James Hill

Economics 051

The Economics of North Carolina

What is the Impact of Winning a Championship? :

Influence of the Carolina Panther’s Success on North Carolina Government

James Hill

28 November 2006

The National Football League (NFL) has been a part of America’s history since 1920, but it was not until 1993 that the Carolina Panthers became an intricate part of this pigskin pastime. Brought in as the 29^th franchise and a member of the National Football Conference (NFC), Jerry Richardson rejuvenated the NFL as he took the Carolina Panthers from nearly losing the opportunity as a potential expansion team, to being one of the most respected, revenue-generating, hard-nosed football franchises in the nation. The Panther’s path to success surely has not been pretty, but their fan base always has remained faithful. In 2003, the Panthers were victorious in the NFC Championship game and unified an entire state in the process. Not only have Jerry Richardson’s successes brought his family great wealth, but he also has affected the lives of millions of other families by providing new, incremental revenue for the greater Mecklenburg County area (“Carolina Panthers History in Chronology” 1).

            The North Carolina Government, more notably the Mecklenburg County local Government, could not be more pleased with the establishment of the Carolina Panthers in their area. Although their relationship is far from conventional, the externalities of this prolific franchise have proved to be exceedingly monetarily beneficial for its localities. The development of the team has directly affected nearly every aspect of life in Mecklenburg County, including increased infrastructure, expenditures, employment, businesses, tourism, average payroll, as well as the aftereffect that each of these new improvements may have had and so forth. This new era of affluence has furthered Mecklenburg County’s cornerstone as the most prominent county in North Carolina. On the other hand, what has the North Carolina Government done to help facilitate the Carolina Panther’s franchise, justifying the millions of dollars in revenue that it has received due to its establishment over the past decade? Seeing that North Carolina acknowledges the long and short term economic benefits the Carolina Panthers present to the state, it would seem reasonable that the local governments within the state would do everything in their power to ensure that this success continues for years to come. However, there is only one difficulty, The Carolina Panthers are privately owned, and are not obligated to receive nearly as much assistance from the state and local governments as other states have received with their franchises, which leaves much of the responsibility in Jerry Richardson’s hands. Although Richardson has accepted some significant aid from the city of Charlotte and a little monetary support from Mecklenburg County and the state, their contributions are diminutive in the grand scheme.

The Government needs to take greater action in giving financial aid to the Carolina Panthers because the return on investment for each of these localities is near exponential. Since the foundation of the Carolina Panthers, these areas continue to reap considerable economic benefits while the stadium functions as a separate whole and it is unreasonable. (Plyler, Richardson, Odom, Blackmon, Hartsell, Conder, Marvin, Cochrane, Smith, Forrester, Bryan, Allran, and Carter 1)

Background

            Jerry Richardson’s Carolina Panthers are an elaborately designed, innovative franchise. Unlike the other 28 other teams in the NFL at the time that were publicly owned, established mainly on taxpayer dollars to fund the construction of their stadiums, the Carolina Panthers were privately owned. To be a privately owned NFL franchise at this time was unfathomable. The total cost of the stadium alone was over $184 million, marking it as one of the biggest stadium projects in NFL history, not to mention that the franchise itself would cost roughly $220 million in addition to this already large sum. The $220 million derives from the NFL, which functions as a diffused form of government, in which all teams must comply with specific rules and regulations. The bulk of the fee was a $140 million “franchise fee,” a payment necessary in order to start a franchise in 1993. The rest was an conglomeration of a $69 million loss because of Jerry Richardson’s agreement with the NFL “to delay participation in league’s highly profitable licensing arm, NFL Properties, for 18 months,” as well as a $10 million accumulation of interest on the loan Richardson had taken out in order to afford to pay for the franchise fee (Menzer 14).   Jerry Richardson defended the steep prices of the franchise,

“We have never done anything to compromise the fans. Take the Jacksonville franchise. Our stadiums were built at the same time but theirs is $134 million and ours is $184 million. Why? Because ours has more fan features” (Menzer 20).

