Daily Tax Report: State

Last-Minute $645 Million Deal Keeps MLS Team in Ohio

Dec. 28, 2018, 8:40 PM

A landmark tax lawsuit and lightning-fast $645 million deal have prevented Major League Soccer from transferring a pro team from Columbus, Ohio to Austin, Texas.

MLS and the owners of the Cleveland Browns announced a deal Dec. 28 that will keep the Columbus Crew in Ohio’s capital following a high-profile, protracted legal and PR battle over the team’s future. The deal came in just before time expired—MLS gave developers until Dec. 31 to wrap-up negotiations.

While many governments have tried, until today no lawsuit has ever kept a pro team from leaving when the owners had called it quits. But Ohio Attorney General Mike DeWine (R) argued under a unique “taxpayer assistance” law that the Columbus Crew’s owner needed to offer the team up for local buyers before leaving Ohio.

The suit opened the door for a development group headed by Browns owners Dee and Jimmy Haslam and Pete Edwards Jr., an Ohio physician and real estate mogul. The league accepted their $645 million deal to purchase the team and build a massive mixed-use commercial and residential campus around a new 20,000-seat downtown Columbus arena.

“While we work to finalize the deal promptly, we want to state publicly the tremendous collaboration and community support for Crew SC, which has set the stage for a powerful plan that includes a world-class soccer stadium—a critical step that will help ensure the club’s success on and off the field,” Don Garber, MLS commissioner said in a Dec. 28 statement.

First of Its Kind

In America, pro sports teams leave and cities sue. Until today, the teams have consistently won, prevailing under arguments that to force a team to stay in one state would violate the U.S. Constitution’s Commerce Clause and property rights of the team’s owners.

For more than a year, the Columbus Crew’s owner Precourt Sports Ventures actively sought to relocate the team to Austin. However, in May 2018, an Ohio state court issued a landmark order compelling Major League Soccer to entertain local offers before leaving town.

The ruling was the first interpretation under Ohio’s novel law, giving locals a right of first refusal to buy any team that gets taxpayer assistance from state or local government. Although the team never received taxpayer cash, the court presumed that $6.6 million in public money spent on under-market rent and public infrastructure improvements were enough to compel the team to seek local offers.

DeWine dismissed his suit Dec. 28 so the deal could proceed. In a statement, he said a local sale was his goal all along.

Local Tax Money Involved

While the project is mostly privately funded, state and local government will chip in about $115 million toward the deal.

On Dec. 19 Gov. John Kasich (R) signed a bill providing a $15 million state grant for the stadium. The city of Columbus and Franklin County are also contributing $50 million apiece that will go toward infrastructure improvements and adding a public sports park to the teams current stadium, which will eventually become a practice facility.

The case is: Ohio v. Precourt Sports Ventures LLC, No. 18-cv-1864, Case voluntarily dismissed 12/28/18

To contact the reporter on this story: Alex Ebert in Columbus, Ohio at aebert@bloomberglaw.com

To contact the editor responsible for this story: Jeff Harrington at jharrington@bloombergtax.com

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