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August 11, 2011

L.A. stadium benefits rely on crazy number of events, nonexistent taxes

In yesterday's item on the AEG stadium, I almost called out the Los Angeles Times for its unquestioningly rosy depiction of the project's economic benefits, which it said "gave city leaders a rare chance to seize on a major economic development after years of slashing payrolls, scaling back services and watching helplessly as the real estate market dried up." I didn't have time to do a full evaluation of the project's likely impact, though, so I skipped it.

Fortunately, last night the Associated Press did it way better than I could:

A close reading of an economic study that AEG released last month shows that the promise of a sales and property tax windfall appears to be overblown. ...
The study released by AEG sees some $22.1 million in city taxes being generated, including $11.6 million that would come from hotel room taxes.
Yet, two of the largest hotel offerings in the area got breaks on those taxes to spur their development. The JW Marriot and Ritz-Carlton hotels in AEG's adjacent LA Live entertainment complex get to keep their respective room taxes until 2035, unless better-than-expected business gets it to a maximum rebate of $246 million before that.
AEG chief operating and financial officer Dan Beckerman said new stadium and convention business would help the hotel reach the rebate cap faster, so the city would begin collecting the taxes sooner.
Also unlikely to materialize are the $3.1 million in property tax and $1 million in parking taxes that the study says would go to the city, since the deal approved this week would earmark that cash for the repayment of a loan taken out to move the convention center building.
Beckerman defended the inclusion of that cash in the tally.
"The purpose of the study is to identify the universe of new taxes and then the city will identify the portion of those new taxes that are going back into the project," he said.

The AP story also questions whether an AEG stadium could really host 38 events a year, as the report promises: Supposedly this would include 12 NFL games (which would require an L.A. team to make the playoffs every years and for the players union to accept an extended regular season), the Pac-12 Championship (which currently goes to the school with the best record), an annual boxing match ("If you look back in the history of professional boxing in the United States, you could probably put on one hand the number of championship fights that drew 50,000," fight promoter Roy Englebrecht told AP), and one "Super Bowl-sized event," whatever that might be in the years when the Super Bowl inevitably went elsewhere.

Coincidentally, I went to a presentation yesterday on the mathematical models used to draw up these kinds of economic impact reports, and one of the comments from an economist in the audience was that the model itself matters a lot less than the assumptions that go into it — it's easy to get pretty much any Excel formula to spit out a positive number if you can put in any inputs that you like. So, kudos to the AP in vetting what sounds like a patently ridiculous study by AEG; but was there really nobody on the L.A. city council staff who knew that the NFL season is only 16 games long?


Ok Neil. Lets stop the b.s. 38 is obtainable. You get two NFL teams and that's 20 events alone, PAC 12 championship, USC/ucla game, summer x-games and doesn't even include the international soccer friendlies they can host and lets just say 6 of those. Plus mega concerts like u2, lady gaga etc that can fill a stadium like that. AEG will get booking control of the conventions and that's not put into the numbers. If AEG didn't think it could do this, they wouldn't. Simple as that. AEG wants to control that area to get L.A. Live as much traffic flow going thru.

Posted by NFL in LA on August 11, 2011 05:29 PM

Start a game, let's see what would be, say, 90% likely:

10 NFL games
1-2 College bowl game (If a BCS game, maybe a minor one too)
1 College championship (Pac10 50%, if not them, other conference)
4 Mega concerts
2 Soccer friendlies/MLS all star games
3 Major conventions

I get 21-22 as a base, and I may be too optimistic. Anyone else care to guess?

Posted by Ty on August 11, 2011 06:13 PM

Hi NFL in LA,

You assume 20 NFL games. Are you compressing two seasons into one, or are you very optimistic in assuming two NFL franchises are ready to cohabitate in the new LA stadium from the start? If so, which two franchises are you counting on?

Posted by Anderson on August 11, 2011 06:27 PM

Just so you know, that big event is wrestlemania. Vince said he wont bring WM back to california unless its in a roofed stadium, but once one is built he will bring WM right back to Cali.

Posted by Ryan on August 11, 2011 06:43 PM

Neil, you forgot the UFL! So much potential there...

