D.C. United to critics of stadium design: How about a fountain? You like fountains, right?

Still on the road, but can’t fail to alert you to new stadium renderings from D.C. United that were released yesterday (on Twitter, because 2016). The last round of renderings, you’ll recall, was disparaged as looking like a prison:

dc-united-press dcunited.imrs.phpSo how do the new pictures compare?

https://twitter.com/dcunited/status/767881787670466560

That’s, um, pretty similar. There’s a big glass box sticking out of one corner for some reason, instead of the big grey box, and some kind of fountain with giant lens-flare-bedecked “D.C. UNITED” letters in the middle of it right in the path of fans trying to get to the game, but otherwise the design is largely unchanged. It’s not a bad design, but it’s a bit no-frills compared to the original one floated when United was trying to get citizens of D.C. to pay for it:

At least United is still planning on having lots of featureless ghost fans come to games. Make your own MLS attendance jokes.

L.A. seeks to use $22.5m in anti-poverty funds to help build MLS stadium (UPDATED)

When the Los Angeles city council approved a $250 million stadium plan for the Los Angeles F.C. MLS expansion team in May, I wrote that it looked like it would be entirely paid for with private money, “unless there’s some other shoe yet to drop.” And you know, sometimes I really hate being right:

Los Angeles City Hall is seeking to give a loan of up to $22.5 million to the developers of a new soccer stadium near downtown Los Angeles.

A motion submitted this week by City Councilman Curren Price asks for city approval for a U.S. Department of Housing and Urban Development (HUD) loan for the backers of the Los Angeles Football Stadium.

Now, the HUD loan isn’t for the stadium per se — it’s for the “ancillary” construction, meaning a sports museum, conference rooms, and retail, i.e., all the parts of a stadium complex that don’t specifically involve watching the game. The excuse for using a federal housing loan program to build this is that it’s “economic revitalization,” which is the usual argument for this sort of thing.

If the government were just lending the money and the team repaying it, that wouldn’t be such a big deal. But HUD Section 108 loans are repaid by a local government’s federal Community Redevelopment Block Grant funding — meaning Los Angeles is considering taking $22.5 million in anti-poverty funds and giving it to the developer of a soccer stadium, because economic development.

MynewsLA reports that the city council voted on Friday to ask HUD for the loan, so presumably this is now up to the Obama administration (or its successor) to approve or deny it. I’m not sure what discretion HUD has to reject uses of its loans for really off-label purposes, but hopefully we’re going to find out.

UPDATE: A commenter who works in finance points out some fine print in the Section 108 program: The city’s CRBG funds are only used as security on the loan, but it’s still supposed to be paid off by the private developer. This is much better for the public than a straight subsidy, obviously — LAFC’s owners would be getting the benefit of a cheap loan rate, and there’s some risk to taxpayers if they default on the loan, but it’s not just handing over $22.5 million. You can still make a good case that HUD should be looking at this project with lots of skepticism — if building a soccer stadium is an anti-poverty program, then building pretty much anything is — but at least it’s less of a cash grab it appeared at first.

Consultant reports that soccer stadium would lose around $40m, let’s go build one!

With the race officially on to see which cities can land all the expansion franchises MLS is selling for $200 million a pop, Louisville welcomes to the world a study it commissioned on building a new stadium for Louisville City F.C., which currently plays in the USL but could join MLS as easily as anyone else, I guess. Anyway, the study was conducted by our old friends Convention, Sports & Leisure, the rent-a-consultants owned by the Dallas Cowboys and New York Yankees, and as usual, their recommendation is build build build:

In January, Louisville Metro Government paid Minnesota-based firm Conventions, Sport and Leisure International $75,000 to complete the study. The result calls for a 10,000-seat soccer-specific stadium to be built, primary for use Louisville City FC, by 2020…

CSL estimates a new stadium with its recommended specifications would cost between $30 million and $50 million, and the study assumed in its scenarios the city would fund the stadium through 20-year bonds to be repaid by private and public sources.

