November 13, 2002 News & Views » Citizen Servatius

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Whatever You Say, Pam 

Arena cost overrun disaster is in the making

Charlotte City Council member John Tabor wasn't confused. City staff just wanted him to think he was. At last week's meeting, Tabor, like other city council members, swore he'd been told by city staffers that they were negotiating a deal with the NBA in which 20 percent of the $200 million budget for designing and constructing a new arena -- in other words, $40 million -- had been put aside for cost overruns.

So when Tabor was told last week that he must have misunderstood, that only $20 million was in the budget for cost overruns, he blew a gasket, worried that it wouldn't be enough. Like Tabor, I too was initially confused last week because I swore I'd heard city staff say the same thing Tabor had. So I asked City Manager Pam Syfert to straighten out for me exactly how much money the city had put in the budget for cost overruns.

"It has always been $20 million, 17 percent of the construction budget," Syfert told me last Thursday. The construction budget, mind you, is $159.7 million, not $200 million. When asked the same question, City Budget Director Curt Walton said that the members of the city council must have misunderstood how much money the city had put aside for cost overruns.

They didn't.

According to the minutes from the council's October 14 meeting, in which council members were told what was in the agreement with the NBA that city staff members had been negotiating behind closed doors, Mayor Pat McCrory asked Syfert how much of the arena construction budget would be used for cost overruns.

In response, Syfert said that about 20 percent of the $200 million budget was for cost overruns. Three weeks later, that number has dropped to 10 percent of the $200 million budget cap, which is what was actually written into the city's agreement with the NBA.

I'm not certain which is more upsetting -- that the city staff thinks council is too stupid to remember what they told them about the arena deal three weeks ago, or that most of the city council actually is too stupid to remember critical details of what the city staff told them.

But the bottom line is that it's becoming increasingly clear that the nice, round numbers in this deal have more spin to them than a Vegas roulette wheel. One has to wonder how the cost overrun contingency on this project went from 20 percent of $200 million to 10 percent in under three weeks, where staff plans to spend the difference between the two figures and, most important, whether they have any idea what this project will really cost in the first place.

The answer to that question is an important one, particularly when you consider that Syfert told me last week that she doesn't know where the city will get the money to pay for cost overruns if they exceed $20 million. Uh. . .shouldn't we figure this out before we break ground?

As City Engineer Jim Shumacher told the council last week, this is a project that will be constructed on a fast track. Cincinnati could tell Charlotte all about what that's like. That city rushed the opening of the Bengals' stadium and taxpayers paid $50 million in cost overruns. Seattle rushed the opening of a new stadium for the Mariners in 1999 and wound up with cost overruns of $100 million. In Seattle, the team paid. But according to our memorandum of understanding with the NBA, the city of Charlotte will pay cost overruns unless they result from changes to the construction budget requested by the team.

City Council member Harold Cogdell is right to wonder why the projections for how much the hotel-motel tax, the main funding source for repaying the city's debt on the arena, seem to conveniently adapt themselves to whatever city staff has currently decided the project will cost.

Just for kicks, I'd love to know who will be repaying the $10 million the city will be borrowing from the banks to round out the deal. According to the memorandum of agreement with the NBA, that money will be paid back through "the Corporate Community Contribution," whatever that is. Though council members asked at the meeting last week where that money would come from, city staff either couldn't or wouldn't give them a straight answer, so the ever-vigilant council members dropped the subject.

Then, at the end of the evening, after everything you just read above went down, McCrory, who has always claimed he's "for the people," had the audacity to punctuate the evening by congratulating city staff on what a great job they'd done negotiating the arena deal.

It seems to me that the city's level of desperation to re-obtain an NBA team has grown to the point that questioning what one is told by city staff, even if it flat-out makes no sense, has become tantamount to being "anti-arena." To me, this makes no sense.

But as long as the NBA's happy, I guess we shouldn't fret over the little details.

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