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LA stadium study appears to overstate tax benefits

JACOB ADELMAN, Associated Press
8/11/11

LOS ANGELES (AP) - An annual Pac-12 championship. Boxing matches with consistent knock-out audience sizes. A Super Bowl-sized mega-event each year.

These are among the outsized engagements that Anschutz Entertainment Group counts on luring to the NFL stadium it wants to build in downtown Los Angeles in order to generate tens of millions in state and local tax revenue.

The sports and entertainment firm has dangled that tax bounty before officials in its efforts to garner public support for its plan to build a venue for an NFL franchise in a city that has been without a team since the Raiders and the Rams left the region within months of one another some 16 years ago.

Council members cited the project's economic impacts when they voted to approve a memorandum of understanding with AEG that sets the stage for future binding deals between the city and the developer.
But 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.

It anticipates a highly optimistic number of events, some of which would not be new to the region. And a chunk of the tax revenue included in the tally is apparently already spoken for by other projects.

AEG wants to build its $1.2 billion stadium known as Farmers Field on the city's convention center campus. The plan approved by the City Council anticipates the issuance of $275 million in tax-exempt bonds for the relocation of a convention center building that now stands where the planned 72,000-seat venue would be built.

The framework deal with the city requires AEG to secure a NFL team before any work on the project, which would start with the convention center relocation, could begin.

AEG president and CEO Tim Leiweke told reporters this week he's been in touch with team owners about a possible move to Los Angeles, but declined to identify likely candidates or say whether any formal negotiations had begun. He said no move would be announced until the end of the 2011-2012 football season.

The financial study, completed by consultancy Metropolitan Research and Economics primarily using data provided by AEG, estimates that new economic activity from the stadium and improved convention center would result in $41.8 million in annual tax revenue for city, state and other public entities.

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.

City legislative staffers have said they would complete an analysis of the study's findings. The city's own consultants, who use more conservative estimates and strip out taxes that would be recycled back into the project, have projected that the stadium and convention center improvements would add an average of about $14.7 million in new taxes to city coffers each year, about two-thirds of the amount estimated by the AEG-funded study.

Among the firm's most optimistic projections concern the numbers and types of events it hopes to host.
The projected 38 events outnumber tallies for comparable venues such as Atlanta's Georgia Dome, which hosts about 33 events each year. Arlington, Texas' Cowboy's Stadium, Glendale, Ariz.'s University of Phoenix Stadium and Indianapolis' Lucas Oil stadium each draw 25 events per year, according to a Metropolitan Research and Economics tally of events at comparable NFL venues released separately by AEG.

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Trojans may add a hurdle to the NFL's return

Paul Pringle and David Zahniser, Los Angeles Times
August 12, 2011
http://www.latimes.com/news/local/la-me-812-nfl-stadium-20110812,0,602382.story

Ever since the NFL left Southern California in 1995, USC has held the mantle of L.A.'s championship football team.

But with the city now moving to bring professional football back to L.A., USC could block efforts to have the new team play at the Los Angeles Memorial Coliseum during the three to four years that a proposed football stadium would be under construction downtown.

The Coliseum is home to USC football and the school's lease gives the Trojans veto power over the NFL returning to the stadium, which is across the street from the campus and once hosted the Rams, Raiders and Chargers franchises.

City Councilman Bernard C. Parks, whose district includes the Coliseum, said that a USC administrator told him that the school intends to exercise the veto unless it receives a new "master lease" that would give the private university near-total control of the publicly owned stadium.

Parks, who also sits on the Coliseum's governing commission, said he would oppose such a lease, believing that it would allow USC to keep other events out of the stadium, such as soccer games, Fourth of July celebrations and even a third Olympic Games. "I do not believe that I could realistically turn over a public facility to a private institution," he said.

A USC spokesman said the administrator who spoke to Parks, Thomas Sayles, was traveling and not available for an interview. In emailed statements, Sayles, USC's senior vice president for university relations, said the school is "open to discussions on a mutually beneficial arrangement" regarding an NFL team.

But he added that "for some time we have believed that having a master lease is in the best long-term interests of the community and the university."

"…Under our current lease, we have the right to approve any other team playing football in the Coliseum during our season. We have not been presented with any proposal for another team to play in the Coliseum. If we were to receive a proposal, we would review it."

The clash comes at an awkward political moment. Just this week, the L.A. City Council, citing the economic benefits of luring a football franchise back to town, voted unanimously to approve a $1.5-billion plan for a downtown stadium and Convention Center wing. The city would issue $275 million in bonds to help facilitate the project by developer Anschutz Entertainment Group, which already operates Staples Center and the L.A. Live entertainment complex in the same area.

