Sacramento Bee says city must “hold line” on MLS subsidies by providing MLS subsidies

Back during the Kings arena debate, the Sacramento Bee had a pretty consistently terrible record of being a booster for spending public money on the project, and never mind what the actual numbers showed about whether it would be worth it. So it was encouraging to see this editorial yesterday about the city’s proposed MLS stadium:

Sacramento City Council must hold the line on public money for MLS stadium
One big draw about the proposed Sacramento soccer stadium is that it doesn’t call for a large, direct taxpayer subsidy.

That is a line that shouldn’t be crossed as city officials and Republic FC owners try to beef up their bid for a Major League Soccer franchise.

Now that’s more like it! The team owners promised to build a stadium themselves, and City Hall shouldn’t let them back down on that just because MLS is withholding a franchise in hopes that the ownership group can come up with more cash. (Their cash, new investors’ cash, the public’s cash, MLS seems pretty agnostic on which they prefer.) This is good stuff, what does the next paragraph say?

Mayor Darrell Steinberg is on the money: It could make sense for City Hall to reduce or defer some building fees, to donate land for a training facility, to give the team the revenue from new digital billboards, or to help with roads, sewers and other infrastructure near the stadium.

(DEEP SIGH)

Let’s say it all together: MONEY IS MONEY, SPORTS TEAM OWNERS DON’T CARE HOW THEY GET IT. If very rich dude Kevin Nagle can get a pile of tax or fee breaks or free land or a pile of billboard revenue that would otherwise go into city coffers, that’s going to be just as fine with him as getting city checks with “4 STADM BLDG” written in the memo field. To pretend there is any moral or fiscal difference is, well, the kind of thing you do when you’re a mayor and want to propose a sports team subsidy but don’t want it to look like one. Or if you’re a newspaper that wants to do the same, I suppose, but you’d think their copy editing department might have balked at using “hold the line” to describe it — if the Bee still has a copy editing department, that is.

Sacramento mulling public subsidies for MLS stadium so that rich owner can stay rich

If there’s been one given in the insane world of MLS expansion, it’s been that the Sacramento bidders were promising to come up with private money to pay for the entire cost of a $245 million stadium. Except that Sacramento didn’t win a expansion franchise last month as had been anticipated, reportedly because the league was worried that the prospective owners couldn’t afford a stadium on top of a $150 million expansion fee, and you know where this is headed, right?

Sacramento city leaders and the local ownership group seeking an expansion spot in Major League Soccer are discussing public contributions to a new $250 million soccer stadium planned for the downtown railyard – conversations that eventually may include a request for a direct public subsidy to the project’s construction.

(DEEP SIGH)

This was probably inevitable given the way MLS was running its expansion bidding: Setting expansion fees as high as possible, then picking winners based less on what’s the best soccer market than on which was offering the biggest guaranteed subsidies. (While two expansion teams were supposed to be announced last month, only Nashville got the nod, and it can’t be coincidence that Nashville was the only city among the finalists that had approved $75 million in public cash.) For a while it looked like Sacramento would sneak through on the basis of having a new stadium even if the owners were paying out of their own pockets, but MLS’s determination that “No, we want a team that can afford to pay us $150 million so we can keep funding our league by selling rights to more teams for big bucks, and yet still have lots of money left over for team profits, which isn’t going to happen if you’re on the hook for all stadium costs” put a fork in that, so now it’s back to the subsidy drawing board.

What that subsidy could look like is anyone’s guess: Mayor Darrell Steinberg mentioned reduced building fees and free land for a training facility as possibilities, which don’t sound too bad until you remember that Steinberg was formerly the California state senator who wrote a bill to fast-track the Kings arena by exempting it from environmental challenges, so he doesn’t exactly have a great track record in protecting the public interest. Steinberg also said, “I’m confident we can get Major League Soccer without a major public construction or operating subsidy,” and if you’re concerned by that qualifier “major,” you’re not the only one.

As for prospective team owner Kevin Nagle, who sold his prescription-drug-benefit company two years ago for $2 billion and estimated his net worth in the hundreds of millions, the Sacramento Bee reported this:

Asked if he would request a direct construction subsidy from the city, Republic FC CEO and Chairman Kevin Nagle said the team remains “incredibly appreciative to Mayor Steinberg and the City Council for their support and are committed to continuing to work with them to explore any and all paths that will help win this for Sacramento.”

No, you’re right, that’s not an answer at all. California’s tough laws allowing referendums to block sports stadium spending may be an obstacle to any team subsidy demands here, but it might be a good idea for Sacramento residents to put one hand on their wallets, just as a precaution.

Friday roundup: Trump rescued stadium tax break, Sacramento MLS group needs more cash, more!

