Explaining The Relationship Between the Hurricanes, PNC Arena and the Centennial Authority

The Carolina Hurricanes and the Centennial Authority agreed to a new lease yesterday, replacing the previous lease that expired at the end of June 2024 with a new lease that runs through June 30, 2029.

Straightforward enough, right? Well...not so much. Every time the team’s relationship with the arena enters the news, there’s inevitably a torrent of confusion about who, exactly, does what. What’s the Centennial Authority? Why does N.C. State basketball have scheduling priority? Does Tom Dundon own PNC Arena the same way he does the Hurricanes?

Finally, once and for all, we’re going to answer these questions. (Yes, we should have probably done this long ago.) By the time you’re done reading this, hopefully you’ll have a better idea of how all the parts work together. Be forewarned: it’s not short.

---

First things first: who owns the Hurricanes?

Yeah, we’re starting with the “who own da Chiefs” of this FAQ. Tom Dundon owns the Hurricanes. But that’s too simple an answer for this exercise, so let’s get into the weeds.

Dundon is the managing general partner of Hurricanes Holdings, L.L.C., which is a Delaware corporation that owns the Hurricanes franchise granted by the NHL. Hurricanes Holdings comprises Dundon and the minority partners, including former owner Peter Karmanos Jr., who was the managing GP of Hurricanes Holdings until he sold a majority interest to Dundon in January of 2018. He still holds a minority share.

So that means Dundon owns the arena too, right?

No, he doesn’t. The Centennial Authority owns the arena, but the Hurricanes operate it.

The what now?

The Centennial Authority is a public body created by the General Assembly that has responsibility for ownership and management of PNC Arena. The authority contracts the “management” portion of that responsibility to the Hurricanes, or more specifically Gale Force Sports and Entertainment. We’ll get back to that in a little bit.

OK, so what’s with the Centennial Authority?

In 1987, N.C. State University celebrated its centennial, and announced plans for a new arena for Wolfpack men’s basketball. Then-coach Jim Valvano was also the athletic director at the time, and spearheaded the effort to raise money for the arena, including going to the North Carolina General Assembly to request public funds. The legislature funded $1.5 million to assist in initial planning, matched dollar for dollar by the university.

The next step was to get Raleigh and Wake County on board, which they accomplished in 1991. That year, the General Assembly authorized the county to levy a hotel and prepared foods tax, the proceeds from which would be used both for the arena’s initial construction and, once completed, for its ongoing maintenance. The next year, the various entities - at this point, the Wolfpack Club, the city of Raleigh, Wake County and the General Assembly - committed $46 million to the project.

You’ve just spent two paragraphs on this and haven’t mentioned a Centennial Authority yet.

Yeah, I know. Trust me, I’m getting there. By 1995, the process had moved along to the point that the nitty-gritty of building an arena - blueprints, contractors, bids and the like - was coming into view. Because the city and county were involved, the General Assembly couldn’t just dictate terms and run the show themselves, so it passed legislation creating an appointed governing body to own and manage the arena: the Centennial Authority. (It’s N.C.G.S. §160A-480 if you are an insomniac looking for some quick legalese to get yourself to dreamland.)

The Authority consists of 21 members, representing all of the stakeholders in the arena’s ownership: five members each appointed by the Speaker of the House and the Senate President pro tem; four members each appointed by the Raleigh city council and Wake County commissioners; two members appointed by the collective mayors of each city and town in Wake County; and one member appointed by N.C. State.

When the authority was created, the Hurricanes were still two years away from announcing their move to North Carolina.

Where do the Hurricanes come into this?

Even before the Hurricanes announced they were coming to town, Peter Karmanos had already been in contact with the Centennial Authority to try to get some changes made to the arena plans. Remember, up until May of 1997, when Karmanos announced that Raleigh was getting the team, the arena was only envisioned as a basketball arena, and for some ancillary events like concerts and the circus. There wasn’t a second sports team that the arena needed to accommodate as its home facility, so when the Hurricanes entered the picture, the authority had to hastily rework the plans to account for the necessities involved in being the home facility for a professional hockey team.

Next time you’re at the arena - whenever that is - notice how the press box juts out from the top of sections 320 to 328. That’s one of the design changes: a hockey press box is way up in the rafters, while press row for basketball is at courtside. The architects had to cleave a few rows off the top of those sections to put a press box in.

For the Hurricanes to use the arena, they had to negotiate a lease agreement. The agreement was a 25-year lease that commenced in 1999, when the arena opened; that’s the lease that was “extended” yesterday, although it almost functions as a new lease because so many of the provisions have changed. The Hurricanes were, and remain, tenants of the Centennial Authority, which is the “landlord” of the arena.

OK, if the Hurricanes lease the arena, does that grant them management rights?

Yes and no. As part of their lease, the Hurricanes manage the arena. Many arenas contract their arena management out to entities like ASM Global (formed by the merger of AEG and SMG last year), Live Nation and Oak View Group. By contrast, the Hurricanes keep all of the arena management in-house, which means that when traveling acts (concerts, shows, events like Disney on Ice, and such) want to come to Raleigh, they deal with people at PNC Arena directly.

