Orlando soccer stadium has raised $15m via the old green-card-for-investment scam

The interwebs are freaking out about this article in the New York Times by our old friend Ken Belson, which talks about how Orlando City F.C. owner Flávio Augusto da Silva is seeking overseas stadium investors in exchange for a shot at green cards, “in what may be the first deal of its kind.”

As with so much that Belson writes: No, not exactly. The federal EB-5 program offering to let foreign investors in U.S. development projects jump the line for visas has been around for 25 years (which Belson notes), and was in fact a key part of then-Brooklyn Nets owner Bruce Ratner’s finance plan for his arena project back in 2010 (which he doesn’t). The money there went to pay for infrastructure for the larger site, not the arena per se, but still it means the Orlando deal isn’t exactly a first. (EB-5 loans were also proposed for one of Las Vegas’s many arenas that never got built, at least not yet.)

EB-5 has been criticized for being ripe for abuse, with some developers allegedly using it as a scam to rake in cash without ever building anything, while others have complained that if the U.S. is really going to sell green cards to people will to pay for the privilege, it should at least get the money directly instead of giving it to private developers in the hopes that it will somehow create jobs. (The provision of the EB-5 program that da Silva is using is only available for projects in high-unemployment areas, which is certainly true for the area around the Orlando soccer stadium, though how a handful of temporary construction jobs and less temporary hot dog vendor jobs is going to do much to mitigate this is less clear.)

Anyway, this is indeed a scam, though it’s one that is by no means limited to Orlando’s soccer stadium (which is otherwise being funded entirely out of da Silva’s pocket), and one that’s more about how developers have sweet-talked the federal government into getting them access to cheap capital by bumping certain foreigners with money to the front of the immigration line. Team officials haven’t said how much they’re expecting to raise by this method (they say they have $15 million so far), but keep in mind it’s just a no-interest loan, not a grant, so while da Silva would be saving money, he’s still be on the hook for the principal. It’s worth getting upset about, in other words, but less because da Silva is applying for it than because it still exists at all.

Minnesota senate approves United soccer stadium tax break, whatever the cost

The Minnesota state senate voted 37-30 yesterday to approve a full property tax exemption for St. Paul’s proposed Minnesota United stadium, without once attempting to calculate how much this tax break will be worth to the team owners. Or at least that’s what all available evidence is showing — for starters, here’s the entire text of the stadium-related portion of the bill they voted on:

Section 14. Soccer stadium; property tax exemption; special assessment. Provides that any real or personal property acquired, owned, leased, controlled, used, or occupied by the city of St Paul for the primary purpose of providing a stadium for a Major League Soccer team is exempt from property tax. The properties are still subject to special assessments. Any real or property subject to a lease or use agreement between the city and another person for uses related to the purpose of the operation of the stadium and related parking facilities are also exempt regardless of the length of the lease or use agreement.  This property tax exemption does not apply to any real property that is leased for residential, business, or commercial development or any other purpose not necessary to the operation of the stadium. Effective upon approval by the St. Paul City Council.

Also, the Minnesota senate has only posted partial video of the hearing, but there’s no discussion there of an actual price tag on the value of the tax breaks, or any talk about the stadium at all. (Yes, I actually listened through 38 minutes of an omnibus tax bill hearing to determine this, so you don’t have to. I’ll be hitting the Advil early today.) So our best guess is still the $57 million in present value that Minnesota Public Radio estimated back in March.

Two notes on this: First off, yes, a tax break is still a public cost even if it’s on land that’s not currently paying taxes. For United’s owners, paying $57 million less in future taxes is exactly the same as getting $57 million in cash from taxpayers to help pay for a stadium. (Well, slightly different in that they’d be getting payments over time instead of all at once, but they can always just borrow $57 million from a bank and pay it off with the future tax savings — that’s precisely what “present value” means.) United owner Bill McGuire has been saying that there’s no way he can afford to build a stadium without the tax exemption, and whether you believe him or not, clearly it’s worth a significant pile of cash if he’s threatening to walk away from the stadium plan without it.

Second, it’s worth noting that this same senate voted 61-4 to approve a ban on tax breaks for a Minneapolis soccer stadium last year. The difference? Minneapolis mayor Betsy Hodges was opposed to it, while St. Paul mayor Chris Coleman is in favor of it. You can pretty much ignore most of the arguments made for or against the tax exemption on the grounds of what’s good policy or how much it’d cost whom: This comes down to “the mayor wants it, so the senate isn’t going to argue with him.” It’s possible things will be different when the state house votes — both Coleman and the senate leadership are Democrats, and the house is controlled by Republicans — but given past history, I wouldn’t hold my breath.

