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June 20, 2011

Los Angeles caps tax kickbacks for AEG stadium to $175m

The city of Los Angeles yesterday released 13 pages of responses to questions raised by city councilmember Bill Rosendahl about the AEG NFL stadium plan, and the big takeaway, at least according to the Associated Press, is that city revenues could only be used to pay for half the $350 million cost of rebuilding the L.A. Convention Center to make way for the stadium, with the rest coming from private sources.

Of course, AEG has previously said that it would pay off the new convention center bonds (bond payments are expected to run about $25 million a year), but also said that it would want to use "new" city tax revenues generated by convention center visitors for part of this. So what the city of L.A. has effectively done is to cap that portion (which is basically a TIF) at $175 million, meaning AEG's new NFL team would need to generate the other $12.5 million a year through a ticket surcharge. That'd come to an average surcharge of $18 a ticket, which while not undoable at NFL ticket prices, is still a pretty hefty chunk of change.

The exact language used by the city in its memo:

The Ad Hoc Committee established as a negotiating principle that any costs associated with the bonds be fully offset by revenues from private sources and no more than 50% of the actual net new direct General Fund tax revenue generated by the project.

Why 50%, incidentally? Presumably somebody figured that would be only fair: Any new tax revenues get split down the middle, with half going to AEG and half to the city, so everybody benefits. Except, of course, that the city never says how it will be calculating "new direct General Fund tax revenue," or how it will ensure that this revenue is really a result of the new stadium and convention center and not just cannibalizing revenue that would have come in anyway. Maybe that can be something for Rosendahl's next letter.


Neil, noting the discussion of a ticket tax for an LA stadium, did you notice that the ticket tax that was proposed to help pay off bonds for the 49ers Santa Clara stadium has now disappeared in the latest information from the city? The Term Sheet had proposed a ticket tax plus naming rights income to pay of Stadium Authority bonds. Now, it's just naming rights income. And the price tag has increased - approaching the $1 Billion mark. (Note that the Term Sheet says the 49ers will pay for cost overruns.

The Santa Clara city council just voted to start paying itself for meeting as the Stadium Authority. And while the Term Sheet showed the 49ers responsible for 53% of the construction costs, the latest paperwork says they will pay 15% to 25% of the construction costs. Another $750,000 has just be authorized for consultants, and $550,000 for city staff time for the stadium project. All without a signed contract between the city and the 49ers, which was due 1 year ago, but is now due Sept. 2011.

Posted by SantaClaraTaxpayer on June 20, 2011 10:38 AM

"Any new tax revenues get split down the middle, with half going to AEG and half to the city,..."

With that statement alone, they've just acknowledged that they can't get that money from the NFL team that locates there?

A team playing an L.A. stadium will take over hundred million dollars - every year - out of any stadium that Los Angeles subsidizes. That team should be paying the entire costs of what Los Angeles will be losing on the deal.

But here they've all but admitted that Los Angeles itself won't even break even.

Same thing here in Santa Clara - the San Francisco 49ers are looking for all kinds of ways to squeeze even more out of a deal that already benefits them alone.

Pathetic little games involving future ticket surcharges are among them - but pushing as much debt as possible onto our public agencies is the 49ers' true priority right now. This we learned in our own City Council meeting of June 7th.

Welcome to "Stadium Poker" - where the NFL Millionaires club always win and where cities and their taxpayers always lose.

Bill Bailey, Treasurer,

Check out "Ron Kaye L.A.":

Check out "Far from easy score:

Posted by Bill Bailey on June 20, 2011 10:54 AM

I just do not see this project happening soon if ever. The single biggest problem is time. Next year is an election year, and one thing the politicians want to avoid any possibility of losing in a general election or primary (Which a politically unpopular project could cause to occur (Guess why the voter referendum on the new Coliseum in Long Island is occuring in August, NOT November.?)). Even in places like Minnesota, Santa Clara and San Jose, where it was expected something would occur, shovels are not close to being in the ground. Throw in the issues such as the end of RDA $$$$$$$, massive unemployment, budget deficits, the possibility of no NFL season, and the likelyhood of lawsuits over such issues as the environment, and funding of education make this project's odds of completion before say 2020, very slim. In fact, after the completion of projects in Berkeley (Cal Stadium), Seattle (Husky Stadium), Brooklyn, Miami, and the Madison Square Garden upgrade, there are perhaps three $100m sports related projects the might get done in the next five years: Penn State ice hockey arena, the new arena in Lincoln, Nebraska, and the arena in Nassau County.

