Carolina Panthers owner David Tepper is reportedly the richest owner in the National Football League – which is saying something. His reported net worth of $16.7 billion is $6 billion more than the second-richest NFL owner, Stan Kroenke of the L.A. Rams.
Unlike the current Super Bowl champion Kroenke, who largely paid for his own stadium in Los Angeles, Tepper is one of the more aggressive owners in the country at securing public subsidies for his teams, which include the Charlotte FC of MLS. He’s on record as saying, “Like I said before and I’ll say it again, I’m not building a stadium alone.”
When that mindset expanded from stadiums to a practice facility and offices for his NFL team, the result was a bad deal that’s in the process of falling apart in South Carolina.
In May 2019, the Panthers reached a deal with South Carolina politicians to build a practice facility and team offices on land in York County that would be brought within the city limits of Rock Hill. The deal included $225 million in subsidies from Rock Hill and $115 million from South Carolina’s state government. The state also received $34.6 in federal funding toward an estimated $40 million cost to build a new freeway interchange on I-77 to serve the Panthers’ facility.
Opponents of the deal complained that it was based on deeply flawed economic impact predictions. One state senator, John Harpootlian, went so far as to hire Rebecca Gunnlaugsson, the state commerce department’s former chief economist, to do her own independent assessment of the officially rosy predictions. Harpootlian held up the deal for two months and forced the state to release the secret methodology it had used to arrive at its economic impact predictions.
After digging into the state’s methodology, Gunnlaugsson found that the projected economic impact was overstated by nearly $2.7 billion. One flaw, she pointed out, is that it assumed that every single player, coach, staff member and owner of the team would move to South Carolina rather than drive the 22-mile difference between the team’s Charlotte offices and their new Rock Hill home.
Another huge flaw was the way in which the official economic impact predictions assumed that each job would create more jobs in the region. That’s called a “multiplier,” and it’s a common economic concept that isn’t especially controversial by itself. What was controversial, however, was the size of the multiplier being used to justify the state’s subsidies. Researchers generally agree that any multiplier larger than “2” is rarely justified by real-world results, and even the state’s standard inflated “arts, entertainment, and recreation” multiplier was only 3.785. The Panthers’ multiplier? A jaw-dropping 39.1.
But while inflated predictions of how much new economic activity would be generated by offices and practice fields may have swayed state legislators and local elected officials to commit taxpayer dollars to the project, they apparently weren’t as persuasive to Wall Street investors who had their own money on the line.
When Rock Hill went to try to sell $225 million in bonds to fund its promised subsidies, it reportedly couldn’t find enough buyers at anything other than “junk bond” rates. The original plan was that the city would forgo 100 percent of property tax revenues from the 800-acre project, the local schools would give up 75 percent and the county would do the same for 65 percent. Potential bond buyers, however, were apparently deeply skeptical that those revenue streams would be enough to ensure payment on the bonds.
Rock Hill city manager David Vehaun explained that the city would not risk its credit rating for the Panthers: “The city would not, could not, should not back stop this debt,” he said. (Any reduction in the city’s credit rating would make everything else the city borrows money for, such as roads, sewers or other infrastructure projects, cost more for taxpayers.)
Tepper’s team claimed the city was in default on its agreement and stopped work on the project. The city disagreed, saying it “did everything to make this project a success and has not defaulted on any of our obligations,” pointing to language in the agreement that committed Rock Hill only to “reasonable best efforts” to issue bonds and limited what city funds could be devoted to bond payments.
State Senator Wes Climer, who had been an early champion of the deal, has started lambasting Tepper and his team for their behavior – including reportedly not showing up for a scheduled meeting with the state commerce secretary.
“That was my first indication Tepper is not thinking rationally or economically about this project,” Climer said. “You don’t blow off that meeting if you are a rational economic actor. You have the guy in the room who can address your problems – (so) you take the meeting.”
We’ll leave the final word on this to State Sen. Climer: “If David Tepper’s behavior is indicative of how the NFL does business, then who wants to do business with the NFL?”