MLS still set to announce two new teams in December, unless it needs the stadium leverage

MLS has been dead set on announcing two expansion franchises this December, with two more getting the nod next year. But on Thursday, commissioner Don Garber hedged on that timetable just a bit:

A league spokesperson later texted, according to ESPN, that “MLS remains on track to name two teams in December, with an announcement ‘likely around Dec. 19-20.'” But that’s still hedging, in a way that could probably best be taken as We’re planning an announcement the week before Christmas, but we reserve the right to change our minds.

What could be going on here? Soccer Stadium Digest thinks that MLS wants to be sure that David Beckham’s Miami franchise will actually get stadium approval in time to begin play next year — the stadium won’t be done by then, mind you, but MLS will award a team so long as it has a stadium deal in place — or else award a franchise to a fallback city in order to keep an even number of teams. That’s certainly possible, though MLS has operated with an odd number of franchises before, so it could always just push back Miami’s entry another year or three if necessary.

Equally possible is that MLS may want to wait out the legislative process in some potential expansion cities to see what they can shake loose in terms of public stadium funding. Of the four frontrunners declared by Soccer Stadium Digest, Detroit Pistons owner Tom Gores and Cleveland Cavaliers owner Dan Gilbert’s $300 million plus free land and I’ll build Detroit a new jail to replace its already half built one plan still needs both city and county approval, Nashville S.C.‘s $75 million subsidy demand requires approval of the regional Nashville Metro council, F.C. Cincinnati‘s gambit for that city to pay for half of a new $200 million stadium hasn’t seen much action in recent months (other than a new Cincinnati citizens’ group petitioning Garber to let the team move up to MLS while still playing at Nippert Stadium, where it’s setting attendance records), and Sacramento F.C. has already started clearing land for a new stadium, though with actual construction not scheduled to begin until 2018 the team owners can always slam on the brakes if they don’t get awarded an MLS franchise by then.

That’s a whole lot of uncertainty, and could easily be a reason why the league doesn’t want to set an expansion announcement date in stone. When running a bidding war, it’s a fine line between wanting to scare the participants with a countdown clock, and wanting to make sure they always have enough rope to up their bids.

Nashville mayor vows MLS stadium with almost no public costs, it’d actually cost $75m-plus

Nashville Mayor Megan Barry released her proposal for a soccer stadium for a new MLS franchise yesterday, and this is how the Nashville Scene headlined it:

Mayor Proposes $275 Million Soccer Stadium Deal

Potential MLS team would be responsible for all but $25 million of fairgrounds stadium cost

Sounds pretty good, right? What’s that? What do you mean, “You’re just setting us up with a rosy headline so you can undermine it with the actual horrible facts, aren’t you?” Do you think you know me that well?

The actual horrible facts:

  • Of the $275 million in construction, land, and infrastructure costs, the Nashville Metro Council, a joint city-county governing body, would put up $250 million by selling bonds. The other $25 million would come from John Ingram, owner of Nashville S.C., a USL expansion club slated to begin play in 2018.
  • Ingram and his fellow owners would pay off the bonds via “a mixture of rent, captured taxes from revenue generated at the stadium and private investment,” according to the Scene. The Tennessean breaks that down: It’s actually $9 million a year in rent payments, plus $4 million a year from kicked-back state sales taxes from anything bought at the stadium and from a $1.75 surcharge per ticket.
  • If sales taxes and the ticket surcharge fall short of $4 million, Metro would be on the hook for the shortfall.

Let’s be clear about this: Counting money siphoned off from sales taxes collected at a sports venue as a “private” contribution is completely insane. Even aside from the substitution effect — where increased money spent at, say, soccer matches invariably turns out to mostly be counterbalanced by decreased money spent at, say, local movie theaters and restaurants — this is money that for a normal business would flow directly into the state treasury. For Ingram to insist that this is really “his” money because he touched it with his hands (or his concessions workers did, anyway) is just the Casino Night Principle.

Exactly how much in public money this would actually cost Tennessee taxpayers is a little tricky to determine, since those sales taxes are lumped together with a ticket surcharge, something that economists universally agree ends up mostly coming out of the team owner’s pocket. But let’s try to back into it: If a typical MLS team sells 20,000 tickets per game (I’m assuming here that tickets given away for free still have to pay the surcharge), and there are 19 home games in a year, that’s 380,000 tickets per year. Multiply by $1.75, and the ticket surcharge should generate about $665,000 a year.

That leaves $3.335 million a year to be covered by sales taxes, which comes to about $50 million in present value. Add in the $25 million that won’t get repaid, and we’re at $75 million in public cost — at minimum, because if tickets don’t sell well, then Nashville would have to make up the shortfall out of its own pocket.

This is not the worst stadium proposal in history, but it’s also not the “private-public” (emphasis on the first word) deal that Mayor Barry promised. And if things break the wrong way, it’s not that far off from the $100 million subsidy demand that is raising eyebrows in Cincinnati. MLS stadiums are still generally lighter on the public purse than those in other U.S. pro sports, but that’s only because MLS team owners and wannabes know they can’t get away with demanding as much — and that doesn’t make the cash that taxpayers would be out any better of a deal.

(Rest in peace, Tom.)

Friday roundup: Raiders talk lease extension, Rams attendance woes may set record, and more!

Here’s what you missed this week, or rather what I missed, or rather what I saw at the time but left till Friday because there are only so many hours in the week, man:

Nashville mulls 30,000-seat MLS stadium, council warns that Deadspin writer thinks it’s dumb

The investor group seeking an MLS expansion team for Nashville — one of the 12 cities actually being considered for four new franchises being awarded this year and next year, according to the league — revealed its new stadium plans on Monday: The stadium would be built on the city-county owned fairgrounds site, would hold 30,000 people (that’s a lot for MLS, which typically sticks closer to the neighborhood of 20,000 seats), and would be paid for by … let’s see … “the project still lacks a cost figure and financing plan” … keep scrolling … the mayor’s chief operating office “told council members the mayor’s office hopes to finalize stadium financing negotiations with Ingram in 45 to 60 days and file legislation for a stadium deal by October” … scroll, scroll … “The Metro Nashville Sports Authority and Metro Board of Fair Commissioners would also need to approve any financing plan, which would likely involve issuing revenue bonds” … wait, what?

Council members, getting their first crack at the looming soccer stadium debate Monday, said they plan to fully vet the project. Three council members raised a recent story from the online sports publication Deadspin that, citing work of an MLS critic, questions the business model and rapid expansion of MLS.

That would be this article by me. If anyone reading this knows more about who exactly said what, and how my article entered into it, please let me know in comments; and if anyone from the Nashville Metro council has any questions about my research, I guess drop me an email. In the meantime, beyond noting that 1) the renderings look pretty enough, though the upper deck seems unnecessarily high, especially on the side with no luxury boxes/club seats, 2) revenue bonds are fine enough if there’s some dedicated revenue to base them on, not so much if the “revenue” is tax money that may or may not be cannibalized from public tax receipts elsewhere, and 3) 30,000 seats really does seem like a lot for a small-market MLS team, guys, I’m afraid to say much about this proposal, because apparently it’s from my mouth to the council’s ear.

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.

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.