Business Update with Mark Lacter

Will the sale of AEG affect a football stadium in downtown Los Angeles?

KPCC's business analyst Mark Lacter examines whether the sale of AEG will affect a pro football stadium in downtown Los Angeles.

Steve Julian: A few days ago, we learned that the company aiming to build a pro football stadium in downtown LA was being put up for sale. Mark, is there any front-runner in the sale of Anschutz Entertainment Group?

Mark Lacter: I haven't the foggiest idea, Steve - and I doubt that the analysts, the bloggers, and the elected officials who are yakking about this sale have any idea either. You know, Philip Anschutz keeps everything close to the vest, his company is privately held (which means no financial statements get released), and so there is absolutely no way to know from the outside how a sale of AEG is going to impact the downtown stadium deal or a possible football team for L.A. And that’s why some skeptics of the plan believe the city should put the brakes on a deal with the Anschutz people - even though that's very unlikely to happen at this point. The City Council votes on the plan on Friday.

Julian: The city seems deeply vested in this deal...

Lacter: They're betting that the stadium and convention hall revamp will proceed as planned; and that the city won't get stuck after issuing about $300 million in bonds as part of the deal (that money is supposed to be repaid through the revenue generated from the facilities). Mayor Villaraigosa and the head of AEG, Tim Leiweke, insist that any deal worked out would be applicable no matter who the owner turns out to be. And maybe that'll turn out to be true. But new owners of companies have a way of adjusting priorities that seemed to have been set in stone by a previous owner.

Julian: That could be a problem. What if you're the owner of a business and were prepared to cut a long-term, complicated contract with someone and at the last minute that someone said, "Oh, by the way, I'm selling my company and you'll be dealing with someone else in a few months?"

Lacter: That’s the point - would you want to go ahead and sign the contract, or hold off until you knew who the new owner was and how he felt about the deal? I suspect that most of us would hold off. Which, of course, raises another question about the proposed stadium: Does it have to be done now? L.A. has been without pro football for many years, and it won't slide into the ocean if it takes another few years to get it done. On the other hand, you have supporters who say that the city should take advantage of AEG’s offer to build the stadium on its own dime now because a new owner might not be willing to do that. By the way, this could be a complicated sale because AEG is a massive company that goes way beyond the assets in downtown L.A. – we’re talking sports stadiums, soccer teams, basketball and hockey franchises, theaters, entertainment districts.

Julian: If it were to go through today, what's the economic impact of stadium and a revamped convention hall?

Lacter: It’s not huge - about 2,500 temporary construction jobs and another 6,300 permanent jobs. The city of L.A. has a total workforce of 1.6 million people. Most every economist who has studied this says that having a football stadium won't add to the economy, but just shift dollars that otherwise would be spent somewhere else.

Julian: And tourism?

Lacter: Well, there's disagreement about the amount of additional convention business this might bring. AEG claims that L.A. will get another 14 conventions each year. The city's own research says it's closer to five. And even five may be pushing it, considering that the convention business has fallen on hard times, and it's going to be tougher to compete with cities like Las Vegas, Chicago, and Anaheim.

Julian: How would this impact L.A.’s financial situation?

Lacter: Well, in theory it wouldn’t add to the deficit because there’s no taxpayer money involved. But, even a revenue neutral project might be questionable at a time when so much of the city is falling apart because of these massive budget cuts that have been drastically reducing services. So, the question is whether this is worth a very limited payback. That's something the council should be mulling over this week.

Mark Lacter is a contributing writer for Los Angeles Magazine and writes the business blog at LA Observed.com.


blog comments powered by Disqus