The GOP tax plan being crafted in Congress may provide an unexpected boost to Detroit’s bid to get a Major League Soccer team, some tax experts believe.
The MLS board of governors met Thursday in Manhattan and was expected to decide on two cities, among four finalists, to be awarded an expansion team. The information from the meeting was made public late Thursday, and an announcement could come at any time.
House and Senate Republicans on Wednesday said they had reached a deal in principle on a sweeping tax plan but all the details had not been released late Thursday.
Of concern to MLS and its contending teams is how the overhauled tax plan will address the future of the tax-free municipal bonds that sports owners use to get public money for building stadiums. The House version of the tax plan eliminated the break; the Senate version leaves it intact. As congressional leaders are reconciling the plans for a final bill to present to President Donald Trump, some tax experts speculate some changes to the financing provision.
The final decision could affect plans for the construction of stadiums in the MLS competition. Right now, Detroit is the only city among the finalists not proposing to build a new stadium. Some observers are suggesting that such financial independence could sway the league’s decisions.
Two other finalist cities — Cincinnati and Nashville, Tennessee — are relying on tax-free municipal bonds to provide millions to their plans to build new soccer stadiums. The other finalist, Sacramento, California, is not using the bonds.
The theory — and it’s just theory — is that the league may lean toward the two cities where the plans don’t depend on these bonds. .
“Any institution about to take on an expensive, complex plan wants to reduce any financial uncertainty to that plan as much as possible, and that’s part of what the soccer league is deciding,” said Leon LeBrecque, manager and CEO of LJPR Financial Advisors in Troy, referring to stadium bonds. “If these bonds go away, or change, that’s definitely a wrinkle for those cities.”
LeBrecque said he didn’t know if the use of the bonds would be considered a “game-changer” in the league’s decision and stressed that he’s not been closely following the issue.
Officials in Cincinnati and Nashville have already approved plans to build new stadiums in anticipation of a new soccer team. Cincinnati is preparing to build a $200 million stadium, Nashville a $275 million facility. Both cities have said the new venues would be open in time for the 2020 MLS season.
In Sacramento, preliminary work has begun on a potential new $226 million stadium for the Sacramento Republic FC team that plays in the United Soccer League. That team would join the MLS if invited. The team’s owner is paying for the venue.
Detroit is proposing its new team play at Ford Field, the downtown home of the NFL’s Detroit Lions.
The Detroit bid is being led by Dan Gilbert, founder of Quicken Loans Inc. and owner of the NBA’s Cleveland Cavaliers; Tom Gores, founder of Platinum Equity and owner of the NBA’s Detroit Pistons; and the William Clay Ford family, owners of the Lions. Originally, the Detroit pitch included building a new stadium in the Greektown area. The plan was revised last month when the Ford family joined the effort.
The MLS has said the three main criteria in its decision on the expansion team are ownership structure, the financing plan and measurable local support for a professional soccer team.
In Washington, meanwhile, Trump is pushing Congress to submit the newly written tax legislation — whether or not it addresses the municipal bonds for stadium issue — before Christmas.
These type of municipal bonds are issued by local government entities to help pay for the construction of multi-million dollar sports venues. They are used often because they are free from federal tax. Some politicians see them as a way of depriving the federal treasury of significant potential revenue.
Tax-free municipal bonds have been used by to help pay for 36 of the last 45 professional stadiums and arenas built since 2000, according to a study by the Brookings Institution, a Washington think tank. Locally, the Pontiac Silverdome, Comerica Park, Ford Field and Little Caesars Arena were built with the help of these bonds.
The newest Detroit venue, Little Caesars Arena, was completed using $250 million in tax-free municipal bonds to pay for sports-entertainment complex that cost a total of $863 million. (Another $200 million in bonds was backed by the Ilitch organization, which manages the city-owned venue.)
When the Detroit Pistons decided to move to the arena, another $34.5 million in tax-free municipal bonds were issued to help make changes to the venue for the professional basketball team.
Ted Gayer, one of the authors of the Brookings Institution study, noted that stadium bonds have been targeted at various times by Democrats and Republicans in the past and are probably part of the current tax debate in the Congress.
“I suspect what is happening is that a couple senators may be worried about a deal in the works for the Oakland Raiders to move to Las Vegas, and so that gets an exemption,” Gayer said. He was referring to the plan already in motion to relocate the NFL team from Oakland, California, to Las Vegas.
Even if the stadium bonds go away, Gayer said pro sports teams owners and local governments may find other ways to help subsidize the building of stadiums.
“Will it substantially impact the ability of sports teams to get subsidies? Maybe at the margins, but probably not,” Gayer said.