Questions for Deputy Mayor Beutner

My naïve skepticism of AEG's downtown stadium (posted here, here, and here) led to an enlightening e-mail exchange with Greg Nelson, who is a far more knowledgeable L.A. observer than I am. He also has hard-earned experience with AEG's big plans for this town.

Nelson was the chief of staff to Los Angeles City Councilman Joel Wachs when Wachs questioned AEG's proposal to build what is now the Staples Center.

AEG President Tim Leiweke has dismissed Wachs' involvement in that deal (and slammed suburban Los Angeles as unworthy of an NFL stadium here). But as Nelson points out, Wachs got everything he wanted for taxpayers after threatening to lead a ballot initiative that would have prohibited the use of city funds to subsidize AEG's arena.

Among other things, Wachs halted plans to spend $45 million in General Fund money to build the Staples Center. And he forced AEG to sign a near ironclad guaranty to repay the $70 million in city bonds that bought the land under the LA Live entertainment complex.

Nelson has lots of questions about the new "known unknowns" in AEG's stadium proposal . . . seven pages of tough questions that he's shared with Councilman Bill Rosendahl. Last week, Rosendahl began sending his own lists of questions to Deputy Mayor Austin Beutner, as well as to other council members and the city's CAO.

Among Rosendahl's initial concerns:

It appears that the stadium development would limit future expansion of the convention center beyond its current size (about 770,000 square feet.) Weren't there previous plans that required the Convention Center to be expanded to one million square feet in order to be more competitive with the top tier convention cities such as Chicago and Las Vegas?
In the best and worst case scenarios, how much revenue could the Convention Center lose (during construction of the stadium) and who would make up the losses?
Conventions set up and tear down during the weekends. When a multi-day convention is being held, won't there be (parking) conflicts with football games, and thereby limit the number of major conventions that we could attract?

Rosendahl has so far focused on operational issues that would put the Convention Center at a disadvantage vis-à-vis the AEG-owned stadium. But I find the deal's financials equally murky and troubling:

1. The city's General Fund (which covers the costs of law enforcement, along with other programs) is paying off $445 million in existing Convention Center bonds at the rate of $48 million per year. Does the stadium deal - which depends on partially demolishing and rebuilding the Convention Center - include AEG's paying off or paying down any portion of the city's existing debt?

2. The city will have to sell at least $350 million in new bonds to replace the West Hall of the Convention Center at a cost of $29 million a year for another 30 years. What sources of revenue will repay the holders of these bonds? (AEG admits that ticket taxes and parking revenue will cover only part of the debt service.)

3. Since the city's revenue from tickets taxes should go to the General Fund to offset the cost of police, paramedic, and traffic services around the stadium, wouldn't the diversion of this revenue lead to a subsidy of stadium operations from the General Fund, something AEG said wouldn't be needed?

4. AEG claims that it will cover the city's bond payments (although it's unclear which payments are included). How can AEG pay bond holders, share revenue with an NFL team owner, and make a profit? (Bear in mind that the stadium naming rights deal will produce only $20 to $25 million a year.) And what sort of guaranty will AEG sign this time as they did to close the Staples Center deal?

5. If the city's share of stadium revenues doesn't go to the General Fund, but instead pays off bond holders, won't the benefit to the city budget be reduced to practically nothing? (Remember, cities have been fooled many times into embracing a poisoned deal with the promise that a money-pit project is really a generator of tax revenues elsewhere. Nothing in decades of economic development studies has ever justified a sports stadium on that basis.)

There are many more questions - about parking, about environmental impacts, about lost opportunities for other kinds of development, about keeping an NFL team if owner wanderlust strikes again, and about the stadium's elitist design.

Here's another question that needs an answer:

Los Angeles will have to pay off the last $445 million in existing Convention Center bonds at about $48 million a year for another 10 years. And Los Angeles will have to pay off at least $350 million in new Convention Center bonds at about $29 million a year for 30 years. And someone - the city probably - will need to raise $117 million for new parking structures at a cost of $9 million a year for 30 years. Setting aside the cost to the city of infrastructure improvements and not counting any revenue losses at the Convention Center for up to three years, someone will have come up with $86 million a year for the first ten years to make the stadium deal work.

Or am I wrong?

D.J. Waldie, author, historian, and as the New York Times said in 2007, "a gorgeous distiller of architectural and social history," writes about Los Angeles every Monday and Friday at 2 p.m. on KCET's SoCal Focus blog.

The image on this page was taken by flickr user Alexander Henning Drachmann. It is used under a Creative Commons License.

About the Author

D. J. Waldie is the author of "Holy Land: A Suburban Memoir" and "Where We Are Now: Notes from Los Angeles." He is a contributing editor for the Los Angeles Times.
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