Coliseum Commission President David Israel said he would be surprised if USC tried to deny the city an estimated tens of millions of dollars in annual business activity that would flow from a NFL-Coliseum partnership. If the Coliseum is ruled out, a new NFL team would most likely take up temporary residence at the Rose Bowl in Pasadena, a city that has remained on the sidelines in the most recent drive to bring a team to L.A.

"Is USC going to try to leverage something that could create a lot of jobs in the city of Los Angeles to their own ends?" Israel asked. "Is that a wise thing to do in the long term to their neighbors? I don't think it is."

Israel said he and other commissioners are willing to consider a broader lease with USC, but not under duress. "If they want a master lease, they should get a master lease the right way and not by threats and ultimatums," he said.

Another commissioner, Barry Sanders, said the panel would welcome an NFL team if it "met the contractual requirements of USC." But he added, "If they don't care to [allow a team], it's up to them."

Whether AEG can land a team for Los Angeles remains a big question mark. But lining up a construction-phase stadium could be an important part of the sales pitch to NFL owners, according to officials. The team's owners would have final say on selection of an interim stadium, the officials said.

AEG has met with Pasadena and the city is "very interested," said Rose Bowl General Manager Darryl Dunn.

Parks said AEG Chief Executive Tim Leiweke has indicated in talks with city officials that the company would prefer the Coliseum, if only because it is just down Figueroa Street from Staples Center and L.A. Live, which could cater to pre- and post-game crowds. Parks pushed for language in the city's stadium development agreement that says AEG "shall" use the Coliseum as the team's temporary home, but only if it makes financial sense.

AEG spokesman Michael Roth said Thursday the company is looking at all possibilities. "I would not say we have a preference," Roth said.

Leiweke said earlier this week the firm was committed to trying to use the Coliseum. But he emphasized the aging stadium needs improvements that could be costly and give an advantage to the Rose Bowl, which is undergoing a $152-million renovation.

"If there's a way to make it work at the Coliseum, we will," he told reporters. "But realistically, it may be there are minimum standard issues at the Coliseum we're unable to get past. And certainly with the Rose Bowl's renovation, that may be the more likely site. But we are committed to using our best efforts to try to make it work at the Coliseum."

The Coliseum and companion Sports Arena are jointly operated by the city and county of Los Angeles and the state.

Financially, the Coliseum has struggled off and on since it lost the Raiders to Oakland in 1995. The Rams had earlier decamped to Anaheim and then St. Louis. The Chargers played just one season at the Coliseum before moving to San Diego in 1961.

The commission signed its current lease with USC in 2008 after abandoning a long and fruitless campaign to entice the NFL to return to the Coliseum.

Lately, the commission has been caught up in a widening conflict-of-interest scandal centered on reports that two firms set up by a former manager collected at least $1.8 million from companies that did business with the Coliseum and Sports Arena. Now the subject of criminal investigations, the alleged diversion of funds occurred even as the commission fell into the red and failed to make improvements to the stadium required under the USC lease.

USC administrators have privately pointed to the financial scandal as evidence the nine-member Coliseum Commission has been a poor caretaker and that the university would do a better job.

Israel conceded that oversight mistakes make the commission a fair target for criticism. But he contended that the stiff NCAA sanctions imposed last year on USC — resulting from a finding that the school lacked "institutional control" over its athletics program — show that the university's management has had similar problems.

"There is plenty of blame to go around," Israel said.

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Football coming soon to LA

August 11, 2011
Matt 'Money' Smith, FS West
http://www.foxsportswest.com/08/10/11/Football-coming-soon-to-LA/landing.html?blockID=545713&feedID=7972

Tuesday the LA City Council unanimously approved a "Memorandum of Understanding." A piece of legislation that helps pave the way for the Anschutz Entertainment Group to begin construction on a new Convention Center, which in turn will produce a new football stadium built on the very spot where the west hall of the current convention center currently sits.

In the past, I've written about my conditions for conversation to take place regarding the NFL's return to Los Angeles. I want three things before I'm convinced. A local luminary with a pair of giant scissors cutting a red ribbon, some beautifully framed loose dirt and a gold plated shovel to scoop out that ceremonial first piece of earth to officially mark the beginning of the building process.

Thanks to Tim Leiweke and everyone involved with the Farmers Field production, I've had to amend my demands, and by "amend," I mean they are now non-existent.

As a matter of fact, I found myself screaming at anyone who dared doubt the idea that we would have a NFL team here next season to play its 2012 through 2015 schedules at either the Rose Bowl or more likely the LA Coliseum before finally moving into their brand spanking new and permanent home.

When it comes to legalese, politics and the business of sports, most are turned off. They would just as soon focus on the games and leave the rest of the billion dollar transactions to the fine folks at Forbes or Fortune, and stick with their box-score.

