Sacramento faces 'funding gap' in Major League Soccer bid, Mayor Steinberg says
Sacramento city leaders and the local ownership group seeking an expansion spot in Major League Soccer are discussing public contributions to a new $250 million soccer stadium planned for the downtown railyard – conversations that eventually may include a request for a direct public subsidy to the project’s construction.
Mayor Darrell Steinberg said he is comfortable with a limited public contribution to the project, including reducing some building fees and donating land to Republic FC for a team training facility.
But Steinberg said city residents have expected that the stadium construction would be privately financed. Former Mayor Kevin Johnson set that expectation three years ago following a controversial campaign that culminated in a $255 million subsidy for Golden 1 Center. That subsidy is funded largely by city parking revenue and backed by the city’s general fund, which pays for most core services such as police officers, firefighters and parks.
“I’m confident we can get Major League Soccer without a major public construction or operating subsidy,” Steinberg said. “Major League Soccer and the building of a state-of-the-art railyard stadium would have a tremendous benefit to the community. But this primarily needs to be done privately, and that has been the expectation from the beginning.”
Asked if he would request a direct construction subsidy from the city, Republic FC CEO and Chairman Kevin Nagle said the team remains “incredibly appreciative to Mayor Steinberg and the City Council for their support and are committed to continuing to work with them to explore any and all paths that will help win this for Sacramento.”
No formal negotiations have taken place around the amount of a potential subsidy.
Steinberg said he supports reducing or deferring some of the various fees the city would charge Republic FC for developing the stadium; fees on a project that size could reach millions of dollars. He said he also would support allowing Republic FC to earn revenue from electronic billboards on public land – similar to an agreement the city has with the Kings – and would support the city establishing a special financing district for the stadium site that would allow the team to lower its debt payments over time to pay for roads, sewers and other infrastructure.
In addition, Steinberg said he would back a proposal for the city to donate land to Republic FC for the team to build a training facility and youth soccer complex. “I am willing to support anything that is reasonable, that is creative, that is helpful, but not a full-blown subsidy,” he said.
Sacramento was one of four finalists named by MLS last year for two expansion spots, and Steinberg and Nagle traveled to New York in December to make the city’s pitch to the league. Nashville was given a team in December and the second expansion award is expected to be announced soon. Cincinnati and Detroit are the other two finalists.
Not long after their trip to New York, Nagle and Steinberg held a press conference outside City Hall to announce they were searching for a billionaire to act as the lead investor in the city’s MLS expansion bid, citing a significant funding gap.
With an advanced stadium plan and a large and loyal soccer fan base, Sacramento for years had been considered a front-runner for expansion. But as time passed, the MLS expansion fee more than doubled, to $150 million, and the cost of the railyard stadium increased from $180 million to $250 million. Any public subsidy granted to the stadium would not be expected to fill Republic FC’s financing gap.
Steinberg stressed that the success of Sacramento’s expansion bid does not hinge on a stadium subsidy. “It is about the league having the confidence that Sacramento has the ownership capital to be able to not only get into the league in the first place, but to be able to grow with the league over time,” he said.
Supporters of a new railyard stadium – including the mayor and City Council – see it as a major catalyst for one of the largest urban infill projects in the nation. The 244-acre site just north of downtown has stood mostly vacant for decades, and city officials have counted on the stadium to finally spark its redevelopment into a neighborhood with thousands of homes, nearly 4 million square feet of offices, shops, parks, hotels and a large hospital complex.
But any discussion of a public subsidy likely will come with the reminder that the city already invested hundreds of millions of dollars in Golden 1 Center, while other pressing needs – including homelessness – continue to be a challenge.
David Carter, a sports-management consultant and director of the Sports Business Institute at the University of Southern California, said that investing in a soccer stadium would not provide the same level of return as building a new NBA arena in the heart of a struggling downtown. As a result, it could be harder to gain public support for a soccer subsidy, he said.
Unlike Golden 1 Center, which is used about 200 days a year and drew 1.6 million people downtown in its first year, a soccer stadium would only be used around 30 times a year, potentially drawing fewer than 500,000 people to the railyard.
“It’s comparing an apple and an orange,” Carter said, adding that soccer-stadium events, like concerts, could end up cannibalizing arena attendance.
A large public contribution to the project, however, could be a selling point to a wealthy investor and MLS.
“If I’m (MLS Commissioner) Don Garber, I’m looking for a deal that is the best for the league, (one) that provides financial stability for that local owner and that sets up the team for long-term stability,” Carter said. “If I’m that billionaire, I also want to see a business model that gives me the greatest chance at long-term success. And if that means being able to reduce my costs because of a generous public subsidy, I’m all for it.”
Nagle said his group is “encouraged by the interest in recent weeks from new potential investors clearly intrigued by the MLS opportunity in this region.”
As Sacramento begins to debate its involvement in the stadium, other cities already have made that leap.
In Nashville, the Metro Council plans to issue $25 million in bonds to fund infrastructure work for a $275 million stadium. The city also is donating the land for the stadium and 10 acres near the site that the Nashville soccer group plans to develop into housing and retail.
The city of Nashville also is issuing $225 million in bonds for the stadium, although the soccer club is scheduled to repay most of that debt.
Cincinnati, which now appears to be the front-runner for a second expansion spot ahead of Sacramento, also is getting public help for a stadium. The City Council there voted in November to spend up to $36 million on infrastructure for the stadium. Roughly $19 million of that could come from the city’s hotel tax.
At the same time, Ohio’s Hamilton County agreed to spend $15 million to build a parking garage for the stadium, bringing the total public contribution to $51 million.