And WPS, and maybe AEG wants a CFL team too...
And don't forget the Kings first outdoor hockey game (it must drop to - what, 60deg or so on new year's day in LA?)

Posted by John Bladen on August 11, 2011 07:21 PM

1 team will be easy, two could possible come.

Here we go:
8 Regular Season NFL games.
2 Pre-season.
Play-off games?
Most likely a second team comes on board, times that by 2 like Giants/Jets.
Superbowl (2 in the next 10 years).
Pro-Bowl (NFL is looking to move this game back to the Mainland).
NCAA Pac-12 championship game (Future. It will be in the leader's stadium now, yet most "power conferences" have it at a net. site.
NCAA bowl game (possible/future).
NCAA final four, basketball.
USC getting out of the Colosseum? The Colosseum comm is broke and won't let USC upgrade it.
X-Games. AEG already has.
NBA All-Star Game (like the Cowboys Stadium).
Boxing Matches (AEG works well with Boxing Promotions).
Soccer (plenty of events here).
Concerts. AEG does run their own concert/Live Division.
Conventions/Corporate Buy-outs (wow).

Lets put it this way, AEG manages the Staples Center is host to over 250 events and nearly 4,000,000 visitors a year.

Do I think they can do 40-50 events a year at Farmers? Yes.

Teams that have easy leases to break: Rams (google it), Chargers, and Vikings (if they don't pass their stadium bill). Raiders have an easy lease as well, yet who would want to dance with Al Davis? He has sued the NFL multiple times (and usually loses). He has left Oakland for LA, to go back to Oakland, and now he wants to come back? Sounds like a bad relationship to me. He is also sue happy. Bad for AEG, Fans, NFL, and the City of LA.

Lastly the Jags can, yet their lease is very expensive to break.

Posted by DTLA Resident on August 11, 2011 07:45 PM

In spite of all the naysayers, this stadium will get built & the NFL is coming back!

Posted by bottomline on August 11, 2011 08:08 PM

I've seen nothing in any of the local fishwraps here in the Bay Area that claim that the Raiders want to move back to LA. Link please?
And, not to stray too far off topic, but just how many lawsuits against the NFL has Davis lost? He seems to win the important ones, like being able to move to LA in the first place, which a number of NFL teams have leveraged into bigger and newer places to play. The other owners should be thanking Davis for that one victory. Especially the owner(s) who will move to LA if a park gets built. Have your lease expire and you can move, no matter what the league says. That's a valuable victory for the owners.

Posted by Joe on August 12, 2011 03:06 AM

Bottomline, do you have any reason to think that the stadium getting built is a good thing for LA taxpayers, or that the NFL's return to the area is a net benefit for the community? You may be right that it is inevitable, but you haven't shown that this is something to celebrate.

Posted by Anderson on August 12, 2011 09:21 AM

I'm deeply saddened that after all the legitimate studies that debunk "economic impact" reports like the one produced by AEG, there are still so many people that encourage mortgaging anything for an NFL stadium. A stadium that is specifically designed to price gouge the very fans that ignore the wealth of academic evidence and support building the stadium.

AEG could submit a report that indicates a new stadium will create puppies to help sick children and there is a large segment that would go with it.

Posted by Thomas on August 12, 2011 02:21 PM

I'm afraid that a large segment of the population thinks NFL football is so awesome that all other considerations are superseded.

Even the two members of the Santa Clara Council opposed to the stadium have frequently preceeded remarks critical of the stadium with the rejoinder "I love the football, but"...

It's like presenting your "I'm not a weirdo who likes ballet or opera" credential.

Real Men love NFL; Suspect Men don't love NFL.

Posted by SANTA CLARA JAY on August 12, 2011 03:00 PM

After reading the LA Times article on this, it looked to me as though LA got itself a good deal that was worthy of the 12-0 vote. But after reading the AP article, I realize how wrong my initial conclusion was.

This is an irresponsible deal. Someone needs to expose it, and stop it. Once again, relying on projections that most-likely would never have been met, but now we learn for technical reasons probably CANNOT be met. That just ludicrous.

There are realistic assumptions; there are unrealistic assumptions; and then there's a whole new category, impossible assumptions. Guess which this one is.

