AEG’s proposed $1.4 billion LA NFL stadium & Convention Center expansion

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Back on February 16th Timothy J. Leiweke, President and CEO of AEG sent a proposal to the Chief Legislative Analyst and Chief Administrative Officer at the city of Los Angeles regarding “a potential [public-private] development of both a new multi-purpose Event Center at the location of the existing West Hall of the LA Convention Center” that would “involve the city issuing $350 million in municipal bonds for the convention center portion of the project.” The June 25th Bloomberg report goes on to say that “AEG seeks to attract at least one NFL team to the city.” Source. Bloomberg.

Where I have a problem is that in Mr. Leiweke’s Feb letter he writes “we are mindful that the City of Los Angeles cannot and will not subsidize a private stadium development with taxpayer dollars. We understand that the City, like most local governments, has been hit hard by the recent recession, and we recognize that the citizens of this City would understandably look askance at any proposal that contemplated public funding of a private facility. In this regard, key elected officials and City staff have consistently delivered the message that any Event Center proposal must be structured in a way that neither puts the general fund at risk nor threatens to divert existing tax revenues from other key City services.”

However on page 2 of the Transaction Overview it addresses “financing of public improvements“.
“(a). Design and construction of both the New Hall and the New Parking Structures, together with associated financing costs will be financed with tax-exempt revenue bonds to be issued by the City or the Los Angeles Convention and Exhibition Center Authority (the “Bonds”). Based on preliminary cost estimates, gross Bond proceeds necessary for the New Hall, the New Parking Structures and financing costs are anticipated to be approximately $325-$350 million.”

So in one breath AEG’s CEO acknowledges the recession yet at the same time comes hat in hand requesting a Bond be issued for part of the proposed development to the tune of $350 million dollars at a time when governor Brown is trying to shut down redevelopment agencies.

Note: Mayor Antonio Villaraigosa and the LA City Council were each copied on the 2-16-2011 AEG proposal

Let’s now look at the current debt of the Community Redevelopment Agency of the City of Los Angeles (CRA/LA).
As of June 30, 2010, “CRA/LA had 67 tax allocation bonds and one parking revenue bond outstanding, totaling $712,586,000, net of un amortized bond premiums, discounts, and related items of $1,124,000. Of the 67 tax allocation bond issues, 49 are insured.”

Pay close attention to the CRA/LA text found on page 13 which reads in part: “To help alleviate the State’s significant budget shortfall last year, the State required all redevelopment agencies to participate proportionately in a shift of $2.05 billion in property tax increment revenues into the county Supplemental Revenue Augmentation Fund (SERAF) in fiscal years 2010 and 2011. CRA/LA’s share is $85,081,000.”

Gilbert caution. On June 30, 2010 CRA/LA wrote “Although the state’s recently adopted (budget) does not include any additional transfer of redevelopment funds, CRA/LA will continue to monitor the State’s fiscal condition for any potential impacts on the CRA/LA.”

I would say that governor Brown’s full court press to abolish redevelopment agencies will have an impact on this already overextended city agency. He is currently asking that $1.7 billion per year of redevelopment tax increment be given to pay for state obligations.

Now is not the time to create additional gridlock adjacent to Staples as we already have the Ritz Carlton, JWMarriott hotel and LA Live condo’s in that immediate area. That said, if AEG feels that bringing an NFL team to LA is a winner than fund the project without taxpayer funds, especially when many residents of LA are unable to afford attending any of the local NFL games.

To express your opposition let me suggest attending the hearing on AEG’s proposal that is scheduled for June 30. Five members of the city council participate in these hearings. According to the Bloomberg report “AEG has given the city a July 31 deadline to decide on its plan.”

About Larry Gilbert