Somebody send the muni bond ratings folks this quote from Charlotte assistant manager Ron Kimble on the tide of red ink washing over the $200m. France Family Convention Center Annex:
“CRVA will have to manage this in a way that keeps the funding within the hospitality and tourism and revenue streams. There won’t be any invasion of the general fund.”
Virtually all debt issued by the city of Charlotte assumes general fund revenue backstops all the little honey-pots of dedicated money. Kimble just told the world that ain’t so. As a result, the city’s borrowing costs should sky-rocket — assuming a rational muni debt market, which of course does not exist.
But this illustrates just how quickly — and predictably — the NASCAR Hall has driven into a ditch. There was never any reason to assume more than 300,000 people would visit in the Hall’s first year — certainly not the wild 800,000 projected by backers. We said that over and over again. Now it looks like even hitting 300K could be tough, with revenue shortfalls — only 60 percent off of projections — already forcing massive cost and staffing cuts for the venue.
Best of all, the CRVA can only cover the Hall’s shortfalls by pulling money away from the other money-losing venues it runs for the city. It is a massive shell game made possible only by the $24m. slush fund the CRVA stashed away from excessive hospitality taxes, money sucked out of the local economy at precisely a time of greatest need. City officials are trying to obscure the numbers, but the $280,000 loss by the Hall in August suggests fixed, bare-bones operating costs of $650K to $750K per month. If so, the HOF needs to generate an absolute minimum of $8.5m. in revenue each year to pay for itself — a number incidentally just about exactly half what city whiz-kids assumed for annual revenue.
Can it do that? Doubtful.
Sticking to the roughly $18 per person revenue number that seems to be fairly stable so far, the Hall would have to bring in about 475,000 bodies to reach $8.5m. As Steve Harrison notes, however, the four-month running average suggests more like 360,000 attendees and with seasonal adjustments, more like 225,000. If we put on our rose-colored glasses and split the difference and say 300K — that would mean all of $5.4m. in revenue. With that the CRVA is looking at having to cover an annual loss of at least $1.5m. to $2m. And that is just for the first full year of operation. The following year as the newness factor wanes, figure at least a 25 percent drop in attendance or only about $4m. in revenue, which could easily double the red ink.
Meanwhile, BAC and WFC float along their own slush funds, the $21.5m. in loans the city took out in order to boot-strap the Hall and were supposed to be paid off with corporate sponsorship revenue — of which little has materialized.
We close with absolutely the sweetest part of this sour deal. Back when some of us raised hell about how the city of Charlotte had signed an incredibly lop-sided and unfair deal with a multi-billion dollar entertainment concern, NASCAR backed-up to offer a five-year kick-back on the first $1m. in annual royalty payments it receives from its take of HOF revenue, which is a nice, fat 10 percent. But if the Hall does not generate $10m. revenue, there is no million to kick-back.