No matter, the politicians who passed this will be on to their next careers when this starts to implode. There won't be anyone around left to blame.

Posted by MikeM on August 12, 2011 03:00 PM

Is USC about to throw a wrench in the works?

Posted by MikeM on August 12, 2011 05:27 PM

The convention center is garbage, the corner which AIG wants to build is garbage, and people actually want it to stay this way? What do you want there instead a COSTCO? More low income housing? A factory?

Posted by Mark R on August 12, 2011 06:32 PM

U r absolutely correct Mark R! The convention center is in dire need of updating & expansion, do any of these pessimistic, negative, naysaying obstructionists have any kind of solution to the problem??!! Other than offering their doom & gloom rants about this project, the answer is "NO"!

Posted by bottomline on August 12, 2011 06:49 PM

My first guess is chargers and rams if the niners let the raiders share the stadium otherwise chargers and raiders will come to l.a. Which are supported thru our local tv and radio. Then swap the chargers and seahawks in realignment allowing an afc and nfc teams in l.a.

Posted by NFL in LA on August 12, 2011 06:58 PM

Mike, wouldn't it actually benefit the NFL team to play temporarily at the Rose Bowl over the LA Coliseum? Sure it's not as easy to get to, but the trade off is a smaller stadium to fill, and more importantly for an NFL team... more luxury boxes. The Coliseum has nothing really in the way of luxury suites while the Rose Bowl has a large number up in the west side tower.

Posted by Dan on August 12, 2011 07:35 PM

I would also think the Rose Bowl would be better. Although the capacity is basically the same (91k to 93 for the Coliseum), the seats are generally much better (not like some of those seats USC uses on the peristyle end that were tarped off when the Raiders played there) and no USC whining (assuming UCLA doesn't have veto power over the stadium).

Posted by Brian on August 12, 2011 08:13 PM

Mark my words, its gonna be the Chargers! The way it should be, they're coming back home!

Posted by bottomline on August 12, 2011 11:46 PM

Coming back home? They played one lame duck season in LA and have spent the last half century in San Diego. San Diego is home. The only team that would be "coming home" would be the Rams who themselves spent a half century in LA before their untimely move.

On that front (ie: the team that'll make the move) the Chargers may make the most sense on paper but apparently the Spanos family have not liked what they've been hearing from the folks at AEG about what they want for ownership. Apparently they want a large minority share to start with an option to buy out majority ownership at a later date (approx 5 years). The Spanos have balked at the idea.

Posted by Dan on August 13, 2011 12:48 AM

Dan, to answer your question... I have no idea. To me, knowing little about the logistics of Southern California, it comes off sounding more like USC angling for its share.

Posted by MikeM on August 13, 2011 01:50 AM

Well, I guess they call it "La-La land" for a reason.

You honestly can't believe this rhetoric is actually realistic or possible, L.A. Councilman Bottonline.

Posted by Mark on August 13, 2011 01:30 PM

Allow me to enlighten u, the Chargers r originally from Los Angeles, their inception was in Los Angeles, then they moved to San Diego after their first year! They could've played in San Diego for a century, it doesnt matter. Also, for your information, even though the Rams played in Los Angeles for 49 years, they're originally from Cleveland! They moved to Los Angeles in 1946.... So, yes, I hate to break it to u but the Chargers would in fact be coming back to their "original" home!

Posted by bottomline on August 13, 2011 02:34 PM

And yes Mark, in this case I do believe the rhetoric! Theres too much $$ involved(invested) for it not to happen! Watch.......

Posted by bottomline on August 13, 2011 02:41 PM

L.A. Councilman Bottomline, have you ever even seen a Los Angeles Rams or Raiders game, or were even alive when the teams were there?

It's not like California doesn't have money problems.

Posted by Mark on August 13, 2011 05:17 PM

The ONLY way this project works is if TWO teams (likely the Rams and Chargers) decide to become tennants. In that case, it seems to me that stadium revenues (in the form of the teams' rent payments) would be sufficient to cover the stadium's mortgage.

FWIW, if I am the Spanos family, I would be negotiating with Pasadena & UCLA to renovate the Rose Bowl into an NFL facility. It would be far cheaper than building a new facility.

