Bad Bonds: The failed Panthers-Rock Hill project had major questions from the start

CHARLOTTE, N.C. (WBTV) - A WBTV Investigation on the failed Panthers-Rock Hill practice facility and headquarters raises questions about whether the project was doomed from the start. The investigation found the amount of bond money agreed to by Rock Hill was far more public investment than other similar projects and simultaneously sidestepped key oversight steps.

Last Wednesday, Rock Hill City Council voted to file a new complaint in court against David Tepper’s GT Real Estate, confirming many of the details WBTV had been investigating for months.

The city’s own complaint shows that Rock Hill city officials signed an agreement with GT Real Estate before some of the most important information about funding and paying back the bonds had been provided by Tepper’s company.

But most importantly, the math on the project made little sense to bond experts, economists, and some state leaders.

The City of Rock Hill was planning on issuing $225 million in bonds to help pay for the project.

In exchange, Tepper’s GT Real Estate was going to spend $500 million developing the property and promised to bring 150 jobs to the area.

Those numbers are wildly different than other similar projects according to an analysis done by WBTV and verified by bond attorneys.

Charleston County wooed Boeing to South Carolina, in part because of bonds. That deal was a $1 billion private investment from Boeing and 2,000+ jobs and just $120 million in bond financing in return.

Charleston County also convinced Mercedes to move a plant there. Mercedes promised $495 million in investment, and more than 1,300 jobs but in return received just $38 million in bond financing.

In both of those cases, the number of bonds was far lower than in the Rock Hill project and the amount of promised jobs was way higher.

What’s similar about those projects is that the bonds would largely have been paid back from revenue generated by something called “fees in lieu of taxes” or FILOT. Those fees are taken from the property only inside of the improvement area and are usually lower than typical property taxes in order to entice the economic investment.

FILOT revenues are typically used for a unique type of bond called a Special Source Revenue Bond (SSRB).

But GT Real Estate and Rock Hill instead agreed on pursuing a MID bond, which are typically funded by an assessment that is very different than FILOT.

Despite that, the majority of the revenue to pay back the bonds for the Panthers project would have come from FILOT, not an assessment.

One of the main differences between a MID and SSRB relates to oversight and accountability to taxpayers.

Almost every local bond in South Carolina must get approval from the State Fiscal Accountability Authority to ensure it is fiscally responsible.

MID Bonds don’t have to be reviewed by the SFAA and the bond agreement between GT Real Estate and Rock Hill was never sent to the SFAA, according to an employee of the agency.

According to Rock Hill’s complaint, GT Real Estate expressed a preference for MID Bonds just two months before the final agreement was signed and after financing through FILOT had largely been worked out.

The assessment GT Real Estate would have paid was just $7.5 million.

The entire structure of the agreement left experts questioning, with one bond attorney telling WBTV on the background they had never seen a MID Bond paired with a fee in lieu of taxes structure in their decades of experience.

“I’ve never seen something like that,” Economist Austin Drukker told WBTV.

Drukker studies how sports projects are financed across the country. He told WBTV the unusual part about the bond agreement for the Panthers facility was that most stadium projects are supported by bonds that are backed by the local or state government that is putting together the package.

However, in South Carolina revenue bonds like MID Bonds can not be backstopped by the taxing government entity because state law prohibits it. Instead, they must be backed by the company they are going to support, in this case, David Tepper’s GT Real Estate.

“So basically, I guess they were backed by the full faith and credit of the failed organization,” Drukker said.

Except the complaint filed by Rock Hill shows that time and again GT Real Estate refused to backstop the bonds. Ultimately, GTRE agreed to back up to $7.5 million worth of the $225 million in bonds.

Economists and bond attorneys WBTV spoke with on background questioned whether that math could ever work. The City of Rock Hill claimed it expressed the same concerns to representatives of GT Real Estate in the complaint the city filed in court.

Throughout the process, Rock Hill officials claimed they would not backstop the debt. But a small clause in one of the agreements raises questions about other measures the city was willing to take to get the bonds issued.

In the Finance and Construction Administration Agreement between Rock Hill and GT Real Estate, the city agreed to use reasonable efforts to “obtain Credit Enhancement in connection with the issuance of the bonds.”

But there are few options available to a public entity to “credit enhance” bonds outside of pledging its full faith and credit. One option is bond insurance but insurance on $225 million in bonds that are not backstopped would be difficult, according to industry experts WBTV spoke to.

“I think too many elected officials fell victim to this to this extravaganza,” State Senator Dick Harpootlian told WBTV.

Harpootlian has been against the deal from the very beginning, hiring his own economist to show the numbers didn’t make sense.

“Once you said NFL or once you said football, blinders went on and that happened at a local level and that happened at the state level,” Harpootlian said.

In Rock Hill’s own complaint the city outlines months and months of disagreements with GT Real Estate, accusing the company of failing to provide crucial information predicting the revenue from the project that would end up paying back the bonds.

Despite that, the city still signed an agreement after more than eight months of trying and failing to get the vital material from GT Real Estate.

WBTV emailed questions about this report to Rock Hill, Mayor John Gettys and City Manager David Vehaun. In a statement, a spokesperson wrote “The City Council is looking forward eagerly to the day judgment is rendered on the facts that will be presented in court.”

A spokesperson for GT Real Estate did not provide a comment.

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