The funny bit is that unlike its usual handwavy economic studies, CSL at least gave a shot at doing a deeper dive into the numbers in this one, acknowledging that economic impact would be blunted by both leakage (money spent on soccer doesn’t recirculate locally if it goes to out-of-town owners and players) and what it calls “displacement,” better known as the substitution effect (entertainment dollars spent on soccer instead of on something else local isn’t a net gain) — though CSL doesn’t provide any details at all of how these were taken into account in its calculations. In any case, its cost-benefit analysis for the project is actually pretty dismal:

Screen Shot 2016-08-05 at 8.34.27 AMThat’s $2.7 million in new tax revenues over 20 years, which is an absolutely horrible return on a $30-50 million expense. Yet CSL still recommends that the public fund this money pit, on the grounds that — wait for it — it’s such a money pit that you can’t possibly expect any private businessperson to fund it:

The net income from operations will not be able to fund a material amount of stadium project costs, which is typical of most soccer-specific stadiums that have been built for teams in USL, NASL and other similar leagues. Historically, the development of soccer-specific stadiums has generally involved varying degrees of public-private partnerships.

The study then goes on to list a whole bunch of different ways to pay for a stadium on the public’s dime, including tax increment financing and EB-5 green-cards-for-investment deals and the Louisville general fund, because there’s no real way to build one of these things without dipping into that. Unless you might think about asking a team owner who’d be potentially plunking down $200 million for an MLS franchise to chip in another $50 million for a stadium — or for MLS to take only $150 million for the franchise so that the rest of the cash could go to build the stadium. You know, crazy talk.

Ultimately, when you hire someone like CSL to do a stadium study, you’re not getting an evaluation of whether building one is a good idea, so much as a long list of rationalizations for why it could be defensible, if you squint right. CSL got $75,000 for putting this together, which leads me to believe that I’m in the wrong line of work: I should charging cities a few grand to provide a link to this.

 

MLS to double expansion fee to $200m, hopes world doesn’t run out of rich guys

Major League Soccer is preparing to announce another round of expansion — this time to a whopping 28 teams — and is clearly determined to grab all the money it can in the process, as deputy commissioner Mark Abbott says the league is preparing to double its expansion fee to $200 million.

That’s a whole bunch of money for membership in a league whose own commissioner says it’s losing money, and which Soccernomics author Stefan Szymanski has called a “pyramid scheme” that’s eventually going to collapse. Given that the leading counterargument appears to be that “no, no, even if teams always lose money owners will count on making money when the sale value of the franchise appreciates,” it’s exactly a pyramid scheme — the only question is whether it’s the kind of bubble that eventually collapses, or one that can continue indefinitely.

The argument for the latter — and, presumably, the MLS business plan — goes back to the billionaire glut, which posits that there are so many rich people wanting to own a pro sports franchise these days, and such a limited number of opportunities, it’s going to be a seller’s market for the foreseeable future. With that the case, it’s understandable that MLS would want to get everything it can for new franchises while the getting’s good, even if it means becoming by far the largest soccer league in the world. (Most other leagues cap membership at 20 and relegate the teams that do the worst to a second division, something that MLS has resisted because it might limit the number of people lining up to sign expansion checks.) And with a list of prospective expansion cities that includes way more than they can possibly fill in this round — Sacramento, Detroit, Cincinnati, San Diego, St. Louis, San Antonio, Charlotte and Oklahoma City are all reportedly on the list — it makes total sense to weed out the winners from the losers by seeing who’ll balk at a higher price tag.

Clearly this isn’t sustainable in the long run, but MLS isn’t thinking about the long run right now, which is its prerogative. If you’re a city thinking about building a stadium for a new MLS franchise, though, you might want to at least keep in the back of your mind that there’s a decent chance the league could, years down the road, eventually contract again — or at least split into upper and lower divisions — and that your shiny new team could end up without a chair when the music stops.

Kraft considering Revolution stadium at demolished mall site, and, yeah, that’s about it

Now that Boston’s Olympic bid is mercifully dead, New England Revolution owner Robert Kraft (he also owns some team in that other kind of football) is shopping around for a new site for a soccer stadium, and is considering the site of an abandoned shopping-mall-turned-convention-center in Dorchester:

Robert Kraft’s hunt for a new home for the New England Revolution has led him to hold talks about building a soccer stadium in Dorchester at the site of the former Bayside Expo Center, now owned by the University of Massachusetts….

UMass bought the Bayside Expo for $18.7 million in 2010, after the center went into foreclosure. The university is currently tearing down the exposition hall as part of its plan to expand the UMass Boston campus to that site.

The Bayside Expo site was earlier floated as a possible place for an Olympic Village, which could have been converted to campus space afterwards; if UMass goes for Kraft’s plan, it would presumably be in exchange for lease payments, which the school could use to fund other expansion plans.

