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August 04, 2011

AEG stadium wins first L.A. council vote

AEG's $1.5 billion plan for an NFL stadium in downtown Los Angeles cleared its first hurdle yesterday, as the city council's Ad Hoc Committee on the Downtown Stadium and Convention Center voted 4-0 to recommend approval of the city's memorandum of understanding with AEG.

Significantly, one of the four votes came from Bill Rosendahl, previously one of the strongest skeptics of the deal. "I'm delighted to see all these answers to my questions," Rosendahl said before his yes vote. (One key answer provided by AEG: It promised to cover any shortfalls in tax and lease revenue generated by the project, though it didn't address the fact that some of this tax revenue could end up cannibalizing existing tax revenue.)

The full council is expected to approve the MOU on Tuesday. After that, it will sit down with AEG to negotiate an actual lease. "This is the table setting, not the meal," stadium committee chair Jan Perry told the L.A. Times. It's possible that new hurdles — or new compromises — will emerge at that point, but right now it sure looks like the reason the council is setting the table is that it intends to eat the meal.

At that point, the biggest obstacle will be landing a team — and there you might actually have some problems. In the NFL, where local TV and ticket revenue is a drop in the bucket compared to the national TV contract, playing in a big market like Los Angeles isn't a huge advantage for an owner. (This is in part why L.A. lost its two teams in the first place to smaller markets in St. Louis and Oakland.) A new stadium is a draw — but only because of the new revenue streams it would create, and in an AEG stadium, much of that would be dedicated to paying off the stadium costs.

In the end, then, the question will be whether an AEG stadium can be lucrative enough to pay for itself and generate extra cash for both its owner and an NFL franchise. It's certainly possible — it did work in New Jersey for the Giants and Jets, on more or less the same model (mostly private funding, leavened with tax kickbacks). But just because L.A. gets a new stadium deal is no guarantee that it'll get a new team.


neil, i usually respect your blog posts, but you've gotta be kidding me if you think AEG is going to have any problem whatsoever convincing an NFL team to move to LA once the stadium is approved, EIR completed, and everything else taken care of.

to be honest, i think AEG already has a pretty good idea of the team that would end up moving to LA. but of course they have to keep quiet about it for the time being.

also, i think you're really understating the benefits that the league and the owners see in a team based in LA. sure, the massive national tv contract is the big money driver, but let's not act like market size is irrelevant. why do you think the nfl has been trying to get back to LA all these years in the first place? not to mention, the league tried to block the rams from leaving LA, but i believe georgia frontiere (then-rams owner) threatened to sue, so they had no choice but to let it happen.

Posted by pb on August 4, 2011 08:10 AM

LA Chargers. Book it.

Posted by Joe on August 4, 2011 08:35 AM

Oh, the NFL wants a team in L.A., no question, if only because they figure it'd boost TV ratings. But for any individual NFL team, a sweetheart stadium lease is far more important than a large market.

If the NFL kicks in a bunch of cash via the new G-3 program, that'll obviously help. But make no mistake: AEG would be sinking a ton of money into this project, and expecting to get paid back by team rent payments. That's not an insurmountable hurdle necessarily, but it is a hurdle.

Posted by Neil deMause on August 4, 2011 08:37 AM

I'm fairly certain that the NFL doesn't want a team in LA. It's too valuable for all the other team owners to extract concessions from their current market on the threat of moving to Los Angeles. If there is a team in LA you're next best option is moving to Las Vegas (which due to gambling is verboten) or going back to a city that just lost a team to LA. Neither of those is really all that appealing in terms of leverage.

Posted by jmauro on August 4, 2011 09:05 AM

Actually, to be clear here the NFL wants to TALK about a team in LA, but they don't actually want a team IN LA.

Posted by jmauro on August 4, 2011 09:06 AM

I DISAGREE completely with u jmauro! R u kidding me? The NFL would be stupid "NOT" to want to have a presence in the 2nd largest market in the country! The 1 & only reason y it hasn't happened is because there wasnt a suitable stadium here with all the modern-day amenities... Also, I believe theres already a deal in place to have a team come here! This deal will get done(theres too much $ involved for it not too)!

Posted by bottomline on August 5, 2011 02:04 PM

It passed unanimously today.

This article doesn't provide anywhere near enough details, but it seems like a better-than-average deal to me. I'd bank on the Vikings.

The LA Vikings. Yup, nothing reminds me of vikings quite like LA.

Posted by MikeM on August 9, 2011 06:34 PM

Pretty much!!! It was a no-brainer, of course they approved it! They would've been foolish not too! For all u obstructionists out there, if u all have a better idea, we're all ears...

Posted by bottomline on August 9, 2011 07:06 PM

bottomline, the article doesn't really have enough details for me to judge, but the one area where recent arena/stadium deals have failed involves shortfalls in revenues. They take all the revenues they're "sure" to get and add 'em up, and then say, "See? It can be done!".

Then the tax revenues don't come in as anticipated, and they must hit the general fund as a result.

If there's something in this LA deal to firewall the general fund from the arena, fine. But there usually isn't, and that's usually the downfall.

I think the folks up here in Sac should be especially interested in how things go from here.

Posted by MikeM on August 9, 2011 08:07 PM

Mark my words, this deal will get done, there will be an NFL stadium built in downtown L.A & it's gonna be the Chargers who will move here! U can take it to the bank! I also believe that theres already been a backroom deal in place for a while now.... Y else would AEG have commited to such a deal unless they already knew who was coming?! This isnt rocket science we're talking about, 1+1=2....

Posted by bottomline on August 10, 2011 03:33 AM

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