Why Trump tax break for the rich could be deathblow for Vancouver Whitecaps
The Vancouver Whitecaps’ half-century of history in the city is hanging by a thread.
Owners of the Whitecaps listed the team for sale in December 2024. Over that time, the club has reportedly engaged in discussions with over 100 groups of interested investors, but no one has emerged as a saviour.
MLS Commissioner Don Garber has sounded the alarm bell on multiple occasions, and so have the Whitecaps. Politicians have been involved, with the mayor of Vancouver urging for a resolution.
Lost in all of the commotion is one of the unspoken reasons why the Whitecaps are at a massive disadvantage in relation to some American cities vying for the team, like Las Vegas.
It’s all related to a policy introduced by U.S. President Donald Trump.
Why opportunity zones could sink Whitecaps
In 2017, Trump and the Republicans introduced the Opportunity Zone program, which was enacted under the Tax Cuts and Jobs Act.
The idea was to incentivize private investment in low-income communities by offering significant tax advantages.
This program was set to expire in 2027. However, last summer, the Trump administration announced that the program would be permanent, adding another layer of dread to the Whitecaps’ fate.
So, why exactly does this matter to the Whitecaps?
Well, the fact that a group from Las Vegas wants to buy the team may outline this perfectly.
The Grant Gustavsson group from Las Vegas already stated that they plan to privately finance a new stadium in Sin City. And, based on opportunity zone legislation, there’s a hefty tax advantage to doing so.
There’s massive potential for Las Vegas to build a stadium district inside an opportunity zone, considering there are many options within the city limits.
Las Vegas is littered with opportunity zones, highlighted by grey areas on the map. (U.S. Department of Housing and Urban Development)
Say the new group from Las Vegas built a stadium to house a Whitecaps team, with an estimated cost of building it being around US$500 million (not including the cost and subsequent gains of any real estate or entertainment built around the stadium).
However, it’s not just the stadium appreciation that would be tax-free for the new prospective owners in Las Vegas.
Intellectual property within the opportunity zone is also subject to tax-free growth. A source with knowledge of the situation told Daily Hive that it would certainly apply to the MLS franchise value.
If the Whitecaps were purchased for $500 million, and the cost of a new stadium was theoretically $500 million, then let’s say Las Vegas would be spending $1 billion on the MLS franchise.
If the value of the stadium and the Whitecaps rose 10 per cent annually, it would be worth approximately $2.59 billion in 10 years.
And, if the stadium and MLS franchise were held inside an opportunity fund for 10 years, all of that growth (roughly $1.6 billion) would be tax-free upon sale.
If the same scenario played out with a new Whitecaps stadium in Vancouver, the sale of a stadium and franchise with $1.6 billion in growth would net the hypothetical owners $1.16 billion based on corporate tax rates in the province.
Basically, if the same scenarios unfolded in Vancouver and Las Vegas (or any American city building stadiums and putting an MLS team in an opportunity zone), there’s automatically a $432 million advantage in favour of Las Vegas, with everything else being equal.
As if any prospective Whitecaps owners in Vancouver needed another reason to worry about the financial dilemma of keeping the team in the city.
The average person probably doesn’t have a shred of sympathy for billionaire owners of sports franchises, which is understandable for the majority of Vancouverites.
However, another significant advantage for prospective U.S. owners lurking over the Whitecaps saga just spells more trouble for the future of the franchise.
Can the Whitecaps overcome the disadvantage?
The Whitecaps already hold major disadvantages to their U.S. counterparts in the form of tax rates, not owning their own stadium, and the currency exchange rate.
But is the threat of the team moving to a U.S. market with an opportunity zone advantage a potential final blow for the club?
It certainly complicates the situation, but hope isn’t completely lost yet.
Some of the situations depend on how much the MLS cares about ripping a successful franchise away from a passionate fanbase, something that’s already drawn criticism from players and pundits.
The Whitecaps relocation fiasco clearly has nothing to do with fan support or a lack of on-field success; it has everything to do with money, business, and politics.
So, from a financial perspective, can government officials enact a change if the MLS wants to chase the American money? Could there be something similar to opportunity zones in Canada?
Of course, there are pros and cons to the idea of opportunity zones in Canada. Proponents of the strategy in the U.S. argue that opportunity zones drive community investment. Detractors say that the program is just another tax break for the rich, while the actual impact on low-income communities has also been questioned.
Regardless, opportunity zone legislation in the states gives the Whitecaps another massive disadvantage amidst their current uphill battle to stay in Vancouver.
It’s an advantage so significant for potential American investors that it makes you wonder, could another Canadian MLS franchise soon face a situation similar to the Whitecaps?