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1. Anaheim Stadium Deal Starts Getting Pecked by the Larger Birds
Come one, come all! Watch and see Martin Wisckol perform some real investigative journalism so strong that even the Register’s mighty paywall cannot contain it. Now he’s coming onto the Anaheim Stadium story full throttle, which is ( in multiple senses) welcome news. Those of us lower in the pecking order have been doing our damnedest to prepare the public and the media for a real good, analytic discussion of the Angels deals, but there’s only so much we can do until we attract the attention of the likes of the Register. Give us a good underlying story — and that’s possible.
If we do our job well enough — from lower-circulation blogs from people close to the action, such as Cynthia Ward’s “Think for Yourself OC” and Jason Young’s “Save Anaheim,” to medium circulation general interest venues like this one, to larger circulation investigative venues like (at its best) OC Weekly and (more emphatically on this issue) the Voice of OC, then we do have a decent chance at bringing in the heavier hitters: the TV stations, the big radio stations, and the print publications: primarily the Los Angeles Times and the Orange County Register. And then things are more likely to get done.
When we write extensively about a civic scandal, the second-best outcome is that we have to lead the charge to press the issue ourselves. Of recent issues, the 405 Toll Roads, the Poseidon project, and the still-developing story of full LGBT participation in the Tet Parade fall into that latter category. Until recently, so did the story of the Anaheim Stadium Area Giveaways. But, as of this weekend, the cow has fled the bottle and the genie is out of the barn.
The best outcome comes when we do enough work that one or more of the “top-level predator” publications decides to chase down the story. (To be fair, this is often at the behest of local politicians, many of whom are our sources as well — such as Anaheim’s Tom Tait, Westminster’s Diana Carey, Huntington Beach’s Joe Shaw and Connie Boardman — and yes, Fullerton’s Bruce Whitaker gets a hat tip here as well.) The Register’s Martin Wisckol has been zeroing in on the Angels Stadium story, getting his Anaheim ducks (sorry) in a row, and now he is running with it — doing the sort of journalism that requires the resources and access that we lack. That’s a great feeling.
Wisckol’s resulting story is one fine job — though not beyond adding to. I’m going to review it in depth.
2. First, Nibble on the Appetizers
I expect that I’m not the only one who, when encountering a large story, reads the side features first. In this case, I’ll quote both in full. Here’s a nibble at the photo caption:
PHOTO CAPTION: Anaheim’s plan to help the Angels develop land around the stadium is a type of strategy that’s growing in popularity nationwide as the public loses its appetite for direct taxpayer subsidies and cities look for new incentives to attract or keep teams. However, with development comes risk – and public efforts to offset that risk raise the question of how far cities should go to keep or draw teams.
My only problem with this is that, as we’ll see, it’s too benign. The above suggests a standard story of whether a community should dare to dream (and gamble) big with an investment in a sports team. This past summer, that’s the story that I had expected I would eventually be writing about the Angels Stadium Lease Renewal. But the real story has gotten much darker and more complex: a story of how the leaders of the city may use a sports stadium deal to get what they want, what can make them wealthy, even when the team owner doesn’t really care about these ancillary matters at all. It’s the story of how The Deal becomes the vehicle for The Steal.
For a more substantial appetizer, the Register’s information-stuffed sidebar (containing the “deal points”) is a must-have:
SIDEBAR: The proposal being used to negotiate a new Angel Stadium lease calls for a deal that would extend through 2057, with opportunities for the team to opt out in 2036, 2043, and 2050. A proposal for a separate lease with Arte Moreno’s Pacific Coast Investors would give PCI the right to develop 128 city-owned acres surrounding the stadium and control the property for 66 years.
That means PCI could control that development for as much as 33 years after the Angels have relocated. That’s attracted some criticism.
Although the land lease with PCI has been proposed by the city to help the Angels pay for stadium renovations, city staff says there are reasons to keep the two leases separate and on timetables appropriate for their respective goals.