This sentiment of never aspiring to compromise the fans proved to be an underlying concept in Jerry Richardson’s career with the Carolina Panthers. It is because of this, that when faced with an enormous $404 million bill to take care of, he did not look to the individual taxpayers of the Carolinas to pick up the check.

            It seemed impossible to fund a team without the support of taxpayers and local government. Even the NFL commissioner, Pete Rozelle, in 1990 told Jerry Richardson, “I don’t think you’re going to get a team, you’ve got to figure out a way to get the taxpayers involved” (Menzer 17). However, Richardson did not want to put a burden on taxpayers, because “the partnership group had already spent over $5 million in lobbying efforts” to persuade government officials to support the need for an NFL franchise in the area, and searched for an alternative. Then, the Carolina Panther’s franchise changed forever. One of Richardson’s associates, Louis Howell, brought the idea of Permanent Seat Licenses (PSLs) to help fund the construction of the stadium. PSLs would be sold to fans in order to guarantee them the right to buy season tickets. There were many skeptics, but as “41,632 [PSLs were sold] within the first four days…for anywhere from $600 to $5,400 of taxable dollars to get a seat,” the disbelievers in the PSL system were silenced. Richardson was humbled by how high the demand was for this commodity, and in seeing this undying effort to establish a stadium in Charlotte Richardson was confident that, “It showed a fan commitment on even stronger level than the tax payer argument” (Menzer 17-18). In the end, the PSLs generated over $112.7 million dollars and with the help of a guarantee from NationsBank and Wachovia to purchase $30 million in unsold PSLs, the $184 million deficit was nearly vanquished. The additional $41.3 million was needed simply to purchase the stadium’s real estate in Charlotte. This is where the local government stepped in played an important role in the Panther’s foundation, quite literally, as the city of Charlotte allocated over $30 million in government spending in order to provide the land needed for the stadium, whereas Mecklenburg County’s local government provided $10 million in order to relocate the building (Usa Today Sport's Staff 1). With the construction costs out of the way, and what seemed to be the overwhelming amount of the state’s support, the Carolina Panthers seemed in the perfect position to create larger waves in the Mecklenburg County area.

Impact of Carolina Panthers on State and Local Government

            We have established that the State Government of North Carolina, besides allocating comparatively miniscule capital to support the large venture of the Carolina Panther’s franchise, did not impose any new specific regulations on how the franchise was to be put operated (besides the given global sanitary and worker protection laws). The only insecurity still lingering was how the success of the Carolina Panther football team would influence the many sectors of its surrounding governments. The obvious assumption would be, with any championship team, the state would benefit immensely, but is there a monetary value that can be but on this victory? Let us use the 2003 NFC Championship year to provide a brief snapshot:

After the Panther’s trip to the Superbowl, North and South Carolina both were in national attention and received more than enough free publicity. Seeing that tourism is the 9^th largest private industry in North Carolina, the exposure that the NFC Championship season provided had a direct effect on the increase in tourism around the state ("North Carolina the State of Minds" 13). In 2004, following the championship, domestic travelers spent $13.3 billion throughout the entire state, which was a 4.9% increase over 2003, producing over 182,950 jobs for North Carolina. Obviously, this increase in tourism cannot be directly associated to the Carolina Panther’s victory, but a portion of the increase, even a potion of this percent must be attributable to the football team’s championship. To better illustrate this further, we must direct our focus to Mecklenburg County in order to provide more accurate information. Here, the direct economic impact of tourism to the county was $2.6 billion dollars, a 4.7% increase since 2003. Through the theory of circular flow, which can be described as the process in which expenditures circulate within a county between firms and households and any new, incremental revenue from out-of-county expenditures can generate new employment. Over 2003, their championship year, 38,550 jobs were generated due to travel and tourism in the county alone, increasing the overall payroll by $1.08 billion dollars (Travel Industry Association 1). This new revenue can be more exclusively warranted to the Carolina Panther’s victories because the top five attractions of travel and tourism in Mecklenburg County are The Carolina Panthers, Carowinds, Discovery Place, the Mint Museum of Art, and the Charlotte Bobcats. The largest percent on what is generated from tourism is not what is spent on the entertainment alone, but it is the expenditures of tourists at restaurants, hotels and other unscheduled purchases that total in 28% of overall tourism revenue ("North Carolina the State of Minds" 1). However, this percentage would not exist at all if attractions such as the Carolina Panthers had not enticed tourists to visit in the first place, consequently the increasing bustling economy and surrounding nightlife scene in Charlotte can greatly be attributed to the Panther’s franchise success and other entertainment venues.

