In the beginning, it seemed that there was no way the thing could fail. When the new NBA team came to Charlotte in 2004, there were ticker-tape parades with smiling politicians waving from cars to crowds of fans. Sure, the crowds weren't as big as last time around, when the Hornets arrived on the scene, but the fans were every bit as excited.
The politicians were relieved. After a nasty battle over the arena, they weren't sure how many people would show up, but about 5,000 turned out for the parade and free food and drinks. It was a good sign that their $285 million gamble (the eventual price of the arena, including cost overruns) had paid off, that the fans had disappeared from the old arena not because they had lost interest in NBA basketball, but because they didn't like the owners of the now-departed Charlotte Hornets basketball team.
At first, it seemed they were right. The luxury suites sold out completely, which was supposed to make up for the somewhat disappointing sales of club and regular seats. Though the arena lost money during its first year, an average of 3,000 more fans attended each game during the new team's first season compared to the Hornets' last season. The operating losses were subsidized with money from a fund made up partly of property taxes, so it technically wasn't completely property tax money, city officials argued.
The second year was supposed to be better, but things got worse, despite the two hot new players the new owners had signed at large salaries. Attendance dipped slightly, and the league as a whole took a hit on its television revenues. That forced the new owners to exercise a controversial clause in their lease that guaranteed operating subsidies for the team should the team lose money. The city had had to put the clause in the team's lease because of the precedent set by New Orleans, which guaranteed subsidies to the former Charlotte Hornets.
The new owners, who had assured the city council that it was unlikely they'd ever make use of the subsidy clause, had owned the team for just a year when the council was forced to give in -- and to use property taxes to make the team whole.
Because the majority of the revenue the new arena generated, including money from events like the circus and ice shows, went to the team as stipulated in the lease, the coliseum authority, the quasi-city agency that runs the arena, was forced to come to the council for operating subsidies for the arena too, as well as Cricket Arena and Ovens Auditorium. By then the city, which had been struggling to make the ends of its budget meet since 2002, had spent over $100 million in property tax money to cover cost overruns, arena operating deficits and team operating deficits, all of which contributed to a large property tax increase in 2005. But there were still more problems still to come.
Declining hotel revenues and the closure of several major hotels hamstrung the hotel-motel tax, which was supposed to pay the debt on the arena, while arts groups and the museums demanded desperately needed renovations and upgrades that were long overdue. The city even dug into sidewalk and road repair funds to prop up its capital budget, but it just wasn't enough. The city council was forced to hike property taxes again in 2007 just to meet its basic capital needs. Because the state had also hiked taxes by 20 percent over the last five years and withheld increasing amounts of revenue the city counted on, city leaders found themselves caught in a real jam. By then, combined tax hikes by the city and the county had raised local property taxes by 40 percent. Suburban flight over county lines, particularly into South Carolina, became an issue.
Then, smack in the middle of it all, the owners of the new team demanded a renegotiation of their lease in an attempt to grab control over the few revenue sources the city still collected on the arena. The team owners had propped the franchise up with their own money, and they felt the city should chip in as well. To generate the kind of profits it would take to sustain a highly paid, world-class team, the city would have to invest, they argued. There was no chance the franchise would achieve solid profitability without more investment from the city.
At the same time, the city's other capital investments needed propping up too. Baseball bonds had passed in 2003, and by 2009 the stadium needed upgrades. The trolley had turned into something of a money pit as well, as various re-routing schemes and add-ons to the project had increased its cost to a whopping $80 million, plus operating subsidies. Police and other basic city services had been slashed to the bone. Even arts funding was frozen. In desperation, the city finally went to the state legislature seeking new sources of revenue, taxes on rental cars, an increased food and beverage tax, a payroll tax -- anything that would fill its coffers. But as usual, state leaders slammed the door in their faces.
By the time taxpayers realized how much money was missing from their wallets, it was too late. In 2005, there was an organized effort to toss much of the city council out of office. Voters actually managed to defeat two of the four at-large members, but the districts the rest of the council members drew for themselves were so gerrymandered that the voters couldn't dislodge the rest of the council, which was largely elected by hardcore party hacks in primaries where less than 3,000 votes were cast. By the end of the decade, several now-elderly members of council had died in office despite the best efforts of voters to rid the city of them.
By the end of the decade, Charlotte and Mecklenburg County regularly made top 20 lists of the least affordable places to live in the country despite the $100 million in affordable housing bonds that had been passed. The city just couldn't build enough subsidized housing to stop the flight. It now struggled, not to recruit new business, but to hang on to the businesses it still had.
New leaders who inherited the mess struggled to put the city back together, but it would be 2015 before the staggering debt load the city and county had accrued over the last two decades was reduced back to manageable levels.
When they asked world-famous Creative Loafing columnist Tara Servatius what she thought of what they'd done to her beloved city, she shook her head and said, "I told them so, but they wouldn't listen." *