Posted by David Brown on June 21, 2011 06:34 AM

Last week on Sirius NFL Radio Scott Farmer (sportswriter for LA Times) mentioned that he believed all the recent talk regarding placing TWO teams in LA was so that NFL teams could still use LA as leverage when negotiating stadium deals (e.g. even if a team moves to LA if everyone believes a second team is inevitable owners can still threaten to move to LA and people will be reluctant to call their bluff).

Other interesting notes from the conversation: NFL will be hard pressed to get LA football fans to abandon their "man caves" with large screen TVs and NFL Sunday Ticket to buy expensive seats to a team they are probably not fans of, not to mention traffic issues. It seems the NFL is in love with idea of a team in downtown LA, less enamored with a team in the City of Industry, but traffic will be far worse downtown.

Posted by elkhnd on June 21, 2011 10:38 AM

Maybe they can build both stadiums in LA, thus getting two teams to move. I'd guess one come from CA, raiders or charges with jaguars the team the nfl would like to move but don't know about the lease.

Posted by runner on June 21, 2011 01:34 PM

To elkhnd:

The "two-team" silliness is what they trot out when they find that they need a contribution from the NFL itself for a billion-dollar stadium. The NFL Millionaire Owners' Club votes on that, and there are not too many franchises for which you could get 24 out of 32 owners to raise a total of (possibly) $150 million for somebody else's stadium.

We've faced exactly that here in Santa Clara - Commish Goodell has visited twice in three years, reminding the front offices of both the 49ers and the Raiders that a League ante will be very much dependent on putting two teams in one subsidized stadium.

But Al Davis won't move the Raiders here, and San Francisco wasn't willing to cough up the hundreds of millions in corporate welfare payments that they intend to get from Santa Clara.

Since the Niners and the Raiders are in the bottom six revenue producers, the other owners sure aren't going to chip in for two Bay Area stadiums.

And they shouldn't give the Yorks or Al Davis a single penny.

As for fans staying at home, you are "right on the money"! Paying for expensive seats means that you don't get to buy any season tickets before you've purchased a Personal Seat License.

Count on $20,000 on the 50, three rows back - PER SEAT! And that's what you'll pay before you even pay for your season tickets...

Bill Bailey, Treasurer,


Posted by Bill Bailey on June 22, 2011 01:15 AM

I think the real goal for the NFL is to put the 49ers with the Raiders in a new facility in Oakland (The carrot could be hundreds of millions in construction money). While it is true, the NFL does not want to put a dime in Al Davis's pocket, he is in his 80s, and 5-10 years from now, will he be still owning the franchise? One thing to watch is the lease agreement between the A's and the Coliseum, that ends after the 2013 season. If the A's cannot get an extention, and have to move (Or be contracted), then the door is open for the Raiders to stay, and possibly the Niners to join them. As for Los Angeles, there are still teams out there that can end up there (Albeit at the Coliseum for 5-10 years (Or more)), my guess is the Vikings are the most likely team. Unless a deal is struck to keep them in Minnesota in a few facility, they will: a: Spend the next 5-10 years playing outdoors on the Minnesota Golden Gophers campus. b: At a cheaply renovated Metrodome. c: In San Antonio. d: On the road (Sort of like the final season of the Expos). When looking at those options (Except for possibly San Antonio), playing in the Coliseum, does not look so bad.

Posted by David Brown on June 22, 2011 05:38 AM

AEG is leading the back-to-Los Angeles campaign, not the NFL. The league is taking a hands-off position as it should.

Not only that, the NFL considers the Coliseum obsolete and for good reason. Last week the L.A. Coliseum Commission admitted that it doesn't have enough money to refurbish the Coliseum for USC -- where the Trojans have been since the 1920s.


Posted by Chucky on June 22, 2011 11:21 AM

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