Happy interval between Hanukkah and Christmas! If anyone is out there reading this and not getting on a plane from somewhere to somewhere else — or is reading this while waiting for a plane from somewhere to somewhere else — enjoy your lightning-round news of the week:

  • San Diego Union-Tribune columnist Kevin Acee, who never met a stadium or arena deal he didn’t love to bits, says that several people are interested in building a new arena in San Diego, including the owners of the Padres and new Brooklyn Nets minority owner Joe Tsai. Acee adds, “Several people insisted in recent weeks the Nets will remain in Brooklyn long-term and there are no plans to ever move the team to San Diego,” which, given the relative size of the markets, is possibly the least surprising sentence ever written in the English language. Also, Acee includes zero attributed quotes in his story, and says nothing about how such an arena would be paid for, so take it with a large grain of salt for the moment.
  • Donald Trump made retaining the tax-exempt bond subsidy for sports stadiums in the tax bill “a priority,” according to one GOP aide. So when he tweeted in October, “Why is the NFL getting massive tax breaks while at the same time disrespecting our Anthem, Flag and Country? Change tax law!”, either he didn’t mean anyone to take him seriously just because he was the president of the United States speaking out on a matter of public policy, or more likely he just forgot to check with his funders before clicking Tweet.
  • “The Miami Open tennis tournament won permission to move to the Miami Dolphins’ stadium, with the kickoff planned in 2019,” reports the Associated Press, which seems to be slightly confused about how a tennis match starts.
  • After the NBA used the promise of an All-Star Game for Cleveland in 2020 or 2021 if it approved publicly funded arena renovations for the Cavaliers, and the city approved $70 million worth, the league gave those games to Chicago and Indianapolis. Not that there’s really that much value in hosting an NBA All-Star Game, but still, HA ha, suckers.
  • Apparently the reason why Sacramento didn’t get an MLS expansion team along with Nashville this week is the league is worried the city’s ownership group doesn’t have enough cash for a $150 million expansion fee and a $250 million stadium. All they need is to find someone with deep pockets who thinks the best thing to do with their money is to invest it in a U.S. soccer franchise that will start off $400 million in the hole, and, well, good thing that P.T. Barnum movie is opening this week, that’s all I can say.
  • There’s a “Plan B” stadium proposal for the Pawtucket Red Sox, where instead of helping to fund the stadium directly, the state would instead give the city all income and sales taxes collected at the stadium and let the city use the money on construction costs. Rhode Island state senate president Dominick Ruggerio says he doesn’t “see that as being a viable alternative,” and plans to submit his own stadium-financing bill, which probably won’t pass the state house. This could go on for a while, until somebody remembers where they stored the money generating machine.
  • The Arena Football League is now down to four teams, in part because the Cleveland Gladiators had to suspend operations for the next two seasons thanks to renovations to the Cavaliers’ arena. This was reported in the Albany Times-Union, which has to care because Albany is supposed to be getting an AFL expansion team this year, and man, do I feel sorry for whoever got stuck with being the Times-Union beat reporter on this team, because this is looking like a sad year ahead for them.
  • Deadspin’s Drew Magary weighed in this week on arena and stadium subsidies and concluded that “Arenas Are Important And Football Stadiums Are Not,” according to his headline, but really he meant “if you’re going to waste money on something, at least arenas can be used more days of the year,” which, fair enough. Or as Magary puts it as only he can: “We are entering an age of horrific corruption, and so I have accepted the fact that living in a fraud-free America is a hilarious pipe dream. All I can do is hope for the least of all corruptions, and pray that a bare scrap of public good accidentally comes out of it. If you are some ambitious dickbag city councilman looking to make his name for himself, an arena should be your priority when it comes to getting worked over.”
  • NHL commissioner Gary Bettman spoke out again about the Calgary Flames arena situation, calling it “very frustrating” and saying that “they’ll hang out and hang on as long as they can and we’ll just have to deal with those things as they come up,” but insisting that “yes, Quebec City has a building, but nobody’s moving right now, we’re not expanding East.” Which either means the Flames owners really don’t want to threaten to move right now (or ever), since making overt move threats is usually Bettman’s job, or it means even Bettman is sick of trying to pretend that the Flames have a viable threat to go anywhere.

MLS picks four expansion finalists, only two (or three!) will win the prize

Major League Soccer announced four finalist cities for expansion franchises yesterday, and the results are both unsurprising and kind of intriguing, for reasons I’ll get to in a minute. The four remaining contenders:

These are the four frontrunners predicted by Soccer Stadium Digest last week, so no shockers there. It’s an interesting mix of candidates, though: two with stadium plans in place, one with strong fan support but a funding gap, and one with a prominent ownership group but only an NFL stadium to play in, which the league has said previously it would consider, but it seems kind of suboptimal if your goal is to extract as many new stadiums as possible. Only two winners will be chosen later this month (December 14 will reportedly be the vote), so one would think that this will come down to Sacramento and Nashville, with Cincinnati and Detroit getting a “thanks for your efforts, try again next year once your stadium plans are more firmed up.”

