Sacramento proposes $33 million package to lure Major League Soccer

This is what the new Sacramento Republic FC stadium will look like at downtown railyard

Sacramento Republic FC released on April 3, 2019, new renderings for the club’s proposed Major League Soccer stadium in the downtown railyard.
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Sacramento Republic FC released on April 3, 2019, new renderings for the club’s proposed Major League Soccer stadium in the downtown railyard.

In an aggressive push to land Major League Soccer, Sacramento Mayor Darrell Steinberg and city officials are proposing a $33 million package of fee waivers, tax rebates, advertising rights and infrastructure financing to boost a soccer investment group’s plans for a downtown stadium.

The deal, to be presented to the City Council Tuesday, was negotiated over the last few months between city officials and investor Ron Burkle, a Beverly Hills-based supermarket magnate who is seeking a Major League Soccer franchise for Sacramento.

Steinberg said the deal represents the city’s good faith effort to show MLS and the Burkle group that Sacramento supports the team. “We have demonstrated to the league that we want this,” the mayor said. “We are absolutely the right choice for the league.”

The MLS board will meet in Los Angeles in two weeks to discuss adding a 28th team to the league. Sacramento and St. Louis are the front-runners, league Commissioner Don Garber told The Sacramento Bee.

If the Burkle group is successful in winning an MLS expansion franchise, it has an arrangement in place to take control of the lower-tier Sacramento Republic FC soccer club, essentially elevating that organization to major league status.

The Burkle group also has an agreement to buy 31 acres in the downtown railyard to build a $252 million stadium as well as other adjacent development. The stadium construction will be privately financed, and the facility owned and operated by the soccer group.

Unlike during its dealings five years ago on the Sacramento Kings’ Golden 1 Center project, the city will not help pay for stadium construction. The city put $255 million in cash and land value into that deal.

But Steinberg and city negotiators have agreed to set up a special infrastructure financing district on the 31 acres to capture tax revenue to pay for up to an estimated $27.2 million in infrastructure around the stadium – mainly new streets, pedestrian walkways, a major sewer line and a light rail station.

An architectural drawing shows a proposed Major League Soccer stadium in the downtown Sacramento railyard. HNTB, Sacramento Republic FC

The team would build the infrastructure. The city then would rebate future increased property taxes from the site back to the team. Steinberg pointed out that the tax revenue would pay for public infrastructure adjacent to the stadium, and would not be available to the city if the soccer team or some other private developer didn’t build on the site and enhance its value.

“The wisdom of the (financing district) is ... we help with infrastructure and in exchange we get Major League Soccer and over $1 billion in overall investment,” Steinberg said. “This is the spark that we have needed to take railyard development to another level.”

The city also will provide the team with an estimated $2.4 million worth of permit fee waivers and other tax rebates, and will commit up to $3 million worth of traffic control and policing on city streets adjacent to the stadium during soccer matches.

The 19-page deal is laid out in a staff report published today on the city website.

The city also will rewrite its signage ordinance to give the team rights to install five digital billboards around town. City officials say that incentive likely will come at no cost to the city, but could be worth tens of millions of dollars in promotions and advertising to the team.

The team would be allowed to erect a sixth billboard if it builds a training complex, including youth soccer fields, in city limits within two years of receiving an MLS franchise award.

The deal places a number of other stipulations on the team. The team investor group will pay to build, own and operate the stadium, and will pay for all upgrades. The team name must start with the word Sacramento; the plan is to continue to call the team Sacramento Republic FC.

The team will meet a series of city requirements to hire and train disadvantaged youth and to employ local and small businesses. And it will provide an estimated $22 million in value over the next 35 years in charitable contributions, youth soccer clinics in underprivileged communities, soccer tickets, youth soccer equipment, volunteer hours and food service fund-raising.

The incentive package proposal comes at a critical moment for Sacramento’s Major League Soccer hopes. After several years of expansion, MLS officials say they plan to add one more city to the league this year – perhaps as early as this month – and then may halt expansion for an undetermined period of time. The winning group must pay MLS a franchise fee of at least $150 million.

Sacramento Republic FC officials have tried unsuccessfully since 2015 to win a franchise. The recent addition of Burkle and his partner, Matt Alvarez, a Hollywood film producer, gives the Sacramento effort the financial deep pockets to compete for what may be the league’s final new franchise for awhile, team officials said.

Ben Gumpert, Republic FC president, said his group is in constant contact with league officials, including discussions on a 22,000-seat stadium and to prove the franchise can move forward quickly if chosen.

“This partnership with the city is a final and big step prior to the board meeting that shows all the work we have done and (what) we have been able to create,” Gumpert said.

Soccer investor Burkle, in a statement, thanked the city “for putting Sacramento in the best possible place to secure an expansion team that is hopefully announced after the April board meeting of the MLS.”

The city’s willingness to offer financial incentives to wealthy investors has come under criticism from some in the past. City Hall spending critic Craig Powell, head of the Eye On Sacramento watchdog group and an opponent of recent tax measures, criticized the concept when it was first laid out in more general terms by the mayor in a January speech.

“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.”

Steinberg defended the city’s investment as necessary to ensure the Major League Soccer investors agree to buy and locate the team here, and key to persuading MLS that the city is supportive of soccer.

“I think it would have been much less likely” for Sacramento to land big league soccer without the city investment, he said. “The league made it clear to us they wanted to see the public sector invest itself in a major way. They wanted to see that we are all in.”

Sacramento City Councilman Jeff Harris, who represents the railyard area, says he thinks the city gets a significant return on its investment in the deal. “The stadium is being built with private money. The incentives overall are pretty minor,” he said. “The development of the stadium brings a huge amount of energy to the railyard, the River District and the riverfront.”

Robert Wassmer, a professor of public policy at Sacramento State University, said the infrastructure financing district idea appears to make sense as a way to help kickstart railyard development, especially if that development is successful and includes infill housing near jobs to help reduce greenhouse gas emissions.

“This additional tax increment can be used for what is really a net positive to the city and the region,” he said.

He warned that the city needs to make sure it maintains control of enough tax revenue from railyard development to pay for basic city services that will be needed in the area, including fire and police.

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Tony Bizjak has been reporting for The Bee for 30 years. He covers transportation, housing and development and previously was the paper’s City Hall beat reporter.