“First, each transaction should create sufficient economic benefits and revenue streams to the city to be independently justifiable,” said Tom Morton, executive director of Anaheim’s Conventions, Sports and Entertainment operations.
“Second, retaining the ability to terminate a long-term development lease if the Angels leave Anaheim will likely eliminate the developer’s ability to finance construction of improvements and infrastructure.”Proposed lease terms
The proposed lease for Angel Stadium was drawn up by city staff and a city consultant, in consultation with the Angels. It is the basis for negotiation; none of the terms have yet been approved by the City Council.
- Team keeps all receipts on the first 2.6 million tickets.
- Team keeps all revenue from concessions, advertising, stadium naming rights, non-baseball events, and virtually all receipts from on-site parking.
- Team uses the word “Anaheim” in its official name.
- City receives $2 for each ticket sold after the first 2.6 million.
- City pays about $400,000 annually in debt service.
- City pays about $600,000 annually in maintenance.
- Team keeps all receipts on the first 3 million tickets
- Team keeps all revenue from concessions, advertising, stadium naming rights, non-baseball events, and virtually all receipts from on-site parking.
- Team can drop “Anaheim” from its name
- Team pays for all annual maintenance.
- Team pays for stadium renovations, estimated at $130 million to $150 million.
- Team can develop the surrounding 128 acres, paying the city $1 rent per year for 66 years.
- City tax revenue from new development is rebated to the team.
- City receives $2 for each ticket sold after the first 3 million.
- City pays about $400,000 annually in debt service.
Source: City of Anaheim
3. General Comments on the Sidebar
Again: the only problem with the Register’s recounting of these deal points is that they understate the problems with the contract. Statements of City Staff tasked on the project — who, to a person, sound like they could just as well be paid staff for the Angels — have made clear that the contemplated deal for the Stadium Lot would not necessarily be for 66 years, which is offered the minimum period necessary to satisfy potential bondholders, but for 66 or more years. Could be 80. Could be 99! So one of the harshest aspects of the deal — the time between which the Angels could leave under the new proposed lease framework and the time that Angels owner Arte Moreno – or whomever he sold the rights to — no matter what the Stadium itself might be converted into being, even if it were, say, a massive new third park for Disneyland — could be not just 33 years, but 47 years. Or 66 years! Or who knows how long!
(By the way: that idea of a third park for Disneyland isn’t original with me. I actually think that it’s a natural use for the property, either with or — more likely — without the Stadium as a centerpiece. If this should happen — and the fervor with which Kris Murray, BFF of Disney’s agent in Anaheim, Carrie Nocella, suggests that it may well be part of the secret agenda — then all I want is for the citizens of Anaheim to get as much as they can reasonably get from the deal without killing it. They are owners of the property needed to make it happen, after all.)
There’s an easy fix for this problem, which our prominent commenter David Zenger has pointed out continually: don’t allow the deal to be broken up among two different entities with two different agreements. But someone seems to prefer the more complicated approach! Who? Why? (Because then it’s more easy to sell off the separate interest — in which they’re interested?) These are the sorts of things that give rise to suspicion over the future of Anaheim’s second-biggest real-estate asset — and why the future proceeds reasonably expected from that asset may end up going elsewhere than Anaheim’s General Fund.
And Anaheim — a city that already has a growing minority population and a recent history of civic unrest — is going to need that money, both sooner and later.
In other words, this is largely about what happens way down the line. Not just for the adults of Anaheim now, nor children born this week who will at some time live in the city. It’s about those children’s children — and their grandchildren, great-grandchildren, and even great-great grandchildren. A 99-year span of the Stadium Lot lease — fully possible under the current MOU framework — could cynically cut Anaheim residents out from the vast majority of the benefits of the most productive economic uses of this centrally located parcel.
It doesn’t have to be this way. The excuse given for having to give the rights to this lot to the Angels is that under the current lease Arte Moreno owns the parking rights. (Of course, a sufficient parking structure could be built in the eastern portion of the parcel, closest to the new ARC station — while the western portion of the parcel could be developed. This would generate a lot of money — of which, as the MOU stands, the City would barely share at all.