Minnesota senate to vote today on $54m in tax breaks for United soccer stadium

The Minnesota state senate is set to vote today on whether to give a full property tax exemption to Minnesota United‘s new stadium project, writes the St. Paul Pioneer Press:

On Tuesday, the Senate Tax Committee passed a tax-related measure, including property tax exemptions for the pro soccer team’s proposed stadium at the intersection of Interstate 94 and Snelling Avenue.

“That’s great news,” bill sponsor, Sen. Sandy Pappas, told the Pioneer Press. “We certainly expected this. The soccer stadium is very popular on both sides of the aisle, and we think that as long as we have tax bills that are moving in the Senate, we have a really good chance to be in the final bill.”

The Pioneer Press goes on to add that a related proposal to exempt the stadium from construction sales taxes is expected to be added in conference committee once both houses of the state legislature have voted, and has a lot more to say about the plan … with the notable exception of how much these tax breaks would actually cost, which seems like an important detail. For the record, the best estimate so far is that the tax breaks would cost about $57 million in present value ($54 million in property tax breaks, $3 million in construction sales tax breaks), which for a $150 million stadium would be a decent chunk of change. We’ll see if any updated numbers emerge during today’s senate vote, but I’m not holding my breath.

Miami MLS stadium deal now held up while Beckham thinks about local hiring goal

Whuh-oh, the Miami Herald is reporting that David Beckham’s proposed Miami soccer stadium has “hit a snag”:

Already months behind schedule in assembling a nine-acre site in Overtown for a 25,000-seat Major League Soccer stadium, Beckham and his partners have yet to sign off on a string of hiring goals, employee benefits and local-business perks that Miami-Dade is demanding as part of the sale…

Among the benefits sought by Miami-Dade from the Beckham group: job training for local residents; free transit passes for stadium employees; a goal of 65 percent of construction jobs going to local residents; and an agreement that Beckham’s group won’t disqualify applicants or subcontractors “based solely on a prior incarceration.”

Those are the sorts of terms that are technically referred to as “piddly,” and indeed, a source on Beckham’s side told the Herald that they just need to look over the terms more closely. Still, it’s been a while — long enough that a county attorney wrote an email to Beckham’s lawyer two weeks ago saying, “It’s been awhile” — so you have to wonder why they’re taking so long instead of sitting down to do some quality haggling. It’s still extremely likely that this stadium will happen as planned, but it’s also extremely likely that it won’t happen without at least a bit more drama, even if it’s only local doctors and business leaders arguing about whether Miamians are willing to walk for ten minutes to get to the game.

LAFC gets approval for new $250m stadium, looks like no tax money involved (fingers crossed)

The Los Angeles city council approved plans for a $250 million stadium for Los Angeles F.C. on the former L.A. Sports Arena site on Friday, and … that’s it. The documents approved by the council are just about rezoning the land to allow for a soccer stadium, with nothing about the tax incentives that LAFC’s owners had previously hinted at (and still hint at on their website). So unless there’s some other shoe yet to drop, it appears that this is like how stadium deals would work in a world without subsidies: A bunch of rich guys decide they want a team, decide on a place to build a stadium, ask for permission, and then start spending their own money.

There are also some renderings, which look about like a soccer stadium, and which if history is any guide won’t look much like the final stadium design anyway. The biggest controversy at the moment appears to be about whether the stadium will be open for the start of the 2018 season, or whether they’ll have to play a few games in one of the city’s other stadiums before moving into their own place. If that were all we had to worry about for every sports team, I could shut this site down.

160425_LAFC_Stadium-Launch_Cam-3_Final-2web.0

Detroit MLS stadium isn’t a loss leader for Cavs and Pistons owners, it’s a land grab

The owners of the proposed Detroit MLS team released renderings of their proposed arena yesterday, and it looks just like a sketchily drawn soccer stadium. But more important, they revealed some of their financial and siting plans, and it’s far more revealing of just what Cleveland Cavaliers owner Dan Gilbert and Pistons owner Tom Gores are up to:

Billionaire Dan Gilbert and Pistons executive Arn Tellem announced plans today for a $1-billion investment at Wayne County’s unfinished jail site for a 25,000-seat Major League Soccer stadium and other developments, including restaurants, hotel rooms, and a commercial office tower…

If the unfinished jail site can’t be used, it’s unlikely that MLS will seriously consider Detroit, [MLS commissioner Don] Garber and Gilbert both said.

