Why Metro’s deal with the Sounds is a major hurdle for MLB to Nashville

As a group of business people ramps up its efforts to bring Major League Baseball to Nashville, a major obstacle stands in the way in the form of Metro’s current stadium deal with the Triple A Nashville Sounds.

The New York Times and USA Today published stories in recent weeks about former baseball executive Dave Dombrowski joining the Music City Baseball group, which wants to secure an MLB expansion team and build a ballpark on the east bank of the Cumberland River.

But, Metro insiders are skeptical about the prospects of Nashville landing a team for a number of reasons. The Music City Baseball group isn’t starting with the level of financial backing that typically accompanies legitimate expansion efforts at the onset. According to public filings with the U.S.  Securities and Exchange Commission and public comments by investors, the group has only raised about $2 million to date. By comparison, the cost of the most recent MLB ballpark, the Texas Rangers’ stadium, had a final price tag of $1.1 billion.

MLB is nowhere near launching a formal expansion effort to seek bids from prospective owners, but it’s safe to assume the expansion fee new team owners must pay will be well north of the $325 million that recent Major League Soccer franchises paid. Some believe it could cost nearly $2 billion between expansion fees and the stadium.

The political climate is also poor for bringing in another pro sports team since Nashville Mayor John Cooper campaigned on investing in neighborhoods over downtown and reforming the city’s economic incentive strategy, including not giving away publicly owned land for private investment. Cooper said the city could not subsidize a stadium.

Music City Baseball identified property that is owned by the Sports Authority and contracted until at least 2038 to the Tennessee Titans and adjoining Parks Department property that is currently home to popular Cumberland Park. Additionally, the city just concluded a bruising budget fight that culminated in Cooper and Metro Council approving a 34 percent property tax increase.

The Nashville Sounds’ stadium deal with the Sports Authority is another significant hurdle.

Metro has just over $102 million in outstanding debt payments, including interest, related to the construction of the largely successful First Horizon Park for the Sounds. First Horizon Park spurred a series of residential and retail projects on the south side of Jefferson Street and attendance has been strong since the Sounds began playing there in 2015. Restaurants like Von Elrod’s and entertainment projects like Brooklyn Bowl opened near the ballpark in addition to adjacent residential projects.

If an MLB team were to relocate to Nashville, the Sounds would be forced to leave town, according to owner Frank Ward, who said a major league franchise and a Triple A franchise wouldn’t be able to coexist in Nashville. That would create the question of what Metro does with a minor league baseball facility that it won’t pay off until 2043.

The Sounds also represent a business hurdle for the group of investors led by former California real estate executive John Loar, who relocated to Nashville with hopes of attracting an expansion MLB franchise. Loar previously was part of two failed efforts to buy MLB teams; one to purchase the Florida Marlins and another to purchase the Los Angeles Dodgers.

In an interview with the Tennessee Lookout, Ward raised a number of issues about the Music City Baseball effort.

Under MLB rules, the owner of a minor league franchise controls the rights to baseball within a territory.

First Horizon Park triggered other development, Ward says

That means in order to bring MLB to Nashville, Music City Baseball would have to buy out Ward’s territorial rights and Metro would have to navigate walking away from an expensive financial commitment that has helped spur development.

“We control the rights to professional baseball in Nashville and the immediate vicinity,” Ward said. “I’ve been told in discussions with (MLB Commissioner Rob Manfred’s office) and an owner who owns a major league team that if expansion happens, they think they’re probably five years away. Even if it happens, there’s no guarantee that Nashville is going to be one of the expansion cities.”

Ward said that in order for a major league team to enter the Nashville market, the new franchise would have to acquire his territory.

“I would have a seat at the table,” Ward said. “And clearly, if it is economically feasible we would want to be the ones to bring a major league team to Nashville, and by having a seat at the table it may give me a leg up economically to accomplish that goal.”

But, Ward said the Sounds, pre-pandemic of course, have been thriving in First Horizon Park, which opened in 2015. Attendance has been strong and Ward said the project has been a success.

“If you look at all the development that has taken place and all of the new tax base that’s been added,” Ward said. “All the new jobs. All the new restaurants that have come there. It was a catalyst for the area to start bringing people to the area and now it’s one of the most popular areas in all of Nashville. The stadium, to me, was the catalyst for the economic development of the entire area.”

Ward said he has had a few discussions with the Music City Baseball group, at which time he told them he is not interested in joining their group.

“I’ve probably had a telephone call with him and a couple of emails,” Ward said. “And after talking to him I basically said I’m not interested in what you’re trying to pursue. I don’t think the economics of the market, the size of the town, were viable for at the time a third major league team. Now it’s a fourth major league team.”

