NASCAR Hall of Fame Amendment Proposal Charlotte City Council January 5, 2015
Why the NASCAR Hall of Fame? • Expansion of the Hospitality and Tourism Industry for the Region and the State • Gives Charlotte national and international exposure – our brand! • Enhances a $6B motorsports industry in North Carolina • Significant expansion of our Convention Center • Great exposure/ great access to the interstate system • Substantial economic development opportunities for adjacent vacant land and the Second Ward • Office tower represents additional tax base growth on existing Hall of Fame land • Low cost additional parking
Background • The NASCAR Hall of Fame Agreement was signed on March 6, 2006 and amended once on September 22, 2008 to allow for $32M in additional improvements to the original Hall of Fame construction budget • The NASCAR Hall of Fame opened on May 10, 2010 • The construction of the Hall of Fame complex was funded as follows: – 2% NASCAR Occupancy Tax $134.5M – Convention Center 3% / 1% Tax 24.0M – Sponsorship Loan A from BofA/ Wells 14.1 M – Land Loan B from BofA/ Wells 20.0M – TOTAL COST $192.6M • An additional $5.0M of pre-opening expenses for the Hall of Fame were funded from Sponsorship Loan A
Background (cont’d) • The collateral for Sponsorship Loan A is sponsorships, brick sales and civic contributions • The collateral for Land Loan B is sales proceeds from five land parcels created by I-277/ Caldwell Street interchange improvements, and up to $4M in sponsorship, brick sales and civic contributions if sales proceeds are insufficient to retire the loan • The Hall of Fame Agreement also prescribed royalty payments owed to NASCAR on such items as admissions, sponsorships, merchandise sales and concessions • The City, the CRVA, NASCAR and the two banks have had meaningful discussions about ways to improve the financial position of the Hall of Fame, leading to …
Recommendation • We are here tonight to share a staff recommendation comprised of the following: – The City proposes to: make a $5M payment from the 2% NASCAR occupancy tax fund to the two banks on Sponsorship Loan A (there is sufficient capacity in the tax fund to make this payment) and to forego the fifth of five successive years redirection of sponsorship and royalties into the City’s NASCAR Tax Fund – The two banks propose to: upon receipt of this $5M payment, extinguish the remaining $14.1M in principal and an estimated $3.7M in accrued interest in Sponsorship Loan A, and release all liens on Sponsorship Loan A collateral (including the piece affecting Land Loan B)
Recommendation (cont’d) – The CRVA proposes to: grant a 5 year continuation of sponsorship to Bank of America and Wells Fargo at no charge (a value of $250K/ year/ bank) – NASCAR proposes to: waive all past deferred royalties, reduce the amount of future royalties to be paid, eliminate the annual $100K contribution to the NASCAR Foundation, and support a reduction from $10M to $2.5M in the reserve required by the Hall of Fame Agreement – Bottom Line: the impact of these changes will be a significant improvement to the financial position of the NASCAR Hall of Fame, bringing it close to break even on an annual basis. The CRVA will then constrain expenses and/ or enhance revenues to cause break even or better to occur
NASCAR Royalty Payments Current Royalties Proposed Royalties 10% • Gross Revenues on: • 3% on gross revenues on Admissions, Retail, Tour, NASCAR Hall of Fame Sponsorship, and revenue amount in excess Miscellaneous; Net of $10M/ year Revenues on Induction 7.5% • Gross Revenues on catering, special events, special admissions, gift certificates 5% • Gross restaurant revenue
Next Steps • Consideration at the January 12, 2015 City Council meeting – Consider approval of the second amendment to the NASCAR Hall of Fame Agreement, and the second amendment to the Loan Agreement – Consider authorizing the City Manager to execute the documents necessary to effectuate the above amendments – Consider a budget ordinance appropriating $5M in proceeds from the NASCAR 2% occupancy tax for financing purposes
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