structure is driven by their desire to avoid paying income tax on $125 million,” Hagemann told council members at a January meeting.

•  Panthers profits: City officials did not press the Panthers on how much money they make – or how much they could afford to spend on renovations.

Kimble said that NFL teams are an asset, and that the city was focused on anchoring the team to Charlotte. The city studied other deals NFL teams have with host cities and tried to make a deal favorable to those agreements.

But during a Jan. 14 closed session meeting, in which the Panthers first asked council members for public money, council member Michael Barnes, a Democrat, asked Panthers majority owner Jerry Richardson how much he could afford.

“We have just crammed and crammed to pay debt (on the stadium), and it just wouldn’t make sense now for us to load the business again with that kind of debt,” Richardson said.

Barnes asked: “So you are saying your capacity is $62.5 million?”

Richardson replied: “Well, I could load it up just like you could. You could use your credit card up, that is an option, but I’m not going to do that.”

In February, the website Deadspin released a financial report for the Panthers covering the 2010 and 2011 seasons. The audit showed the team had a net income of roughly $97 million for those two seasons.

The Panthers said at the time that the better indication of the team’s profitability was its operating cash flow, which was $66.5 million for the two seasons. The team said the report showed it would be difficult to field a competitive NFL team while paying for major stadium renovations.

• Length of tether: During the team’s first meeting with the city, the Panthers did not offer a binding agreement to keep the team in Charlotte in exchange for public money. But over the course of several meetings, city staff and council members pushed back, securing a so-called “hard tether” enforceable by the ability of the city to seek an injunction before a Mecklenburg Superior Court judge that would force the team to play in Charlotte.

•  Parking revenue: The Panthers have long said they are at a financial disadvantage to many NFL teams because they control few parking spaces. In its early discussions with the city, the team asked for game-day parking revenue from a city provided site.

“They wanted us to build them a parking deck,” Kimble told council members in January.

The city rejected that idea. But the city did agree to a $1 million annual maintenance fund, as well as $250,000 annually for game-day traffic-control costs.

•  Secrecy: Some council members were concerned that they were holding too many negotiations in closed session, rather than discussing Panthers funding openly.

At the Feb. 8 meeting, Barnes asked: “We are not having any public dialogue or debate about it and that really bothers me. It reminds me a lot of the Hall of Fame deal, which has gone down the toilet.”

Barnes voted for the Panthers proposal on Feb. 8 and again on Monday.