Public finance split among cities building pro soccer stadiums


Three of six recent Major League Soccer stadium plans rely on public financing to pay for the stadiums backers promised to secure or keep their franchises.

Nashville, Cincinnati and Columbus, Ohio will issue bonds to help subsidize the new venues. Austin, Texas, Miami, St. Louis and Sacramento have MLS stadiums in development without municipal bond financing, although Austin’s land and public improvements will be tax-exempt and Sacramento, which hasn’t even landed a team, has sweetened the pot with incentives.

Rendering of a stadium planned for Sacramento Republic FC if it lands a Major League Soccer franchise.


MLS announced plans in December 2015 to expand the league by six teams by 2020, which pitted cities and investors against each other to land franchises.

Cities are shifting away from supporting public financing for these projects because stadium construction does not generate a significant amount of additional economic activity and because, although businesses near the stadium see positive impacts, those further away face declining sales, according to Bank of America Merrill Lynch analysts Ian Rogow and Yingchen Li.

Stadium bonds are also a somewhat risky venture for investors, according to the BAML report.

“Stadium deals are arguably some of the “least essential” of projects funded with municipal debt,” the BAML analysts wrote. “Particularly in distressed scenarios, this puts them towards the back of any claim hierarchy to the extent they are unsecured. Revenue bonds too may prove risky if the anticipated revenues from the project fall below lofty estimates.”

In Cincinnati, three local governments are issuing a total of $283.5 million in bonds for the MLS stadium, according to the BAML report. FC Cincinnati made its MLS debut this year using the University of Cincinnati football stadium, with the promise to the league of a bespoke venue.

Nashville plans to sell $225 million in revenue bonds and $50 million in general obligation bonds, according to the report. SC Nashville will debut in 2020, playing in the city’s NFL stadium until its venue is ready.

In Columbus, Ohio, multiple local governments are issuing bonds totaling $140 million toward construction of the soccer stadium it will build to keep the Crew, one of the original MLS franchises from 1996, from leaving town.

Major League Soccer, which reaps lucrative expansion fees, has two other cities on the hook.

Sacramento’s Republic FC and the Las Vegas Lights FC are hoping to be selected as the next two cities approved by the MLS for expansion teams. Both also are crafting new stadium proposals. They currently field teams in the USL Championship, a level below MLS.

“The MLS selected Sacramento as one of the two cities with which it would conduct intensive negotiations toward reaching a deal,” said Mary Lynne Vellinga, a spokeswoman in the Sacramento mayor’s office. “The league plans to add three more slots. St. Louis has already finalized its deal and will get one of those. We are quite confident Sacramento will get the next one.”

Sacramento’s Republic FC currently plays at the 11,500-seat Papa Murphy’s Park. The city approved a term sheet in April that would bring a $252-million stadium to former railyard land near downtown.

Construction would be privately funded, but city officials are also preparing a $33 million package of fee waivers, tax rebates and infrastructure financing. The city also plans to form an Enhanced Infrastructure Financing District, according to the preliminary term sheet approved by the City Council in April.

The EIFD would allow the Republic FC investor group to capture a portion of the property tax growth caused by development of the site, according to the city. The money will be used to reimburse the owners for some of the estimated $27.2 million they are expected to spend to install streets, traffic signals, utilities and other needed public infrastructure on the site. EIFD reimbursements would not go toward work on the actual site. The city would also waive $1.8 million for fees and permits.

“The city will not issue bonds because it won’t need to, since there is no direct financial subsidy,” Vellinga said.

Among the city’s conditions are a 35-year commitment for an MLS team to play in the stadium and keep Sacramento as the first part of the team’s name. The proposed stadium would seat 22,000.

Las Vegas hopes the second time is the charm after pursuing MLS expansion in 2014. The Las Vegas City Council approved a six-month negotiating period this summer that ends in November with Renaissance Companies to develop a master plan for a mixed-use development on the 62-acre Cashman Field site.

As part of the deal, Las Vegas Lights FC owner Brett Lashbrook would sell control of the Lights to a new investment group led by billionaire hedge-fund manager Seth Klarman of the Boston-based Baupost Group. The city and the new owners would develop the Las Vegas MLS stadium plan.

The Lights play at 36-year-old Cashman Field at the edge of downtown Vegas, which was built as a minor league baseball venue. No decision has been made about where the Lights would play if the team is selected by the MLS as an expansion team until a new field could be constructed.

City staffers and Renaissance Companies, a project manager and advisory firm working with the Baupost Group, were asked to draft a master development agreement and detailed financing plan to be brought back to the City Council for consideration in November.

The negotiating deal stipulates that team ownership work with the city to make an application to MLS for the Lights to become an expansion team.

Jace Radke, a spokesman for the City of Las Vegas, wouldn’t comment on what kind of progress has been made on the negotiations since the city approved the agreement in June.

It would be premature, he said, to speculate about what form the financial agreement might take whether this involves bond issuance, or something else, or how much public financing might go toward the stadium’s development.

Since soccer-specific stadium financing has a shorter history, the BAML analysts recommended investors look to other publicly-financed stadiums with similar pledged revenues to find comparable deals.

Florida, one of the states with the largest expenditures on stadiums over the last 15 years, considered a bill to prohibit counties from using tourist development tax dollars on stadiums, though the bill did not pass, according to Rogow and Li.

While football and baseball attendance has been declining, soccer, which appeals to the younger generation, has taken off, said Darin White, executive director of the Center for Sport Analytics in Birmingham, Alabama.

PwC does an annual sports industry outlook, and two or three years back it reported the increasing unwillingness of taxpayers to support public financing for new stadiums had caused a decline over the past 20 years, White said.

It puts the cities in a difficult position in competing for an MLS expansion, he said, because so many cities want one.

MLS stadiums are not as expensive to build as those for other sports, because they are smaller, White said.

Seating in football stadiums hover around seating for 75,000 while soccer stadiums have capacities in the 30,000 range, White said.

Stadium seating is also shrinking to provide room for other features like luxury boxes and open areas that mimic the tail-gate effect within the venue, he said.

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