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USSF D2 Update; New Standards Set for League, Current and Future Owners

2010 August 11
by Brian Quarstad

The much-anticipated USSF D2 meeting on Monday took place in New York without much fanfare or negotiations according to sources involved with teams that participated. The meeting was in general amicable and US Soccer did allow discourse.

Those attending the meeting from the federation were Sunil Gulati, Dan Flynn, and Brian Remedi. Team owners attending were: Austin Aztex owner Phil Rawlins, Carolina RailHawks owners Bob Young and Selby Wellman and his son Brian, Crystal Palace Baltimore’s Pete Med, FC Edmonton owner Tom Fath, Miami FC/Traffic US president Aaron Davidson, Montreal Impact owner Joey Saputo, NSC Stars GM Kris Bjerkness, Rochester Rhinos owner Rob Clark, FC Tampa Bay majority owner Andrew Nestor and Vancouver Whitecaps president Greg Kerfoot and USL owner Rob Hoskins. Those not present were Jeff Cooper of AC St. Louis, representatives from Puerto Rico who were said to be frustrated and felt that they most likely will not meet the new USSF standards, and the Portland Timbers who will be moving on to MLS next season. Vancouver and Montreal have been actively involved with these discussions because the Whitecaps and the Impact would like to discuss the possibility of keeping a team in the D2 league for developmental purposes. Atlanta Silverbacks’ Boris Jerkunica was not in attendance either which may be telling with his involvement with the league in the near future.

IMS has been told the standards that US Soccer presented to the team owners on Monday and that were passed by the Federation board on Tuesday will be released in the next several days. While some of the new standards may be negotiable, the financial set of standards will not. Provisions are laid out in the documents that teams could ask for a wavier on certain aspects of the rules. However, US Soccer made it very clear to those in the room that the financial qualifications will be strictly adhered to. As IMS posted on Monday, some of those standards for teams are the ability to post a $750 thousand bond 90 days in advance of the season. Last year’s bond by USSF was $350 thousand. When the United Soccer Leagues ran the league the amount was $100 thousand.

Another qualification is the majority owner of the team must have a net worth of $20 million. The federation also told owners they would each be asked to make a personal disclosure of that money and would need to have a percentage of it liquid enough for capital calls as necessary. As one source told IMS, “They are not going to mess around with this. They (US Soccer) are going to be very diligent.”

It’s believed that while not everyone was thrilled with the new standards, most in the room were able to make the standard and felt in the long run it was what was best for Division 2. However, some  felt there should be more guidance from the federation “looking at the big picture of how the league and its teams can remain viable in a struggling soccer market in the US.”

USSF announced they have set September 15 for the deadline for bids to be placed for sanctioning of D2 for 2011. They also announced to the group they have no intention of running the league again next year. After a league is sanctioned, the teams within the league will be carefully scrutinized to make sure they comply with the new USSF litmus tests.  According to one source they hoped that US Soccer could have the whole procedure taken care of by mid to late November so teams could plan appropriately for next season. Last year, teams were thrown into limbo when it was not known who would sanction the league and teams were not able to secure dates and venues until mid to late January. This also prohibited them from selling season tickets around the holidays and some felt the chaos from the last offseason hurt their overall attendance numbers this season.

Teams in question
It’s not known if Crystal Palace, who have had deep financial troubles this season, will apply for next season. As noted, Pete Med did attend the meeting.

With Jeff Cooper, now primary owner of AC St. Louis, not attending the meeting, it could be a sign that he will not apply for next year. But Cooper has had a falling out with both US Soccer and the NASL group and it’s possible he could apply again next year but did not want to be in attendance at the meeting.

It’s also not known what Puerto Rico will do. They do not have any one owner worth the $20 million and it’s not know if they can even come up with the bond money. It’s possible they could find another investor or that US Soccer allows the variance if they come up with the performance bond and prove enough parties have enough cash liquidity to satisfy the federation.

The NSC Stars will announce soon they are looking for investors in the team to partner with them for next season. The concept is not new as the organization was hoping to do this last spring. With only 90 days to prepare for the season they did not have time to properly investigate the legality of investors being involved with a non-profit. IMS was told by GM Kris Bjerkness several weeks ago that this has been explored and they are now open to talking to investors. It is clear that the NSC does not meet the standards required by the USSF and if an investor or a group of investors is not found, the team will not be able to apply to play in the league next season.

Another new federation rule is 75% of teams participating in the league need to be from the US. If Edmonton qualifies for next season it would mean that 2 teams, Montreal and Edmonton, both from Canada, will be involved with the league next season. That means 6 teams need to be US-based teams to meet the criteria.