Again, the solution is obvious: rewrite the contract so that Moreno no longer owns the rights to the parking lot at all. In exchange the City of Anaheim could build that parking lot for him — especially if (as should be the case) it profits from the proceeds of parking. (Or, the City and Moreno could go 50-50 on the project; it’s a good deal for Moreno either way.) The current City Council doesn’t rule that out — they insist, over and over, that the current form of the MOUs is not final. But this assertion carries little weight because they are not starting from a blank slate. If the draft MOU were simply an agreement to agree — a blank slate — it would be a lot more … blank. Why write down things — apparently at the behest of City negotiators – that favor Moreno and that the City doesn’t favor?
That wouldn’t be so much of a problem either except that the City Council majority (everyone but Tait) refuses even to instruct the City negotiators as to what they DO want them to accomplish! They say that they can’t talk about this for fear of undermining their negotiating posture — but they intentionally adopted such a weak negotiating posture (you’ll see evidence of that below as I review Wisckol’s story) that it can barely get worse without it becoming politically unfeasible (as well as, I’d argue, misfeasant or malfeasant). We critics have made some pretty loud noise over this for months now; if the City Council’s members think that any of our specific complaints are legitimate they have had the ability to say that they would instruct the negotiators that a given position was inappropriate.
Councilmembers Lucille Kring and Gail Eastman are the most likely to step in and join Tait in a reasonable majority — but they haven’t. Why? Hey, let’s ask a professional journalist.
4. Into Wisckol’s Article
You really have to read this for yourself. Here, here’s that link again. Given the stakes, just make the time for it. My comments will be interspersed in bold orange.
Wisckol notes that the proposed lease could give Moreno tens of millions of dollars of new income (and again, I think that that’s a lowball estimate, because he’d probably sell it for plenty) — through 2070 (and again, that is the best case) even if the Angels exercised their option to leave in 2036. He says that, to keep the Angels in place, Anaheim wants to help Moreno defray the $7 million per year or so that the Angels are obligated to do in stadium renovations over the next 20 years. Letting Moreno (or whomever he sells it to) develop the 128-acre lot (I’ve heard 155 acres, but he could be right) is supposed to keep him happy. And he’d also get (and be able to resell) a rebate of all city taxes that the developed acreage generates.
Wisckol quotes Tait as saying, during the September 3 post-Labor Day “sneak attack” meeting: “I would not do the deal. … That land belongs to the people, and we need to protect the people. We certainly value the Angels, but the economic value to the city doesn’t merit giving away the land for free.”
Wisckol then breaks some important news: that “at least two (of the Council majority) have concerns about a 100 percent tax rebate and about letting Moreno benefit from development even if the team leaves.” (THAT’S GREAT! Add Tait’s vote, and they can instruct the negotiators ASAP, before negotiations go a day further than necessary, that they should seek a deal that excludes both of those deal points! Not good enough — but at least it would be a start! And remember, that is just Anaheim’s bargaining position, not the final wording of the agreement!)
He notes that the Council is waiting for an appraisal (although at last report not a fair expert appraisal, for some disturbing reason) which could be as high as $380 million. (Or higher. Consider a possible third Disney Park, for example!) He notes that “if the land was worth a more modest $200 million and Moreno was given development rights for $1 per year, that would mean a $50 million benefit to the owner beyond his highest expected renovation expenses.” This makes even Councilwoman Kring hesitate.
Now comes the best part of the whole story – in which the emphasis is mine:
Eager to dispel the impression that it’s making a land grab, the team emphasizes that the proposal originated with city staff.
“Including the land was the city’s idea as their contribution to fund the much-needed stadium improvements,” Angels spokeswoman Marie Garvey said. “We are trying to work through the details of the land in a way that is mutually beneficial.”
