F.C. Cincinnati cuts deal with councilmembers for $63m in West End stadium subsidies

Oho, so this is why F.C. Cincinnati kept moving the goalposts on its stadium deadline, and then released a statement pivoting back to the West End site it had previously rejected: The team had been secretly — or at least behind-the-scenesedly — working on a deal with the city council to revive subsidies for a West End stadium:

The deal, presented by Councilmen P.G. Sittenfeld and David Mann, calls for FC Cincinnati to build a $200 million soccer stadium, pay $25 million in property taxes to Cincinnati Public Schools and infuse $100,000 a year for 10 years into the neighborhood.

City and county taxpayers would contribute $48.8 million, vs. $51 million for the Oakley site.

Okay, let’s back this up a sec. When the West End site was last in play, F.C. Cincinnati was looking to have its property taxes capped at between $100,000 and $500,000 a year, while the school district thought the team should be paying more like $2 million a year. The deal proposed by Sittenfeld and Mann would set property taxes at closer to $1 million a year, which would still be a tax break worth around $14 million in present value, if the school district’s valuation is correct.

Meanwhile, taxpayers would spend an additional $48.8 million in straight-up cash: $17 million from local hotel taxes, $6.3 million from the sale of the former Blue Ash airport site, $8 million in tax-increment financing kickbacks, $2.5 million in city capital funds, and $15 million in county money to build a parking garage for fans. Add in the tax breaks, and that’s $62.8 million that Cincinnati residents would be contributing toward the $200 million stadium project. (F.C. Cincinnati would also build a new high-school football stadium as part of the deal, but as the West End already has a perfectly good one that it would lose to make way for a soccer stadium, that’s really a net gain.)

So what now? The support of Sittenfeld and Mann should give F.C. Cincinnati five votes on the nine-member city council, though the other three nominally pro-stadium members haven’t actually chimed in on this latest plan. The school board has to approve selling the stadium land in a vote tomorrow; presumably the councilmembers wouldn’t have announced this deal if the school board hadn’t signed off on it, but who really knows. And then MLS has to actually award Cincinnati an expansion team, but given that the league has been twiddling its thumbs since December waiting for Cincinnati to put together a stadium deal that makes the team and league happy (read: pays for a large chunk of the costs with somebody else’s money), that’s probably a slam dunk.

If it all pans out, there is some happiness here, in that Cincinnati boasts by far the strongest fan support in the second-tier USL, and so arguably deserves a shot at an MLS club. (We will ignore the fact that in most of the world, Cincinnati could earn this promotion without anyone paying a dime just by winning games.) But man, $63 million is a lot of dough, nearly as much as Nashville is coughing up toward its MLS stadium. Soccer is still a relatively cheap date in terms of subsidies compared to the Big Four U.S. sports, but MLS is doing its best to change that, and this whole multi-city bidding war thing is working out about as well as the league could have hoped, even if it’s taking a while to get there.


16 comments on “F.C. Cincinnati cuts deal with councilmembers for $63m in West End stadium subsidies

  1. You presume that “just winning games” requires no extra expenditures at all.

    You presume that no team has ever encountered financial difficulties as a result of chasing promotion by spending outlandishly on players aimed at “just winning games.”

    You presume that a promoted club would not have to spend a dime on bolstering its infrastructure, and could continue to play at a baseball stadium or an artificial turf college football stadium they don’t own.

    You’re the stadium finance guy. You tell me who is going to kick in for a stadium when one bad season (teams do “just lose games” too, I’m told) could relegate them to a position where they could no longer pay the debt service on their shiny new stadium.

    But promotion/relegation zealots only want you to focus on the fun, let’s-run-on-the-field, other-American-sports-don’t-experience-this nonsense and never on the actual financial realities. It’s all just a magic elixir to them.

    “Just win games,” no investment required!

    • Of course winning games requires an investment. But promotion doesn’t come with a $150 million cover charge on top of what you have to spend on players, nor a league request for an eight-digit public stadium subsidy.

      • I find the idea of promotion/relegation in US soccer absurd, given the sums of money involved in “acquiring the license to operate a team in a single-entity ownership structure” or whatever it is called in MLS. European teams are simply too different–even the high-turnover teams are mostly cash-poor organizations that raise money by selling developed players, hustling local businesses, and borrowing on the value of their (mostly worthless) stadiums (when owned by the team).

        I will tell you that lots of teams get promoted and invest virtually nothing in their infrastructure. In fact, in the last 10-15 years you could go to nearly any Prem League stadium in London and think you were in the 19th Century.

