Sacramento still in running for Major League Soccer. But here’s what has to happen next

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Tony Bizjak, Marcos Bretón
·6 min read
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That didn’t take long.

Almost immediately after news broke Friday evening that business investor Ron Burkle had dropped plans to bring a Major League Soccer expansion franchise to Sacramento, the phone calls started to come into leaders of the local effort from potential new financiers. Finding that deep-pocketed investor is vital to Sacramento’s chances of getting back into the MLS picture.

“My phone is ringing off the hook,” Mayor Darrell Steinberg said on Monday. “I can’t be specific (about who is calling) at this point but there is already significant interest being expressed from some major investors and that is exactly what we want.”

Sacramento Republic FC principle owner Kevin Nagle said this weekend he has also talked with other wealthy people who expressed interest in exploring the possibility of launching a top-tier soccer team in the capital city. He and city officials declined to say who or how many may be interested.

“We have re-engaged with potential lead investors, and have been receiving serious inquiries since Friday’s news broke,” Nagle said in an emailed statement.

Nagle had planned for 18 months to step aside to allow Beverly Hills billionaire Burkle to take charge of the complicated and expensive effort to qualify Sacramento for an MLS team. That appeared to have succeeded when, in October 2019, MLS officials came to town to announce that Sacramento would be home to the league’s 29th team. Charlotte was later added as the 30th MLS franchise.

After follow-up negotiations failed, the league announced on Friday that Burkle had dropped out, citing COVID-19 costs and delays.

Now Nagle finds himself suddenly back in the driver’s seat, working with Steinberg to see if there is a way to salvage the city’s six-year effort to join MLS.

His Republic FC soccer team currently plays in the lower-tier professional United Soccer League and will be launching a new season in a few weeks. The new season – the eighth for the local club – would have occurred whether or not the MLS deal was struck.

“As to the USL season, nothing has changed, especially our focus on adding more hardware to our trophy case,” Nagle said.

Whether Sacramento ever makes it to MLS status, though, appears to be as much in doubt as it was for years.

Sacramento will have to find a new lead investor group that meets MLS’ approval. Sacramento itself does not have businesses with the kind of intense wealth typically required to finance an expansion franchise, so it likely will have to look to the Bay Area, Silicon Valley or the Los Angeles area for investors.

MLS currently has 29 teams signed up as part of an aggressive expansion process over the last handful of years. Commissioner Don Garber has said he wants to add a 30th franchise, which was to have been Sacramento, then call a halt to expansion.

San Diego, Vegas, Phoenix court MLS?

A handful of other cities have groups that have expressed interest in landing an MLS franchise, and many of them have been in contact with the league for several years attempting to position themselves for that possibility.

League officials indicated on Friday that they consider Sacramento a deserving city and that they are willing to work with Sacramento on its efforts, but Sacramento may still have a leg up should it land new investors. Garber and Steinberg have had several phone calls in the days since.

Cities waiting on the sidelines include San Diego, Phoenix and Las Vegas. None have filed a formal application to become an MLS team, and none were in active discussions with MLS as of Friday’s announcement. This is where Sacramento still has an advantage over other cities, Steinberg said.

“All of the elements it takes to get this done (with the exception of having a principal investor) have been negotiated and agreed to,” Steinberg said.

The entitlements to build a stadium in the downtown Railyards are done, as is the environmental review, clearing the way for stadium construction. In 2019, the Sacramento City Council voted 7-0 to approve a term sheet with Sacramento Republic FC in which the city will provide $33 million in fee waivers, tax rebates, advertising rights and infrastructure at the Railyards.

That deal was made to demonstrate the commitment the city had for developing the Railyards and landing an MLS team.

“The city stepped up,” Steinberg said. “We’re ready to put shovels in the ground.”

Sacramento appears to have a stronger proposal at the minute than others, with stadium plans in place and organized corporate and fan base support. Nagle said he believes that makes Sacramento a good opportunity site for the key missing piece – an investment group.

“It’s important to understand we aren’t starting from scratch,” Nagle said. “This is a tremendous opportunity and a fantastic market.”

Local leaders support expansion team

On Monday, the executive committee of the Greater Sacramento Economic Council, a group of business CEOs, said they will work as well to help bring MLS to the region.

“This project is important as we continue to build the economy of California’s capital,” GSEC executive Barry Broome said. “We understand and have dealt with setbacks in the past, but our community is extremely dynamic, and we are ready for this MLS expansion team.”

But the costs of bringing an MLS team to Sacramento are high and growing higher, even as COVID-19 has hammered MLS team revenues and thrown a cloud of financial uncertainty over the near-term future of professional sports in general.

“We need to find a billionaire investor,” said City Councilman Jeff Harris, who represents the soccer stadium development site. “This is a big disappointment, but we will keep plugging. I don’t think it spells the end of the game for Sacramento. From a positive point of view, we are shovel ready.”

Burkle and his representatives have declined public comment about the deal collapse.

That worsening financial scenario, however, was the reason the Burkle group backed out of signing a deal last week, according to a source familiar with the finances of the Sacramento MLS effort but who was not authorized to speak.

When the Burkle group entered the picture several years ago, MLS was charging new teams a $75 million franchise fee to enter the league. That increased to $150 million and, on the day Sacramento was announced as the lead candidate for the 30th spot, had jumped to $200 million, a change that caused Burkle to hesitate initially.

Meanwhile, the price to construct a stadium in the Railyards increased from less than $300 million to about $400 million due to pandemic-caused delays, as well as higher construction and materials costs.

Value engineering could have reduced the stadium cost to $380 million, but that price tag, as well as growing infrastructure costs, proved too much of an investment under the economic uncertainties of COVID-19, the source said.

New construction regulations and added infrastructure costs apparently also played a role.