In hopes of landing Major League Soccer for his city, Sacramento’s mayor this week proposed an incentive package worth tens of millions of dollars that he says will help kick-start the construction of a 20,000-seat stadium and the redevelopment of the long-vacant downtown railyard.
Darrell Steinberg said he plans to ask City Council colleagues next month to approve financial incentives for the Republic FC ownership group – including infrastructure financing at the planned soccer stadium site – as part of his push to bring an expansion franchise to Sacramento.
Unlike the controversial Golden 1 Center arena construction deal with the Sacramento Kings basketball team, though, the mayor said the city will not be investing millions of dollars in the facility, or use its general fund as a financing backstop.
“The City will not write a check, and it will not bear any liability or risk,” Steinberg said in his State of the Downtown speech at the Hyatt Regency Hotel on Tuesday.
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Instead, Steinberg said he would like to see the city offer Republic FC the rights to new electronic billboard advertising and development fee waivers, as well as creative financing to build streets and other infrastructure around the proposed stadium site. The mayor also floated the idea of the city paying for the construction of a youth soccer complex that would double as a training facility for the soccer team.
Steinberg offered the incentive ideas Tuesday as a backdrop during a speech in which he announced that Los Angeles billionaire Ron Burkle, a co-owner of the Pittsburgh Penguins hockey team, has agreed to buy a controlling interest in the second-tier Republic FC soccer team and to build a stadium, if Major League Soccer agrees to award his group an expansion franchise.
Steinberg said Burkle represents the missing piece of the puzzle that has stalled Sacramento’s Major League Soccer efforts the last few years – a deep-pocketed investor capable of assuring soccer officials in New York City that California’s capital has the financial goods to make professional soccer here a long-term success.
Steinberg, Burkle and others plan to go to New York in early February to make their case to MLS officials.
Burkle and Republic FC would pay MLS a franchise expansion fee estimated at $150 million, and would invest $250 million to $300 million to construct a stadium east of Seventh Street and south of North B Street in the railyard. Burkle has proposed building an entertainment district as well on 14 acres adjacent to the stadium.
Steinberg said his incentive plan stems from talks with soccer officials over the past year as they were trying to lure a major investor. Steinberg said he believes the city should put some skin in the game to finally start development in the 240-acre downtown railyard site.
Recent MLS expansion cities Nashville and Cincinnati both approved public subsidies for stadiums, much of it in the form of infrastructure financing and land deals.
Steinberg said Sacramento’s investment is similar to incentives the city has offered on occasion to other businesses, such as the 2017 deal granted to Fortune 500 company Centene to help it build a corporate hub in North Natomas, and the attempt to woo Amazon to build a second headquarters here.
“This has been part of the discussion and negotiation over the past year as well, to recognize where the public can make an appropriate contribution that not only helps bring Major League Soccer, but enhances the overall development of the railyards and adds to our economic vitality,” Steinberg said in a follow-up interview after his Tuesday speech.
“As long as it’s not writing a check or money coming out of our general fund, we’re in.”
He said he did not know how much value the proposed incentives represent, but estimated a package could be worth tens of millions of dollars. “We’re still working on all of the numbers and we’ll present all of that in the weeks ahead,” he said.
The mayor’s proposal drew a rebuke from City Hall spending critic Craig Powell, head of the Eye On Sacramento watchdog group and an opponent of recent tax measures.
“I think it is a breach of trust with voters who just approved a one-percent sales tax (in the November election) to turn around and offer freebies to a billionaire,” Powell said. “It was a bad precedent with the Golden 1 Center. We are doubling down on that bad precedent.”
The mayor’s proposal represents far less value and risk than the Golden 1 Center project. In that deal, the city contributed $212 million in cash as part of a $255 million subsidy that included land given to the Kings.
But this plan includes one idea from the Golden 1 Center deal. Steinberg said he plans to ask the council to give Republic FC rights to build a handful of digital signboards, some in the railyard and some elsewhere in the city. The city gave the Kings rights for six billboards.
Steinberg said he also plans to propose that the city waive, reduce or defer payment of some development fees for the stadium, a move the city does periodically to ease the cost burden on some employers and developers.
The mayor said the city also is looking into creating an “enhanced infrastructure financing district” at the soccer stadium site and surrounding acres, as well as possibly other areas in the as-yet undeveloped railyard.
Much of the railyard is owned by local development group LDK Ventures, which has been working on redeveloping the area. LDK is selling the stadium site to the soccer team and just sold other acreage to Kaiser Permanente to build a medical center.
The financing district would allow the city to sell bonds to pay for public infrastructure, such as streets or sewer systems, up front. The bonds would be paid off by future property taxes the team would pay on the site – tax revenue the city would not receive if the stadium is not built.
Michael Coleman, a municipal finance expert, said that the use of infrastructure financing allows the city to assist downtown or infill development where infrastructure costs are often onerous. But he said it could lead to a debate about whether it is necessary.
“The debate piece is: Would that growth have happened anyway? Are you subsidizing a thing that didn’t need to be subsidized?” Coleman said.
Two Sacramento City Council members who represent the downtown area said this week they support the mayor’s plan in concept.
Jeff Harris said the incentives make sense to fast track railyard development as well as development in the adjacent River District around Richards Boulevard.
“Major League Soccer will be huge in creating economic opportunity moving forward for the city,” Harris said. “Whatever the city can do to help, the city will thrive.”
Councilman Steve Hansen said the soccer stadium and the planned Kaiser Permanente campus are “game changers” in the long dormant railyard. It makes sense, he said, for the city to help by financing public infrastructure.
“We’ve ruled out a direct subsidy,” Hansen said. “What the mayor is proposing is consistent with what we have done for other projects. So, why not?”
Republic FC President and Chief Operating Officer Ben Gumpert declined this week to discuss potential business dealings with the city, but said the team has been in talks for a year with Steinberg about bringing MLS to town, including the finances involved.
“This is about getting this done for the fan base and the city,” he said.