Secrets of the Inglewood stadium plan revealed! (Except for how much subsidy is worth, that’s still hazy)

I’ve finally gotten a peek at the documentation for St. Louis Rams owner Stan Kroenke’s proposed Inglewood NFL stadium (thanks, masked stranger!), and I can now share the two paragraphs governing the $100 million in tax-increment financing he’s looking for. They’re long and filled with legalese, so if you prefer, skip to the end and I’ll try to explain them in plain English there:

15.3 Reimbursement for Public Improvements. The 2009 Fiscal Analysis provided that, at stabilization of the Original Development Project, the City would receive approximately $14 million per year in gross new revenue to the City’s general fund. In the event that the Landowner elects to proceed with the Stadium Alternative Project, then it is estimated that at stabilization of the Stadium Alternative Project, the City will receive significantly greater general fund gross revenues, estimated to be at least $44 million per year. At the same time, implementation of the Stadium Alternative Project requires a significant expenditure of private monies for Public Improvements, including public roads and infrastructure, park construction and maintenance, as well as event day public safety costs of retaining City police, EMT, and other services and operating public shuttles from off-site public parking lots. Accordingly, if the total sales taxes under the laws of California from (i) taxable construction materials sales on the Property that have the City and the Property designated as the point of sale, (ii) ticket taxes, (iii) parking taxes, (iv) transient occupancy taxes, (v) franchise fees, (vi) property taxes, (vii) utility users taxes, and (viii) business license taxes, in each case generated by the Stadium Alternative Project during any fiscal year of the City meet or exceed a threshold of Twenty-Five Million Dollars ($25,000,000), excluding any gaming and card club tax revenue from the casino, and to be adjusted annually by the CPI Factor beginning in the first fiscal year following the later to occur of City’s issuance of the final certificate of occupancy for the Stadium and the Stadium opening for business to the public (the “City Revenue Hurdle”), then the Retail Property Landowner shall be entitled to receive reimbursements (“PI Reimbursements”) of amounts advanced and spent for Public Improvements set forth on Exhibit C-1, as well as amounts advanced and spent for event day public safety costs of retaining City police, EMT, and other services and operating public shuttles from off-site public parking lots and other expenditures of a public nature, in each case together with interest accruing on such amounts from the date of expenditure at a rate equal to the then-applicable rate available to municipalities (“PI Expenditures”), not to exceed the amount in any one fiscal year by which such new general fund revenues exceed the City Revenue Hurdle (the “Maximum Reimbursement Amount”). Landowner acknowledges that the City will utilize tax revenues generated by the Stadium Alternative Project solely to measure the City Revenue Hurdle, and that no provision of this Agreement is intended to or shall be deemed to be a designation or set-aside of any tax revenues generated by the Stadium Alternative Project for any purpose other than the deposit of such tax revenues into the City’s general fund.

Within sixty (60) days following the end of each fiscal year of the City during the Term, Retail Parcel Landowner shall submit to City written evidence of all PI Expenditures advanced during the preceding fiscal year. Within fifteen (15) days after submission of such written evidence, City shall notify Retail Property Landowner of any deficiencies in the evidence submitted by Retail Property Landowner and/or any need for additional information. Retail Property Landowner shall provide such information as is reasonably requested by City in response to any request therefor. Within sixty (60) days after receipt of reasonable documentation of the PI Expenditures that were advanced, City shall remit to Retail Property Landowner PI Reimbursements in respect of said PI Expenditures, up to the Maximum Reimbursement Amount. Notwithstanding anything to the contrary in this Agreement, Retail Property Landowner shall only be eligible for PI Reimbursements after it makes the election to proceed with the Stadium Alternative Project. In any given fiscal year, if PI Expenditures exceed the Maximum Reimbursement Amount, then such unreimbursed PI Expenditures shall accrue and be eligible for reimbursement in any subsequent fiscal year, provided that in no event shall the aggregate PI Reimbursements to Retail Property Landowner hereunder exceed the aggregate Maximum Reimbursement Amounts accruing over the Term of this Agreement. City and Retail Property Landowner expressly acknowledge and agree that the PI Reimbursements are not a subsidy, but rather a reimbursement of costs of a public character that, but for the Stadium Alternative Project, the City would not otherwise have the resources to fund and thus were advanced by a private party. PI Reimbursements may not be used to reimburse the construction costs for the Stadium or any other private improvements.