The most astonishing part is that an entertainment industry such as the NFL can influence each individual citizen even if the citizens themselves are uninvolved entirely. For example, the State and Local taxes from tourism amounted to $207.34 million in 2004, resulting in a tax savings of $270 for each of Mecklenburg County’s 771,617 residents. Therefore, when the Carolina Panthers succeed in attracting more and more people into the area, the government has the flexibility to reallocate this newfound revenue from the citizens to other areas of need, such as the education system, hospitals, or even attempting to draw more tourists into Mecklenburg County the following year. Mecklenburg local government would be able to reallocate that same $207 million in taxes towards other projects at figuratively no cost at all to the residents of the county, and meanwhile benefit the entire state in the process (“North Carolina the State of Minds" 1). To shed some light on how far implanting new revenue of a sum similar to $207 million can affect a county, a study was done in 2006 focusing on the “Advertising Effectiveness” of North Carolina revenue.

            “The return on investment component of the study indicated that for every $1 invested in paid media advertising in the spring and summer of 2005, NC received $185 in new visitor spending, $9.72 in new state taxes and $5.99 in new local taxes. This represents a more than 15 to 1 return on investment of tax dollars” ("Longwoods International Advertising Effectiveness Study" 1).

            It is clear to see how bringing incremental revenue into a county can develop into exponential economic growth for the locality for years on end. This cycle where the Carolina Panthers will generate an outstanding amount of new revenue for the area, which fuels the economy, which will then reproduce itself as new revenue attracting others to the area once again to visit attractions such as the Panthers, will only slow down if the franchise ever began to lose profit.

            The Carolina Panthers have an extensive effect on the State and Local Government. Although supporting the Panther’s success is not presented as a major concern, if you were to remove the franchise from Charlotte the entire environment would change because millions of businesses and families thrive off their success. There has only been piece of adopted legislation in the past decade that has been concerned with the Carolina Panther’s football team, entitled, “Senate Resolution 1221.” In this resolution, “The Senate strongly supports the Carolinas' bid for a National Football League franchise. The Senate further supports [a] rally… to show the region's support for an NFL franchise…to be held on June 10, 1992, in Charlotte and urges the citizens of this State to participate”(Plyler, Richardson, Odom, Blackmon, Hartsell, Conder, Marvin, Cochrane, Smith, Forrester, Bryan, Allran, and Carter 1).

Despite its best intentions, this legislation’s approval was largely due to the $5 million lobbying efforts that Jerry Richardson placed on government officials through the help of his partnership group. It is does still seem unique that this privately owned franchise has separated itself that much from its government that only one piece of legislation has been passed on a franchise that today is worth over $936 million according to Forbes Magazine ("NFL Team Evaluations: #11 Carolina Panthers" 1). Even when conversing with Senator Edward B. Goodall, the democratic Senator from Mecklenburg County State Legislature, he too was befuddled, “I am not aware of legislation attributable to the Panthers nor any plans for same.” He continued to add that the county has benefited immensely due to The Panthers ability to “brand” the area.