        Lots of teams pay rent to play in an unadorned civic-owned stadium and do just fine (Italian teams come to mind). Given that US teams aren’t going to be relegated, there should be nothing wrong with them playing in a perfectly serviceable local stadium and paying rent.

        • My guess is pro/rel in Europe would probably go away in an instant if the major teams could figure out a way to transition out of the currents structure.

          With the exception of the top 4 or 5 teams in the league it really doesn’t benefit most of the soccer teams since there is no margin to invest or rebuild the roster, since a bad year can effectively sink the club for a long, long time (see Leeds United collapse in 2000-2002).

          • It’s not a “bad year” that sinks a club for a long time (or puts it into administration), it is poor management practices.

            Whenever a small team is promoted to the PL, they have a decision to make:

            Do they spend the £50m annual windfall on salary commitments to players (many of whom will not be worth what their contracts require they be paid) and hope they can hang on in the PL?

            Or do they spend perhaps a third of that windfall on improved on field talent, another third on improving facilities (including youth & training) and bank the rest for the leaner times that will certainly come?

            The teams that spent out of step with their operating income (or owner’s capacity to inject capital) have been heavily damaged (Leeds, Plymouth, Blackpool etc). None of them “had to” spend the way they did. It was a choice the owners made.

            Again, it is not the existence of relegation that damaged these clubs. It is their own failure to adopt a sensible financial plan that did them in.

            Whether owners use clubs as ATMs (and some certainly have done so) or just spend wildly in a misguided effort to stay on the big stage, it is their mistake to make. Don’t blame the system for the actions of incompetent or corrupt owners.

  2. I believe Neil was speaking of the team achievement of promotion in relation to their (self-identified) status as a Division II team seeking to become a Division I team through joining another league.

    Also, promotion/relegation is a non-zero sum game. There would be minimal economic affects of the Pittsburgh Pirates being replaced in the NL by the PCL OKC team. I’m not sure if the Expos actually exist anymore but I do know that the debt service of their stadium long outlasted the franchise, just as the case in St Louis.

    Also, Leeds and Parma went through bankruptcy and they are both still around and in their same stadiums. I have no doubt that if the giants were still at the Polo Grounds they’d find a way to introduce a “beer terrace” or something and try to get us to pay for it and MLS is doing the same exact thing with soccer. Orlando City anyone?

    • There would be minimal effect on the league as a whole if Pittsburgh was demoted and OKC was promoted, but there would be a major effect on both Pittsburgh via a drop in revenues and OKC via a major increase in revenues.

      Leeds is a good example on why Pro-Rel is bad. The team borrowed so much on future UEFA Championship revenues to make improvements that when they missed it the entire club imploded and went back down to League One. It took them eight years to even get out of League one and they’ve remained mired in the mid-teir English Championship ever since.

      Also there is the problem of TV contracts, where the major broadcasters want a large spread out fan base across the country. It’s ok in say England where there really is only one major city, London (in the US the equivalent would be if there was New York and then the next largest city would be Milwaukee), but not so in the US where there are lots of large cities everywhere. Pro/Rel can cause the league to start to bunch up in just one or two cities hurting ratings overall which would hurt ad rates and then drop the league revenues.

      • Looking at the Premier League standings, it goes Manchester, Manchester, Liverpool, London, London, London, Burnley, Leicester, Liverpool, Newcastle. There are a lot of teams in London because there are a lot of soccer fans there — if the U.S. didn’t have territorial rights, New York would have 5-7 baseball teams and the Yankees wouldn’t find it as easy to outspend everyone — but it’s not true that the good teams are all bunching up in London, or even in the cities with the biggest population.

        Pro/rel comes with its own, different set of problems, but I don’t see this as one of them.

      • “Leeds is a good example on why Pro-Rel is bad. The team borrowed so much on future UEFA Championship revenues to make improvements that when they missed it the entire club imploded and went back down to League One”

        Logic error. This is not an example of why promotion and relegation is bad, this is an example of why incompetent business management is bad.

        Leeds does not have a large or rich enough fan base to support the level of spending the club engaged in. It also underperformed on the pitch, but that is very much secondary to the fundamental problem (in other words, if they had won ‘everything’ every year they still might not have turned a profit). If club management and administration had not made a series of truly awful decisions (both business and sporting ones), Leeds would not have found themselves in the trouble they did.

