AEG, Denver billionaire Phil Anschutz’s sports and entertainment company, has won the bid for a $1.35 billion proposal for a new NFL stadium in downtown LA, beating out real-estate mogul Ed Roski’s proposal for a new stadium in the City of Industry. Farmers’ Insurance paid $700million for the naming rights, yet the stadium is far from a reality; the City of Los Angeles must first approve the massive endeavor and LA must convince a team to move here.
The biggest hang-up about giving the project a green light is the worry that the stadium will cost taxpayers and the city money when the city is in the midst of a financial crisis. AEG claims that it will not use any public money for the stadium, but in order to develop it AEG wants to issue $350 million in municipal bonds to cover the cost of replacing the West Hall of the Convention Center that would be torn down to make space. The company plans to cover the cost of the bonds with ticket fees, increased parking revenues, and other tax revenue streams from the stadium. Additionally, since the city is in such financial trouble, its first concern, according to councilman Bill Rosendahl, is to maintain day-to-day operations like “[fixing] potholes, [keeping] parks open, [and keeping] police on the beat,” and not assume any of the financial risk a new stadium would entail, meaning that approving the stadium by AEG’s March deadline is not a top priority.
I certainly understand that the city is in a financial crisis and that the thought of breaking ground on $1 billion stadium is a lot to swallow. AEG is notoriously private about how it makes money from its other sports facilities, like the Staples Center, which is disconcerting to any city official who needs reassurance in order to approve such a massive project. Additionally, the March deadline AEG is shooting for is unrealistic, especially considering the current NFL-player labor dispute negotiations that could last into summer that need to be settled before the NFL is willing to consider any teams moving. AEG even admits that all the measures it plans to use to pay back the $350 million in municipal bonds will still come out about $6 or $7 million short. The company says it plans to cover the difference; however, this is still a bold enough statement that requires a lot of faith from city officials that the project won’t dive deeper into the city’s already empty pockets.
Despite these qualms, I believe that a new NFL stadium in downtown LA will ultimately economically benefit the city and reinforce downtown’s transformation into a sports and entertainment hub. The new stadium will create 20,000-30,000 new jobs, which is an economic ray of hope in itself! The stadium will have 64,000 seats with a retractable roof allowing an expansion up to 78,000 seats, meaning that LA would easily be a contender for future Super Bowls, World Cups, conventions, and so on. In 2010, LA Live drew 13 million visitors, proving that downtown can be an attractive one-stop entertainment and sports destination for Angelinos and tourists alike, which will only be bolstered by the addition of a world-class stadium.
The timing for this stadium is also favorable. In addition to capitalizing on downtown’s urban renewal that includes the developing Figueroa Corridor, there are a few NFL teams that will likely need or want to relocate in the near future. The Minnesota Vikings’ stadium famously collapsed in a snow storm this winter, the San Diego Chargers are facing numerous stalls in plans for a new stadium, the St. Lois Rams have a stadium that is getting old and fading in quality, and the Jacksonville Jaguars are suffering from waning fan interest. So clearly, the pool for teams potentially willing to relocate is not empty. Additionally, LA is currently ranked 15th for cities in terms of attracting conventions, which is pretty dismal considering the wealth of business and entertainment options (not to mention that LA is one of the largest cities in the world), so the convention center needs a face lift to draw more conventions and the accompanying tourism.
Some skeptics are complaining about potential traffic problems and that a more thorough traffic study needs to be conducted, but they should take a step back and remember that football games are on Sundays and, as AEG put it, “you could land a helicopter on the highway” at the times fans would be heading to the stadium. LA is the second largest media market in the country, and while I certainly love Trojan football, there are enough sports fans in the city to support two NFL teams if the city was so inclined, sort of like our two professional basketball teams…
In my view, the funding, timing, and desire for a downtown LA NFL stadium are all coming together at the right time; let’s break ground!
I actually heard about this project over two years ago from one of Ed Roski’s senior executives during a presentation in one of my real estate development courses. I completely agree that this stadium is far from a reality. I would be very surprised if AEG’s claims about this project’s funding are accurate because most stadiums tend to be heavily subsidized by the local government. I doubt AEG has the money to fund this football arena without public or private financing. After all, most banks are very hesitant to give out loans these days. Such a large project seems very unrealistic during one of the worst economic downturns in our country’s history. Nonetheless, building this football stadium will benefit Los Angeles in many ways.
ReplyDeleteAs a student studying real estate, I spent over a month learning everything imaginable about stadiums and how they can help surrounding businesses. Staples center is a great example of this. Many people think it started Downtown Los Angeles’s transformation from a crime-infested portion of the city to a development and social hub. The construction of this stadium will increase the demand for everything from hotel rooms to restaurants, all of which are a source of tax revenue for the city.
Job creation is another benefit of building this stadium. In addition to the roughly 30,000 jobs you spoke about, several thousand more will be needed for the construction of this super structure. This is especially true in today’s economy where the unemployment rate is about 9%.
I heard about this new football stadium in my sports journalism class, and found it very fascinating that there is not a team in L.A. right now. I learned that the reason there hasn't been a team in Los Angeles in a while is because the previous teams had outdated, shared stadiums. This would definitely drive me away if I was an owner of a team because why would I want my team to have to share facilities with another team.
ReplyDeleteThere was a chance to get a deal done to bring a team to L.A. many times, but they all feel through. The most realistic time was in 2002, however, the city of Los Angeles could not get their act together to come up with the demands the league had of them. There were multiple ownership groups with differing stadium plans, and the finances weren't on par with what the billionaire in Houston was offering. So, Houston got the expansion team instead of L.A., and there hasn't been a good opportunity to bring a team to L.A. until now.
With the signing of Farmers Insurance, an already planned out football stadium (with a very expensive budget that uses no public funding), and a perfect location, I don't see how there will not be a team in L.A. in the next four years. The Staples Center has shown that L.A. Live is a great place to have a stadium; there is plentiful amounts of parking, there are numerous restaurants and other attractions in the area, and there is a hotel right next to the arena.
You're right that there will be more jobs created by bringing a team to L.A., which would benefit those who are currently unemployed now. The team would also give money to the city and state because they would have to pay rent, which would help out California's terrible deficit.
The possibility of the NFL Stadium in Downtown LA will be great for Los Angeles’ economy. Ever since the Staples Center was constructed in 1999, downtown has experienced a great revitalization which is only expected to continue. Staples’ attracted many hotels and retail to the area, and the NFL Stadium is expected to do the same. In another one of my classes we studied the possibility of the NFL Stadium, and the estimated revenue generated from the stadium will be huge. As you said, the Stadium is expected to attract around 25,000 jobs, which will drastically improve unemployment statistics that have plagued DTLA and LA in general since the recession. The Stadium is also forecasted to attract up to 5 new hotels, which will generate revenue for the area as well. One of the simple calculations we did in my other class was just for revenue in surrounding restaurants, and the increased revenue the Stadium would bring was massive.
ReplyDeleteFor example: If the Stadium were to seat 78,000 people, and host around 200 events per year, with an estimated 60% occupancy, this would bring an additional 9.36 million people to the area annually. If each person spent an average of $20 on food/drinks, and 50% of their spending was in surrounding restaurants, this would create a total of $93.6 million dollars in additional revenue for restaurants downtown. It is clear that the Stadium’s introduction would be beneficial for Downtown LA’s economy.