If Elk Grove Got an MLS Team, Would it Be Profitable or a Drain on Taxpayers?

October 21, 2013 | One of the more outlandish schemes cooked up by Mayor Gary Davis and his supporters on the Elk Grove City Counci...

October 21, 2013 |

One of the more outlandish schemes cooked up by Mayor Gary Davis and his supporters on the Elk Grove City Council has been to spend taxpayers dollars on a study to see if the city could build a stadium to host and recruit a Major League Soccer (MLS) club.

Elk Grove taxpayers first got wind of this scheme last December after Davis was wined and dined by Commissioner Don Garber at the MLS championship game. Subsequent to that, former California Assembly Speaker Fabian Nunez, part of a potential ownership group for the proposed franchise, appeared before the Elk Grove City Council talking up the economic benefits a professional soccer club that would bless the city with.

Aside from tying a multi-hundred-million dollar taxpayer subsidized stadium to much-needed youth soccer fields, Davis has painted the stadium as a Godsend of sorts not only for his burning desire to transform Elk Grove into a destination city, but to act as a catalyst to complete the unfinished Elk Grove Promenade.

While we won't dwell on the irony of making another mistake, building a taxpayer-funded stadium to correct another mistake - the five-years-and-counting unfinished eyesore of a mall, there are other points we ought to consider. 

If the city were to build a stadium and land an MLS franchise, will the Elk Grove soccer club actually buck the trend plaguing other clubs in the league and make money?

While Elk Grove has big league dreams of becoming a soccer mecca, another city is seeing the challenges in landing and developing facilities for their MLS club. Crain's Business Detroit published an interesting story yesterday on the challenges facing two billionaires, Dan Gilbert and the Apostolopoulos family, who are competing for an MLS club in that troubled city.

There are several take-aways from the story worth considering:
  • "Just four or five of the professional soccer league's 19 clubs make money, sources familiar with the situation told Crain's."
  • 'Pro soccer is a hard dollar: Even the majority of the elite English Premier League soccer teams are in the red, according to public reports."
  • "While the English Premier League is widely considered the pinnacle of professional soccer, only eight of its 20 clubs had a profit in 2011-12 despite $3.8 billion in league wide revenue, according to a report last year from Britain's The Guardian newspaper."
The entire story is available here 

So if Davis and the Elk Grove City Council pushes ahead, issues revenue bonds, which generally do not require voter approval and builds a stadium for an MLS club, we taxpayers better put on our green eye shades, examine the books and see if Davis and Nunez are leading us down a path of fiscal ruin. It is us taxpayers after all, who will be on the hook if the scheme tanks.    

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Willie and the Poorboys said...

17 home games per season is not gonna pay the bills I'm afraid. Can EG realistically expect to land enough concerts during the remaining 348 days of the year to pay the bills as the market study suggested? Arco Arena sits empty most of the year--how does EG expect to do better than that as a concert venue?

Does youth soccer (all those bright-eyed kids who attended the Council meeting that night)actually expect to play their games for free in a professional stadium in debt?

I suppose we could fill out the calendar with a food truck jamboree, an ice rink, and a Galt-style flea market!

Beware of doctored-up feasibility studies and "destination city" promises!

Capt. Benjamin L. Willard said...

I agree with Willie - can we reasonable expect any feasibility report commissioned by the city to draw any other conclusion other than what Mayor Davis and Mr. Nunez wants? It's cooked and everyone knows it.

The real test will be when bond financing comes around. Say what you will about the crooks on Wall Street, but they will take a look at the whole picture and sure, they will underwrite some bonds, but at what interest rate? They know how to measure risk and most importantly, collect a healthy fee for themselves and socialize the risk.

As Mr. Cooper is so fond of saying, 'we've been around for on 13 years.' True enough and consequently we have no track record in this area. So Wall Street will say, yeah, we'll issue the bonds but at a very high interest rate.

When all those bright-eyed-kids Willie references grow up, move out of Elk Grove and lose interest in soccer, and trust me they will, who'll be filling those seats at the stadium?

This scheme actually makes the water park scheme seem relatively reasonable.

Someone who usede to care said...

As much as I'd like to have an MLS team located here and a nationally recognized aquatics center, I believe that the financial viability of both of these projects is tenuous at best. If not done with the utmost due diligence and caution, these projects could bankrupt our city.

I'm certainly not sold on the either of the outside parties promoting either project.

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