“When one thinks of a city some image(s) appears in one's mind. Since there are few icons (St. Louis and the arch), whatever image gets press coverage for a city might become part of that brand. The Panthers, I am sure, represent much of Charlotte's brand” (Goodall). It is because of these positive influences that the Panthers provide for the economy and community of Mecklenburg County that has made Senator Goodall feel the need for, “Sports enterprises [to] be market driven and that government limit its involvement.” This is valid because it can be quite dangerous to allow one organization to hold that much importance in a county. If the time ever did occur, in which the Carolina Panther’s franchise collapsed, then we would not want those repercussions to negatively effect Mecklenburg County and its surrounding areas (Goodall).

Conclusion

            The North Carolina State nd Local Government are very fortunate to have the Carolina Panthers as a NFL Franchise in their state. As the team continues to prosper, Mecklenburg County will remain the dominant economic power that it is today. Despite their lack of involvement and support after the foundation of the team, they have taken full advantage of the benefits that the Carolina Panther’s franchise has provided them. This is the Panther’s true responsibility. The Charlotte and Mecklenburg County Governments cannot be seen as neglectful in the situation, because if they could have had it their way, the taxpayers most likely would have paid for the stadium. It was Louis Howell and Jerry Richardson’s idea to use PSLs instead to raise funds for the stadium, and the government could not do anything about that. Regardless of government involvement, the same effect ensued. Those loyal to the team, whom at the same time happen to be Carolina taxpayers, provided ample funding for the new stadium and meanwhile increased team spirit and support within the state. However, it is clear that the North Carolina governments are making some smart decisions by acknowledging the prosperous cycle that has been created in Mecklenburg County. Due to the Panther’s success, Mecklenburg County has been able to reallocate their incremental revenue from attractions such as the Panthers to bring in more businesses, events, establishments and attractions, in order to establish more revenue and jobs for the county and refuel the cycle once again.

Works Cited

"Carolina Panthers History in Chronology." Carolina Panthers Home. 15 Jan. 2006. The Carolina Panthers. 16 Nov. 2006 <http://www.panthers.com/Team/Default.aspx?id=798>.

Goodman, Michael E. The History of the Carolina Panthers. 1st ed. Mankato: Creative Education, 2005.

Goodall, Edward B. E-Mail interview. 24 Nov. 2006.

"Longwoods International Advertising Effectiveness Study." The Department of Commerce of North Carolina. 01 Nov. 2006. North Carolina Department of Commerce. 24 Nov. 2006 <http://www.nccommerce.com/tourism/econ/executiveSummary.pdf>.

Menzer, Joe. The Carolina Panthers. New York: MacMillan, 1996

"NFL Team Evaluations: #11 Carolina Panthers." Forbes.Com. 31 Oct. 2006. Forbes Magazine. 15 Nov. 2006 <http://www.forbes.com/lists/2006/30/06nfl_Carolina-Panthers_309456.html>.

"North Carolina the State of Minds." The Department of Commerce of North Carolina. 01 Nov. 2006. North Carolina Department of Commerce. 24 Nov. 2006 <http://www.nccommerce.com/>.

Plyler, Richardson, Odom, Blackmon, Hartsell, Conder, Marvin, Cochrane, Smith, Forrester, Bryan, Allran, and Carter. United States. Cong. Senate. A SENATE RESOLUTION SUPPORTING A NATIONAL FOOTBALL FRANCHISE IN CHARLOTTE. General Assembly of North Carolina Cong., 1st sess. S1221. 4 June 1992. 15 Nov. 2006 <http://www.ncga.state.nc.us/Sessions/1991/Bills/Senate/HTML/S1221v2.html>.

Roush, Chris. "Panthers Try to Run Up the Score on Last Season." Business-North Carolina 1 Aug. 2004. Factiva. Dow Jones & Reuters. Wilson Library, Chapel Hill. 24 Nov. 2006 <http://global.factiva.com/ha/default.aspx>.

Travel Industry Association, comp. The Economic Impact of Travel on North Carolina Counties. 10 Jan. 2006. 24 Nov. 2006 <http://www.nccommerce.com/tourism/econ/2005county-change.pdf>.

Usa Today Sport's Staff. The Complete Four Sport Stadium Guide. 2nd ed. New York: Fodor's, 1996.