Charlotte won’t get county money for MLS stadium, expansion race now bigger mess than ever

The Mecklenburg County commission voted 5-3 on Wednesday to hand over the site of 83-year-old Memorial Stadium to the city of Charlotte for a new soccer stadium for a potential MLS team — but no money for building it, which is what the ownership group had been hoping for. Commissioners said they wanted to see a soccer stadium built, but, you know, by the city, not them:

“They manage stadiums and they have a division in the city that deals with pro sports teams,” [Commissioner Jim] Puckett said. “They have a dedicated tax revenue stream that’s for entertainment and can be used for pro sports. They have the expertise and funding stream to deal with that.”

The team’s original plan was for a $175 million stadium where $101.25 million of the costs would be paid off by the county, with the team repaying the public via $4.25 million a year in rent payments. (Note to readers who can do math: No, $4.25 million a year is not enough to repay $101.25 million in bonds unless you get a 1.5% interest rate, which I know they’re low but get serious.) Now they’ll instead have to try to hit up the city of Charlotte alone, which has already indicated that its maximum contribution is $30 million.

That would leave the team to shoulder $145 million of the cost, plus MLS’s nutso $150 million expansion fee, which is a hefty chunk of change. On the other hand, the team wouldn’t have to make those rent payments, so maybe it could just go to a bank and borrow the cash, and make mortgage payments instead? Or maybe the rich NASCAR track heir who wants to launch the MLS team would rather have somebody else on the hook for loan payments if his team, or MLS as a whole, went belly-up at some point as a result of its pyramid-scam spree of handing out expansion franchises like candy to anyone who wants to pay $150 million for candy? Yeah, probably that.

If you’re keeping score, the MLS expansion candidates are now:

That’s a whole mishmash of stuff indeed, and I don’t envy the job of the MLS officials tasked with having to pick two winners this fall (and two more next fall, because they can’t cash those $150 million expansion-fee checks fast enough). You have to wonder if commissioner Don Garber doesn’t think to himself sometimes, maybe it’d be easier just to stick the expansion franchises on eBay and take the highest bids. It would mean giving up on the pretense that they’re actually selecting the best soccer cities or something, but get real, nobody believes that anyway.

Detroit’s “renaissance” has enriched its billionaire sports owners while rest of city suffers

If you want a depressing read about the impact of Dan Gilbert, the billionaire Quicken Loans baron, Cleveland Cavaliers owner, and would-be Detroit MLS owner, on his hometown of Detroit, there’s a great one by Shikha Dalmia in The Week. Among the highlights:

  • Gilbert is pushing for the state legislature to approve a super-TIF bill that would kick back property, sales, and income taxes from environmentally contaminated “brownfields” sites to help pay for the project. It would only apply to projects costing over $500 million in cities of more than 600,000, so the only eligible developer is Gilbert, who is proposing a giant project on the former site of the Hudson’s department store in downtown Detroit.
  • Gilbert got $50 million in tax breaks to move his Quicken headquarters from the suburbs to Detroit.
  • He and his partner, Pistons owner Tom Gores, are seeking $300 million in cash and land in exchange for building a new soccer complex on a half-finished jail site (and a new jail elsewhere).
  • Detroit is about to open a new $187.3 million light rail system that will link “Detroit’s downtown, dubbed Gilbertville because it houses the Quicken office and other buildings where Gilbert’s employees live, with the midtown area, where the entertainment district [built by Gilbert’s fellow sports billionaire, the late Tigers and Red Wings owner Mike Ilitch] is. Never mind that Detroit’s jobless and carless residents would have much more use for bus lines transporting them to jobs outside the city.”

Okay, maybe it’s a high price to pay, but at least Detroit is finally undergoing a long-awaited renaissance as a result, right? Well, actually:

The whole argument for pouring taxpayer dollars into this area is that its growth will spill over to the rest of the city, opening up jobs and business opportunities for all Detroiters. But research by Michigan State University’s Laura Reese and Wayne State University’s Gary Sands published earlier this year suggests that on virtually every metric, life outside the targeted zone is worse than it was even in 2010, when the alleged renaissance began.

Detroit’s overall population actually declined by 2.6 percent between 2010 and 2014. The unemployment rate among Detroiters increased by 2.4 percentage points between 2010 and 2013. This may have been because of the bankruptcy-induced layoffs of city employees, but Sands maintains that the trends don’t seem to have changed much in 2015. “About half of the neighborhoods in the periphery saw employment and payroll declines,” he notes. What’s more, although the overall number of Detroit businesses remained unchanged between 2014 and 2015, 13 of the more peripheral city zipcodes saw a decline.

In other words, far from the city core leading a comeback, it is at best siphoning — and at worst destroying — business and employment in the rest of Detroit, perhaps because smaller enterprises are having trouble competing with powerful billionaires who can dip into taxpayer pockets and divert other public resources toward their grand designs.

The whole thing is a terrific read, if you like to be depressed about how our cities are increasingly being run as engines for boosting the profits of their richest citizens. But you almost certainly do, since you read this website, so by all means go check it out.

