Major League Soccer Expansion Kicks Off Stadium Financing Pitches

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By Alex Ebert and Andrew M. Ballard

Major League Soccer’s efforts to expand its national footprint is prompting public financing plans that could range between $100 million and $300 million per stadium.

Twelve cities submitted bids to the MLS in January, hoping to pay $150 million to be named one of the league’s four new teams and round out the league to 26. The markets vying for a team are Raleigh and Charlotte, N.C.; Cincinnati; Detroit; Indianapolis; Nashville, Tenn.; Phoenix; Sacramento, Calif.; San Antonio; San Diego; St. Louis; and Tampa/St. Petersburg, Fla.

One league requirement—a soccer-specific stadium—means teams are often also asking their taxpayers to chip in to construct the stadium, arguing economic benefits will follow. But landing a team isn’t a certainty that the construction project will pay off for the city.

“They’re kind of like snowflakes—each one is different,” Steve Arwood, former head of the Michigan Economic Development Corporation and current CEO of Miller Canfield Consulting LLC, told Bloomberg BNA. “There are examples of municipal owned stadiums that have done well, and there are some that didn’t do as well. It’s not really something you can tell this far in the future.”

Immediately, new stadiums bring revenue to their communities through sales taxes on tickets and food, and hotel taxes from out-of-town visitors. But the larger question is how communities want to define themselves economically, and whether 20 to 30 years down the line these cities will be open to redeveloping stadiums and re-investing in the teams, Arwood said.

“The devil is in the details as to whether developments of this kind pay for themselves,” Andrew Zimbalist, professor of economics at Smith College, told Bloomberg BNA. “If it’s just a stadium with no ancillary benefit, and it’s mostly publicly funded, then it probably won’t pay for itself.”

Zimbalist said local taxpayers might have to weigh whether a slight increase in taxes is worth having another local attraction, just like a park or a theater. But promoters and fans hope the expanding American league for the game will be a money-maker, too.

Detroit

Detroit’s pitch includes far more than a soccer pitch.

Dan Gilbert, founder of mortgage lender Quicken Loans Inc., development company Rock Ventures LLC, and owner of the Cleveland Cavaliers, is working with Detroit and Wayne County, Mich. officials on redesigning a 15-acre swath of downtown Detroit that houses an unfinished corrections facility.

He’s proposing to invest $1.46 billion to create not just a 20,000 seat stadium, but also a mixed-use residential and commercial district that University of Michigan researchers claim will bring permanent 2,106 jobs to the city and annual income tax revenue of $4.9 million for Michigan and $1.5 million for Detroit.

In return, the proposal seeks property tax abatement for 10 to 12 years, $295 million in state funding for allowed “Brownfield TIF” expenses related to redeveloping the property, and asks that the government convey the property for free in return for developing a new criminal justice center elsewhere.

Rock Ventures is already seeking similar redevelopment tax incentives for a four-building Detroit development announced in late September. The MIThrive program allows a developer to receive reimbursement from the state for up to 50 percent of the state income taxes generated by jobs created on the project or residents living in the project. It also provides sales and use tax breaks on construction equipment used for brownfield site redevelopments.

Arwood said that a professional soccer stadium will bring Detroit into conversations as one of the nation’s bigger players in professional sports. With an MLS franchise, it would have five major league franchises located downtown. Currently, the National Hockey League’s Red Wings, National Basketball Association’s Pistons, Major League Baseball’s Tigers and National Football League’s Lions all play within a 20-minute walk of each other.

There’s been no confirmed agreement on the project. However, the city and county took initial steps toward making it a reality last week when they reached a preliminary deal on a land swap that would allow the county to transfer the 15 acres to Gilbert to construct the stadium.

Rock Ventures and Mayor Mike Duggan (D) didn’t return requests for comment. However, Duggan and Gilbert have made public statements in favor of the project.

Nashville

Nashville’s hopes to gain a team got a boost Oct. 2 when Mayor Megan Barry (D) announced that the city would support a $275 million effort to build a 27,500-seat stadium in Tennessee’s capital city.

Under a plan unveiled by Barry, the city would issue between $200 million and $225 million in bonds to erect the structure. Nashville would issue another $25 million in bonds to improve infrastructure, and a private ownership group has pledged $25 million and will pay for about $13 million in annual lease payments, she said.

Nashville’s plan also calls for a ticket tax of $1.75 to help pay for the costs, along with sales tax and other revenue from stadium activities. The ticket tax will increase to $2.25 in the sixth year of stadium operation and to $2.50 in the eighth year.

The city council needs to approve the issuance of bonds, which could occur as soon as Oct. 17, the mayor said in her announcement.

An economic impact study provided by Barry’s office said that building the stadium would create more than 3,572 jobs and generate some $18.3 million in state and local tax revenue. Starting in 2021, operations would generate some $77.7 million annually and bring in about $15.1 million in yearly tax revenue, according to the study.

Cincinnati

The Hamilton County Board of Commissioners held an executive session Oct. 9 to discuss possible public financing of a $200 million stadium development either in Cincinnati or bordering Newport, Kentucky.

The current FC Cincinnati team’s ownership is saying they’ll put up $250 million—$100 million for stadium construction, and $150 million for the league’s franchise fee—if local government agrees to pay $100 million. Though what form that financing could take is still up in the air.

Like Nashville, the Cincinnati stadium wouldn’t be part of a larger development. And a study produced by the team acknowledges that some of the income generated by the project won’t be new spending.

“Most of the attendees of the soccer matches will be local residents who, like the visitors, will pay entry fees, purchase concessions, and may shop nearby. But most of the spending of these residents will come out of current budgets and will thus be in lieu of spending elsewhere in the region,” according to the study authored by Stephen Buser, a professor emeritus of The Ohio State University. “Consequently, the related output is simply transferred from one part of the region and one activity to another.”

Despite that caveat, the study still argues the stadium construction would be a boon to the local economy. Buser reasoned spending from visiting fans, and the larger employment needed to support the stadium, would create about 820 jobs in the region and bring about $71 million in new spending by the team’s fifth year.

Raleigh and Charlotte

Two localities in North Carolina also are hoping to land a team: Raleigh, the capital, and Charlotte, the state’s largest city. Local government representatives told Bloomberg BNA that those cities currently had no concrete plans to offer tax breaks or other financial incentives.

John Boyette Jr., a spokesman for Raleigh, said the private sector is leading and coordinating efforts in the capital. The city “has not been involved in discussions on incentives as part of the bid,” he said.

Raleigh’s plan envisions a 22,000-seat stadium downtown, with private funding paying for the estimated $175 million cost.

The city of Charlotte also doesn’t have any plans to offer financial incentives, Brittany Clampitt, a spokesperson for the city, told Bloomberg BNA.

Earlier this year, Mecklenburg County commissioners had agreed to provide $47.5 million, or about a fourth of the cost of a 20,000-seat stadium in Charlotte.

The county, of which Charlotte is the seat, subsequently decided against providing that funding but offered Charlotte county-owned property for the structure instead. The city’s economic development committee recently voted to reject the county’s offer for land, which required it be used for a Major League Soccer stadium.

Clampitt said that the effort to land a soccer team in Charlotte is being led by a private entity, called “ MSL4CLT.”

To contact the reporters on this story: Alex Ebert in Columbus, Ohio at aebert@bna.com and Andrew M. Ballard in Raleigh, N.C., at aballard@bna.com

To contact the editor responsible for this story: Jennifer McLoughlin at jmcloughlin@bna.com

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