“If you have a Plan B, it distracts from Plan A,” Gilbert said. “There really is no Plan B.”

The proposed site, in other words, doesn’t involve any of the land that Gilbert already owns in downtown Detroit, but rather a prime parcel near the Tigers, Lions, and Red Wings venues that is currently home to a county jail complex that has gone way over budget. By announcing their designs on it for a soccer stadium — and getting Garber to deliver a “their way or the highway” message — Gilbert and Gores can use the desire for MLS (and for the ever popular “mixed-use development”) as a way to stage a land grab for a potentially valuable downtown property. It’s the Atlantic Yards model, in other words, though with a much cheaper sports facility as the hook.

So would it make sense for the city and county? Fortunately, county elected officials seem to be asking that question. Wayne County Executive Warren Evans said in order to do the deal, a new jail (plus courthouse) would have to be able to be built at the city and state’s Mound Road site for no more than the estimated $175 million it would cost to finish the current jail plan. Evans didn’t say anything about a fair price for the downtown land, but it’s presumably on his mind: The county recently rejected a $50 million offer from Gilbert for the land, something that the soccer-plus-the-kitchen-sink proposal is no doubt designed to get the county thinking twice about.

In theory, there’s nothing wrong with using centrally located land for sports and retail and hotels instead of for a jail — so long as there’s no huge giveaway of public assets involved. Too often, cities that have been facing a long history of disinvestment and abandonment like Detroit end up fighting the last war once there’s an uptick in interest from well-off newcomers in resettling the area, throwing money (or land and development rights that are worth money) at any developer offering a construction project rather than trying to see what its assets are really worth. (I’m just wrapped up writing a Brooklyn Wars chapter that addresses exactly this, so it’s close to my mind.) Gilbert and Gores are clearly looking to dangle that “$1 billion investment” as an enticement to get the county to give them what they want at their price; how the county responds will go a long way toward determining the next stage of Detroit’s problematic revival.

Oh, right, I promised you renderings, so let’s do those now. There are fireworks and searchlights! (There are always fireworks and searchlights.)

635973657163165618-2016-0427-MLS-Detroit-Aerial-Site 635973657070188426-2016-0427-MLS-Detroit-Interior-Bowl

635973657004823588-Map1

Cavs, Pistons owners to seek Detroit MLS stadium, because what bankrupt city doesn’t need four new sports venues?

The owners of the Detroit Pistons and Cleveland Cavaliers have announced they’re teaming up to seek a Detroit MLS franchise:

Soccer is the most popular sport in the state, according to [Tom Gores and Dan Gilbert’s press] release, with 92,000 registered players in Michigan and “if Detroit is chosen for an MLS expansion team, it would become the most dense urban sports and entertainment district city in America with four major professional sports stadiums within a 10-15 minute walk: Ford Field, Comerica Park, the new Detroit Red Wings arena and the new MLS stadium.”

Oh, yeah, did I forget to mention this would require a new MLS stadium? Gores and Gilbert didn’t say anything about where a new stadium would go, though Gilbert’s Quicken Loans owns a ton of downtown Detroit land that would qualify as “within a 10-15 minute walk” of Mike Ilitch’s baseball-and-hockey-world.

The bigger question is how a new stadium would be paid for, since a publicly funded MLS stadium could also make Detroit the home of the most dense set of stadium subsidies in America. Gores and Gilbert might choose to go it themselves — MLS stadiums are relatively cheap as these things go, and it could be a kind of loss leader for their other downtown properties. (Not that soccer fans would buy that much from neighboring stores, but anything new in Detroit helps sell that neighborhood as “not the part of the city that’s totally burnt-out and where the streetlights don’t work.”) Best to keep a close eye on this, anyway.

Beckham buys six of nine acres for new stadium, now just needs stadium that’ll fit on nine acres

David Beckham’s Miami MLS ownership group has purchased six acres of private land needed for its proposed soccer stadium, for an undisclosed price. He still needs to buy three acres of county-owned land as well; Miami-Dade Mayor Carlos Gimenez is hoping to use a state economic-development law to get around allowing public bids on the property, which would require Beckham’s group to pay a “market-rate” price, which is estimated to be around $9 million.