Posted by Pudgie on August 13, 2011 05:48 PM

Yes, I was very much alive when both the Rams & Raiders were here. In fact, I went to see them both play at the Coliseum(Rams in the late 70's & Raiders in the late 80's & early 90's). Y do u ask & what does that have to do with anything? As far as California being broke, that's what makes this project all the more acceptable. Is it perfect, "No" but its being privately funded & our Convention Center is being enlarged & updated as well! If u or anybody else has a better alternative and/or suggestion, im all ears!

Posted by bottomline on August 13, 2011 08:24 PM

Homeboys, don't get your hopes up. The Raiders only drew 15,000 -- yes, 15,000 -- to a preseason home game the other night. If they can't fill their own stadium even for a preseason game, what makes you think they'll fill Farmers Field? Not to mention a fanbase full of gangbangers.

FWIW the Rams' new owner is from St. Louis and will see to it that they stay there. Also, the NFL no longer wants anything to do with the Coliseum.

Posted by Chucky on August 13, 2011 10:51 PM

Hence, which is exactly y Farmers Field is being built & y everything points the Chargers occupying it! As far as the Rams new owner being from St Louis, that doesn't mean a Damn thing at all whatsoever! He, like every other NFL owner, is a businessman first & foremost above all else! If it makes dollars it makes sense(cents) & he'll move 'em!

Posted by bottomline on August 14, 2011 03:38 AM

"Allow me to enlighten u, the Chargers r originally from Los Angeles, their inception was in Los Angeles, then they moved to San Diego after their first year! They could've played in San Diego for a century, it doesnt matter. "

The NY Yankees played their first two seasons in Baltimore, so never mind the century that followed, eh?

Touting some historic bond to the Chargers based on playing one season while in AFL is absurd and revisionist. There's a reason teams like the Texans and Chargers moved after a couple of seasons from Dallas and LA and that was because they were second fiddle to NFL teams.

Posted by sasha on August 14, 2011 01:43 PM

That may be so but history is history & facts r facts! I really don't know much about the Yankees but if what u say is true then their "original" home is Baltimore! I'm sorry if that upsets u but that's just the way it is..... And yur absolutely right about there being a reason y some teams have left the cities they played in. It just so happens that the reason y most(if not all) of the teams that left L.A was because of stadium issues! It had nothing to do with fan support!

Posted by bottomline on August 14, 2011 02:52 PM

By the way, I was born & raised in L.A & I acknowledge that my Lakers r originally from Detroit(not Minneapolis like a lot of people think) & my Dodgers r from Brooklyn! There's no harm in admiting that......

Posted by bottomline on August 14, 2011 03:01 PM

At the risk of sounding redundant, I would like to summarize... Los Angeles is going to issue $275 million for the updating & expansion of the Convention Center(which is long overdue & city-owned) while at the same time have a "privately" funded stadium/event center with a retractable roof built right next to it & yet there's still resistance?! I implore with any/all of u who r against it, what better alternative/solution do u have??

Posted by bottomline on August 14, 2011 03:55 PM

Solution to what exactly?

Posted by Neil deMause on August 14, 2011 04:08 PM

For starters, how to go about updating & expanding the L.A Convention Center without risking taxpayer $$??

Posted by bottomline on August 14, 2011 04:36 PM

First you'll have to show me that expanding the L.A. convention center is worth $275 million to the city. With very few exceptions, putting money into convention center expansions has proven to be throwing good money after bad, because there are so few big conventions and so many cities chasing them.

Posted by Neil deMause on August 14, 2011 05:09 PM

So, am I to assume what u r suggesting is that it would not be cost effective to update/expand our convention center because(as u put it) there r "so few big conventions and so many cities chasing them"? Basically, the same strategy we used with the L.A Sports Arena, watch it decay & let it become an obsolete eye sore?

Posted by bottomline on August 14, 2011 06:03 PM

Somehow I'm thinking it wouldn't cost $275 million to keep the convention center from "decaying." But in general, yes, I think the convention business isn't worth throwing lots of money at, even if it does bring in visitors from out of town. Especially for a city like L.A., which gets plenty of visitors for other reasons anyway.

