Anschutz Entertainment Group and the city are moving closer to a tentative agreement that would allow the company to build a $1.2 billion football stadium next to Staples Center, a project that would change the face of downtown Los Angeles. A proposed, non-binding deal receives its first full city council hearing Friday.
Even as they promised to scrutinize the proposal, most members of the city council's ad hoc stadium committee said they like what they see from AEG:
“I want to thank AEG, and its leadership team, especially Tim Lieweke,” said Councilman Bill Rosendahl, referring to the company's CEO.
“I’d like to also thank the private investor AEG," Councilman Tony Cardenas said.
"I believe the report before us is a very good deal for the taxpayers," Councilwoman Jan Perry added.
For months, negotiators for AEG and the city have been hammering out a proposed memorandum of understanding. It is non-binding, but provides a framework for a final agreement after an environmental impact report is completed next year.
Under the deal, L.A. would issue $275 million in tax exempt bonds to pay for tearing down and rebuilding the west hall of the convention center. That's where AEG wants to build its 72,000 seat football stadium.
AEG would pay off most of the bonds. The rest would come from new tax revenues generated by the project.
“What is the worst case scenario for the city treasurer if this project fails?” Rosendahl asked during the first public presentation of the deal Wednesday night.
“I cannot envision a reasonable scenario where there is a hit to the city treasury," chief legislative analyst Gerry Miller replied.
Miller said AEG has promised a $50 million letter of credit. And if tax revenue doesn’t cover bond payments, the company will pay the difference.
Some council members have suggested the city should seek a greater share of billboard revenue from AEG, or naming rights revenue. The company will control a series of billboards that overlook the busy 110 and 10 freeways.
A consultant hired by the city said the council should be careful about demanding more from AEG.
Bill Rhoda of Conventions, Sports & Leisure International projected AEG will have an operating cash flow of $54 million and debt payment of $38 million. He said the company would have an "internal rate of return" of 6.7 percent.
“So you can see it’s a fine line between making this venue very profitable, and being able to pay down the debt," Rhoda said. "They’re going to have to achieve very high levels of premium seating, sponsorship and naming rights revenue to even advance this project.”
A spokesman for AEG declined to comment to KPCC.
The company — one of the world’s largest owners of sports teams and sports events — sees significant profit opportunities. It’s lobbied the council hard for approval of the football stadium, and sought support from powerful interest groups.
With the city projecting the project will generate 2,600 temporary and 6,300 permanent new jobs, labor unions have been particularly supportive of AEG.
“We’ve got 40 percent unemployment — plumbers, electricians, iron workers — all of those people would go to work" if the deal went through, Building & Construction Trades Council Executive Secretary Robbie Hunter said.
Analysts project L.A. would see general fund tax revenues increase $410 million over 30 years. Officials said that tax revenue increase happens largely because a new convention center hall and stadium would attract bigger conventions, and with them hotels and restaurants.
There are critics of the proposed stadium deal, too.
Some worry too few local residents would get the new jobs. Others, like Victor Citrin, worry about the traffic from football games and bigger conventions.
"Lines of cars through our neighborhood out of the parking structures at the convention center, up 12th Street, up Albany which is right outside our bedroom window," Citrin said.
City officials said they’ll address traffic and parking issues in the environmental impact report early next year. One major fight may center on a possible attempt by AEG to seek immunity from lawsuits over the impact statement, which could slow the project down.
Citrin says he’s not optimistic he'll succeed against AEG's power, and mayoral and city council support.
“I believe that this project has been like a slow moving freight train with no brakes. There’s just going to be no stopping it,” he said.
AEG hopes to win city council approval of the tentative deal next week. It wants to break ground in the fall of next year, and start hosting football there in 2016.
One of the biggest questions remains whether it can lure a professional team to L.A. — and whether it can do that before another company, Majestic Realty, which wants to build an NFL stadium in the City of Industry.