John Locke Update / Research Brief

Major League Competition For Major League Soccer

posted on in City & County Government, Economic Growth & Development
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Over the past couple of weeks, I’ve written a lot about Major League Soccer (MLS) and the competing bids from Charlotte and Raleigh-Durham for a franchise.  If it feels like this has all been moving rather quickly, it’s because it has.  MLS announced its plans for this round of expansion in mid-December and bids were due this week, January 31st.  It’s made for some interesting negotiations across the country as owners groups have scrambled to find investors, draw up stadium plans, identify potential corporate partners, and get local governments on board.

It’s this last element that interests me most.  In all cases, owners will need the cooperation of cities and counties.  At minimum, they’ll need zoning and permits and the like.  But what exactly owners are asking for varies widely.  Some are asking for very little – essentially those permits and a bit of infrastructure investment.  And some are asking for local governments to build stadiums costing more than $100 million.

The bid documents are private, so there’s still a lot we don’t know, but here’s an overview of what we do.

The North Carolina bids:

Charlotte’s bid is led by Marcus Smith of Speedway Motorsports.  There was an original proposal for the city, the county, and Smith to split the cost of a stadium evenly, but that was quickly revised when it became apparent that the local governments were going to balk at those numbers.  Instead, Smith’s revised proposal was for him to fund half – $87.5 million – and for the city and county to split the other half.

Kind-of.

He had asked the county to loan him $70 million of that, which he would repay over 25 years.  The county commission agreed.  They planned to use taxpayer dollars to pay $43.75 million and loan another $70 million for construction to Smith while retaining ownership and thereby exempting the stadium from property taxes.

About an hour after the county agreed to all this, the city canceled their vote on the subject saying they weren’t prepared to move on it now and on such short notice.  Smith pushed ahead with the bid, raising questions from at least some County Commissioners.  “If it turns out that more money is out there that could make up the city’s difference, than I am going to have to question whether we could have pushed a little harder and gotten a better deal for the taxpayers,” said (Commissioner Matthew) Ridenhour,” according to WBTV.

Smith is still hoping that the city will jump on board, but it appears unlikely.  Charlotte’s mayor clarified the position of the City Council yesterday in an interview with Charlotte Business Journal.  She said, “…the consensus is that this structure and deal is not what council is going to support to go forward on.”

The Raleigh-Durham bid is led by Steve Malik, owner of North Carolina FC.  We know considerably less about his bid because he’s funding the stadium himself.  Consequently, we haven’t witnessed public debates or local government votes.  But what we do know is that Malik has submitted three different stadium options.  One would be a renovation of the Wake Med Soccer Complex where North Carolina FC currently plays.  No one’s sure of the other two, but there’s been a lot of talk about a downtown Raleigh location.  Either way, he says he’ll fund it and only ask for public support with things like infrastructure.

And that funding will be substantial.  Again, we don’t have the details, but the number $150 million keeps popping up, which would be in line with other MLS stadium plans.  Malik has said that the plans include a 22,000 seat stadium with a translucent roof.  But it will be Malik and his co-investors who will be on the hook for that money, not Triangle taxpayers.

The Other Ten:

Of course, North Carolina cities are not the only ones vying for these two franchises.  Ten other cities have also submitted bids.  All of them will need stadiums.  So here’s a quick run-down of how they’re planning to pay for those stadiums if they’re chosen.

Cincinnati:  The existing minor league soccer team plays in the University of Cincinnati football stadium, and the plan is to upgrade that facility and continue to share space.  This plan is unique, given that the MLS has expressed a clear preference for soccer-only stadiums.

Detroit:  Their plan is a mess.  The stadium would be part of a billion-dollar redevelopment project.  The taxpayers wouldn’t fund it, but there would be significant associated costs for taxpayers.  Basically, Detroit has a half-finished jail downtown, and construction has stalled.  The MLS owners group wants to buy it, build a sports complex, and then require taxpayers funding a new jail site.  The county wants to continue with the jail construction where it is.

Indianapolis:  This one snuck in last minute, so we know less about it than most.  The owners want public money for their stadium, but they’ve had trouble getting it in the past.  It’s unclear if they will fare better this time.

Nashville:  The city and county appear to be on board with taxpayer funding.  The mayor has been very vocal over the past week about wanting to build a stadium at the city fairgrounds to bring MLS to the city.  Again, we don’t have detailed plans, at least not that have been made public, but there does seem to be significant local government support for public funding.

Phoenix:  This was another last minute bid, but we do know that it would be a privately financed stadium and a site has already been selected.  They have a large group of owners assembled, all of whom are connected to the existing minor league team.

Sacramento:  Remarkably, the political and economic climate in California doesn’t support taxpayer financing of stadiums, so both of the California bids would be privately financed.  The city has agreed to the plans already, including some publicly funded infrastructure, much like Raleigh-Durham would require.

San Antonio:  Plans here call for a publicly-funded stadium.  Who’d have thought Texas would build stadiums with taxpayer money while California wouldn’t?

San Diego:  Again, this would be a privately-funded California stadium.  The plan is to redevelop the Qualcomm Stadium site now that the Chargers have left town.

St. Louis:  Funding discussions here have been tumultuous.  The city has expressed opposition to publicly funding a stadium, as has the governor, but the stadium plan calls for the state to donate land and the city’s taxpayers to pay a portion of the construction costs.  At this point, it appears they’re having a hard time getting together on this one.

Tampa:  Not only is the owner pledging to pay for all the necessary renovations to a city-owned stadium, but he’s also promised to pay for the costs of the referendum that would be required in order for him to do so.  This shouldn’t cost taxpayers anything.

So my picks? 

Raleigh-Durham, Phoenix, Sacramento, San Diego, or Tampa.

Those are the cities where private investors are planning to fund stadiums themselves, as they should.  And a not-so-surprising additional benefit is that those seem to be some of the simpler bids.  Unlike Charlotte, St. Louis, or Detroit, these five plans have not encountered the kind of political drama or financial uncertainty that could imperil an agreement with their respective local governments.  As it turns out, it may be easier for private investors to bring a major sports team to town when state and local governments are not heavily involved.

Julie Tisdale is City and County Policy Analyst at the John Locke Foundation. Before coming to the Locke Foundation, she worked at the Centre for Civil Society in New Delhi, India, where she wrote about various economic and public policy… ...

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