More details on Montreal emerge

Further information on the no-MLS-for-Montreal situation has come out since my last post on the subject, thanks once again to Ben Knight of The Globe and Mail's On Soccer blog. The devil may be in the details, and if so, he's hiding after the jump.

First, some quotes from Impact owner Joey Saputo at his aforementioned press conference Monday:

“First: Montreal never at any point withdrew its bid from the process. We were rather informed that our bid was not retained.
Second: The Montreal partnership never, at any point, had any trouble whatsoever financing its bid.
Third: There was never any question of using public funds to finance this project.”

The second point is the most interesting new information here. My earlier speculation was that this might have been due to financial struggles on the part of George Gillett, Saputo's partner in the bid and the owner of the Montreal Canadians and co-owner of Liverpool FC (which is having financial problems of its own [Roy Collins, The Times of London]. Basically, what Saputo's saying here is that the amount Montreal was willing to pay was sustainable and did not change; what changed was the league's willingness to consider it (and also the drop in the Canadian dollar, which made the Saputo/Gillett bid worth a lot less).

On the financial details front, the league asked for expansion fees of $40 million U.S. Montreal apparently offered $43 million Canadian, including stadium renovations. Considering that the Canadian dollar was reasonably close to par at this point, this was probably a reasonable offer; not quite what the league was looking for, but close enough that they might have been able to work something out.

The Canadian dollar has tanked since then, though, losing close to a fifth of its value. As Knight writes, "That effectively means the Impact were bidding about $34.4-million (U.S.), minus whatever rebuilding a stadium costs in a town where construction expenses are – at best and most charitable – imprecise."

Look under "Stadium, Olympic" if you want an example of that imprecision. Presuming that the other cities were ponying up the asked-for $40 million franchise fee in addition to stadium costs, it's not hard to see why MLS would drop Montreal from consideration. It's interesting that they did so publicly, though; might it not have made better business sense to have everyone think that Montreal still had pole position in the expansion race, compelling them to sweeten their own bids? This also looks bad on Saputo and Gillett, as they're now seen somewhat as cheapskates who didn't want to pay the required price. It would have been a better situation for MLS commissioner Don Garber to quietly tell the Montreal guys that their bid wasn't sufficient at its current level, but then have both sides keep that information under wraps and just announce that Montreal wasn't one of the selected cities when the decision was eventually made. That way, both sides save face.

Knight argues that this makes some sense for Montreal, and I tend to agree. As I wrote back in September, their current situation is pretty good. Not joining MLS may hurt them in the long term, but unlike many of the cities in this expansion race, they have a very tenable fallback position. This position is certainly strengthened by their success in the CONCACAF Champions League; they've proved they can play with bigger clubs, and they can offer potential players a large and supportive crowd and a chance to play international soccer. MLS would be great for Montreal and great for the Impact, but they aren't compelled to try and get in at any price.

However, I'm not sure that the MLS expansion fees are as ludicrous as Saputo seems to be claiming. Perhaps $40 million plus stadium building/renovations is too steep in this economic climate, but there are six cities that seem willing to pay that (and the majority, if not the entirety, would likely face steeper stadium costs than Montreal). It's supply and demand, and MLS is in a very good position here; they have several strong bids to consider for only a couple of slots, so they can play the cities off against each other and force them to keep raising the stakes. Montreal wasn't interested in that game, and that's fine; they have less to lose than any of these other cities, given their existing stadium, strong supporter base and CONCACAF success. The long-term viability of the USL is in no way assured, though, particularly if some of the stronger franchises like Vancouver and Portland jump to the MLS.

It's going to be tough to evaluate this decision exhaustively at the moment, as we don't know what will happen. MLS could bring in two to four other franchises, halt expansion and take off in popularity; Montreal would then be left on the outside looking in. If Vancouver and/or Ottawa get into MLS, that will also hurt the Impact; it will be tougher to sell the USL when there's a national alternative league, rather than just one franchise in Toronto. Alternatively, the other cities may overpay and struggle financially, and the league may lose popularity. The USL might even mount a challenge to MLS. There could be a mix of the two scenarios as well, where Montreal stays in the USL for a few more years and then jumps to the MLS later on. My feeling is that MLS expansion prices are going to rise, not fall, but you never know what will happen. Regardless of what eventually comes of this, though, this is a significant move for both Montreal and Canadian soccer. We'll see if it's remembered as a smart business decision or as a missed opportunity.