Category: Sacramento Republic FC

The Sacramento city council is set to vote tomorrow on a plan to loan $27 million to Ron Burkle, owner of the new Sacramento Republic F.C. MLS franchise, for roads and other traffic and transit upgrades around his new stadium, and “repay” it using Burkle’s own property taxes on development surrounding the stadium. Said Sacramento Mayor Darrell Steinberg, who is proposing the loan:

“For me as mayor, there is one overriding question: Is an infrastructure loan that clinched the deal to get Major League Soccer and help reverse decades of little progress in the railyards good for the city? I have no doubt the answer is yes.”

That seems to imply that any size public loan to a private entity would be good enough for Steinberg — who can put a price on reversing decades of little progress? — but whatever, it’s best not to think to hard about what politicians say when politicianing.

This is, of course, tax increment financing, which we’ve covered to death here previously. (Tl;dr version: No, it’s not “new money.”) On the bright side, sort of, the tax increment cash was already set to go to Burkle under his previous agreement to get $33 million in city funding for his stadium; now instead of having to wait to get it year by year, the city would loan him the money up front and he’d pay it back by letting the city have the taxes they would normally collect anyway. The only added risk, really, is that Burkle defaults on the loan, which seems unlikely, since presumably he’ll put up as collateral—

The investor group will be required to put up a yet-to-be determined collateral.

Sigh. Well, it’s not too much worse than the original deal. Probably. Feel free to read the amendment being voted on tomorrow yourself and see if you can find any more potential pitfalls.

The Sacramento Bee is reporting that Sacramento Republic F.C. will finally be officially named the latest MLS expansion team on Monday, after five years of haggling. And the Bee also makes clear what it took to shake loose an expansion approval:

The City Council this year agreed to offer the soccer investment group a $33 million incentive package to help it seal the deal with MLS. That included setting up an infrastructure financing district that would use future increased property tax to reimburse the soccer development group for building an estimated $27 million worth of streets, sewers and other new infrastructure on land near the stadium. The deal also includes $2.4 million worth of building permit fee waivers and other tax rebates, and up to $3 million worth of traffic control and policing on city streets adjacent to the stadium during soccer matches.

The city also will rewrite its signage ordinance to give the team rights to install five digital billboards around town.

As discussed here last month, this is a better deal than many cities are getting for their new MLS stadiums; as also discussed, $33 million plus some free billboards isn’t nothing, and it does seem like the league held out on an announcement in order to get these concessions from the city. (And Sacramento Mayor Darrell Steinberg says he will ask the city council for additional concessions to “give the development group more financial flexibility,” as the Bee puts it, like loaning the money to team owner Ron Burkle and letting him “repay” it later with property tax payments on his other developments nearby.)

The most telling sentence in the whole article, though, may be this one:

The mayor said the proposed loan makes it easier for the Burkle group to finance its $200 million league expansion fee, as well as pay for increased construction costs. The league has bumped that fee up in recent years from $70 million to $150 million to the $200 million level this year.

So if we’re taking the mayor at his word, the city of Sacramento is having to chip in $33 million–plus from future tax receipts plus other goodies, because otherwise the local sports team’s billionaire owner wouldn’t be able to afford the $200 million expansion fee that the league set based on the notion that cities will help subsidize any new expansion teams. Maybe it’s time to consider switching MLS’s designation from “Ponzi scheme” to “extortion racket”?

 

In case you missed it, old-school print publication (which, like everything else, is just as much an online enterprise these days) New York magazine was just bought by Vox Media, a collection of sites best known for its “explainers.” And explaining things is good! We turn to the media to explain things, not just report them, because the world needs explaining, and we count on journalists to have the expertise needed to do it, at least in their particular subject areas.

Which brings us to KCRA’s explainer on the proposed new Sacramento Republic F.C. soccer stadium that just had a public financing authority created for it yesterday, an article that is framed as “3 things to know.” And those three things are:

1) When can I get my MLS tickets?

2) How much will the stadium cost?

3) What are soccer fans saying about the development?

Maybe not exactly the three questions I would have wanted answered, but it’s a start. Skipping over 1 (not yet!) and 3 (they like soccer!), let’s turn to 2 to see if it can shed any light on the stadium’s price tag and funding:

The soccer stadium is expected to cost $252 million and will be financed privately by Ron Burkle and his investment group. No taxpayer dollars will be used to build the stadium.

However, the city of Sacramento has committed $33 million in fee waivers for improvements that will lead to new housing and retail developments. Those new developments are expected to generate taxes that will help pay for the infrastructure.

This again. Almost two years ago, the Sacramento Bee suggested that while having city taxpayers pay for an MLS stadium was a bad idea, a good idea might be 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.” Because while all those things cost money, they go into the team owners’ pockets before coming back out to be used on stadium construction, and that’s, um, better, I guess, somehow?

This kind of Rube Goldberg funding mechanism is increasingly common, and might actually be worth a new entry in the stadium playbook if we ever do another update of Field of Schemes the book, or at least an extended footnote. But as I wrote when the Bee first proposed it in January 2018:

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.

Now, $33 million isn’t a super-exorbitant public cost on a $252 million stadium, so this is still better than most other recent MLS stadium deals. And the money is going toward things that are more legitimately public infrastructure, including new roads and a new light rail station — though a rail station that just serves the soccer stadium is arguably less a general public benefit than a benefit to the team. Also, the term sheet for the stadium (not mentioned by the KCRA explainer) grants the team five digital billboards, so that’s an additional means of the city defraying the team’s costs; and the term sheet is just preliminary, not an official lease or contract, so we can’t be sure just yet if $33 million is the final public cost. (The team does promise to pay property taxes on its stadium, at least, which is refreshing, even if paying property taxes on your property isn’t normally something that should be worthy of singling out for praise.)