That's not me. I've always embraced the moments that ultimately create what becomes the game or the player.

When it comes to the NFL in Los Angeles, because there are no games, all we have is the business that we hope will lead to there actually being grown men in plastic outfits violently running into one another for 60 minutes 8 to 10 Sunday afternoons and the occasional Monday night.

Which means you better get used to all the acronyms that are now so important. With the first one out of the way, M.O.U. (Memorandum of Understanding), we can now focus on the E.I.R (Environmental Impact Report) and C.E.Q.A. (The California Environmental Quality Act) before we can start talking about the S.D.S.C. (San Diego Super Chargers).

Getting AEG on board was the first step. The MOU was a big win for everyone Tuesday, but in talking with my people inside this process, Leiweke is more concerned about the EIR and CEQA than he is finding a team to make the move of leaving their fans behind, and moving to the second largest media market in the country.

This is California, and it turns out we take our "environment" seriously. Well, most of us do. The guys in HB with their flatbills and koi fish sleeves rolling around in their massive Ford F-350's that never see a speck of dirt aren't doing us any favors.

AEG spokesman Michael Roth has said the EIR is already in the process of being prepared and they should have it ready for review sometime in early 2012.

Speculation is, much like Majestic Realty received with their Football Stadium project out in the City of Industry, AEG will be looking for a few breaks and a possible exemption to help speed along the process and prevent any "frivolous" lawsuits that could stall the start of things while bogged down in courtroom proceedings.

So what about those Chargers? They clearly look to be the team of choice. They have a fanbase that extends to Orange Country that would likely be willing to make their way to the new stadium. They're already the team we see most often on television in this market. They have a franchise quarterback to market for the next decade to get the people excited, they have owners that have been battling a city for a new stadium for nearly a decade with absolutely zero progress, and what do you know, they have an out clause in their lease at the end of this year.

Understand Leiweke is no fool. There's a reason why all of this is happening now and not three years ago or two years in the future. The timing of everything is almost too perfect. Add to that, Phil Anschutz is not a guy that's likely to drop somewhere in the neighborhood of $50 million to be told "no."

For those that question whether or not this is reality or fiction just click on this here link.

AEG builds arenas and stadiums. That's what they do, and they're better at it than anyone else in the entire world. When they decide to pull the trigger - they pull the trigger. They did it in Kansas City with the Sprint Center, and they don't even have a team to occupy the 18,500-seat venue.

In the past I would have been screaming about all of you suckers falling for it once again. Today, I'm yelling at all the "haters" who aren't enlightened to the AEG way of doing business.

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Tim Leiweke Says Thank You L.A. -- New Questions about Bloated City Revenue Claims

Ron Kaye, Ron Kaye LA
August 11, 2011
http://ronkayela.com/

As I'm sure you've heard by now, the Los Angeles City Council voted unanimously on Tuesday to approve the memorandum of understanding on Farmers Field and the New Hall for the Los Angeles Convention Center.

I wanted to personally express my gratitude for your time, effort, and support of Farmers Field - and I couldn't just do it in writing. Please take a look at this video I recorded and share it with all of the Farmers Field fans you know:

This project - and the jobs, economic revenue, city pride and professional football it will bring with it - would not have been possible without your hard work.

There is still a lot to do before we break ground on the project. Stay tuned for updates on the progress of Farmers Field, and for ways that you can stay involved in the process.

For now, pat yourself on the back for a job well done. From everyone at AEG, thank you for your support.

Sincerely,

Tim Leiweke
President & CEO
AEG

Even as Leiweke was blasting out his "thank you" to the business, labor and civic leaders who aligned with his NLF stadium proposal, new questions were being raised about the claims made about the financial benefits to the city and region.

Associated Press writer Jacob Adelman, doing far and away the best reporting on L.A. these days, went through the details of AEG's and the city's analyses of the project and after talking with experts concluded that "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."

"It anticipates a highly optimistic number of events, some of which would not be new to the region. And a chunk of the tax revenue included in the tally is apparently already spoken for by other projects."

AEG's financial study by Metropolitan Research and Economics estimatedthat new economic activity from the stadium and rebuilt LA Convention Center would yield $41.8 million a year in new tax revenue for the city, county and state, with more than half going to the city," $11.6 million 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.

"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."

Adelman notes the city's own consultants expect $14.7 million in new taxes to the city, a third less than AEG's study.

He concludes:

"With the vast majority of sales tax money going to state and county government agencies, it is questionable how much of an impact on tax rolls these events would be if they are simply shifted around the region, said David Carter, a sports marketing professor at the University of Southern California's Marshall School of Business.

