Anaheim stadium protest raises question: When is $500m in land worth only $150m?

The People’s Homeless Task Force OC, the same group suing to block the Los Angeles Angels‘ stadium land sale for violating open meetings laws, held a small (about 20 people, per the OC Register) protest in front of Anaheim city hall yesterday, with signs reading “Stadium ‘Deal’ Sucks” and “Recall The Corrupt Mayor Harry Sidhu.” (Actually “The Corrupt Recall Mayor Harry Sidhu,” but I’m assuming they just forgot the caret.) The interesting part, though, came via the canned response they got from city spokesperson Mike Lyster:

“There’s nothing like baseball to generate speculation and strong opinions, and we welcome all voices. We stand by our process and still have more public consideration ahead of us. The only way to see more money from this site is to sell it without baseball, and that was not our goal. Development under this proposal would drive much-needed revenue for our city for years to come.”

Let’s break this down:

  • Opinions are good and part of the public process! Even when they’re wrong, like yours are!
  • The $500 million estimate for the value of the Angel Stadium property is for delivering it unencumbered by a baseball stadium, so unless you want to force the Angels out really it’s only worth the $325 million that Angels owner Arte Moreno agreed to. But no, that’s not how land value works: As we discussed here last December, the fact that Moreno is seeking a less-lucrative use of the land because he wants to keep the stadium on it (as does the city of Anaheim) doesn’t make it less valuable — if the land were for sale on the open market, he’d have to outbid rival developers who didn’t give a crap about baseball who’d be willing to pay around $500 million. So really Lyster is saying here “We’re giving Arte Moreno $175 million in free land to be sure Moreno wouldn’t have to choose between paying what the land would normally be worth or finding other land to buy for a stadium somewhere else,” which sounds a lot less defensible when you put it that way.
  • Lyster also evades the issue of the $175 million in kickbacks that Moreno is getting to build affordable housing and parks, because a new park in the middle of a baseball stadium development is totally worth the same to Anaheim residents as $46 million in cash they could use to build a park (or anything else) wherever they want, right?
  • This will provide the city with revenue, and revenue is good! This is the argument for pretty much all tax and land cost breaks for development on vacant or underutilized land: Without this development we would get nothing, so it’s all free money! It’s also a variant on the Casino Night Principle, where discounts for developers aren’t really discounts because if you go looking for your heart’s desire and it’s not already in your own backyard, you never had it to begin with, hey maybe I should call this the Wizard of Oz Principle?

This should all be a lesson in stadium subsidy economics, Rule No. 1 of which is Pick any number as the amount of public money going into a project, and you can probably find someone who can find a way to justify it. That’s not a justification for throwing up your hands and declaring the impossibility of objective reality — Arte Moreno really is getting $500 million in land for $150 million in cash plus some promises to build housing and parks — but it does help explain how one person’s massive subsidy can be another’s great deal. Toronto Blue Jays exec (and later MLB official) Paul Beeston once famously said of baseball finances, “Under generally accepted accounting principles, I can turn a $4 million profit into a $2 million loss and get every national accounting firm to agree with me,” and the same principle applies here: There are people who make big bucks to change big numbers into small ones and vice versa, so it’s always important to take a hard look at the man behind the curtain.

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4 comments on “Anaheim stadium protest raises question: When is $500m in land worth only $150m?

  1. And on a related note: Here’s Pat Garofalo today reporting on Dark Store Theory, wherein big box stores claim they should be taxed at property valuations for nearby big box stores that are empty, because reasons:

    1. Been waiting for that to begin… it’s the other side of the Amazon/alibaba effect.

      The number of people shopping at big box stores has plummeted after 20-30 years of stable (sometimes fantastic) growth. Just as malls killed downtown and Mom/Pop stores, and big box developments basically killed malls… now the big box developments appear to be going over the cliff.

      The first three all paid local taxes to their host cities.

      Now what?

  2. If the bare land value is $500m and the ‘encumbered’ value (with the baseball stadium in place) is $325m, I’m going to assume that the $175m difference is what city officials (probably inaccurately) consider the cost of clearing and completing any necessary remediation on site.

    I doubt that that number is actually valid. Years ago I watched a program on the demolition of the old Orange bowl to make way for the new (and less well attended) Marlins stadium. I don’t recall how much the demolition contract was valued at, but it wasn’t more than $10m (I want to say $6m, but I really can’t recall).

    I would agree with Anaheim in the sense that selling the land for redevelopment would require clearing and prepping the site first (or at least discounting the price to account for this), but not that it will cost $175m.

    No chance it costs that much to remove the stadium and clear the site.

    It looks like they have started from the position that having a baseball stadium on that site is non negotiable. It must stay/be enhanced. Once again, negotiating from a position of having to get a deal with ONE potential purchaser is the very definition of failure.

    As I recall, the current president did much the same thing with the Commodore hotel in the 1980s. “We’re going to transform this hotel with a $100m investment”. Small print: it was funded with $400m in public money – a future tax abatement.

    It’s been a decade or so since I’ve been to Anaheim, but I can’t imagine that the location of the stadium is any less ideal than it was back then. I guess at least here it’s likely that Moreno has the money to do the development he wants to. The other guy didn’t.

    1. No, it’s different: $175m is the additional value you’d get from being able to develop the stadium site as well, since baseball stadiums provide far less revenue per acre than pretty much anything else.

      So Sidhu is saying, “Yes, we’re getting $175m less than we could from another bidder, but that’s because we don’t want to tear the stadium down and have the Angels leave.” Which is admitting that he’s paying Moreno $175m to keep the Angels in their current location.

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