You can quibble over the exact price, but none of this should be too controversial — at least Beckham is paying something close to market price, and construction costs and property taxes, too. The biggest question, really, is how to squeeze a 25,000-seat soccer stadium into a nine-acre plot of land: The latest renderings still show a stadium plopped down on top of parked cars, so no way to tell from those. I’m actually tentatively excited to see what Beckham & Co. come up with, as site constraints often make for the most interesting stadiums, but also curious to see how they make this mesh with the demands of a modern-day concession-filled mallpark. Stay tuned to this channel for further breaking news.

D.C. zoning commission likes United stadium, just wishes it looked less like a prison

The D.C. Zoning Commission held its first hearing on D.C. United‘s new stadium being built with the help of $183 million in city money, and the commissioners didn’t sound too thrilled with the team’s bait-and-switch stadium design:

“I actually looked at it and it and I thought, this reminds me of a prison, the facade,” [commissioner Marcie] Cohen said. “I think we need to get a little bit more, maybe a little bit more friendly to the neighborhood, because if I’m looking at the facade, I wouldn’t be too happy with that view.”

What Cohen was talking about was presumably this, which, yeah, she has a point:

dc-united-pressNot to mention: Ghost balloons! Eeeagh!

The good news for United owner Erick Thohir is things like spiffing up the exterior are relatively inexpensive in the grand scheme of things, so they should be able to make the commissioners happy with a few tweaks. And if not, well, Thohir is only on the hook for half of the first $20 million in cost overruns, so it’ll be more the city’s problem than his.

Speaking of Thohir, he also owns Italian soccer giant Inter Milan, and had this to say yesterday about that team’s new-stadium campaign:

“If you look at future revenue, the stadium is very important, just look at what Juventus make with ticket sales. Both Milan clubs are working to improve the stadium, otherwise we’ll lose €20m in profit.”

Lose €20m in profit compared to what exactly? Compared to what they make now? Compared to what Juventus makes now? Compared to what they’d make in a new stadium? How does Thohir know what his profits would be in a new stadium when he doesn’t even know how much he’d have to spend on it? Do sports team owners even think before saying these things, or is it like those “You’re going to be grounded for the next six months!” threats that parents blurt out before thinking what they’re saying or how they’ll enforce it? Anyway, nice to see that while Europe may be far behind when it comes to lavishing public money on its sports teams for no good reason, America doesn’t yet have a monopoly on stupid.

Orlando’s MLS stadium deal not as taxpayer-friendly as reported, still better than a poke in the eye

Elliott Turner, aka Twitter’s @futfanatico, also had a piece in Vice Sports on Friday, this one a long analysis of Orlando City S.C.‘s stadium deal, which I’d previously praised as a rare moment when “a professional sports franchise is actually agreeing to pay to build its new stadium, and pay (something) for the land to build it on, and pay property taxes on the stadium once it’s complete,” though the next day I had to unpraise it when it turned out the team was still expecting the city to use its eminent domain powers to force private owners to turn over part of the stadium land. Turner has even more problems with the deal, though, calling it “a new way to milk taxpayers”:

  • The team will now operate the stadium, not the city, meaning it will cover operating expenses but also won’t share revenues.
  • The team’s non-relocation clause has been cut from 15 to ten years, and it will no longer pay a $20 million fine if it moves before then.
  • The city is still on the hook for sewer and infrastructure upgrades that could amount to $16 million, which will wipe out the $9 million profit the city will turn on the land it bought and re-sold to Orlando City S.C.
  • Under the previous deal, the club was going to pay $675,000 in annual rent; by owning the stadium itself it won’t pay rent but will pay property taxes, but those will likely amount to less than the rent would have.
  • Under the new contract, Orlando City S.C. can deduct future construction cost overruns from the $18 million purchase price it’s paying the city for stadium land.

So how bad is all this? Not real bad, honestly: Operating costs can easily outstrip any revenues. The non-relocation clause is likely a non-issue if the team owns the stadium and would be saddled with it if it moved. Sewer costs are a standard city expense that property taxes are supposed to help cover. And most importantly, that “rent” wasn’t going to pay back the city and county’s $40 million in construction costs under the old deal, but toward paying back a $10 million loan that the city was going to provide toward the team’s share.

The most salient item uncovered by Turner is that the $18 million land purchase price may get eaten up by cost overruns, which is a real concern. But even then, getting a lousy price on land sales is a perfectly cromulent tradeoff for getting out from under $40 million in taxpayer cash obligations. The Orlando City soccer deal may not be the stadium utopia we had hoped for, but it’s at least close, and much closer than the original deal that the team owners originally proposed. I may not be quite shocked and awed by it, but if all stadium deals looked like this one, the world would be a significantly better place.