"Is the fact that you're moving the game two miles going to affect how much is spent?" he said. "How much is that spending actually different from what is already occurring in the area?"

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L.A. Vikings news is good for Zygi Wilf in Minnesota

EVAN WEINER, NEWJERSEYNEWSROOM.COM
August 11, 2011
http://www.newjerseynewsroom.com/professional/la-vikings-news-is-good-for-zygi-wilf-in-minnesota

THE BUSINESS AND POLITICS OF SPORTS

Life as a player in the stadium game is looking up for New Jersey's Zygi Wilf. You see Wilf's Minnesota Vikings lease with the Minneapolis Metrodome is over and Wilf's Vikings are a hot commodity. The National Football League lockout was propped up by owners like Wilf, who are saddled with outmoded facilities, which lack revenues streams or more importantly the kind of seats which rich people, rather customers, will buy: luxury boxes and club seats along with valet parking, in-stadium dining and lots of concessions.

Wilf doesn't have those gadgets like the big boys, Jerry Jones (Arlington, Texas), Woody Johnson and the Mara/Tisches families at the Jets-Giants facility in East Rutherford, New Jersey and Jim Irsay's Indianapolis venue, which gives just about as much of every dollar generated in the building to Irsay's Colts.

Zygi Wilf got incredibly good news on the stadium front this week.

Minnesota Governor Mark Dayton, who presided over a state that shutdown when state Republicans would not play ball with Democrats as both tried to pass a budget in the one of the more recent battles of dysfunctional government which is spreading like cancer throughout the country, decided to take another look at how the state could spread hundreds of millions of dollars in a partnership with Wilf to develop a stadium in the Twin-Cities area.

While Dayton was rallying the troops and waving purple pom poms, the Los Angeles City Council decided they too need to get into the stadium game and give the Anschutz Entertainment Group, by a 12-0 yes vote, a framework deal on the project's funding that will include the issuance of $275 million in tax-exempt bonds for the relocation of a convention center hall to accommodate the proposed $1.2 billion football venue. Los Angeles is broke but that isn't stopping the city council for waving pom poms for some football equivalent of poverty level NFL owner to turn his sad eyes to the nation's second largest market. A second LA group led by Ed Roski also reminded Wilf that they are still in the stadium building business too.

Those sad owners on a list could include Wilf, the St. Louis Rams (and Walmart heir by marriage) Stan Kroenke, the San Diego Chargers Spanos family, Jacksonville's Wayne Weaver, Buffalo's Ralph Wilson and perhaps the NFL's two Bay Area teams, the York family's San Francisco 49ers and Oakland's Al Davis.

Before LA city leaders, the wealthy and the beautiful people including Hollywood’s finest flock out to downtown LA to see an NFL game in 2014 or 2015 (the next available teams are Wilf's Vikings, Wilson's Bills — following the 2013 season — Spanos' Chargers although it is unclear when the Spanos' can actually vacate San Diego, Davis Raiders may be available after 2013 and Kroenke's Rams lease is done after 2014, there has to be a serious look at what kind of lease AEG can really offer an NFL owner.

The stadium will cost over a billion dollars even with Los Angeles giving away the store in whatever tax scheme the politicians offer. There will be personal seat licenses obviously and banks of luxury boxes (even in a bad economy sports people are convinced they can sell high end seats) but AEG is going to have to pay most of the bills. NFL owners like to negotiate deals with municipalities not landlords and AEG is still going to be the landlord unless Phil Anschutz is going to buy into a franchise or own a franchise.

Wilf really is better off cutting his own deal in Minnesota with Dayton and the legislature because he can make more money even putting in hundreds of millions of dollars in the place by controlling all stadium revenues from all events in the building.

The other group looking to build a Los Angeles football stadium — east of Los Angeles has seemingly brought up the same question. Ed Roski wants to put up a football facility in the City of Industry and Roski's spokesman on Tuesday issued an interesting statement.

“Our stadium proposal will generate more money, jobs and long-term success for the region and the NFL. We are more active than ever and are currently working with the league, owners and teams to bring a franchise back to Los Angeles,” said John Semcken, Vice President Majestic Realty.

That has to be music to Wilf's ears and it may be why Minnesota Governor Dayton is pushing the stadium issue now instead of waiting for the beginning of the next legislative session in January.

NFL owners apparently tried to pull a fast one on the players during the lockout when they wanted the players to give back money to the owners so that the players would provide some financial backing to proposed stadium. The NFL stopped the York family from seeking financing for the better part of a year for a 49ers facility in Santa Clara, Calif. In an effort to convince the players that building super revenue generators like a new Silicone Valley football stadium was not feasible under the past collective bargaining agreement.

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