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Inside LAFC's Stadium Maneuvering: Can Something Come From Almost Nothing?

LAFC may not have a team or name, but their owners know how to play the stadium-finance game
June 26, 2015, 4:55pm
Kirby Lee-USA TODAY Sports

For the last few years, Major League Soccer's quest to plant soccer-specific stadiums across the land has clashed with cold, hard political reality. In Miami, out-of-town owners have barely mustered the interest and political will to talk about a stadium with politicos, let alone name their team. In Minnesota, things are a bit better: a local owner at least has a team, passionate fans, and County officials on board (if not the city and state legislature).

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So cynical soccer fans might look at LAFC's proposal in May for a soccer-specific stadium at the site of the present day Sports Arena and ask: are these guys legit?

Read More: Minnesota Disunited: The Fight Over an MLS Stadium in Minneapolis

The short answer is yes. The long answer, though, is that it's complicated. Here's why.

In 2004, MLS embarked on an ambitious plan: two active teams in Los Angeles. Three Mexican owners, Jorge Vergara and the Cue brothers, purchased and launched a new franchise: Chivas USA. The idea was to capitalize on the Latino population of LA with a well-known Hispanic brand. Yes, the team would share a stadium with the Galaxy, but MLS hoped that Mexican branding and alleged "soccer know-how" could build a team and an intra-city rivalry.

For the first five years, things worked out pretty well. As Alicia Rodriguez noted for SB Nation, it was largely the Cue brothers who managed day-to-day operations for Chivas USA. They hired a tough coach and former MLS player Preki and brought in exciting young talent like Cuban Maykel Galindo and Sacha Kljestan, and solid veterans like Claudio Suarez and Jesse Marsch. The team made the playoffs for four straight years and attendance hovered around 13,000. For MLS teams at the time, those were pretty good results and figures.

Then things got really bad, really quickly. On the field, the team failed to replace veterans like Suarez and Marsch. Galindo got injured and Kljestan moved on to Europe. Even worse, off the field things got super messy. First, Vergara bought out the Cue brothers.Then, Chivas USA was sued for employment discrimination after some tasteless remarks by Jorge Vergara to the staff—specifically, two non-Hispanic coaches. But, as I have noted in elsewhere, he pretty much stopped caring about (re: investing in) his Chivas teams both north and south of the border.

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Not surprisingly, attendance suffered a nosedive in 2013, dropping to a paltry 8,000 fans per game. The league eventually took over day-to-day operations of the franchise and started looking for a possible buyer. Guess what? Nobody was interested. Instead, Vergara eventually settled the discrimination lawsuit and sold the team back to the league. Vergara pocketed a nice profit, but the league announced they would close the team, disperse the players to other clubs via draft, and look for new local owners.

I exchanged emails with Chivas USA fans and you can bet they were mad, but they were not taken by surprise. In fact, a few were optimistic: Vergara had betrayed fans trust by failing to invest in the team on the field, and the discrimination lawsuit, didn't build any bridges.

Still, MLS faced a daunting task: could they find an ownership group who could repair the trust with alienated fans? Then there was even a bigger hurdle: MLS wanted owners who were committed to building and playing at a new stadium far away from the Galaxy's StubHub Center in Carson. Who in their right mind would jump into this mess and invest millions? Enter LAFC.

On October 30, 2014, Brian Straus reported for Sports Illustrated on the details of Los Angeles Football Club or "LAFC." The managing partner was Vietnamese-American Henry Nguyen, and the ownership group included a who's who of sports names in Southern California: LA Dodgers co-owner Peter Guber, former NBA executive Tom Penn, Magic Johnson, and Nomar Garciaparra and Mia Hamm, for good measure. The team expected to return to MLS in 2017, but Chivas USA fans could be happy: local rich people with sports knowledge and political know-how were on board. And the owners made short time in launching an ambitious stadium plan and campaign.

To see what I could find about this process, I sent open records requests to the City of Los Angeles, Los Angeles County, and the L.A. Memorial Coliseum Commission. I found that one day after the announcement, on October 31, 2014, one of MLS Commissioner Don Garber's special assistants, Charles Altchek, introduced Tom Penn by email to Glyn Milburn of the L.A. Mayor's Office for Economic Development. On November 4, 2014, Penn met with Mayor Eric Garcetti, Deputy Mayor Keill Barnard, and Glyn Milburn. Penn acknowledged that LAFC was in discussions with USC about the L.A. Memorial Coliseum site, but graciously later met with Councilman Buscaino to look at a San Pedro waterfront site and then afterward met with Stuart Waldman to look at options in the Valley.

