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MLS is expanding and FC Cincinnati is pulling out all the stops

Interest in Major League Soccer, and soccer in general, has enjoyed steady growth in the United States. Even in Cincinnati. Yes, Cincinnati. Soccer took hold in the U.S. (among the non-soccer fanatics) when the country hosted the 1994 World Cup. The event, spread out across nine American cities, set massive attendance records that still stands today.

This indirectly led to the formation of MLS, two years after the 1994 World Cup. Soccer was finally establishing a foothold in the United States, international commentaries insisted.

Soccer simply hasn’t translated well in the United States. Most Americans focus their sports-related enthusiasm on baseball, football, and basketball, while soccer was disregarded as some international phenomenon. You could include hockey in this narrative, but like soccer, it’s usually viewed as a lesser sport here; an enthusiastic fanbase but with very few casual observers. We have our sports in America, they have theirs. MLS needed those people. It needed growth. It needed more.

Within five years of forming, the league was on the brink of bankruptcy, announcing $250 million in losses and faced the very real possibility of folding in 2001. Kansas City Chiefs founder and owner Lamar Hunt convinced owners to stay. Give it one more chance.

Over the next 48 hours, Hunt called each owner to convince them to give the league another shot. Ultimately, three owners – Hunt, Philip Anschutz and Robert Kraft – shelled out the necessary money to take over the remaining 10 teams and keep MLS afloat.

They’re still around.

MLS have become the benefactors of tremendous growth, especially in recent years.

However, MLS is still dealing with relative issues. Interest hasn’t translated to TV ratings, averaging around 300,000 for “nationally televised games.” There are STILL serious questions about MLS’s business models. MLS franchises are gaining value but failing to turn a profit..

According to the estimates released by Forbes on Wednesday, the average MLS team is worth $185 million – which is up about an amazing 80 percent from just three years ago. New York City FC, which is in its second year of existence, ranks third in the league at $255 million, behind the L.A. Galaxy ($265 million) and Seattle Sounders ($285 million).

The Red Bulls are 11th at $178 million. Despite the increase in value, Forbes estimates the teams operated last year at a combined loss of -$6 million, with NYCFC (-$9 million) and the Red Bulls (-$5 million) dragging down the group.

Stefan Szymanski, a writer for a website called Soccernomics, argues that MLS’s soccer model is similar to pyramid scheme that could result in eventual collapse. “MLS cannot conceivably pay this amount AND have a situation where the clubs make money,” writes the author.

However, a possible indicator substantiating an argument for growth is expansion. It also carries a great risk. Will MLS expand too fast? Is there a demand to justify exponentially increases in franchises? There are many entertainment options for Americans, from sports, movies, and comedy clubs… can MLS grab a chunk of that pie and keep it? Even Major League Baseball, at one point, grappled with the idea of contraction (a reduction of team). In fairness to baseball, contraction was an active subject when the United States was facing the Great Recession.

MLS currently fields 22 teams with expansion plans to add six more. Los Angeles FC will play in 2018 with Miami, owned by a group of investors that includes David Beckham, are expected to arrive a year later. The MLS Board of Governors will meet on December 14 to determine two more new teams, with another two joining after that.

FC Cincinnati wants to join MLS. 

MLS, the only sanctioned United States Soccer Federation (USSF) Division I men’s outdoor soccer league, is the biggest games in the United States (with the exception of the national teams). As we’ve noted earlier, they are expanding from 22 teams to 28.

Cincinnati wants a piece of that.

Since joining the United Soccer League in 2016, FC Cincinnati has been crushing attendance expectations. The team had hoped for an average attendance of 10,000 per home game; they averaged closer to 17,000 during their inaugural season at Nippert Stadium. When Cincinnati hosted English Premier League’s Crystal Palace FC for a friendly last year, 35,061 showed up.

“The entire stadium rose to its feet and applauded as the final whistle sounded, indicating the lasting legacy of arguably the biggest soccer occasion in the history of the Queen City would extend far beyond the final score, and potentially far into the future,” writes the Cincinnati Enquirer.

There is legitimate enthusiasm for soccer in southwest Ohio.

Cincinnati is one of 12 cities being considered for expansion: Nashville, Sacramento, Raleigh, Charlotte, Tampa, Detroit, Indianapolis, St. Louis, San Antonio, Phoenix and San Diego, and of course, Cincinnati.

And the Queen City is pulling out the stops.

Public hesitation with public funding.

FC Cincinnati leadership proposed a $200 million, privately funded, soccer-only stadium in Oakley. However, they’ll need public money to improve surrounding infrastructure, including a 1,000-car garage.

FC Cincinnati needs local governments to pay $70 million to $75 million to upgrade the roads, parking and other infrastructure. To do that, Berding suggested the county’s hotel tax. The county’s hotel tax revenue, he said, has $2.8 million left over each year for “other projects.” That could pay off the debt for the infrastructure over about 30 years.