Teams from the US that should be able to pass the financial standards are:  (5 teams) Austin Aztex, Carolina RailHawks, Miami FC, Rochester Rhinos and FC Tampa Bay. The Canadian team are: (2 teams) FC Edmonton and the Montreal Impact, bringing the total to 7. Eight is the minimum number of teams to form a league according to FIFA, but exceptions are allowed if there are plans to bring more teams into the league the following year.

There has been no definitive word from the USL concerning the Orlando group who have recently had financial trouble or the FC New York group. Neither were at the meetings on Monday.

28 Responses
  1. Nicholas permalink
    August 11, 2010

    Brian,

    If Puerto Rico were to achieve the benchmarks, would they count as a U.S. team for the 75% participation rule?

  2. Soccer Boy permalink
    August 11, 2010

    Puerto Rico is an unincorporated territory of the United States, and is subject to U.S. jurisdiction and sovereignty–all Puerto Ricans are American citizens and it is not an independent country. However, I do think they are recognized by FIFA as a seperate entity–and I was honestly quite surprised the other night when they played the “Puerto Rican national anthem” before the Stars/Islanders match. It is my understanding that in the CONCACAF Champions League, they qualify as a team from the Carribean, and not as a North American team. They might have to let the lawyers decide this question!

    I do think it is interesting that Vancouver and Montreal want to retain a D2 precense. I think this will be good for competition and the league. Like with anything, I would imagine there will be a number of players who do not move up to the MLS with the “new” teams.

    I would hope if they can make an excpetion for PR and the net worth requirement, they could also make an exception for the NSC MN Stars. While they Stars might not mee the $20 million requirement, I think they have more financial stability than others given the srcutiny they receive from their other programs. They could always sell the Super Rink if the team faces financial problems, right?

  3. August 11, 2010

    Puerto Rico has it’s own FA, and is recognized by FIFA as it’s own entity. Other examples of this are Scotland, Wales, England and Northern Ireland rather than “Great Britain”. I don’t know if they’d be recognized as a US team, but would imagine based on all other items, they would not.

    I’m of a mixed feeling with the requirements. For me, the most difficult was the $20m net worth of a majority owner. Not for the Aztex, as Phil Rawlins was reported by The Evening Standard in January, 2010 of having a net worth of about $47m. However, I’d hate to see a team like Puerto Rico excluded, as a result of their primary ownership being the PR Tourism Board.

    Time will tell. As usual, and interesting off season. Brian, thanks for your work on this topic not only this year, but last off season. Frankly, without your work, most of the fans would not know what’s going on as US Soccer has been poor at best, negligent at worst, in keeping fans up to speed.

  4. Aljarov permalink
    August 11, 2010

    No one from Atlanta in attendance?

    You’d think if PR could show that they’ve been viable thus far that’s a far cry from the likes of CP Baltimore, St Louis or the NSC Stars, who are all essentially 1st year teams. That should definitely count for something in the way of an exemption.

    I understand the need for setting standards, mostly, it’s not really a world standard (other than not being in administration for example), but setting the bar so high as to exclude half the current teams isn’t right. It’s pretty anti-competitive to say only rich teams can be involved, and even more counter to the promotion/relegation we see elsewhere. Sure, a team has to be able to prove it wont fold mid-season, at least under forseeable circumstances.

    I think the USSF needs to do more to help build the league, rather than just make it harder to get in. That’s the sporting equivalent of euthanizing.

  5. Greg permalink
    August 11, 2010

    This looks to me like they’re trying to kill D2. How could there be enough owners who can meet their “fit & proper test” to form a league? What am I missing here?

  6. pony permalink
    August 11, 2010

    The point is not to form a league, but to sustain a league and develope American (and by extension Canadian/Caribean) talent long-term. Without these standards we’d be back to the old USL “Wild West”.

  7. Rasin permalink
    August 11, 2010

    I think Sunil Gulati and Don Garber have talked about having Promotion Relegation in the future is and that the USSF trying to have a stable and successful 2nd division

  8. Miami Ultra permalink
    August 11, 2010

    Well based on what we’ve heard so far there will be a league next year, probably under the NASL banners since USSF says they don’t want to run the league next year. Miami FC(Strikers), FCTB, Edmonton, Montréal, Austin, Rochester and Carolina is 7 teams. I simply cannot see them booting out the Islanders, them being fairly stable despite not having a single “$20 million dollar man”(plus they are annual players in CONCACAF Champions League). MN needs to be in there too. It’ll work out, hopefully for the better.

