Nashville mayor vows MLS stadium with almost no public costs, it’d actually cost $75m-plus

Nashville Mayor Megan Barry released her proposal for a soccer stadium for a new MLS franchise yesterday, and this is how the Nashville Scene headlined it:

Mayor Proposes $275 Million Soccer Stadium Deal

Potential MLS team would be responsible for all but $25 million of fairgrounds stadium cost

Sounds pretty good, right? What’s that? What do you mean, “You’re just setting us up with a rosy headline so you can undermine it with the actual horrible facts, aren’t you?” Do you think you know me that well?

The actual horrible facts:

  • Of the $275 million in construction, land, and infrastructure costs, the Nashville Metro Council, a joint city-county governing body, would put up $250 million by selling bonds. The other $25 million would come from John Ingram, owner of Nashville S.C., a USL expansion club slated to begin play in 2018.
  • Ingram and his fellow owners would pay off the bonds via “a mixture of rent, captured taxes from revenue generated at the stadium and private investment,” according to the Scene. The Tennessean breaks that down: It’s actually $9 million a year in rent payments, plus $4 million a year from kicked-back state sales taxes from anything bought at the stadium and from a $1.75 surcharge per ticket.
  • If sales taxes and the ticket surcharge fall short of $4 million, Metro would be on the hook for the shortfall.

Let’s be clear about this: Counting money siphoned off from sales taxes collected at a sports venue as a “private” contribution is completely insane. Even aside from the substitution effect — where increased money spent at, say, soccer matches invariably turns out to mostly be counterbalanced by decreased money spent at, say, local movie theaters and restaurants — this is money that for a normal business would flow directly into the state treasury. For Ingram to insist that this is really “his” money because he touched it with his hands (or his concessions workers did, anyway) is just the Casino Night Principle.

Exactly how much in public money this would actually cost Tennessee taxpayers is a little tricky to determine, since those sales taxes are lumped together with a ticket surcharge, something that economists universally agree ends up mostly coming out of the team owner’s pocket. But let’s try to back into it: If a typical MLS team sells 20,000 tickets per game (I’m assuming here that tickets given away for free still have to pay the surcharge), and there are 19 home games in a year, that’s 380,000 tickets per year. Multiply by $1.75, and the ticket surcharge should generate about $665,000 a year.

That leaves $3.335 million a year to be covered by sales taxes, which comes to about $50 million in present value. Add in the $25 million that won’t get repaid, and we’re at $75 million in public cost — at minimum, because if tickets don’t sell well, then Nashville would have to make up the shortfall out of its own pocket.

This is not the worst stadium proposal in history, but it’s also not the “private-public” (emphasis on the first word) deal that Mayor Barry promised. And if things break the wrong way, it’s not that far off from the $100 million subsidy demand that is raising eyebrows in Cincinnati. MLS stadiums are still generally lighter on the public purse than those in other U.S. pro sports, but that’s only because MLS team owners and wannabes know they can’t get away with demanding as much — and that doesn’t make the cash that taxpayers would be out any better of a deal.

(Rest in peace, Tom.)

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12 comments on “Nashville mayor vows MLS stadium with almost no public costs, it’d actually cost $75m-plus

  1. Without knowing the soccer culture in Nashville, it feels like a good expansion candidate. However I’m still floored at why the MLS gatekeepers wouldn’t just let them share a facility with the local NFL or SEC football team.

    1. There was interest going in together with Vanderbilt on a joint project but the university backed out.

  2. I think they are counting on the construction subsidies providing a lot of value for the leagues/teams. If the teams are just tenants somewhere their net worth is near zero.

    1. Crazy right? You would think value of a team is based on their cash flow from their actual product (soccer games). There is extra value to be derived from stadium naming rights, non-soccer events in your stadium, etc, but the soccer is providing very little value!

    2. Actually value would be closer to the price they paid for the team. Economics 101. But your right about the the public subsidies adding to value.

      1. No the value is what someone else would pay for it. Not you. Once you make the transaction that value disappears.

  3. Hmm, shouldn’t the real question be, “Why is anybody – public or private – talking about spending $275M for an MLS stadium?”

  4. I just don’t understand this: MLS is an incredibly marginal sport with no hope of making significant inroads until they pay for talent. Why would any football player worth their weight in gold come to the States and make a fraction of what they can make in Europe. Not to mention, essentially there is no free agency, since the ownership group is a conglomerate.

  5. Yeah Jay, I just saw on 60 Minutes Sunday, this kid Christian Pulisic. He’s supposed to be the next big thing in American soccer, but he plays in Germany. He said in the interview, “I want to be the best, and I knew I had to play against the best, to be the best.” Or something like that.

    Hasn’t Nashville just about used up its market-size, to number of pro teams it can support ratio? It’s not the wealthiest place I’ve ever been to, either. Why not just tarp off the upper-deck at the Titans place, for their MLS games? Why not use Vanderbilt Stadium? Nuts.

    How many teams is MLS going to expand to? 50?

    1. MLB would be a huge stretch right in Nashville. But NFL draws from the entire state, NHL is the opposite season, and MLS doesn’t require 81 home games a year.

      In other words no, MLS would not stretch the fan sports dollar too thin in Nashville (around 2 million and booming). But the amount of the subsidy is clearly absurd.

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