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The City of Sugar Land has broken off talks with Anschutz Entertainment Group, owner of the Houston Dynamo, over a proposal to build a new stadium complex for the Major League Soccer team.

However, talks are continuing between the company and the city over building a $65 million arts and entertainment center on 45 acres at the University of Houston – Sugar Land campus, which would seat at least 6,000 people and include 1,800 parking spaces (see related story).

“Due to timing issues related to the ability to fully and appropriately examine and gain public input on the stadium project, the City and AEG have decided to suspend further discussions on the stadium at this time,” Sugar Land Business & Intergovernmental Relations Executive Director Joe Esch said in a report prepared for Tuesday’s City Council meeting.

Oliver Luck, president of the 2006 MLS champion Dynamo, said Monday that Sugar Land now is ruled out as a new home for the team “for a 2009 target date.” He also indicated the team could sign a letter of intent to negotiate exclusively with the City of Houston for a new stadium home within a matter of days.

Sugar Land Mayor David Wallace said the team presented the city with a timeframe by which they wanted to complete a new stadium, coinciding with the end of the Dynamo’s lease with the University of Houston for Robertson Stadium. (The team now is in the second of a three-year contract at Robertson.)

“We kind of worked backwards” from the Dynamo’s 2009 target, and considered when things had to be in place so that the city could hold a required election over financing of a stadium complex, Wallace said, adding that one important element was gaining positive community input.

Luck said city officials told AEG “if you’re interested in working with us, we will need to know early in May if we’re your choice. We were not willing to make the commitment” to sign a letter of intent with Sugar Land.

Consequently, city officials decided within the past few days, “we’ll have to take this off the table for the 2009 timetable,” Luck said. “We’re fine with that.”

The Dynamo president acknowledged that team owner AEG now is talking to City of Houston officials, and apparently to no other city. And, he indicated an announcement may be forthcoming from the two parties within a few days. Sources familiar with the talks suggest a letter of intent may be signed.

The City of Houston’s preferred venue is a city-owned parking lot near Minute Maid Stadium downtown. Luck said the area has sufficient surface parking to handle both the Dynamo’s needs and those of the Houston Astros, at least initially.

Whether Houston can put together a soccer stadium proposal without violating provisions of a 2000 agreement between the city, the Harris County Houston Sports Authority and the Houston Rockets is another question.

Under that agreement, the Rockets agreed to manage Toyota Center. In return, the city and sports authority agreed to a non-compete clause that says they may not “directly or indirectly, finance, subsidize, provide any incentives for, or otherwise assist any venue…which could compete with the Arena for events of a type appropriate for the Arena and generally targeted at audiences in excess of 5,000…” that are located within 10 miles of Toyota Center.

While the developments appear to take Sugar Land out of the hunt as a potential new home for a pro soccer team, a clause in an agreement the City Council is considering, governing development of the arts and entertainment center, contains a glimmer of hope for those who want the Dynamo in Fort Bend County:

A letter of intent covering the arts center indicates the door may remain open a crack, stating that the city and AEG will “jointly create a conceptual site plan which provides for the opportunity to construct the stadium and soccer fields in addition to the theater.”