Ward said an MLB franchise and the Sounds could not both be successful in a market of Nashville’s size, and that he will be forced to leave town if MLB expands here.

“If our territory is acquired, we have the right to take our franchise and move it to another part of the country,” Ward said. “I don’t know what would happen then to First Horizon Park.”

During a recent presentation to the Brentwood Rotary Club, Loar said he believes that MLB and the Sounds could co-exist.

“Part of the reason this market works is because of the Sounds and their success,” Loar told the Rotary Club, according to a transcript of his presentation provided to the Tennessee Lookout. “I think Major League Baseball, in at least our position, we think there’s an opportunity for both clubs to survive in a market… I think we’re certainly supporting that as part of our feasibility analysis. We’re certainly going to study that.”

In response to questions from the Tennessee Lookout, a team spokesman called the Sounds a “first class organization.”

“We understand there are city bonds associated with the Sounds stadium,” Music City Baseball chairman Alberto Gonzales, the Belmont University Law School dean and former United States Attorney General, said. “We intend to work with city officials and the Sounds to find a mutually acceptable outcome that retires those bonds. We also believe our feasibility study will likely provide more insight.” 

Music City Baseball reiterated construction of its project will be privately financed.

“Assuming the city incurs no costs in having the Sounds ballpark bonds retired, the city will not only not lose money with a MLB team but we believe that the city will earn more revenue for important city services through more property and sales taxes from the development of the East Bank as a result of 81 home baseball games, concerts, shows and music events,” Gonzales said. “These additional revenues could be used in part to help the city pay for any necessary obligations to the Titans, including any required upgrades to Nissan Stadium.”

Cooper, O’Connell weigh in on project

Metro Councilman Freddie O’Connell, who represents the neighborhood the Sounds call home, said he is concerned about the future of First Horizon Park if an MLB expansion effort gains traction.

“It certainly calls into question if this was a sound investment and if Metro should have given foresight to whether the current ballpark could be expanded for a major league park,” O’Connell said, adding that his understanding is First Horizon Park can’t be expanded.

Music City Baseball has been clear that it is in the early stages of a long-term effort, acknowledging serious questions still need to be answered related to financing, attracting investors and where their proposed development will be located. Loar told the Rotary Club the group has raised “north of $1.5 million, heading to $2 million” so far. That’s a long way from what it will cost to bring MLB to Nashville.

And, while the New York Times and USA Today stories painted the picture of an expansion project gaining traction, the reality is that the proposal is facing serious headwind from a city that is weary of big-ticket projects after a decade of such massive investments.

Cooper told The Tennessee Lookout he hasn’t talked to Music City Baseball since he was elected last year. He said the city is not interested in subsidizing MLB, which he described as in an economically precarious position in an era when streaming content is the new media model.

“Well I have not really talked to them since I’ve been mayor,” Cooper said. Everybody has the right to make a proposal. It’s a free country. So they have always said very loudly they were not going to expect any resources from the city, including land. Well they have a right to make that proposal and they can go do that.

“I do think the city has a right to be very shrewd in its understanding. All large sports seem very challenged, particularly Major League Baseball, with a big salary structure and a streaming media challenge. So the finances seem to be challenged, and the city in no way can afford to subsidize that massive change in the economics of any sport.”

If investors want to utilize tax increment financing, where sales tax generated by the ballpark and surrounding development could be re-routed to pay for the cost of construction, Cooper said that should be up to Davidson County voters. When the Nashville SC pursued a new stadium project with Metro financing, Cooper, who was on the Metro Council, advocated at the time for a public referendum.

“Do we need to adopt a referendum on these kinds of proposals? Probably,” Cooper said. “It’s something I advocated back in soccer. Part of this is just cleaning up the public engagement process in these kinds of deals. Go make your pitch, but then the city has to decide, and not have it be privately dealt with behind closed doors in something that is that significant.

“The short answer is I have not seen them since before the election. Everybody in America is allowed to come up with some idea and pitch it. So go for it.”

Gonzales said Music City Baseball is aware that the expansion effort will not be successful without support of the mayor.

“Of course the mayor has to be smart in all decisions affecting the finances of the city,” Gonzales said. “Our goal is to bring forward a development and entertainment project that raises revenue for the city, that benefits the citizens of Metro Nashville and that enhances the reputation of the City of Nashville.

“We believe baseball can help unite this city. We also believe our demonstrated commitment to inclusion and equity, and our partnership with the Negro Leagues Baseball Museum and our ties to the Negro Baseball Leagues will resonate with the people of Nashville and the mayor.”