  9. Coppercanuck permalink
    August 11, 2010

    Quite the bombshell if you ask me. In Canada, Bob Young has been linked with a new stadium in Hamilton. http://www.thespec.com/News/BreakingNews/article/824087
    Putting some of those stadium issues aside, both Hamilton and Ottawa have looked at the NASL for expansion teams. Adding Edmonton (playing an exhibition schedule), Montreal and Vancouver (rumored to want to keep D2 teams) makes 5 teams from the north. Puerto Rico, imo, will be treated as an international team. To get to that point, there would need to be 18 teams from the USA. Not even on the radar. I don’t see a D2 next year.
    Maybe it is for the best. Drop all the clubs to D3 and get the standards in order.

  10. August 11, 2010

    Ya, I had seen that but not as detailed. Thanks for the link.

    Perhaps this will mean that Young will stay involved with the Railhawks and will no longer be entertaining investors?

  11. WSW permalink
    August 11, 2010

    Brian keep up the good work you are the “official” blogger for D2 in my opinion.

  12. Brendan permalink
    August 12, 2010

    I hope something happens for Puerto Rico Islanders to keep them in D2. They have their own farm team in the Puerto Rican domestic league (popular on the island; Sevilla, River Plate, Pachuca, Boca Juniors, Fluminense) so it’s not as though they could, and certainly wouldn’t want to, step down there. I like the idea someone threw out of a Caribbean super league, because it is generally the same clubs in the CFU championship.

    I want to think that the USSF would not force “viable” teams out of D2 even if they don’t measure up to the standards, but the wording now seems pretty concrete.

    Vancouver could field a youth team in the Pacific Coast Soccer League for one season, but they could see that as a big step down.

    I know it won’t sound good to fans in Orlando, Ottawa, Hamilton, Phoenix and where ever else there were expansion rumors, but I think it would be best for the league to slow down the expansion fervor. Ownership groups should take a step back and make sure they actually know what they’re doing. Instead of the NASL or USL just trying to get cities on a list in order to win the sanction bid, the league that gets sanctioned should really work with potential expansion cities to provide a smooth transition and ensure long term success not only for the new clubs, but also for the growing league.

  13. fotbalist permalink
    August 12, 2010

    Brian, this has been excellent work! It appears to me that you have become a soccer journalism force in North America, particularly on the D2 topics. You have found a strong niche of readership, and more importantly strong recognition from soccer personalities. That’s clearly evident in the way you are able to gather and report soccer news even before official press releases are issued. Great work! Okay, enough accolades, I don’t want this to get to your head…lol

    I am pleased with the fact that USSF has taken action, and actually strong action, but I have some serious concerns. Most have been voiced earlier, but some I will try to articulate differently.

    1) I think the non-negotiable and mandatory $20 million for the majority owner, and on top of that with a certain amount of liquidity (not specified yet) is really unreasonable. The greatest examples are PR Islanders and NSC Minnesota Stars. Particularly with PR, who have fielded great teams every year since they’ve joined, this is truly unfair. Essentially it is saying that USSF is excluding great soccer (and business viability I might add) to satisfy a business requirement. I really am supportive of good business practices (see #2 below), but $20 mil is just too much.

    2) The $750k bond 90 days prior to each season I agree with. Even though it’s a steep increase from last season’s $350k, I think this offers much more assurance for each team in the league. At least we will not have worries of disrupting seasons for both fans and players, not to mention league administration.

    3) The requirement of 75% of teams to be from the US in order for USSF to sanction it, in my opinion also makes sense. The USSF is a national federation of the United States of America, and it concerns itself with the promotion and organization of soccer in the USA. Makes perfect sense, and I support it.

    4) Related to the point above I am wondering why the USSF & Canadian Soccer Association (& even the Puerto Rico Federation) did not meet and talk about this together. I would really appreciate it if they could have a discussion (like most normal people do) and sanction the league together. It’d be great to see some cooperation on the part of the federations.

    In any case, this is exciting. I can’t wait until September 15, the deadline Brian specified the USSF has set for sanctioning a D2 league.

  14. smatthew permalink
    August 12, 2010

    Maybe they were over looked in mentioning who was in attendance and were there but if not, how messed up of a fed can the CSA be? I mean couldn’t some one from CSA at least pretend to have an interest in the development of the game up in Canada?

