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What's the Deal, Anyway? How does the deal the Hurricanes signed in Raleigh compare to the package offered to the Whalers in Hartford? Operating Losses HARTFORD RALEIGH The Whalers wanted two years of their losses, at $15 million a year (later upped to $43 million for two years), covered while a new arena was built. The state of Connecticut, with a contribution from the city of Hartford, would eventually offer to cover $20 million of the team's operating losses. The Hurricanes lost $30 million playing in the Greensboro Coliseum in 1997-98, and will play there through the 1998-99 season. Local media sources estimate that the team will lose a similar amount in 1998-99. The team insists that they will operate in the black once they move to Raleigh. The team has paid $20 million for upgrades to the arena in Raleigh, and an additional $8 million to cover budget overruns on construction. (See notes below.) Revenue and Naming Rights HARTFORD RALEIGH The Whalers would run the new arena, and as primary tenants would take whatever upside they could out of the building, with the exception of University of Connecticut basketball games. The Whalers would have the right to sell the name of the building. The Whalers would receive all concession revenue and advertising revenue. The Whalers also would get money from arena parking -- not only for Whalers games, but from other arena events and daily downtown workers. The building, both sides agreed, would have earned the Whalers $50 million a year. The arena began life as a basketball facility for North Carolina State University. NCSU's basketball games and graduations get scheduling priority. The Hurricanes will not schedule arena events that conflict with NCSU football games, because the arena and football stadium share parking. NCSU has the right to sell naming rights for the arena. Under NCSU's arena-use agreement, the university's naming rights are worth $10 million. (See notes below.) NCSU will get all of the revenue from the sale of its own temporary advertising for university events, all of the revenue from the sale of Wolfpack novelty items during university events, up to 30 percent of the revenue from concession sales during university events, 15 percent of luxury skybox rent during its basketball games and 70 percent of the annual parking proceeds for basketball games after the first $35,000 goes to the Centennial Authority, which planned and built the arena and will oversee it once it is open. The arena's interior will be white and NCSU red. Rent and Ticket Taxes HARTFORD RALEIGH The state of Connecticut wanted to collect about $3 million in admission tax on tickets sold in the building, and $2.5 million in rent. The state wanted a 20-year lease. The Whalers wanted a rent-free arena. The Whalers wanted an option to leave after 10 years. The Hurricanes will pay $2.4 million each year in rent to the Greensboro Coliseum while the new Raleigh arena is under construction. Once in Raleigh, the team will pay the arena authority $3 million a year in rent, plus 3 percent to 6 percent of the arena's gross revenue after the first three years. The team can deduct up to $250,000 a year in game-day costs. The team also contributed $28 million to upgrade the arena to NHL standards and cover cost overruns. (See notes below.) The Hurricanes will run the arena -- booking concerts, promoting games and putting on all other events -- for at least 20 years, extendible to 30 years. It must honor the authority's arena-use agreement with NCSU. The arena's financial performance -- whether in the red or in the black -- is the Hurricanes' responsibility. If the arena runs a deficit, the Hurricanes pay it. Where the Money Comes From HARTFORD RALEIGH No tax money was to be used. The state of Connecticut would collect about $3 million in admission tax on tickets sold in the building, and $2.5 million in rent, which would have gone toward paying off the state bonds financing the arena. The Centennial Authority's original arena financing deal divided costs among several parties: $18 million from the state, $70 million from Raleigh and Wake County ($22 million in cash and $48 million in bonds financed with future county hotel tax revenue), $18 million from NCSU's Wolfpack Club, and $20 million from the Hurricanes. The authority also had about $6 million in interest income from those accounts. (See notes below.) Peter Karmanos once claimed he did not believe in public subsidies for sports franchises, but he will be playing in a building for which the taxpayers of North Carolina are on the hook for $90 million...and rising. By July, 1998, the Raleigh arena was five months behind schedule and in danger of missing its opening date of September 1, 1999 -- in time for the start of the 1999-2000 NHL season. The Hurricanes, fearing the many repercussions of playing even part of that season in Greensboro, offered to contribute another $5 million and to lend the authority up to $20 million more, to be repaid out of arena revenue, to cover cost overruns. In exchange, the team wanted more money from concessions, ticket sales, advertising and other revenue sources from the building; they wanted more say on the arena authority, which is dominated by NCSU sports boosters; they wanted some control of property around the arena, to build a practice facility; and they wanted some say over naming rights. But their offer was politely declined. "I don't want to give away the farm to the Hurricanes," said Raleigh City Council member Julie Shea Graw. "They have no roots here. They could be up and gone in a hurry when their contract is up. They certainly left Hartford in a hurry." In August, negotiators for the authority tell the Hurricanes that the arena will not be completed in time for the team's 1999-2000 season unless the Canes agree, within the next 10 days, to pay an additional $14 million toward the cost overruns, which members of the group blame primarily on a costly redesign of the project demanded by the hockey team. At the deadline, the Canes offer $8 million more, in return for significant concessions. NCSU increases its pledge from $5 million to $6 million, and the arena authority agrees to seek an additional $7 million in bank loans. But the team's contribution is contingent on the city bridging the gap with $5 million in debt reserve funds. And although the authority decides to grant the Hurricanes' 10 conditions--ranging from reduced rent on land for a practice hockey rink to a right to share in the development of land around the arena, and to the authority's agreement to take a basement office and give up control of two luxury suites--they do so reluctantly. "What they're asking for is way out of balance," says Ray Rouse, an authority member who estimates the value of the concessions at $12 million to $15 million. "The numbers just don't seem to match up. It seems like the out-of-pocket money coming from them is getting smaller and smaller." In September, the Raleigh city council approves what is hoped will be the last financing piece for the new arena. The council agrees to let the arena authority use up to $5.2 million from a construction-bond debt reserve fund to round out a financing package to cover the arena's $26 million budget shortfall. The reserve will have to be replenished with future county hotel tax revenue, boosting Raleigh and Wake County's joint contribution to the project to $75 million. Topping the conditions of the city council is an insistance on renegotiating naming rights to the arena to raise more money. By agreement with the authority, NCSU has the naming rights. It has agreed to sell those rights for $10 million if a deal can be worked out. In that case, any revenue from a naming sponsor -- minus that $10 million and any deductions for interior advertising or skybox rental the Canes would have to give up -- would be split, with Raleigh and Wake County sharing 38 percent of the net proceeds, and the Canes getting the rest.

The Story So Far // How's it Goin', Pete? // Whalers Warehouse // John's Home Page

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