All of which, you might say, is too detailed for a basic explainer to get into. But that’s one big drawback of explainer journalism: By choosing what information is deemed necessary to readers and what isn’t, it can effectively frame a story to direct readers’ attention away from elements that aren’t deemed important, all while telling them they have all the basics to understand what’s going on. Which, I suppose, is one big drawback of bad journalism in general — but somehow it feels more egregious when you’re being steered away from important information under the guise of an explanation.

Good morning, and let’s all read an article that contradicts itself constantly!

The place: Sacramento, California. The outlet: KCRA, which used to be just a UHF television station but is now also a website because everything is also a website (even books!) and broadcasts on something called “virtual channel 3.” The author: “KCRA Staff,” which either means a whole lot of people worked on it or one person who really doesn’t want to be held responsible.

Here is the first paragraph of the article:

The Sacramento City Council approved a public-private partnership to build a Major League Soccer stadium in the downtown railyards and develop the surrounding area.

Whoa, that was fast! Just Friday we were looking at new stadium renderings, and now the council has already approved a funding plan! How did that happen so quickly?

Here is the second paragraph of the article:

Councilmembers unanimously voted Tuesday night to approve a term sheet, a non-binding document that lays out ways the city, the Sacramento Republic FC and Los Angeles-area developer Ron Burkle plan to work together to fund and build the stadium.

Okay, Mr. or Ms. KCRA Staff, that word “non-binding” you used? It means the entities signing it are not “bound” to it, by which is meant that either side can back out. So the partnership isn’t so much “approved” as “planned,” with the actual vote to approve it still to come.

Anyway, how will the city, Sacramento Republic FC, and Ron Burkle (who is actually majority owner of Republic FC, so it’s not entirely clear why he’s listed twice) work together to fund the stadium? On to paragraph three:

The $252 million stadium would be privately funded by the Republic FC and Burkle. No taxpayer dollars will be used to build the stadium.

Great news! Especially since as of Friday the project was set to receive $33 million in tax breaks and other subsidies. But now there’s nothing at all about that, according to paragraph three, and paragraph four, and what’s this now paragraph five:

The term sheet also includes $33 million in tax refunds, waived fees and administrative costs for the stadium.

Look. I understand the difficulties of doing comprehensive reporting in the modern world when media outlets are mostly staffed by overworked, underpaid interns and grad students and maybe sometimes augmented Roombas. But seriously, Mr. and/or Ms. KCRA Staff, is it so much trouble to read the very thing you just wrote to see if it still makes sense, given what you’re writing now? Even if you’re suffering short-term memory loss — perhaps the stress is getting to you, or your expanded RAM chip has come loose from its socket — the words are right there for you to look at as a reminder. It would definitely make for a better article if all the words worked together to convey a consistent series of facts, as opposed to looking like they were assembled from a series of separate articles about separate things happening in separate universes.

Anyway, MLS still hasn’t approved an expansion franchise for Sacramento, and won’t until later this year at the earliest, and the time when the league approves an infinite number of franchises at the latest (which could also be later this year). And the deal that is really a term sheet doesn’t kick in until Sacramento gets a team, at least — this isn’t Indianapolis, for god’s sakes.

The Sacramento city council last night unanimously approved Republic F.C.‘s stadium term sheet, which proposes building a new $180 million MLS stadium almost entirely with private money, once MLS deigns to give Sacramento a franchise.

Republic owner Kevin Nagle says he and his investment partners can pay for two-thirds of the $180 million construction budget with “equity” (I assume he means cash, unless he’s really going to give the stadium contractors shares in the team) and borrow the rest. Add in an expected $100 million expansion fee, and that’s $280 million Nagle and his partners will need to earn back before turning any kind of profit — so figure close to $20 million a year in revenues needed in order to make this a reasonable investment. How does that compare to other MLS franchises?

Team	Value ($M)	Revenue ($M)	Operating Income ($M)1
Seattle Sounders	245	50	10
LA Galaxy	240	44	4
Houston Dynamo	200	26	5
Portland Timbers	185	35	4
Toronto FC	175	32	-7
Sporting Kansas City	165	29	4
Chicago Fire	160	21	-6
New England Revolution	158	25	7
FC Dallas	148	25	-3
San Jose Earthquakes	146	13	-1
Philadelphia Union	145	25	2
New York Red Bulls	144	22	-9
D.C. United	140	21	-1
Montreal Impact	128	22	-3
Vancouver Whitecaps	125	21	-6
Columbus Crew	112	18	-4
Real Salt Lake	108	17	1
Colorado Rapids	105	15	-3
FORBES estimates; revenue and operating income is for 2014 season 1 Earnings before interest, taxes, depreciation and amortization

Yeah, I have no idea how this is going to work out either, unless it’s a roll of the dice on MLS franchises making a whole lot more money in the future. Or rich people just think it’s fun to own soccer teams. Which, sure, so long as they’re spending their own money, it’s no skin off taxpayers’ noses.

Meanwhile, here are pretty pictures to look at. It sure does look fun, no? I don’t know about $280 million worth of fun, but then, I have no way of knowing what $280 million worth of fun looks like, so maybe I’m not the one to judge.