Translated: “As part of our development project, we’re going to build a bunch of things, like roads and shuttle buses for fans, that can be considered ‘public improvements.’ (Or at least we consider them as such.) So we’ll be wanting some of our tax money back to pay for those. Thanks!”

The big question isn’t whether these are things that would result from the development project — sure, there wouldn’t be new roads crossing the Hollywood Park site without new buildings there, but then, you also wouldn’t need any new roads then — but whether these are items that the city would normally pay for anyway, or if they’re something that would normally be on a developer’s tab but Kroenke’s group is looking to get out of paying for them.

That remains really hard to tell, unfortunately. The development plan includes a long laundry list of “public benefit” items, including job creation and “a minimum of 500,000 gross square feet of Hybrid Retail Center,” which are really more properly thought of as private business operations — the public might be happy that they’re there, but much as the IRS is no doubt happy when I earn a paycheck, it’s not about to pay me for it. Yes, city government is usually on the hook for infrastructure, but a lot of this would be built on and under the private land, and then there are the bits like shuttle buses that aren’t infrastructure at all, so … reply cloudy, ask again later.

If you want something we can say for sure, it’s that some of the kicked-back tax money would go for things that Kroenke and friends would normally be on the hook for. And, as covered here before, if the “public services” piece is calculated for 30 years instead of five — and it doesn’t appear that there’s a time limit on how long the developers could receive these TIF payments — then that could make the total tax break worth $180 million in present value.

So, Stan Kroenke is looking at somewhere between a few tens of millions of dollars and $180 million in public benefits. That is, as the Los Angeles Times’ Tim Logan and Angel Jennings write, “a relatively modest public tab in a world where upfront subsidies approaching $500 million are not unusual.” But it’s still a public tab, which isn’t quite what Kroenke and the mayor promised.


4 comments on “Secrets of the Inglewood stadium plan revealed! (Except for how much subsidy is worth, that’s still hazy)

  1. Neil, how are you getting the $180 million in present value for the tax cuts? If we assume 2% inflation a year (which is higher than the current inflation level), aren’t the $10 million per year around $228 million? And do we even know if this number should be inflation adjusted at all? Is it possible that Stan will ask for more than $10 million a year in future years, as the cost of the ‘services’ he’s providing the city also increase year after year due to inflation?

  2. Present value isn’t based on inflation, but on how much money you would need now to generate a certain amount per year. (Money earns interest even when inflation is zero.) It’s about $180 million at a 5% discount rate — if we assume that interest rates (and returns on capital) are going to be at historic lows for the next 30 years, then maybe we could use a 4% discount rate, but that’s not going to make a huge difference.

    That’s an excellent question about increasing the tax kickback rate in later years, though. I don’t see anything in the agreement spelling out the actual amount of the TIF, so yeah, it’s very possible Kroenke could try to ask for more down the road.

    I guess I’d feel comfortable guesstimating the tax subsidy as “likely somewhere between $50 million and $300 million,” not that that helps much.

  3. Shouldn’t the annual reimbursement payments to the developer decrease over time, considering that most of the cost would be infrastructure built up front? Isn’t the city responsible for upkeep of the infrastructure (utilities, maintenance, shuttles, etc.) once the initial investment from the developer is fully reimbursed? It seems at that point, it’s not a taxpayer subsidy anymore, it’s simply what all cities have to do with their general fund in order to keep their cities running.

  4. “But it’s still a public tab, which isn’t quite what Kroenke and the mayor promised.”

    Mr. deMaus, after all these years don’t you feel a bit… worn out, writing that last sentence? When did a marriage between a pol and and NFL owner ever toss a bouquet back to the local taxpayers that wasn’t made of dead flowers?

    I guess I’ve been dipping into the 100 year old scotch a little too much tonight. Why I’m practically telling the TRUTH! Something Rog told us never to do. Sigh. Goodnight.