Dan Gilbert says Detroit MLS stadium will create umpty-bajillion dollars in economic impact

In “economic impact reports are ridiculous, but some are more ridiculous than others” news, Cleveland Cavaliers owner Dan Gilbert says that if Detroit gives him $300 million in city funding plus free land so he can build a soccer-stadium-plus-other-stuff complex on the proposed site of a new jail, it will create $2.4 billion in economic impact, because sure, why the hell not?

I can’t find the actual study anywhere — it’s not anywhere on the website of Rock Ventures, Gilbert’s real estate umbrella firm, or on the site of Mark Rosentraub’s University of Michigan Center for Sport & Policy, which conducted it — but I’m sure I can guess where it came up with that crazy-high impact figure: Gilbert says he’ll spend $1 billion on construction of the soccer stadium and surrounding development, so add in a smidge more for money spent at actual soccer games and apply a standard multiplier effect, and you can certainly get to $2.4 billion. (I’ve asked Rosentraub and Rock Ventures for a copy of the study, and will report back here if I get a look at it.)

Wayne County executive Warren Evans immediately called the study “irrelevant” and said it “does nothing to sway my thinking,” but not because of anything about the numbers — rather, Evans is just concerned that building a soccer stadium will delay getting a jail built. (Gilbert says he’ll build a jail complex elsewhere if he gets the stadium land and money.) It doesn’t sound like this plan is going anywhere fast, but if so, it’s less because of the actual economics underlying it than because Major League Soccer is still less popular than jails, which seems to be the trending message these days.

Gilbert to Detroit: Give me $300m and free MLS stadium land, and abracadabra, get a new jail!

I’ve seen a lot of convoluted stadium subsidy proposals over the year, but I’ve got to admit that “give me at least $300 million plus free land so I can build a pro soccer stadium and I’ll build the city a new jail” is a new one. Deadspin explains:

The plot of land [where Dan] Gilbert wants to build the new arena is on Gratiot Avenue in downtown Detroit. Wayne County was in the process of building a jail on the site until 2013 when officials announced that project, estimated to cost $220 million, was likely going to run far over budget (closer to $391 million). So it sat unfinished for more than three years. The county is issuing a request for proposals to finish the jail on Friday, after which it will decide what to do with the site.

But ahead of that deadline has arrived a proposal from Gilbert-owned Rock Ventures LLC. The group announced yesterday that it had made an offer to build Wayne County a new “consolidated criminal justice complex” at a different site, about one and a half miles away, the Detroit Free Press reported. In return, Gilbert’s company would get $300 million from the county, the rights to the Gratiot Avenue jail site, and what’s described as a “credit to be paid to the company for the savings a new consolidated criminal justice complex would provide.”

How much Gilbert’s soccer stadium would cost isn’t clear — it’s being described as a “$1 billion commercial development,” but obviously much of that wouldn’t be the soccer part. But whatever Gilbert would be spending on whatever, he’s looking to get paid $300 million plus land plus that undefined “credit” in exchange for building a new jail on a different site, something he says is worth $420 million, which is even more than the city’s over-budget stalled jail would cost.

Many, many questions, in other words, most of which Gilbert no doubt hopes that Detroit’s journalists will be too busy to really put their minds to unraveling. After all, it’s the central secret of magic!

Every concentration of humans on earth now bidding to build MLS stadiums

Nashville is looking to build a new MLS stadium, and Indianapolis is looking to build a new MLS stadium, and San Diego is looking to get a new MLS stadium, and Detroit is considering providing free land for an MLS stadium, and St. Louis is still looking to build an MLS stadium after rejecting it once, and a guy in Charlotte is still looking to have an MLS stadium built for him, and Tampa is looking to get an MLS franchise but already has a stadium.

These are mostly terrible ideas, notes the Guardian, at least where they involve public money. And if the newspaper slightly overstates the case that there’s growing pushback on MLS subsidies (truth is, they’ve never been an especially easy sell as sports subsidies go, mostly because MLS isn’t as popular yet as the Big Four sports), it does contain a classic defense of them from Peter Wilt, the Chicago Fire founder who now heads later headed the Indy Eleven NASL team and wannabe expansion franchise:

“It is about image and plays into making a city cool to live in, a good experience for young professionals, and reducing the brain drain on a community. Things like that are sometimes not taken into account. If Oakland loses the A’s and the Raiders, which is a possibility, then no one will hear about Oakland in any positive terms for the foreseeable future.”

Things like that actually are taken into account in economic studies of teams and stadiums, which overwhelmingly find that if sports teams make cities “cool,” it doesn’t show up in things like per-capita income or jobs or economic activity or tax receipts. Plus you’d then have to explain how a city like Portland, for example, which until recently had only basketball as a major-league sport and famously turned down a domed stadium in the 1960s that would have brought an NFL team, nonetheless became one of the hippest cities in America. (It has MLS now, but the hipness predated that.)

Anyway, with MLS set to announce four more expansion franchises in the next year or so, the league can probably count on some cities stepping up to throw money at new stadiums, so long as they’re not too picky about which ones. (Cincinnati, Raleigh/Durham, Sacramento, and San Antonio are also in the mix.) Bulk-mailing extortion notes is kind of a strange business model, but hey, whatever works.

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.