        They were conducting business like a club with a multibillionaire owner willing and able to write checks to cover any and all losses when they DID NOT HAVE such an owner.

        • Leeds is one of the largest cities in the United Kingdom…and their population base is much larger than Burnley. So….Logic error right back at you.

          https://en.wikipedia.org/wiki/List_of_urban_areas_in_the_United_Kingdom

          The literal argument used when MLB campaigned for protection was that the owners needed their investment protected via a monopoly (development & travel expenses) in order to profit. It seems eerily similar to some of the posts NdM has made regarding stadium financing…That alone should probably be a reason to wonder about the viability of MLS in relation to “free market” soccer systems such as LigaMX, EPL, SerieA, or Bundesliga.

          You can insert “movie theater” or “mcDonalds” in place of “football club” or “baseball club” and see if having a monopoly makes any sense. Also, I don’t think Stu Sternberg has the wherewithal to build a stadium for the TB Rays, so he’s operating just exactly as you say the LUFC owners did.

          But this isn’t about Pro/Rel, it’s about FoS…and if FC Cinci wants to bulldoze a playground for children for their own profit and business use.

          • Leeds itself (the club’s drawing area) has about 500k population. If you want to include the entire CMA as Leeds’ drawing area you will need to include the other clubs in that urban area (amongst them, Bradford, Huddersfield, Barnsley, York, Halifax etc…) that’s how urban areas work). Leeds isn’t the only option for fans in Yorkshire just as Arsenal or Tottenham aren’t the only options in London.

            What does Burnley have to do with the discussion?

            Leeds has a certain level of fan support (it hasn’t been a PL or 1st div club for quite some time). The size of the home city (much less urban metro) is not the single defining factor in the amount of support the club enjoys. There are other sporting attractions in the area, and other clubs that draw support away.

            Leeds attendance and matchday revenue is a clear indicator of what level of spending they can support… and they overspent relative to their earnings.

            Ridsdale (and others) gambled that they could be successful enough to pay off the loans taken out against future income. They weren’t (and, as noted, even if they had been successful on pitch may not have been able to meet their financial obligations).

      • Secondly:

        The US has a population density of about 85/sq mile.

        The UK has a population density of about 1100/sq mile.

        Trying to draw CMA/Urban parallels between two nations with that level of density imbalance is ludicrous. Yes, Birmingham and Manchester “officially” have about 2-2.5m people each. However, the urban area limits finish much, much before you are out of the cities themselves (not true of CMA districts in the US and Canada).

        If you are using more comparable district designations, Milwaukee and Pittsburgh would be 550k and 300k nominal populations… more like Bristol and Preston, not Birmingham and Manchester.

      • I don’t think pro/rel is bad necessarily–it creates interest in a league without playoffs for the bottom half of the league who otherwise would have little to play for (and may be more susceptible to fixing games, etc.).

        However, it was needed in nations that had a large number of broadly equal teams to put them into manageable leagues. It was more survivable when teams were mostly collections of local blue-collar guys being paid artificially low wages.

        Leeds’s problems show how really low local club income really was/is and how it can vary greatly throughout a league (I think in Germany Bayern Munich has a larger annual turnover than the next six or seven teams combined). Rather than pro/rel–big teams want more games on TV against other big teams. I don’t think Bayern worries about being relegated anymore.

        In the US, where leagues were (and are) allowed to establish virtual monopolies and hand out teams through the “franchise” system, it really doesn’t work, nor would anyone investing actual money want it. (Would have been interesting to see MLS try to build on existing clubs rather than invent all of them new). From my sense, this pro/rel debate is just US soccer fans wanting to needlessly emulate Europe again.

  3. Gigantic waste of everybody’s time having the team negotiate directly with the school district when the school lacked the authority to finalize any deal AND when the council was willing to ignore the school’s wishes and do a deal regardless.

  4. As soccer fans demand higher standards of play from MLS, it necessitates spending more on higher priced players, which inevitably will lead to higher ticket prices. Can a balance be struck between quality of play and affordability, or will MLS go the way of other leagues, becoming a sideshow to corporate networking functions and sucking all the life out of the gameday experience?

    • Bzzzzt. Higher player salaries do *not* lead to higher ticket prices. The best way to think about this theoretically is: If teams were raising ticket prices to pay for payroll, that would imply that beforehand, the market was such that fans were willing to pay more for tickets, but owners charged less just because they, I guess, didn’t want the money?

      Or if you prefer empirical evidence, I have some nice baseball charts that this margin is too small to contain.

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