I tend to believe the Angels here — especially if no one contradicts this. (Moreno ain’t stupid or timid — but he’s also not a developer.) And that begs the question: if the City is raising this deal point – why is that? If the City’s goal is just to keep the Angels here, why didn’t they ask Moreno what deal-sweetener he actually wanted — rather than suggesting (and perhaps actually trying to impose) their own? Many of us suspect that some or all of the Council majority already have a buyer in mind — probably someone associated with either Council Majority godfather Curt Pringle or Disneyland (or both). If so, they may want to use Moreno as a “cut-out” to get the property sold to the developers of their choosing in a way that would keep the City’s fingerprints off the deal and shield them from the political ramifications of, say, giving away the rights for Disney to built a third theme park for a song.
My hope and expectation from the beginning has been that Moreno is too smart to be Curt Pringle’s patsy. He has a reputation and a relationship with his team’s fan base to maintain. This sort of underhanded maneuver could destroy it.
Wisckol notes that the team is unlikely to relocate — meaning that if the City is bending over backwards to throw money at Moreno to keep the Angels here, it’s doing so because it wants to do so. He notes that the current lease ends in 2029, but that the Angels have had the right to opt out of the lease by 2016. (If they wanted to do so, they really should have started the plans by August, meaning that by extending the opt-out period by three years on Sept. 3 the City “let them up off of the mat.”)
The next section of Wisckol’s piece is absolutely critical, because if the Angels aren’t likely to leave then the City Council has no legitimate rational reason to throw money at them to beg them not to do so. He notes that moving would probably be more expensiev to the Angels then staying put and paying $150 to renovate the stadium. Right now, they have a very favorable deal — they spent almost $1 million for the stadium in 2013 and the City spent about the same.
And, as you’ll note from the sidebar, the team currently keeps all of the revenue from the first 2.6 million tickets it sells each season, almost all parking revenue, all money from concessions and advertising, and all profits from non-baseball events. That’s one reason that the Angels were the 7th highest grossing team in Major League Baseball, with $275 million. Wisckol reviews recent stadium deals in metro Atlanta, St. Louis, and Brooklyn — all of which cost their teams more than $320 million. One expert quoted say that the team is unlikely to get a better deal elsewhere; another won’t say that it’s likely, but also won’t say that it’s impossible.
Wisckol quotes Kring as follows: “I can see them move if negotiations broke down and there was miscommunication and they wanted to wash their hands of it. … I can see that the team might like something brand-spanking new.”
Like the City’s paid outside staffer, attorney and former San Diego Padres honcho Charles Black, Kring’s idea of tough negotiation is apparently to talk down the quality of what one has to offer and build up the opponent’s position. It’s — well, the nice word I’ll use for it is “unusual.”
Wisckol notes that municipalities now often try to offer non-cash incentives — such as development rights — to teams rather than cash subsidies. In St. Louis, they get ten acres; in brookly, 22. And this part I’ll have to quote directly:
But the 153-acre plan at Angel stadium – specifically, the 128 acres of parking zoned for mid- to high-rise buildings – is unprecedented in scope. It is also full of encumbrances, chief of which is maintaining adequate parking for the stadium. And it comes with a fair share of risk, given the difficulties others have experienced in development plans in the area.
In 1996, 50 acres of the parking lot – which can be developed without infringing on parking needed for the stadium – was to be developed as Sportstown with an indoor extreme sports venue, restaurants and shops. The project died four years later when the developer was unable to secure financing.
In 2007, developer Archstone-Smith offered $205 million to $225 million for those 50 acres, with the city providing as much as $30 million in tax-increment funding for infrastructure, according to city documents. But the recession intruded, and the deal fell apart. There had also been conflicts with the Angels, who must OK residential development and certain kinds of retail building on the site.
(Again: remember that right to approve such development on the site? That is one of the things that Moreno could negotiate away in a new lease agreement, so long as he got reasonable compensation for doing so, if the City Council and its agents had any sense. They could literally trade it for the Stadium building itself — with both sides potentially coming out ahead. Or maybe he’d prefer something else. Hey, here’s an idea — have the negotiators negotiate with him over what he’d be willing to take, beyond a guarantee of adequate above-ground parking, in order to give up the right to block development!)
