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.

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.)

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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.

Garber: MLS to keep adding teams like there’s no tomorrow

During halftime of last night’s MLS All-Star Game — in which the league’s best players were trounced by a club team that finished 7th in the Italian league last season — MLS commissioner Don Garber announced that the league will expand by another four teams, to 24, by the year 2020.

That would just continue the crazy pace that MLS has been on since 2005, when it had only ten teams; NYC F.C. is set to become the league’s 20th team in 2015, meaning the league will keep on adding one team a year (with one year off, maybe) through the end of the decade. Possible expansion targets could include Miami, Atlanta, Sacramento, Orlando, Detroit, Minneapolis, and probably a few others that the AP and I are both forgetting.

This is likely to mean more attempts at stadium deals, which are already burbling under the surface in many of those cities (Sacramento Mayor Kevin Johnson declared his renewed support for a soccer stadium there earlier this week). On the one hand, the pre-announcement of so much expansion should actually give more leverage to city mayors to drive a harder bargain on stadium deals, since if MLS needs to come up with sites for four more teams, they’re going to have to take pretty much whatever stadiums they can get. On the other hand, city mayors don’t really seem to understand leverage, so it probably won’t matter.

Michigan approves Detroit bonds for Red Wings arena, still won’t let Detroit spend on anything else

Need more evidence that the Detroit Red Wings arena subsidy is really, truly going ahead despite the city of Detroit being bankrupt? The state just approved the city’s development arm to sell $284.5 million in bonds for the project:

[Gov. Rick] Snyder paid a visit to the Strategic Fund board moments after it approved the deal and said the new arena is very exciting for Michigan.

“Detroit’s really on a comeback path,” he said. “I think Detroit is absolutely poised for a bright exciting future. This is just another proof point in that exercise.”…

He said he can justify the use of tax dollars on the project, given Detroit’s finances, because it is about investing in the city’s future.

“This is a catalyst project,” Snyder said. “This is going to be where the Red Wings are. Who doesn’t get fired up in Detroit about the Red Wings? Come on now, the people that are criticizing are people from outside of Michigan. This is something that is important to all of us.”

Only about 55% [UPDATE: see below] of the public bonds will be repaid by the Detroit Development Authority out of city property taxes — the rest will come from Red Wings owner Mike Ilitch — so that would keep the city’s subsidy down to a mere $156 million [UPDATE: see below]. Still, you can’t help wondering if the state government that is forcing Detroit to consider selling off the paintings in its art museum might be a bit hasty in not questioning whether a new hockey arena is the best “investment in the city’s future” that the city can come up with. Even if, say, a working school system might not get people as “fired up.” Maybe if the schools sold souvenir jerseys…

Meanwhile, it looks like somebody has decided that so long as there’s public money being handed around for stadiums, he’s going to try to get a piece of the action:

The Toronto-based owners of the Pontiac Silverdome have submitted a bid for the Wayne County justice department sites in hopes of opening a stadium for a Detroit Major League Soccer team, along with a mall, residential space and office towers.

MLS says it will “monitor” the Silverdome owner’s plans. Which, given that it’s this guy, sounds about right.

UPDATE: A new analysis by Crain’s Detroit has the city’s share of the arena project at 58%, for a total of $261.5 million, so clearly my math was a bit off. (I think I used the wrong denominator. It was early.) That’s in line with the original estimates. Also, a heckuva lot of money. I still haven’t seen any studies, even crappy ones, showing how Detroit would make that back in new economic activity from moving a hockey arena from one part of town to another.