Charlotte Hurts Banks for Boosterism
Banks are forced to deal with bankruptcies and bad debt on a regular basis. It isn’t irregular for a bank to write-off bad debt as an uncollectible loss on it’s tax returns. Essentially, the bank stops considering the unpaid bills as assets on the books. While this may have negligible impact on the profit and loss statement, the end result is that money loaned is not collected and this does hurt the bottom line…whether visible or not.
Apparently in the works for the past couple of months has been an agreement between Charlotte, NASCAR, and both Bank of America and Wells Fargo to forgive debt incurred by Charlotte for the NASCAR Hall of Fame.
Essentially, and this comes from the BizJournal article,
“The $193 million cost of the hall of fame is being repaid from four sources:
•A 2 percent hotel room tax dedicated to the NASCAR museum ($134.5 million).
•A portion of existing tourism taxes ($24 million).
•Sponsorships, commemorative bricks and other sales used as collateral for BofA and Wells Fargo loans ($14.1 million).
•A separate set of loans by the two banks backed by city sales of public land around new interchanges built near the hall of fame ($20 million).”
Due to the complete financial and attendance underperformance of the Hall (which isn’t exactly surprising to any of us who were opposed to it from the beginning while the Uptown boosters were engaged in one of the most ridiculous bidding wars of all time…they literally made up attendance figures to get a “one up” on the competitors), both sponsorships and brick sales haven’t met estimates. As a result, according to the Observer, “the city of Charlotte has proposed making a one-time payment of $5 million to Bank of America and Wells Fargo on a construction loan for the NASCAR Hall of Fame – but the banks would be required to write off the rest of a $19.1 million loan.”
As mentioned earlier, banks write off bad debt all the time. The difference is, the debt they write off is usually incurred by people unable to pay. In this case, the City of Charlotte will be asking for debt forgiveness despite the fact they are perfectly financially capable of paying the bills if they simply dug into other accounts and not rely on the expected revenue stream originally designated. For example, they could use the 2 percent hotel tax to repay the bank loans in full, if approved by the legislature to do so. (Darn Dillon rule states…LOL)
City Council member Kenny Smith said it best, “The Hall of Fame is a prime example of why government should stick to core functions such as infrastructure and public safety. The only way The Hall can achieve break-even on operations is to wipe away the remaining debt. My parents taught me in no uncertain terms it is immoral not to repay a debt.”
Bingo Mr. Smith.
The Hall never should have been government funded in the first place, but like you say, most people raised right were always taught to pay their debts.
The banks and their shareholders should not have to bare the expense of poor planning conducted by the city planners and boosters.
Hopefully this is a wakeup call to both our fine local government and to the corporate sponsors of the uptown toys. The city should refrain from entering into such positions that are out of its basic intended roles of good infrastructure, good schools, low crime, and low taxes. Maybe now the banks will also think twice before engaging with them in such ventures.
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