New King in the Queen City: How David Tepper Can Shape Charlotte’s Future
Hedge fund kingpin David Tepper now has two professional sports team under his leadership in the Queen City (Source)
Long regarded as the Queen City, it seems as if Charlotte has found itself a new king. With two professional sports teams at his command, a Pittsburgh native has been given the keys to one of the most important aspects of North Carolina’s economy.
Ever since David Tepper purchased the Carolina Panthers of the NFL — Charlotte’s flagship professional sports team — for a record $2.75 billion in 2017, he has become a household name in North Carolina’s burgeoning sports-entertainment economy. At a time when scandal surrounded former owner Jerry Richardson, Tepper swooped in and picked up a franchise in need of modernization. This act to bolster his portfolio in the midst of turmoil was quintessential David Tepper, who made his fortune by navigating a hedge fund through the 2009 recession.
After his splashy entrance into the Carolina sports lexicon, Tepper has doubled down on his investment in Charlotte’s economy by purchasing an MLS team that will begin playing in Bank of America Stadium in 2021.
While excitement surrounding a new team and an entire new professional sport for a state that is often overlooked in the professional sports world is warranted, the economic impact of one David Tepper on the future of Charlotte currently raises more questions than it does answers.
David Tepper’s History:
Tepper, who made his billions off of a risky investment style, will be putting both his reputation and the future of Charlotte’s economy on the line as he seeks to transform the growing urban center into a Southeastern sports powerhouse.
A look into Tepper’s investment history offers necessary context to his calculated gamble on making the Queen City a true “football” hub, in both senses of the sporting noun.
When faith in international banks cratered during the recession, he saw potential in a banking system on the verge of collapsing and began investing billions in such as Citigroup and Bank of America. After turning a 120 percent profit and amassing over $2 billion in one year for Appaloosa clients, Tepper ascended into legendary status amongst bullish American investors.
Now it’s a bet on Bank of America Stadium, the home of the Panthers and his newly acquired and unnamed MLS team, that will define the future of North Carolina’s largest metropolitan area.
But does the same logic that made Tepper his billions apply to the revitalization of Charlotte?
Taxpayer Responsibility:
Despite Tepper’s past success, the operation of an ascendant hedge fund empire differs drastically from that of a professional sports team. While the former is fronted by wealthy investors, Tepper’s dealings in the Carolinas rely heavily on the pockets of the average taxpayer.
As Charlotte envisions a future that contains both NFL and MLS dynasties, discussions regarding public funding between Tepper and the city council have remained largely behind closed doors. However, a public meeting in December shed some light on the potential burden that taxpayers will face as the city modernizes in preparation for another million-dollar sports industry.
Financing stadiums through the private sector has become a proven model of success for many MLS expansion teams, but it is a trend that Tepper and Charlotte have bucked in favor publicly fronted “hospitality fund” to help support the team in its nascent years.
It was announced that the $110 million will be set aside for what the city of Charlotte’s proposed “hospitality funds.” This unprecedented development budget will help construct a new soccer practice facility and renovate Bank of America Stadium to accommodate both soccer and football crowds, but it also comes at a cost that Pennsylvania attorney Frank Mayer called into question in a recent interview with the Charlotte Observer.
“It appears to me that the sales tax burden on the citizens of Charlotte is fairly high,” Mayer said. “The idea is to get the private sector to pay for this.”
Who’s Paying for What?
As of now, the exact distribution of the $110 million is neither approved nor outlined to the public. However, such funds are typically raised by increasing taxes on hotels/motels and prepared food to minimize the effect on local taxpayers. This strategy differs from precedents set by cities such as St. Louis — whose citizens rejected a publicly financed stimulus of over $200 million. In response to this referendum, team owners secured funding through a group of private investors with the help of only a select number of tax exemptions.
With no public vote on scheduled at this time, it is difficult to predict how Queen City residents will respond to this unprecedented payout to Tepper.
Tepper announced plans to construct a new soccer training facility at the site of the former Eastland Mall in East Charlotte. This area of the city is notoriously underdeveloped and has investors seeking to revive the area by creating an “entertainment district” that would accompany the new multi-million dollar sports headquarters. This would be quite the upgrade from the currently abandoned structure that lies dormant, and the long term effect of MLS teams in new markets has been predicted to catalyze an economic bump of over $25 million in net state general revenue. This financial benefit, along with the intangible community-building that professional sports teams add to a city’s culture, are central to the arguments of owners such as Charlotte’s newest big money investor.
However, while wealthy owners tout the long-term potential of new sports teams, only time will tell if Charlotte and its taxpayers will be willing to front the bill.