LA Stadium Battle—This Time, it’s Real Money 3

LA Stadium Battle—This Time, it’s Real Money
October 28, 2010(Print)

The Los Angeles region has seen lots of efforts to secure an NFL team in the past.  There have been proposals for remodeling the Rose Bowl, the Coliseum, and a new stadium in a gravel pit. What distinguishes today’s efforts from those earlier endeavors is the backing and the financing.  Both the proposal for a new stadium and entertainment center in the City of Industry and in downtown Los Angeles, are not publicly owned and the risk is being borne by private interests, not taxpayer dollars – at least initially.

While there are some pretty clear differences between the two proposals the final choice may hinge on which developer has the money and the horsepower to secure the team, rather than finance the construction. Even purchasing a minority interest in an existing team and moving it to Los Angeles could cost 100’s of millions of dollars.

Billionaire developer, Ed Roski and his Majestic Realty are the promoters and backers of the City of Industry project.

The Industry project is “shovel ready” in today’s popular terms.  The land is secured, the City of Industry approvals are in place, the preliminary design completed and the legal battles over the Environmental Impact Report and the mitigations have all been resolved.  In addition to the $800 million stadium the project contains over one million square feet of restaurants, entertainment, shopping, offices and 25,000 parking spaces.

The Industry project sits in the suburbs at the apex of several freeways readily accessible to the 15.5 million residents of the region and it is estimated to create over 18,000 construction and permanent jobs in the area. Construction is expected to take 22 months from groundbreaking with a unique “in ground” design that is expected to save tens of millions of dollars on construction costs.

This landmark stadium will have 75,000 seats, 80,000 for Super Bowl games, 12,500 club seats and 176 suites.  Revenues are projected at $762 million annually.

The Downtown Stadium is being promoted by AEG (Anshutz Entertainment Group) owned by billionaire Phil Anschutz, the co-owners and operators of the Staples Center. Ironically Anschutz and Roski are partners in the Staples Center and co-owners of the Lakers basketball and Kings Hockey franchises that play there.

The Downtown Stadium has a few more hurtles to overcome.  AEG has not yet released details of their Stadium design. The land required will necessitate the removal and relocation of 300,000 square feet of the convention center and 3000 parking spaces at no small cost for replacement and lost business/conventions, jobs and sales tax during the reconstruction.  The EIR has yet to be prepared. The cost of the mitigations has not been determined. A retractable roof could add $500 million to the cost.  There are no approvals or agreements in place with the Los Angeles City Council. While much of the entertainment, restaurants and shopping are already in operation with the Nokia Theater, JW Marriott Hotel and LA Live, these other unknowns could drive the costs to a level that will require significant public subsidies to make it work or to be financially competitive with other stadiums.

Across the country, the voters’ enthusiasm for public financing of major league stadiums has waned considerably.  But that has not deterred the franchise owners who continue to demand large public subsidies from host cities.

Tim Chapin, a Florida State University professor of urban and regional planning, reviewed all of the major studies and found that economists agree that the economic impact of new sports facilities does not justify public subsidies for them. “Every reputable, empirical study has concluded that these are not good financial investments,” said Chapin, who prepared his analysis for the Lincoln Institute of Land Policy. But that does not mean that sports facilities don’t have a place in a community or that the public sector should not play any role in financing them.

AEG has been non-committal about the need for public financing to complete their project.  Tim Leiweke, President of AEG was recently quoted, “If the private sector is going to step in and spend a billion and we are going to have to do that, then shouldn’t we as a community spend a billion dollars where it has its greatest impact?”

The Industry promoters have been much more emphatic. John Semcken, Vice President of Majestic Realty Company, said, “Having met with several of the nation’s top investment banks and financial experts we are confident that our projections for revenue and expenses will enable us to build a 100% privately financed, state of the art football stadium. Our financing plan will be based on the same model we used when working on the Staples Center in the 1990s”.

With two billionaires in the running, the winner is this race may not be the one with the most money but the most agile developer who is ready jump when one of the NFL team owners can’t milk any more out of their existing host city.  In today’s economy, that agility may go to the owner who only has to reach into his own pocket, not the taxpayers.

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3 Responses to this article

Al Perdon October 28, 2010 Reply

15.5 million residents. Hmmm. Why not both stadiums?

Bryson October 29, 2010 Reply

I agree, however it seems to me that in order for the downtown proposal to work that you have to secure public funds in addition to justifying the reduction in revenues as a result of tearing down the convention center. That is bad policy at a time when LA city, LA county and the State of California (as they all benefit from tax revenues from the CC) are already hurting for money

Mark October 29, 2010 Reply

It seems to me that we should pick a project and support it as a community. The Industry stadium is “shovel ready” and the best possible projet that we could hope to see. All we’re doing at this point is creating confusion in the eyes of the NFL which will only hinder Majestic and/or AEG’s ability to secure a team.

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