  15. Someone from Montreal permalink
    August 12, 2010

    I’m really not thrilled by the 25% rule. Let me explain why. If they let in PR next year, one of Montréal and Edmonton will have to bail out (according that we have a total of 8 teams). Also, we would have to pass on great expansion opportunities in Hamilton, Vancouver and Ottawa (who all have solid potential investors).

    As someone already stated, in order to get 5 Canadian teams (and one in PR), we would need to have 18 American markets with rich investors. This is something I don’t see happening as fast as finding 5 Canadian cities willing to do so.

    One of the result of that situation could be that the CSA create a rushed Canadian league with 5 solid teams. This is something that may be good, but there is 2 problems with that scenario if it happens in a too soon. First, at least 3 other Canadian soccer teams will need to be found which is not a small task (knowing that Montreal’s D2 team will probably be located in Quebec City and Vancouver’s in Victoria). There is a large risk that those filler teams will be shaky at best if the expansion is not prepared properly. Secondly, if it happens too soon, the American D2 will be amputated of some of the strongest teams financially (Montréal, Vancouver). The financial criteria is already hard enough, I’m not sure they need to add more pressure on the already rare investors.

    I do understand that this is an American league and it is 100% normal that the majority of the teams have to be American. Though, I want to suggest that the 25% criteria is applied too soon, because, right now, an interesting number of Canadian investors are willing to create teams of a D2 caliber and that would be stupid to make them have to wait after more American investors to invest in their own league. Let them in when they are ready, but limit their number to 25% of 20 teams league (an approximate number of teams a D2 league should have at its maturity).

  16. Grant Stephens permalink
    August 12, 2010

    Thanks for the news!

    One of the many solutions/answers to these new standards is the idea of dropping everyone down to D3 for awhile until they get their feet under them (as Coppercanuck suggested)

    Forgive me, but Im not exactly sure who or which league that would be? From where I sit, D3 is USL 2, correct? Or is PDL D3? If there is a mass dropping of D2 teams to D3, what happens to D2? Doesnt that just make D3 the ‘new D2′?

    LA Galaxy – D1
    Rochester Rhinos – D2
    Charleston Battery – D3 (?…plus there is only 6 teams here!)
    PDL Teams – D4 (?…plus they dont get paid, correct?)

    NPSL teams (and others!) – ?

    Just looking for clarity. Thanks!

  17. yankiboy permalink
    August 12, 2010

    BQ-Top notch, as always.

    If the USSF tells the Islanders to take a walk then they are stupid. They pay their bills. They make their payroll. They field a competitive team.

    The soccer specific stadium and thw $20 mil are a freaking joke. Way to go to extremes. Sure, the bar needs to be raised. I get that. Waving by to a club that doesn’t need your bailout help and won’t be needing your bailout help when you need to make a number is nonsense.

  18. ERic permalink
    August 12, 2010

    I’m mystified at how people can gripe about the $20 million figure.

    It’s simple math, people.

    I think everyone can see why the bond was set at $750k. This year, it was $350k, and it almost wasn’t enough to keep Baltimore and St. Louis alive. USL used to set it at $100k, and every other year or so, the other owners and/or league would have to step in to keep someone going through the season.

    So, let’s go from there. How much liquid money do you have? I’m old enough that I have an ok retirement built up (considering how our economy has gone the past decade). I have probably 10% liquid savings, as a guess. Taking this as a starting point (can’t say whether it’s reasonable or not, as I tend to be financially conservative), someone that has a net worth of $20 million would have liquid assets of 2 million. Setting aside a $750k bond, that leaves them $1.25 million to run the team this year. And that assumes they don’t have any other business dealings, and also assumes the team doesn’t bring in any revenues.

    It’s a very complicated set of math, and not many of us are qualified to have a very informed opinion on it (except perhaps KT). But I’d say, using very rough numbers, the $20 million is an obvious extrapolation from the $750K bond, which is a very obvious extrapolation from what happened this year.

    Now, I will agree that it might be a good idea to come up with a ‘group net worth’ number to handle cases like Minnesota and Puerto Rico.

  19. thomas permalink
    August 12, 2010

    I’m really surprised that no dialogue with Concacaf has been opened yet – if this was Europe you can bet Michel Platini would be sticking his oar in!

    ok, so the financial rules are within reason, but the nationality question is a joke. down the line we are definitely looking at a canadian league and a caribbean league of some sorts – in a global structure it is in every nation’s interests to have a competitive region with multiple viable competitions. that’s why the mexican federation is complicit in building MLS.

    while Concacaf sits on the sidelines refusing to leverage the superliga into a second valid tournament under their auspices it has also removed the pressure from the bottom of the pyramid to integrate more fully.