County Commissioners said no, questioning the logic of Hamilton County using public money for surrounding infrastructure, when Cincinnati already has two publicly-funded stadiums. Those stadiums have been an emotional issue for 20 years.

According to a Brookings Institute study, Paul Brown Stadium and Great American Ballpark cost federal taxpayers $324 million ($182 million for PBS, $142 million for GAB). “Only New York’s stadiums, at $867 million, cost the federal government more. The New York Yankees’ new stadium alone cost the federal government $492 million,” writes the Cincinnati Business Courier. That’s in addition to the money Hamilton County provided for a team-friendly lease and the soaring cost over the $280 million budget.

The county says the final cost was $454 million. The team’s estimate, which doesn’t include infrastructure work around the stadium, puts the tab at $350 million.

But according to research by Judith Grant Long, a Harvard University professor who studies stadium finance, the cost to the public was closer to $555 million once other expenditures, such as special elevated parking structures, are factored in. No other NFL stadium had ever received that much public financing.

In addition to funding the construction for both stadiums, Hamilton County remains financially responsible for all stadium-related upgrades. Clause 12.3 on the lease called “Level I Enhancements“, meaning that county is responsible for those upgrades, whether they existed when the lease was signed in 1997. Such as a new high definition scoreboard that was installed in 2015. However, the amount of money county was paying for the stadiums crushed local economics.

The stadium’s annual tab continues to escalate, according to the county’s website. In 2008, the Bengals’ stadium cost to taxpayers was $29.9 million, an amount equivalent to 11% of the county’s general fund. (In 2010), it rose to $34.6 million—a sum equal to 16.4% of the county budget. That’s a huge multiple compared to other football stadiums of the era that similarly relied on county bonds for financing. Those facilities have cost-to-budget ratios of less than 2%.

Taxpayers paying for stadiums is insanity. Would Hamilton County, or the city of Cincinnati, welcome any public funding for a new soccer-only stadium? Can FC Cincinnati move to Paul Brown Stadium, as Commissioner Todd Portune suggested? Nope.

In a statement to The Enquirer, MLS said it “continues to prioritize soccer-specific stadiums as a criteria for the selection of MLS expansion markets.”

“Paul Brown Stadium would not support an MLS team, and any suggestion to the contrary is wrong,” General Manager Jeff Berding said in a statement released that afternoon. “Therefore, Paul Brown Stadium simply does not work and does not result in a winning bid. It means a losing bid.”

Alright, alright. We get it. PBS and GAB are out.

Presentation of proposals

When Hamilton County Commissioners rejected FC Cincinnati’s initial proposal (specifically using the hotel tax revenue to generate between $70 million and $75 million), they offered a “Plan B”: Build a parking garage that can hold 1,000 automobiles in Oakley, proposing approximately $15 million through annual parking revenues.

Cincinnati mayor John Cranley offered his own proposal on Friday, covering $37 million of infrastructure if Hamilton County pays for the $15 million parking garage in Oakley, and (obviously) if Cincinnati is awarded an MLS team. Where will the money come from?

  • $7.5 million from the sale earlier this year of remaining Blue Ash Airport land. Cranley and the City Council have been unable to agree on a use for that money, and, instead, council previously voted to save it.

  • $9.5 million from existing tax-increment financing districts in Oakley that would be used to build new roads, sewers, gas, water, telecommunications and power lines

  • $20 million that the city would pledge from annual surplus lodging tax revenue. FC Cincinnati would be responsible for any shortfalls in that revenue. The county must give the city permission to use that money.

Recapping the Actual Proposals

There are basically three on the table right now, and all of them have FC Cincinnati paying for the soccer stadium on their own.

  1. FC Cincinnati: Need $70 million to $75 million to “upgrade the roads, parking, and other infrastructure”. Proposal is to use the county hotel tax, which has “$2.8 million left over” annually, which could pay the debt over a period of 30 years.
  2. County Commissioner: After rejecting the FC Cincinnati proposal, County Commissioners countered with $15 million for a parking garage, using money from annual parking revenue.
  3. Mayor John Cranley: If Hamilton County Commissioners give FC Cincinnati $15 million for a new garage, Mayor Cranley proposed an additional $37 million for surrounding infrastructure and roads. Funding would come from various sources.

Then there’s Newport

The date for MLS to award new franchises is Dec. 14 and FC Cincinnati still doesn’t have a stadium location. If the organization, city, and county are unable to reach an agreement for Oakley, there’s still Newport.

Newport is still in play for the next home of FC Cincinnati.

“Absolutely,” FC Cincinnati General Manager Jeff Berding said Thursday at a press conference in East Price Hill.

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