Charlotte City Council
August 25, 2014

Time Warner Cable Arena (TWCA)
•
1 of 28 cities to be home to an NBA team
•
Source of pride and entertainment for both local residents and out of town visitors
•
Contribution to a high quality of life, which attracts business investment/development/jobs/ people
•
National and international exposure when hosting events in TWCA (i.e. Democratic National
Convention)

Time Warner Cable Arena
–
Charlotte Hornets NBA Games
–
Charlotte Checkers AHL Games
–
CIAA Basketball Tournament
–
Other College Basketball Games
–
Non-Sport Live Entertainment
–
154 Events in 2013

Total Economic Impact for 2013 was
$263.16M
From Arena Related Out-of-Town Visitor Spending and Hornets
Organization Impact (does not count displaced local spending)
Total Economic Impact
Employment 2,558
Total Output
Tax Revenues
(Federal, State & Local)
$263.16 million
$38.82 million

Current Arena Operating Agreement
•
Agreement signed in 2003, Arena opened on
October 23, 2005 (Rolling Stones Concert)
•
Agreement runs for 25 years (through the 2029-
2030 NBA Season) City owns the Arena, Hornets operate the Arena, CRVA performs “back of house” functions
•
Injunctive relief clause or declining balance liquidated damages in effect if Hornets try to leave (tether in place through separate agreement)

Current Arena Operating Agreement
•
Operating agreement has prescribed criteria governing repairs to the Arena
•
Operating agreement allows Hornets and
CRVA to request improvements after seven years of operation, with prescribed criteria, and it requires the City to make the improvements if the criteria are met
•
Operating agreement also includes a Pay-
As-You-Go Capital Fund for annual small capital needs

Pay-As-You-Go Capital Fund
•
City and Hornets pay equally into the Fund
•
Contributions started at $250k each in Year
One and increase by 5% per year up to a maximum of $500K
•
Current contribution is $364,000 per year each ($728,000 total)
•
Hornets also have spent/leveraged an additional $6.685M in improvements benefitting the Arena over the last 8 years

Refer to Handout
( Arena Upgrades/Improvements Funded
By HSE or Through Partnerships)

Current Agreement Terms
Regarding Repairs and Improvements
•
The City is required to make repairs and improvements to keep the Arena operational and current per the following:
–
Changes required by applicable law
–
Changes required by NBA standards
–
Capital repairs necessitated by damage, destruction, defects, ordinary wear and tear, obsolescence or similar causes
–
After seven years, capital improvements where more than 50% of NBA arenas now have incorporated this capital addition
•
The Arena is now entering its ninth year of operation

Arena Improvements Amended
Request Summary
March 3, 2014 Original Submissions
By CRVA and Hornets Over 5 Years
CRVA
Hornets
Subtotal
Add:
Multiple Restroom Refurbishments
(originally a $1 placeholder)
Levy Restaurant Request
Total Updated Request Over 5 Years
$7,840,001
34,075,309
$41,915,310
2,099,999
3,870,000
$47,885,309

Refer to Handout
(TWCA Capital Projects & Repairs)
*fold out*

Goals Met by Staff Recommendation
•
It creates a more appropriately sized annual pay-as-you-go capital fund to maintain a building of this age, size, investment and importance
•
It fulfills the City’s contractual obligation
Hornets and the NBA
•
It leverages participation from our private partner in both up front improvements in specific components, and in annual capital

Goals Met by Staff Recommendation
It allows our Arena to remain competitive in retaining current events and luring new events to our City thereby creating substantial economic impact
It spreads out the improvements and repairs over a 5-year period that enables the City to fund the improvements aligned with our resources

Arena Upgrade Staff Recommendation
•
To satisfy the City’s obligations under the Operating
Agreement, City, CRVA and Hornets propose to implement
$29.9M of improvements over 5 years with $27.5M funded by the City and $2.4M funded by the Hornets
•
City and Hornets each agree to fund $600,000 more per year for 10 years into the existing pay-as-you-go capital fund, with the first four years of the Hornets contribution pledged to home team locker room and suite improvements together valued at $2.4M
•
Funding for the $27.5M of City funded improvements and
$600,000 per year capital allocation to be paid from hotel/motel occupancy tax and rental car tax derived revenues

Refer to Handout
(TWCA Capital Projects & Repairs)

Refer to Handout
(NBA Requirements)

Refer to Handout
(Summary of NBA Improvements)

Arena Funding Sources
Funding Source
Tourism I
3% Occupancy Tax
1.5% Rental Car Tax
Statutory Uses
Marketing and Capital Investment for Tourism Related Activities
(Arena, AAA Baseball)
Tourism II
Equivalent of 4%
Rental Car Tax
Transit, but leverages Tourism
Related Activities (Levine Center for the Arts Campus)
Funding Amount
$6M
(for annual capital over 10 years)
$27.5M
(for improvements over 5 years)

Next Steps
•
Provide any additional information requested by Council
•
Schedule on September 8, 2014 Council
Agenda:
–
Consideration of Amendment to Arena
Operating Agreement Documenting These
Provisions
–
Consideration of Budget Amendments
Appropriating Funds to Make Such
Improvements