City of Charlotte issued the following announcement on June 10.
The Charlotte City Council is considering a new, updated contract between the City of Charlotte and the Charlotte Hornets that would renovate Spectrum Center and extend the Hornets' lease of the building through 2045.
The 17-year-old Spectrum Center is owned by the City of Charlotte, and leased to and operated by the Charlotte Hornets and Hornets Sports and Entertainment. The original operating agreement was executed in 2003 and the arena opened in 2005 under the original team ownership. The Charlotte Hornets assumed the operating agreement in 2010. The current lease expires at the end of the 2029-2030 NBA season.
The May 31 presentation to the council is available on the city's YouTube page. On June 6, staff and consultants shared additional information on the deal in an Economic Development Committee presentation. The June 6 Economic Development Committee meeting is available to watch on theh city’s YouTube page. The Charlotte City Council is tentatively scheduled to vote on the updated agreement on June 13.
Below is more information about what is being considered and why. A feedback form is embedded at the bottom of this page to provide written questions and comments. Comments will be shared with staff and the City Council. Please include any questions as well and the staff will answer them.
Transcript Welcome to Spectrum Center
Why is the city paying for Spectrum Center upgrades?
The City of Charlotte owns Spectrum Center and is contractually obligated to maintain and make improvements to the building. The estimated costs for needed repairs and improvements is approximately $173 million. The Charlotte Hornets' lease for Spectrum Center expires in 2030.
What is the council voting on if the city if obligated to pay for upgrades?
In addition to paying for the $173 million renovations it is contractually obligated to make, the city would contribute $42 million dollars for additional upgrades.
Also being discussed is redeveloping the site of the Charlotte Transportation Center to build a performance center, creating an entertainment district around Spectrum Center. The city would contribute $60 million to the performance center, paid for by new revenues generated by naming rights and other opportunities, not from tourism taxes.
The Charlotte Hornets would extend its lease with the city for an additional 15 years, through 2045. The Hornets would pay a total of $32 million in rent through 2045 and continue its annual $1.1 million capital fund contribution through 2045. The Hornets would cover any costs for Spectrum Center upgrades more than $215 million and any costs more than $60 million for the performance center.
How is the city going to pay for the upgrades?
The money to pay for the upgrades to Spectrum Center would come from rental car and hotel sales taxes that, by law, must be spent on projects to support the city's tourism economy. These funds are not part of the city's funds for police, fire, transportation, transit and other city services.
The performance center would be funded by new revenues generated by naming rights and other opportunities – not from tourism taxes and not from the city's General Fund.
What if the upgrades cost more than what the city and the Hornets agreed to?
The city expenses are capped for Spectrum Center ($215 million) and the performance center ($60 million). Any cost overruns would be paid for by the Hornets.
Can the city afford to do this?
Yes. The city has a policy for vetting projects and this project meets the policy's principles and parameters.
The city has a rigorous process to ensure both the fund balance to cover its financial commitments related to tourism funds and the capacity to afford financing multiple projects. Within the tourism fund, the city has built additional capacity for other projects. While this does impact the fund for the first several years, it does not preclude other projects from happening.
Does the city have to pay for upgrades to the Spectrum Center?
Yes. The City of Charlotte owns the Spectrum Center and is contractually obligated to maintain and make improvements to the building.
What happens if the council does not vote to approve the new agreement?
The city is contractually obligated to perform the work under the current lease agreement. Without a lease extension, the Hornets could request capital improvements to the arena annually until the end of its lease in 2030 and through the team's option to extend for five more years. Most likely, by 2026, there would be a request for a new arena, to extend the lease beyond 2030 and retain the Charlotte Hornets.
If the Hornets were to leave after 2030, the city would have to find another operator for the building or operate the building itself, or hold the building until the debt from the $173 million was paid off in 2045 or later depending on when the debt was issued. The building costs approximately $15 million a year to operate.
More details are available in this Spectrum Center renovations fact sheet.
Please leave your questions and comments in the Spectrum Center Upgrades Feedback Form below.
Original source can be found here.
Source: City of Charlotte
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