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MLS & Sacramento
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Major League Soccer is expected to announce on Monday that it is awarding an expansion team to a Sacramento investor group, making the California capital city the 29th franchise in the fast-growing league, sources with direct knowledge of the deal told The Sacramento Bee on Tuesday.
League officials declined comment Tuesday. The league in past franchise additions has typically refrained from commenting until MLS Commissioner Don Garber announces the expansion with local officials during a public ceremony in the new city.
Sources said league officials will hold a press conference in downtown Monday followed by a fan event in the afternoon, celebrating the franchise award.
The announcement will mark the successful conclusion of a laborious five-year effort by Sacramento community leaders and various investors to secure a franchise in MLS, the premier professional soccer league in the United States and Canada.
That effort stepped up a level this spring after Los Angeles billionaire businessman Ron Burkle, who co-owns the Pittsburgh Penguins of the National Hockey League, and Hollywood movie producer Matt Alvarez joined wealthy Sacramento businessman Kevin Nagle as lead investors, injecting more financial heft into the local effort.
The Burkle group has been in negotiations with MLS league officials on final deal terms since late April.
That group has said it plans to begin construction immediately on a $250 million, 20,000-plus seat stadium on undeveloped land in the downtown railyard east of Seventh Street.
Sacramento currently is home to the Republic FC soccer team that has played in the lower-tier United Soccer League since 2014. The expansion team will take over the Republic FC banner.
The team issued a statement Tuesday saying it looks forward to sharing information in the coming days: “We share the great excitement and anticipation in our community about Sacramento’s bid to join Major League Soccer. We will continue to respect the MLS expansion process and remain confident about the future of our club and our city. We look forward to sharing more information in the days ahead.”
Sacramento Mayor Darrell Steinberg, who served as a deal facilitator, declined comment pending a formal league announcement. Steinberg has promoted Major League Soccer as another step in the evolution of downtown, and as an economic and entertainment engine for the region.
“We have demonstrated to the league that we want this,” he said earlier this year. “We are absolutely the right choice for the league.”
The City Council this year agreed to offer the soccer investment group a $33 million incentive package to help it seal the deal with MLS. That included setting up an infrastructure financing district that would use future increased property tax to reimburse the soccer development group for building an estimated $27 million worth of streets, sewers and other new infrastructure on land near the stadium. The deal also includes $2.4 million worth of building permit fee waivers and other tax rebates, and up to $3 million worth of traffic control and policing on city streets adjacent to the stadium during soccer matches.
The city also will rewrite its signage ordinance to give the team rights to install five digital billboards around town.
New soccer stadium deal
Steinberg said he will ask the City Council in the coming weeks to modify the financing agreement to give the development group more financial flexibility. After discussions with Burkle, the mayor said he will propose the $27 million portion be made as a loan to the soccer investor group. The loan would come from a city reserve fund.
The Burkle group would pay the loan back to the city with interest. If the Burkle group begins building other projects on land it is buying near the stadium, that development would produce new property tax revenues that could be used to supplement Burkle’s loan repayments to the city.
The mayor said the proposed loan makes it easier for the Burkle group to finance its $200 million league expansion fee, as well as pay for increased construction costs. The league has bumped that fee up in recent years from $70 million to $150 million to the $200 million level this year.
That expansion fee is part of an estimated $500 million to $600 million that the Burkle group is expected to invest to bring the team to Sacramento.
That includes Burkle’s pending purchase of the 14-acre stadium site plus an additional 17 adjacent acres to do additional development, potentially housing, retail, entertainment or other commercial development.
The upcoming announcement represents the culmination of a long effort, starting with Nagle and Warren Smith, both of whom have been Republic FC owners since the team was first launched in the USL.
City officials had thought they were at the front of the line in 2016 when MLS Commissioner Don Garber visited Sacramento and told reporters: “We believe and hope and expect that Sacramento will part of that next round of expansion.”
But league officials skipped over Sacramento for several other cities since then, and told Sacramento representatives in 2017 that its proposed soccer team ownership group at the time was not as well capitalized as the league wanted it to be.
Billionaire Burkle leads MLS bid
That changed earlier this year when Burkle and Alvarez signed on to head the Sacramento effort. Burkle, whose net worth Forbes estimates at $1.6 billion, made his fortune in supermarkets, but has since branched out to other investments, including Hollywood film partnerships with Alvarez.
The Pittsburgh Penguins have won the NHL’s Stanley Cup championship three times under his ownership.
Burkle has not yet spoken publicly about his interest in Sacramento. But his partner Alvarez said the more he and Burkle explored the possibility of operating a soccer franchise here, the better it looked.
“We got very excited about Sacramento very quickly,” Alvarez said. “This is an amazing city. It’s already over the cusp of being a very cultured, diverse, great city that has a lot to offer to a lot of different people.”
The arrival of Burkle and Alvarez put Sacramento back at the center of MLS’ radar screen.
In April, Garber announced that the league, then 27 teams, would expand to 30, and would enter into immediate high-level talks with Sacramento’s and St. Louis’ potential ownership groups.
The St. Louis contingent closed its deal with MLS in late August. It will launch a team in 2022.
At the time, Garber said the Sacramento deal was still in the works, but he acknowledged the entry fee and other costs represented significant hurdles and required potential investors to think carefully. The two sides have been in often daily talks since then.