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In early December, Penn again met with the Mayor's office to lay out LAFC's ambitious plan, presumably involving the L.A. Memorial Coliseum site. Glyn Milburn missed the meeting, but asked in email point blank: was the club going to want subsidies? On December 10, Milburn emailed his colleagues and privately raised alarm bells about what subsidies LAFC wanted. Penn never directly answered the email, but in later emails from LAFC's corporate counsel, Latham & Watkins, the club showed lots of interest in California's newest law that allows cities to use county property taxes to redevelop specific economic areas. Basically, the law allows municipalities to skim property tax increases off the top of county budgets to try and attract new businesses or develop blighted areas.

In January, things heated up and Benny Tran, LAFC's Development Director, took over communications with the Mayor's Office. On January 14, Tran revealed that negotiations with USC were progressing and that they were working on economic impact models and with architects on designs for the stadium. On January 22, LAFC and their attorneys met with the Mayor's Office for what counsel referred to as a "Status meeting"—basically, they were updating the City on progress. The thorny question of subsidies and negotiations would not come up. Yet.

On February 28, 2015, KRON 4, a Bay Area TV channel, ran a story on LAFC's $100 million stadium proposal for the L.A. Memorial Coliseum. Two months later, LAFC contacted the Mayor and City Council about attending their stadium announcement press conference.

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On May 12, Benny Tran emailed the city to confirm that they had reached an agreement with USC. The next day, the Mayor's office informed LAFC they were reviewing the economic impact study to then develop a catch PR phrase to sell the project to constituents. On May 18, LAFC held their presser with Mayor Garcetti and MLS Commissioner Garber present. They unveiled a gorgeous stadium design near the LA Memorial Coliseum, a 22,000 seater that would generate $2.5 million in annual tax revenue.

LAFC owners at the introductory press conference. Photo by Kirby Lee-USA TODAY Sports.

And how would it be financed, you ask? LAFC only said that "no money from the city's general fund will be used for this project." In terms of promises, I believe them. However, no stadium project ever uses funds from a general fund. Instead, owners normally ask some government entity for generous tax breaks. Sometimes the city reduces local revenue taxes on items like liquor, sometimes the county reduces property taxes, sometimes the state reduces sales tax. LAFC avoided a lot of hassle by negotiating with USC.

Why USC, you ask? They've already done the dirty work, that's why. USC has a sweet deal on the Sports Arena site. Here are the key details: In an email sent from Kathy Markarian, the Coliseum's Chief Administrative Officer, to the Coliseum Commissioners back in October of 2014, she reminded them that "per the USC-Commission Lease, USC has the right to demolish the Sports Arena for permissible uses with the Commission's approval." However, on April 3, Markarian sent another email to the Coliseum President about LAFC and stated "the Commission has not conducted a review and analysis of a proposed project." Thus, USC is not the end of the arm-twisting. More importantly, the glaring question of public subsidies still remains unanswered. LAFC claims to be planning future meetings with the county and state, but nothing has been set up yet.

Still, LAFC has a serious advantage over both Minnesota and Miami: political goodwill. In Miami, the Marlins Park debacle poisoned local residents against stadiums. In Minnesota, the city and state are paying out the nose for a VIkings stadium that's still not done. Conversely, all the scars from the departure of the Raiders and Rams decades ago have been healed and forgotten. In fact, every NFL team in a stadium dispute openly flirts with L.A. to squeeze millions from their local government budgets. The Staples Center was well received by the community. California may be a regulatory nightmare for new businesses, but the legislature does have a surplus to play with.

Grassroots support? Check. Dope stadium plan? Check. Savvy owners? Check. Political goodwill? Check. Concrete stadium finance plans? Not so much. But there's still grounds for optimism. Perhaps the skeleton of Chivas USA and chronically overlooked South L.A. will be a match made in heaven, two Phoenixes helping one another to rise from the ashes. Still, soccer fans should not hold their breath, and taxpayers should watch their piggy banks. Stadium deals are made over years of lobbying, not weeks or months. It may sound sacrilegious, but LAFC fans may want to get Galaxy season tickets for the meantime.