    I’m sorry but the Fifa guideline that 8 teams are the minimum required for international sanctioning should not be taken in isolation.

    the lack of meritocratic movement on the ladder which hinders growth is maintained by the continuing farce of puny PDL conferences and the failure to reform the lower reaches.

    until settlement is reached over how they are structured a stable and prosperous D2 will remain a far-off dream.

    just as Rochester fans are discovering, if you lose hope of making progress then there’s no point in dreaming.

    so if Slovenia can be good enough for the world cup then Tulsa and Thunder Bay can be good enough for the top club championships in their respective countries too.

  20. WSW permalink
    August 12, 2010

    Statement from Andrew Nestor, President and Owner of the FC Tampa Bay Rowdies

    “We welcome the new USSF Division 2 standards and feel that they are a necessary next step for the growth of soccer in North America. Our ownership group and organization meet the standards and I am confident that our NASL partners do as well. We will work diligently with USSF to ensure this. We look forward to a strong future for the Rowdies and the NASL.”

  21. ERic permalink
    August 12, 2010

    I wonder where the NASL is going to find the 8th teams. No matter what comes out of the USL offices, I think it’s pretty clear that the NASL is the only way forward now. There’s no way the USL can find enough teams to meet those standards in the next month to revive USL1. And with the USL2 rebranding as the USL Pro League, it’s kinda obvious that they’re accepting what everyone else can see.

    The only question, at this point, is where that 8th team is going to come from.

    Though, I suppose, the USSF could, as they have with other leagues, sanction with only seven teams. If we keep a 30 game schedule, that means everyone playing everyone else five times.

    Welcome to MLS circa 2002. Here’s hoping that this plan leads to an MLS style growth over the next 8 years.

  22. ERic permalink
    August 12, 2010

    8th team. Singular. Damnit. I read that three times and still typoed.

  23. yankiboy permalink
    August 12, 2010

    My local team Baltimore needs a miracle (and if anybody “deserves” a miracle, it would be the Medds).

    If Puerto Rico is bumped out then I won’t follow the D2 anymore than I did before PR entered the division (which almost never-ouside of the USOC runs).

  24. Andy permalink
    August 12, 2010

    Some of the outlier teams dropping to Div-3 (USL2) wouldn’t necessarily be a bad thing in the short term; USL2 ran with only 6 teams so the increase will help.

    Long term, I’d like to see a Caribbean Super League, including Puerto Rico, Bermuda, Antigua, and some other select teams in other nations (not including T&T and Jamaica, which already have sufficiently strong leagues) so that players in those local leagues have something readily available to strive for (just as, in some regards, the PR league is a feeder for the Islanders).

    The Canadian situation is more tricky and regardless, once you have promotion/relegation, you can’t guarantee keeping the 75% rule per league. Combine Div 1 and Div 2, though, you can easily absorb the 5-6 Canadian teams. MLS Div 2 anyone?

  25. ERic permalink
    August 12, 2010

    LOL. People keep mentioning promotion/relegation.

  26. Giancarlo Fruzzetti permalink
    August 12, 2010

    The rules make sense, in that they implicitly state none of these teams will make a profit, or probably even generate revenues sufficient to cover annual operating expenses (thus the annual bond of $750k), for a long time to come, if ever. Considering that to my understanding only a handful of MLS teams are profitable, even after nearly 2 decades in operation as a league, this is a reasonable assumption to make. Professional soccer is realistically still in its birthing stages in the US and Canada compared to the rest of the big soccer countries of the world.

    The only things that bother me that have been mentioned are the SSS and the 75% rule. I don’t see where those matter, because they have nothing at all to do with the financial viability of the teams. Who cares if they play at a college football field, city park, reclaimed landfill, or what as long as there is sufficient seating. MLS teams don’t have that requirement….it seems arbitrary. Stadiums cost a lot of money to build and in the current economy it might be hard to find cities to do it or clubs to build their own structures, meeting expenses already being hard enough.

    The 75% rule is also dumb. Who cares if rich Canadians/Bahamians/Bermudans or whomever else wants to field a team. I’d rather have more teams for variety than wait for a bunch of rich US investors to field D2 teams ..a day that may well never come, leaving D2 stuck with 7 or 8 teams for years.

  27. August 26, 2010

    the puerto rico anthem is been since 1879 few of us are offend of some parts been add to it since change it 1952 for political matter. aside from futbol here mr. yankeeboy that is obligated been sing it before anything just like here.

  28. August 26, 2010

    I am sorry I mean soccerboy not yankiboy.

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