For a more detailed explanation, see my interview with Heywood Sanders from a few years back (he has a new book coming out soon, which I hope will update and elaborate on these numbers):

Posted by Neil deMause on August 14, 2011 11:59 PM

I believe u know as well as I do that all public structures need to be updated(or replaced) in order to continue to be viable(not to mention safe). That unfortunately costs money, money that the taxpayer ultimately has to pay if it's a public venue! That is exactly what is taking place here in L.A. Except here, it's happening with a twist, we have a developer who's willing to come in update/expand our convention center(that we're supposed to pay for) & privately fund the construction of a football stadium/event center as well. Correct me if im wrong, but the reason y we lost the last 2 teams we had here were because of stadium issues! The 2 stadiums in the area being the coliseum & the rose bowl(both built in the 1920's)... If im off or if there's something im missing here please let me know.

Posted by bottomline on August 15, 2011 02:53 AM

Bottomline, if this is such a golden deal then AEG should incur all of the financial risk, not the taxpayers of Los Angeles County. It's called "socializing the risk, privatizing the profit" and it's an unethical abuse of government.

Posted by LosAngelesResident on August 15, 2011 03:01 AM

AEG is incurring all of the financial risk(in regards to the stadium)! The bonds the city is issueing is for the demolition & reconstruction of the west wing of the convention center, something the city taxpayers r supposed to pay for anyway!

Posted by bottomline on August 15, 2011 04:51 AM

Bottomline is trying to turn a good situation (no NFL team, lack of billion-dollar stadiums) into a negative. I only wish we had your problems in Arizona. We'd get better games on tv, and wouldn't suffer the indignity of making the ungrateful Bidwill family wealthier at taxpayer expense. Oh, if only they could have carried through on their 'threat' to leave Arizona!

Count your blessings.

Posted by Dave Boz on August 15, 2011 12:13 PM

U know, I never really thought of it that way Dave. U bring up some valid points....

Posted by bottomline on August 16, 2011 04:00 AM

Dave Boz makes a good point or two. When I've been in So Cal at the baseball games and I talk to the locals (I live in the Bay Area) about football, it seems that nobody I talk to really wants a team or two to come back. Fans in LA get the best doubleheader games each and every week and get no games blacked out on the Sunday Ticket.
Living in the Bay Area with two sorry sack football teams means not as many good games on the free tv and the Raiders blacked out on the Sunday Ticket.

Posted by Joe on August 16, 2011 05:28 AM

In some ways by focusing on the sport's TV appeal the NFL has perhaps planted the seeds of its own demise regarding live attendance.

That coupled with the greed involved in gouging the fans.

As Neil points out the [owner's] ideal seems to be to make attending a game more and more like a TV experience but with more fans having pretty nice home theaters, it becomes easier for them to eschew the hassle and expense of attending live and watching at home.

The nature of football facilitates this in a way other sports don't, since each play is so atomized and is subject to analysis via numerous replys. Why not get this at home?

Not to mention the intermitable commerical breaks. You can do a lot of stuff around the house during them. Or simply record the game and watch it in about an hour if you wish.

Posted by santa clara jay on August 16, 2011 03:07 PM

"Y do u ask & what does that have to do with anything?"

No. Spam.

Posted by Mark on August 17, 2011 11:40 PM

Oh, Santa Clara Jay you are so correct. I didn't really notice how often play stops in a NFL game as I just change the channel. But the last time I went to watch the Raiders (two years ago against Washington) I was stunned as to how often play was stopped for a commercial break. And how slow the live game was, it just drug on and on.

Posted by Joe on August 18, 2011 02:45 AM

The Rose Bowl is open for NFL Buisness in 2012, is looking for 2 Pro Football teams to entertain.

Raiders? 49ers? Vikings?

Posted by L.A. 49ers on August 20, 2011 07:07 PM

The Rose Bowl is open for NFL Buisness in 2012, is looking for 2 Pro Football teams to entertain.

Raiders? 49ers? Vikings?

Posted by L.A. 49ers on August 20, 2011 07:07 PM

Raiders? No. 49ers? No. Especially after what went down at Candlestick Park on Saturday night.

Posted by Chucky on August 22, 2011 09:47 PM

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