The view from the stands | KCET
The view from the stands
Leiweke should get out more. This mayor hasn't much juice to give.
The only parade on show last week was a troop of commissioners appointed by the mayor to evaluate the merits AEG's plan to build a $1.35 billion stadium next to AEG's Staples Center and AEG's LA Live entertainment complex.
The mayor's commissioners lined up in good order. As the Associated Press reported last week, nearly all of them had financial, political, or civic ties to AEG. The parade itself was brief. Deputy Mayor Austin Beutner briskly marched the commissioners into a closed door meeting, the first of several.
Closed doors suit Denver billionaire Phil Anschutz and AEG's culture of silence. According to the Los Angeles Times, Anschutz's privately-held company reveals almost nothing about the intricate deals that underlie the company's business. Most of how AEG performs financially - such as how much it makes from the Staples Center - is kept secret, the Times reported. AEG's secrecy will make it nearly impossible for the city's negotiators to know how much revenue a stadium might actually generate for the city or how much an NFL team owner will demand as his cut from AEG's revenue streams. That ignorance will cost the city millions.
"It's easy to take shots at this," Leiweke told reporters before the commissioners met. "Will everyone just take a deep breath and have a little faith that we're not going to lie to people?"
Faith didn't do Kansas City much good. "I can assure you, there is going to be an anchor tenant," Leiweke told the Kansas City Star in 2004. Seven years later, Kansas City still doesn't have a major league tenant for AEG's Sprint Center. USC's Neon Tommy site has an explanation:
One main reason AEG failed to attract a major league tenant to Sprint Center was the lack of benefits and revenue streams that teams have come to expect from arena deals. . . . It seems that an arena or stadium deal can't get done for American teams unless it includes both public subsidies and lease concessions . . .
That's where the trouble comes in for AEG and Farmers Field. Not only is the company promising to pay for the $1.5 billion stadium completely with private funds, but also guarantee $350 million in bonds to replace the West Hall of the convention Center. To pay off these massive investments, AEG would need to make $50-60 million per year from the stadium and surrounding L.A. Live complex.
Concessions to a NFL team owner will bump revenue targets even higher, perhaps unrealistically high. And AEG's cash flow will be constricted even more if any part of the company's $700-million naming rights deal with Farmers Insurance must be shared. So far, AEG has declined to release details of the agreement, since it almost certainly includes provisions for sharing the rights income with any NFL team considering a move to Los Angeles.
The stadium project requires at least $350 million in new municipal bonds to replace a wing of the Los Angeles Convention Center that must be demolished to make room for Farmers Field. That got Bill Boyarsky of LA Observed thinking about the economics of an earlier project:
Several years ago, the city's Convention Center and Exhibition Authority borrowed $450 million through the sale of tax-exempt revenue bonds to build an addition to the convention center - West Hall. . . . The city leased the convention center from the authority and is paying off the bonds with city funds. In the current budget, $48.8 million is set aside for the yearly payment of this debt, which is now down to $445 million. It will take 30 more years to repay it, city officials said.
Under the NFL stadium proposals that have been aired in the press, the $350 million bond issue for the football facility would probably be added to the convention center authority's existing $445 million debt, bringing total indebtedness to $795 million. This would boost debt repayment . . . by $25 million or possibly $30 million a year, officials said. In other words, more than $70 million a year would come from the city treasury to repay the combined debt of the convention center and the football stadium.
AEG has said that city's bonds will be repaid from the stadium ground lease, ticket surcharges at both Farmers Field and the Staples Center, a share of the stadium's parking and outdoor advertising revenue . . . and by diverting all or some of the sales taxes and property taxes generated by the stadium and the replacement wing of the convention center.
As a result, Leiweke has already begun to walk back his "not a penny of taxpayer money" pledge. The Farmers Field will not "divert existing tax revenues" he told the mayor's commissioners last week. But by using future property tax and sales tax revenue to repay the city's debt, the project will divert new tax revenue.
It's not clear if that will be nearly enough. Even in AEG's optimistic projections, the city's revenue falls $6 to $8 million a year short of covering payments just on the $350 million in new debt.
Leiweke has said AEG will cover any financing gap if stadium revenue falls short, but it's hard to see how AEG can make a profit and make hefty concessions to an NFL team owner and immunize taxpayers.
Perhaps Leiweke needs marching bands and parades of cheerleading city hall types as a distraction. AEG needs to keep the real costs of Farmers Field as murky as possible for as long as possible.
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 adapted from a photo provided by the Library of Congress - Chicago Daily News Collection.