MLS expansion race: Sacramento, once viewed as favorite, faces 'tall task'

For much of the current MLS expansion process, Sacramento was considered close to a lock for one of the two expansion sports to be awarded in the current round.

Now its lead investor, Sacramento Republic FC chairman and CEO and Sacramento Soccer & Entertainment Holdings president Kevin Nagle, says the Sacramento bid group has a money problem.

It needs to raise additional capital quickly if it is to make the cut.

Following MLS's announcement that Nashville was awarded the 24th team, the league sent out a statement on Thursday that it won't make a decision on the second expansion team from among Sacramento, Cincinnati and Detroit until 2018. MLS stated that "all three submitted impressive bids which the league will take additional time to review before announcing a final decision in the new year."

While "impressive," they weren't, MLS commissioner Don Garber said at Nashville's expansion party on Wednesday, as complete as Nashville's bid. The issues surrounding the Cincinnati and Detroit bids relate to their stadium plans. Sacramento's issues are largely financial in nature, though indirectly related to its stadium project.

Sacramento Republic FC had already begun work on its stadium, prepping the Railyards area north of downtown Sacramento so construction could begin as soon MLS gave the green-light. Now, Nagle said work will "wind down" while Sacramento Republic FC waits on a decision on its bid.

“We know the final area where there’s room for improvement is a recognized need for additional funding,” Nagle said Thursday morning at a press conference at Sacramento City Hall attended by Sacramento mayor Darrell Steinberg.

Nagle said the costs of securing an MLS expansion team have grown by $150 million since Sacramento began its effort. The MLS expansion fee is now $150 million. The cost of the Sacramento stadium is expected to rise to around $250 million, up from about $180 million when plans for the stadium on 16 acres in the northeast section of the Railyards were finalized in late 2015. And since then, the start-up costs of an MLS franchise, as seen with the investments of first-year teams like New York City FC, Orlando City and Atlanta United, have risen dramatically.

In a letter to Sacramento fans, Nagle wrote:

“While these are typical challenges in business, sports, and MLS, the evolving bid costs have required us to revisit and rethink how we will fund the bid. While we’ve made tremendous strides, the plan we presented to the MLS Expansion Committee a few weeks back raised fair and reasonable questions about the need for additional financial capacity. Both then to MLS, and now to you, we have pledged to do whatever it takes to address and resolve these questions.”

Nagle said three things were needed.

1. New major investor. Nagle, a minority investor in the NBA Kings, said he will continue to "drive our progress as lead investor and am proud of the nearly $30 million that I have personally invested to place Sacramento on the cusp of getting an MLS team" but he said he was "willing to be open and flexible in order to attract the right partners and do what’s best for Republic FC and the MLS bid."

2. Additional Limited Partners. Nagle said the ownership group needs to recruit additional investors who "can bring additional capacity and capabilities to our team." He said that Hewlett-Packard CEO Meg Whitman and her husband, Dr. Griff Harsh, would not be part of the investor group but continue to support the bid in a more limited role.

3. Mobilize Community Support. One of the areas that MLS is now paying close attention to in its expansion process is the support from the local community. Pending MLS approval, Sac Republic has commitments for 10,000 season tickets and a five-year jersey sponsorship deal with UC Davis Health. Nagle pledged to work closely with Mayor Steinberg and others to "identify pathways for our fans, corporate partners, and community at large to help us reach this final objective in our bid."

“No question, this will be a tall task,” Nagle wrote. “And we will need to move quickly to remain competitive for the next expansion slot. But if ever there was a community that can dig deep and persevere, it’s Sacramento. Our paths to victory are rarely straight. We’re no strangers to adversity. We’re used to beating the odds and proving skeptics wrong. We’ve been here before. This journey, long as it may be, will prove once again why we are truly indomitable.”

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