Business & Real Estate

Sacramento looks primed to land an MLS team as league announces expansion plan

Sacramento took a major step toward landing a Major League Soccer team Thursday as officials voted to expand the league from 27 to 30 teams and enter into formal discussions with the capital city’s proposed ownership group.

Speaking to the media after a league Board of Governor’s meeting in The Beverly Hilton hotel, league Commissioner Don Garber said the league has decided to expand. Garber said Sacramento and St. Louis are the only two cities the league will engage in formal expansion discussions, and both will have to show the league they have the stadium plans, fan base, economic strength and corporate support.

“The decision to grant these teams has not been made,” he said. But he added it is the league’s intention to have teams in those two cities competing in the league 2021 or 2022 if the negotiations bear fruit.

Sacramento Republic FC said in a statement after the MLS announcement it was ready to finalize a process that’s been more than five years in the making.

“Everyone is through the moon, but certain we are not done,” Republic FC President Ben Gumpert said. “There are more discussions to have. We’re ready to take the next steps.”

MLS typically announces it is in discussions with an ownership group just prior to formally awarding an expansion franchise.

Sacramento representatives said they had hoped for, but not expected, word coming out of the Los Angeles board of governors meeting.

“This is great news,” Mayor Darrell Steinberg said. “We are now on the precipice of becoming the next MLS city. I’d like to once again thank (Sacramento FC owner) Ron Burkle and his team for stepping up in such a big way. Working together, we will bring home the win for Sacramento.

“We’re gonna bring this home.”

The league will have formal presentations from the two cities, but Garber did not say exactly when, other than to note it will be in the next few months. Sacramento officials said they will be ready to launch construction of a $252-million, 22,000-capacity stadium in the downtown railyards within months of getting the official nod from the league.

In the last four years, MLS has gone from a 20-city league to 27, including adding teams in Austin, Miami, Nashville, Cincinnati, Los Angeles, Minneapolis and Atlanta.

The cost is steep: $200 million, the league announced Thursday. That amount is distributed to the league’s existing ownership groups as compensation for narrowing their slice of the league’s overall revenue pie.

At Thursday’s news conference, Garber said he has great confidence that the Sacramento contingent will be able to make an acceptable presentation when the league and the city group meet in the next few weeks.

”I have confidence they will come in and present a complete plan,” he said of Sacramento and St. Louis.

But he said the league does want to see how strong city corporate support is, and wants to see final details of the Sacramento group’s downtown stadium plans.

Garber said league owners decided they wanted both Sacramento and St. Louis, and Garber acknowledged they had a hard time deciding between the two. That drove the decision to go to 30 teams. League officials said they strongly prefer having a balanced, even number of teams. The commissioner said the league would like to have a final decision on Sacramento’s entrance into the league by the league all-star break on July 31.

“We really wanted to select both of those teams,” he said of Sacramento and St. Louis.

The announcement comes during a period of rapid growth for MLS. The final or 30th spot appears to be a competition among a long list of cities: Phoenix, Detroit, Raleigh, Tampa, Charlotte, San Diego, Las Vegas and Indianapolis.

The Sacramento group, or the St. Louis group, which owns Enterprise Rental Car among other businesses, will be joining a league that is “still operating with a start-up mentality,” Garber said. “While we could operate league wide at a profit, it would not be the league it is today, it would not have the facilities, the quality of play we have, we wouldn’t have the marketing, the branding and promotional support that we continue to invest in.”

Steinberg said Thursday night Sacramento has a big advantage: The city is ready to build a stadium. Republic FC has agreed to fund all construction costs and has a deal with the city to cover infrastructure. The stadium plan has been approved by all the necessary city departments. It’s permitted and ready to be built, Steinberg said.

“We have been through all of the environmental review,” Steinberg said. “I think that’s one of the things actually that has given us a leg up here is that our stadium plan is not some vision, is not some speculation, it is actually a plan that is ready to be built.”

Sacramento’s lead investor, Burkle, has not yet spoken publicly about his efforts to land a soccer franchise. Friend Lloyd Greif told The Bee recently that Burkle does not work on spec. Burkle, who started with supermarket chains, has proven himself nimble enough to take chances while moving one business domain to another with success.

“It is a bet on soccer,” said Forbes Magazine SportsMoney columnist Chris Smith. “As soccer continues to grow in popularity in the states, MLS is going to benefit. That is why these investors are happy to put down money on this, even though they are eating losses short term.”

Economist Patrick Rishe, director of the sports business program at Washington University in St. Louis, said it makes sense of the league to choose both cities, given that both a strong soccer markets, and that the league had said previously it ultimately wanted to get to 30 teams.

“Why pick one when you can pick both?” he said. MLS is in a growth mode, he said, for good reason. “The more markets you are in, it creates more eyeballs for the sport, which leads to better TV and streaming deals, and better corporate partnerships down the road.”

MLS’ announcement “certainly feels like” the two cities have effectively been granted franchises, said Rishe, a close observer of MLS’ business dealings.

“Both cities have seemingly checked off all the boxes,” Rishe said. “Both cities have all their ducks in a row.”

Even if the details still need to be finalized, the arrival of Burkle, and the city’s agreement to provide $33 million in incentives for Republic FC’s stadium, have given MLS owners the comfort level they needed to admit Sacramento into the league, Rishe said. “There’s certainly no reason to make your bid, the Sacramento market, wait,” he said.

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