Nascar Hall of Fame Leaves Charlotte Home With Bank DebtDarrell Preston
Charlotte, where almost 30,000 people make a living off Nascar auto races, would seem the perfect place for a museum honoring driving legends such as Richard Petty and Dale Earnhardt.
As it turns out, the $192 million Nascar Hall of Fame, with vintage cars dating to the 1940s, is drawing fewer than half the visitors forecast when it opened in 2010, leading officials last month to use $5 million of public funds to settle bank loans. The move is raising questions about how North Carolina’s largest city has financed economic development.
“It was a bad deal for the taxpayers,” said Kenny Smith, a City Council member and Nascar fan who opposes the funding of the museum. “The city invested taxpayer money based on faulty assumptions that didn’t come to fruition.”
The city of 793,000, which owns the hall, sold about $137 million of municipal debt in 2009 as part of the financing. Charlotte joins states and localities in the $3.5 trillion municipal market partnering with the private sector to bring in tourism revenue and create jobs as infrastructure needs outstrip financial resources.
Charlotte has gone that route for art projects, sports venues and real-estate developments, said Ron Kimble, the deputy city manager. As attendance for the Nascar venue shows, the projects don’t always go as intended.
Officials originally predicted the museum would draw 800,000 people its first year and 400,000 annually thereafter, said Laura White, a spokeswoman for the Charlotte Regional Visitors Authority. The average has been about 170,000, she said. Attendance doesn’t reflect the 300 or so convention-related events at the site each year, she said.
“It was going to be a huge economic-development project that would pay for itself,” said Don Reid, a former City Council member who runs a marketing firm. “It sounded good because Nascar is a big financial industry, but it’s a colossal failure that has harmed the taxpayers.”
Kimble, who oversees economic development, disagrees.
“It was not working as envisioned, but that doesn’t mean that it wasn’t a success,” he said. “It’s an asset to the community” and helped draw convention business.
Charlotte is home to Bank of America Corp. and boasts aerospace, biotechnology and energy businesses. Yet Nascar -- the National Association for Stock Car Auto Racing Inc. -- is sewn into its DNA.
Besides having 90 percent of the country’s Nascar teams within 50 miles (80 kilometers), the area hosts three major races a year, houses offices for Nascar, which sanctions races, and is home to track operator Speedway Motorsports Inc.
Nascar generates around $4 billion a year for the region’s economy, and its competitions employ about 27,000 residents, according to John Connaughton, a professor of economics at the University of North Carolina in Charlotte. Local schools offer programs such as automotive technology to prepare students to work in the industry, said Vi Lyles, a City Council member.
So it was natural to tie Nascar to tourism, said Tom Murray, chief executive officer of the Regional Visitors Authority, which manages the hall.
Charlotte won the right to build the venue in 2006, beating out fellow finalists Atlanta and Daytona Beach, Florida, where Nascar is based. The group held its first sanctioned race in Daytona Beach in 1948, according to its website.
The city issued tax-free and taxable securities for the museum, to be repaid from a 2 percent tax on hotel and motel rooms, subject to City Council appropriation. Bank of America and Wachovia Corp., which Wells Fargo & Co. acquired in 2008, loaned about $34 million combined. Real estate backed one loan, while sponsorship sales, sales of commemorative bricks and contributions secured the other.
The 150,000-square-foot museum, where the cheapest ticket for adult nonmembers is about $20, features the Glory Road exhibit -- as many as 18 historic vehicles along a banked ramp - - and racing simulators. Other displays honor the hall’s 30 inductees, while a theater with a 64-foot-wide screen shows movies on Nascar’s history.
One afternoon last week, cars in the Glory Road display outnumbered viewers by three to one.
First-time visitor Jay Turner, 65, who lauded the exhibits and the facility, said the price may be keeping people away.
“That price point -- $20 is fine for me,” said Turner, who lives about 80 miles away in Morganton. “For some bringing the family, $100 might be cost-prohibitive.”
The museum hasn’t generated enough revenue to repay the loan secured by sponsorships and brick sales or about $3 million of royalties to Nascar. That led the hall to restructure part of its financing last month in a deal approved by the City Council.
The banks will get $5 million from surplus lodging-tax revenue in exchange for forgiving about $17.8 million of interest and principal, said Kimble. Nascar has agreed to give up royalties it hasn’t collected and won’t ask for payments until museum revenue reaches $10 million. It was about $6 million in fiscal 2014, according to the visitors authority.
“We’re in a position where the hall of fame is sustainable in the future,” said Murray, chief executive of the authority. “We’ve stabilized the situation.”
Wells Fargo has “worked closely with the city of Charlotte to reach a solution that supports the long-term viability” of the hall, Elise Wilkinson, a spokeswoman for the San Francisco-based bank, said in a statement. Bank of America is “a long-time supporter of the Nascar Hall of Fame as a center for tourism and job creation in Charlotte,” spokeswoman Anu Ahluwalia said in a statement.
The overhaul of the financing “helps position the hall for a positive future,” Brett Jewkes, Nascar’s senior vice president, said via e-mail.
Even though the banks got $5 million of city money, Charlotte protected taxpayers in the original deal and in the restructuring, said Lyles, the City Council member. The city isn’t required to use other revenue to pay the debt.
The $5 million comes from a reserve fund for the bonds, said Kimble. Revenue from the hotel levy is enough to cover next year’s debt service, museum upkeep and the bank loans, Kimble said. The financing revamp puts the museum on more secure footing because future revenue won’t go to the banks, Kimble said.
“The $5 million isn’t money that can pay for streets or anything else,” Lyle said. “It’s paid by people who stayed in our hotels.”
The hall of fame is a success because it helps bring business to the adjacent convention center, said Murray.
“I look at it as a loss-leader,” said Bruce Hensley, owner of a Charlotte public relations and marketing firm that works in hospitality and travel. “It’s an opportunity for us to attract conventions we didn’t attract before.”