In theory, the Centennial Authority could contract with anyone to manage the arena, and they choose to contract with the Hurricanes, for whom management of the arena is a major profit center.

But here’s the thing: the Hurricanes - as in, the hockey team, not the corporate entity - don’t directly do all that stuff.

So who does?

Remember when I mentioned Gale Force Sports and Entertainment earlier? This is where they come into play. Karmanos created GFSE as a holding company to operate both the team itself and the management of the arena. Those are two separate lines of business, run in parallel, owned by Tom Dundon (er, Hurricanes Holdings) and managed by Don Waddell (the team) and Dave Olsen (the arena). Both of those positions report to the president of GFSE, who is Waddell and was previously Jim Rutherford, and the president of GFSE reports to Hurricanes Holdings, and ultimately to Dundon.

So, employees of the Hurricanes are employees of Gale Force, and employees of the arena are also employees of Gale Force. Think of it this way: people who work at Walmart and people who work at Sam’s Club are all employees of Walmart, even though they work for different divisions of the same company.

If the Hurricanes ever moved, in theory, Gale Force could continue to operate the arena - although as a practical matter this would obviously never happen.

Wait, so the Hurricanes are both the managers of the arena and the arena’s tenant?

Yep, you got it.

So is the amount of rent they pay as the arena tenant tied into the management of the arena somehow?

They’re tied together as part of the same lease, so the rent the Hurricanes pay takes their management of the arena into account. Or, at least, that was the case until yesterday.

Under the terms of the new lease, the Hurricanes will not pay any rent* beginning in 2021 and going forward. Instead, they will share a percentage of their profits with the Centennial Authority.

* - since consideration on both sides is a legal requirement for a valid contract, the Hurricanes might be on the hook for a nominal rent to satisfy legal consideration. However, that wouldn’t be a practical issue, and in any case it certainly won’t be the millions of dollars they’d paid in rent annually under the terms of the old lease.

If the Hurricanes are sharing profits, does that mean they’re also splitting losses?

No. Since the very beginning, the Hurricanes (Gale Force) have been entirely responsible for operating losses. This is standard operating procedure for arena management companies. Under the previous lease, the Hurricanes kept profits from all events except for N.C. State basketball, and used that in part to pay the rent to the Centennial Authority; now they will share their profits with the Authority in lieu of paying rent.

The Authority itself has a few expenses, including paying an executive director and a $1-a-year lease from the state of North Carolina for the land on which the arena is built. The new lease also says that the Authority will split operating expenses with the Hurricanes up to a shade under $4 million, and the majority of that money from the Authority side will come from the hotel and prepared food taxes (plus, in future years, any profit-sharing money). The Authority gets around $9 million a year from the taxes, meaning that unless they spend a bunch of cash already in the bank on a major project, it’s pretty tough for the Authority to lose money in a given year.

The profit-sharing aspect of the new lease actually makes a lot of sense. Dundon has been outspoken in saying that the arena was underused, and since he bought the team they’ve made significant headway in expanding third-party events at the arena. The more events at the arena, the more money the Hurricanes make, and now the Authority is a partner in that instead of just popping up once a year with an invoice for the rent. But if no one makes money, the Hurricanes are solely on the hook for making up the difference.

Incidentally, there’s also a provision in the new lease that requires the Hurricanes to annually spend to no less than the midpoint of NHL teams with regard to the salary cap, or else face a $2 million penalty. The thinking here is simple, if somewhat optimistic: more money spent on players means a better chance of a playoff run, which means more money in the pocket of the Hurricanes and a higher likelihood of turning a profit.

Is N.C. State also a tenant? Do they pay rent?

They don’t pay rent per se, but they do pay a “facility use fee” or something similar to use the arena. I’m not exactly clear on why it’s set up this way, but it may have something to do with the fact that two different bodies of state government are involved, and the state can’t rent from itself. Functionally, it’s no different than the money the university pays the State Highway Patrol for traffic control at football games.

Is this where the much-ballyhooed scheduling priority for State basketball comes into play?

Yep. Remember that the Centennial Authority was originally created to own and operate a basketball arena, and the members of the Authority back in 1997 were all appointed to that end. So that was one of the concessions the Hurricanes gave up to manage the arena (and reap the associated profits): State would get to pick their dates first.

That’s occasionally been a burr in the saddle of the Hurricanes, who have seen the State athletics department block off large swaths of space on the schedule for potential basketball games. It’s become a flashpoint in the past, but seems to be less of one now. Generally, if the Hurricanes GM and the State athletic director can see eye to eye on things, this isn’t a big deal, but if they get sideways, as they did with former Hurricanes GM Jim Rutherford and former State AD Debbie Yow a few years ago, things can get a bit testy and the Authority, by virtue of their legislative imprimatur to manage the arena, could have to step in to referee the dispute.

Tl;dr

Think of PNC Arena like a city. The Centennial Authority is the city council, and Gale Force is the city’s executive department, headed by its president (Don Waddell), the city manager. The Hurricanes and N.C. State are tenants of “city” property that pay rent to use it.

There will be a quiz later.