That brings us back to how Kraft plans to pay for all this, since he’d now have lease payments to UMass (or outright land purchase payments) on top of construction costs for what could be a $200 million stadium. The last idea the team owner floated was to have Boston pay for the building and get repaid via ticket taxes, which would only work if the taxes were something on the order of $40 a ticket, so that’s not going to work. Picking a site first and then hoping for the magic funding fairy to arrive is a time-honored sports owner tradition, if only because it’s easier to hit up public officials for construction dough once there’s a plan in place, but this seems like it has a long way to go before it even hits the vaportecture stage.

Beckham seeks to hook up with Bucks owner for Miami stadium cash

Now that David Beckham’s proposed Miami MLS team finally has a site where a stadium can fit, sort of, the negotiations have entered a weird phase, with Beckham shopping around for somebody with the cash to actually build the thing. Or lend to him to build the thing. Or give to him to build the thing in exchange for a share of the team, or the stadium revenues, or something. David Beckham seeking rich partner for stadium play, is what I’m saying here.

Back in February, there was a rumor that Beckham was looking to sell a chunk of the team to Qatar Sports Investments, owners of the French soccer giants Paris Saint Germain, but those talks apparently went nowhere. Now, the Miami Herald (citing unnamed “sources familiar with the talks”) says Beckham has approached Wesley Edens, co-owner of the Milwaukee Bucks and co-chair of real estate giant the Fortress Investment Group, about being an “investor” in the stadium project, whatever exactly that means. The easiest way would still be for Beckham to just sell Edens a share of the team, though there are plenty of other options for structuring a deal where Beckham gets cash now to build and Edens gets revenue down the line.

Regardless of how this all works out, the Miami stadium is still looking like it’s mostly going to be a deal indirectly subsidized by MLS — in that the league gave Beckham an 80% off coupon for one expansion franchise as part of his contract to play in the league, and now Beckham needs to do whatever it takes to cash it in. That’s all well and good, if a bit odd, but it’s interesting to see that even with an $80 million head start, Beckham is having to shop around to find investors interested in being a part of his project. Making money by starting sports teams and building stadiums for them with your own money is hard, which is no doubt one reason why so many rich people looking to own sports teams try to skip the “with your own money” part. (The other reason being that skipping the “with your own money” part is always a nice way to make even more money, even if you could turn a profit doing it yourself. Really, there’s no downside to having other people spend money on you, except for having to live with yourself in the morning.)

Hundred-million-dollar “or” could threaten Vikings, United stadium funding

Minnesota has been through some awfully weird stadium shenanigans in its time, but this takes the cake: A one-word typo in a tax bill meant to raise money to pay off the almost-completed Vikings stadium is now endangering not just funding for that project, but for the new Minnesota United stadium, too.

How’s that work, exactly? Well, it seems as if the Minnesota state legislature, as part of a bill designating pulltab gambling money for the new Vikings stadium, intended to carve out a tax exemption for bingo halls — i.e., places where bingo is the main business, not other gambling establishments that happen to host bingo from time to time. So they wrote this into the legislation:

[A bingo hall is a place where an organization] regularly conducts bingo if that organization gets half of its revenue from bingo or no other organization conducts lawful gambling.

See the problem here? If that “or” were an “and,” only organizations that got the majority of their revenue from bingo could get the tax break. Instead, any gambling organization can get it just by “regularly conducting bingo,” so long as it’s the only gambling organization on the site. It’s a whopper of a typo, one that state budget officers say would cost the state $100 million in revenues over the next three years, “all of the revenue over the next three years from charitable gambling intended to offset [Vikings] stadium expenses.”

That’s right up there with the infamous million-dollar comma, but the fallout from the typo could be even more far-reaching: Minnesota Gov. Mark Dayton says he’ll veto the entire tax bill unless the typo is fixed, and since the tax bill also contains Minnesota United’s $54 million property tax exemption for their new stadium, now suddenly the expansion MLS franchise is caught up in this, too.

It’s extremely likely that all this will get worked out, but with the legislature already having ended its session for the year, it may not be a simple fix. (Some legislators are saying they’ll just write a letter saying “that’s not what we meant,” but state budget officials say a special session would be needed to set this right.) In any case, it’s all a great opportunity to point and laugh at Minnesota elected officials, not to mention a terrific case for why it’s important to have copy editors.