Unless MLS could actually pick three winners. Because don’t forget, David Beckham’s previously announced franchise still doesn’t have a home, and his stadium partner Tim Leiweke told the Toronto Star on Tuesday that he’s not super optimistic:

“I’m helping any way I can with David,” Leiweke told the Sun. “I hope it gets done, but it’s not done. I have my fears as to whether it’s going to get done because things like this that drag on this long that’s always tough on a process. But for David I hope he lands somewhere.”

So, Cincinnati and Detroit could be in there as fallbacks in case MLS needs a last-minute sub for Miami. Or, Leiweke could just be saying this as leverage to get the final hurdles cleared for a Miami stadium, and this really is still a four-to-get-two situation. In which case the final verdict will say a lot about MLS’s business model: If it’s Sacramento and Nashville, we know that anybody with a $150 million check and a soccer-only stadium deal will get the nod; if it’s Sacramento and Cincinnati, we know that MLS is looking to where there’s the most established fan support; and if Detroit is involved at all it’s either because of the allure of a more major media market, or the allure of some big-money owners who can increase the league’s ties to the NBA, or who knows.

A lot is likely to depend on how things play out the next two weeks in Cincinnati, where both the city council and the county commission approved $50 million in public stadium subsidies yesterday, but still nobody’s saying how that additional $25 million would be paid for. (Or even what the total stadium cost would be; the gap could end more than that.) And also in Nashville, where the group Save Our Fairgrounds filed suit yesterday to block construction of a new stadium at Fairgrounds Nashville. Maybe hedging with four finalists isn’t a bad idea, in other words, but picking a final two (or three) two weeks from now is going to be anything but an easy task — I guess asking the four bidders to throw money on the table until two have emptied their pockets would be too unseemly?

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.

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 order ativan online overnight 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.

Kevin Johnson wants to build a Sacramento soccer stadium for nonexistent team at unknown price

His city may have been rejected for now for an MLS expansion franchise, but Sacramento mayor Kevin Johnson isn’t going to let that stop him from building a new soccer stadium regardless. KJ announced yesterday that he was launching “Operation Turkey,” a plan to — sorry, what? Oh, “Operation Turnkey.” Well, that does sound better, but you decide for yourself which one is more apropos:

One of the toughest tasks on the mayor’s list might be obtaining control of the proposed stadium site, located on the eastern end of the long-vacant downtown railyards…

City officials said the sticking point involves determining who will be responsible if additional toxic pollution is discovered in the ground…

Johnson appeared Wednesday to have softened his opposition and said he imagined the stadium as a public-private partnership. He pointed out the state has already invested million for roads and bridges in the railyards, but declined to say if would support a subsidy for the project.

Cost of said stadium? Unknown! Who’ll pay for it and how? Also unknown! When Sacramento might actually get an MLS team to play in it? You guessed it! Johnson says he hopes to have all this worked out by the end of this year, which bwahahahahaha, damn, he’s a funny guy.

Business prof says Kings arena could bring MLS team, TV station gets all excited

What the what, CBS Sacramento?

Economists: Downtown Sacramento Kings Arena Could Pave Way For MLS Franchise

That … doesn’t even make any sense? Certainly Sacramento is vying for an MLS expansion franchise, along with everyone else on the planet, and maybe having successfully thrown a whole lot of money at the Kings would help convince the soccer league that they could have money thrown their way, too. But from an economic perspective, what does one have to do with the other? What kind of economists are these, anyway?

Sacramento State economics professor and Wells Fargo wealth adviser Sanjay Varshney says if that arena wasn’t under construction, there’s no way anyone would be talking about the possibility of an MLS stadium coming to the railyards.

“The fact that Sacramento succeeded in keeping the Kings here and are putting in a new arena will be a factor in whether or not we actually get soccer now,” he said.

So, first of all, that’s not economists, plural, it’s one economist. (No one else is cited by name in the CBS Sacramento story.) And second, it’s arguably not even one economist, because while Varshney does have a master’s in economics, he’s actually he’s a finance professor at Sacramento State’s business school, who recently stepped down as dean to work as an investment advisor for Wells Fargo’s wealthy clients.

Not that this makes Varshney unqualified to speculate wildly about how MLS will pick which cities to expand to, any more than any of the rest of us are. But hanging an entire story on this, and spinning it as something “economists” predict, is a low point even for TV news.

Back in the real world, meanwhile, MLS officials heard pitches from would-be owners in Sacramento, Minneapolis and Las Vegas for the last expansion team of the passel being handed out by the league this decade. A decision could be made by the league Board of Governors meeting on December 6, or not.