NYCFC are terrible at home, terrible home to blame

As many of you are probably aware, I’m a strong proponent of finding ways to get use out of existing sports venues instead of spending hundreds of millions of dollars to build new ones, mostly because they’re almost never worth it and so somebody (i.e., Mr. and Mrs. Q. Taxpayer) usually ends up having to foot the bill. I’m willing to admit, though, that NYCFC squeezing an MLS field into a baseball stadium may not have been the best idea of all time:

Unlike the NFL, where every field conforms to precise dimensions, a soccer pitch can vary within FIFA (and in this case, MLS) regulations. In the case of Yankee Stadium, that means a smaller field, which robs teams of their space to create — and the Stadium offers the smallest playing surface in the league. For a finesse club like NYCFC, that is the equivalent of the Yankees sending out a lineup devoid of lefty power to take advantage of the short right-field porch…

And at 110 yards by an MLS-minimum 70 yards, or a Hobbit-sized 7,700 square yards, the small field makes NYCFC easier to press and close down. The next-smallest fields are 8,250 square yards and eight are at least 9,000 square yards.

While all this is sad if you’re an NYCFC supporter and fairly entertaining if you’re not — they lost a game last year when an opposing player practically threw the ball into the goal from the sideline, which is hilarious — it’s important to note that this is no one’s fault but NYCFC’s own: They chose to place a team in New York with nowhere to play but New Yankee Stadium, and then chose to sign a bunch of finesse players with famous names who would be at a huge disadvantage playing on a small pitch. Talks about a new stadium in upper Manhattan have gone approximately nowhere, and there’s really no reason for the city to put itself out to solve a problem of the team’s own making, so NYCFC will likely just need to suck it up and rebuild its roster to play in cramped surroundings for the foreseeable future. To do otherwise would be like the Colorado Rockies demanding a pressurized dome to make up for the fact that they unexpectedly found the air thin in Denver — oh, crap, I’m giving people ideas again, aren’t I?

MN governor to United: Here’s some tax breaks, if you want more later, just ask

Turns out there indeed wasn’t much suspense around the Minnesota legislature’s vote on a full property tax exemption for Minnesota United‘s new stadium in St. Paul: The tax break was rolled into the annual tax bill and easily passed on Sunday. At least the exemption only applies to the stadium itself, not any surrounding development, but even then a Minnesota Public Radio investigation came up with numbers that imply that United’s owners will save $54 million worth of future tax payments via this stroke of the legislative pen.

The new MLS club also got a liquor license approved on the last day of the legislative session, but, interestingly, did not get an exemption from construction sales tax, a common subsidy for many development projects, sports-related and otherwise. (The MPR report gave an estimated value for this of around $3 million.) Gov. Mark Dayton, however, said that just because United isn’t getting the sales tax break now doesn’t mean that it can’t get it later:

As Dayton considers a possible special session, he said in a Monday afternoon news conference that he hoped United officials could see they received most of what they wanted at the Capitol…

While the tax break on construction materials was unapproved, Dayton said United can apply for a sales tax refund under existing state law, an avenue used to build the Saints’ year-old stadium in Lowertown. The law, shared by Coleman’s office Monday, relates to building materials for capital projects of regional significance.

“While the city sought an up-front exemption at the Legislature this session, which is easier from an administrative perspective, the lack of action simply means that contractors can move forward and a refund will be granted on the back end,” Coleman said in a statement.

Okay, sure, the state can just cut United a $3 million check after the stadium is built. But — and I can’t stress this enough — why on earth would it want to? The whole reason for considering the tax breaks in the first place was that United principal owner Bill McGuire claimed that he wouldn’t move ahead with building the stadium without them. (Whether that was true or gamesmanship, we’ll never know at this point, but let’s leave that aside for the moment.) If United starts construction now, it’s not like they can give up halfway if they don’t get their retroactive construction sales tax rebate check — they need to decide if they’re going to move forward under the current law, and if they do, giving them an extra $3 million is just a gift, not a negotiated agreement in order to get a soccer team.

Taken along with Florida’s crazy new stadium-subsidy system, this is an extremely worrisome trend: Suddenly, not only are sports team owners getting public cash because they’re driving a hard bargain, but just because, you know, they asked, and they’re nice guys who built something, so don’t they deserve not to pay taxes on it like normal people? Taken to its logical extreme, it’s probably only a matter of time before Tom Ricketts demands retroactive tax rebates on all the economic activity that Wrigley Field has brought to Chicago over the last century — oh crap, I just gave him an idea, didn’t I? Quick, somebody go distract him with pictures of baby pandas or something until this post has expired from his Twitter feed.

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.