Wisckol notes that in 2004 the Platinum Triangle surrounding the stadium was approved for up to 18,909 residential units, 4.9 million square feet of commercial space and 14.3 million square feet of office space. Only 10% of the residences, less than 1% of the commercial space, and 0% of the office space has been build between then and this past August.
Quoting Wisckol again — and read the damned story because I’m leaving off some good parts:
The risk usually lands squarely with the team rather than with the public, which typically offers incentives in lieu of assuming risk. In the case of Anaheim, the Angels have more site development leverage on the site than an independent developer because of the team’s ability to veto some types of building and to work around parking needs.
If the Angels did nothing with the land, the team would lose a grand total of $66 – the $1 a year lease for 66 years – under the proposal. And it could cut a deal in which a developer would assume all building risk – and pay the team for the opportunity.
… “There’s some price point – between whatever those development rights would get on the open market and zero – that likely makes sense as a compromise,” [one expert] said. “But $1 is surrendering before you’ve even gotten to the bargaining table.”
Again, the Council majority acts as if the $1 figure was “just a placeholder.” No. Do you know what a placeholder in a contract looks like? It looks like this: “___.” That would have been a far wiser choice — and the Council could have asked the negotiators to get rid of in on Sept. 3, on Sept. 24 — or anytime since them.
Wisckol notes that property values in the area are rising, though not yet to pre-2007 levels. The encumbrances (which, again, can be bargained away for fair value!) make the land less valuable; tax breaks and proximity to the stadium make it more so. (Wisckol leaves out the fact that the land is already entitled for development — no messy and possibly deadly CEQA process to undertake! — also enhances its value.)
Wisckol notes that the staff’s preliminary estimate of the 150-odd acres was between $30 million to $230 million – seriously, they said that it could be as low as $30 million! – and that Tait asserts that an unreleased document set the range as between $150 million and $380 million. He quotes an appraiser to say that a $50 per square foot for the parcel would be “unsurprising” — that’s $279 million just for the 128-acre portion of the parcel. (In other words: his estimate outside of the highest point of City staff’s range and in the upper half of the range Tait cited. One thing to keep in mind is that, with interest rates so low right now, investment capital is practically begging for good opportunities.
Finally, Wisckol says Eastman has some reservations about the amount and duration of the tax rebate due to Moreno, while Kring’s reservations are limited to the amount. Eastman dislikes the idea that Moreno’s company could continue to profit even after the Angels left Anaheim; Kring thinks that a term of at least 66-years may be necessary for financing. (Presumably, she doesn’t think that Moreno will agree to keep the Angels here for 66 years or more. Hey, do you know what would solve this problem? Renegotiating the lease to take away Moreno’s right to block development of the property, allow the City — which will be around to be a landlord for 66 or more years — to lease it out, and give Moreno some compensation from that lease – if any is truly necessary – as consideration for giving up his right. That compensation could also be the parking that Moreno wants to secure. This would make sure that the City — rather than Moreno and his agents, received lots of financial benefit from a sale to Disney — or whomever.)
Wisckol reports that Murray is declining comment on the proposal for now until it has been refined in the negotiations for which her majority faction has failed to — publicly, at least — give the City’s negotiators any guidance beyond “hey, just come back with whatever you want.” Councilman Jordan Brandman “responded by email to questions about the tax rebate and split-lease proposals, and did not rule out support for either,” which suggests — probably falsely — that he is a gettable vote on a compromise. Tait would offer concessions to get Moreno’s cooperation in a joint venture to that would allow the City to sell the property to promote development clear of his encumbrances. (This seems quite doable given how the Angels are backpedaling away from responsibility for a “property grab.” It’s the kind of thing that Tait suggested — apparently off the cuff — on September 3 and reiterated on September 24, without anyone on the Council agreeing that maybe they should tell the negotiators that they think that it’s a good idea to do this.)
The timing issue is the most interesting. Eastman says the complexity of the situation may take years to work out — which is why she supported extending the opt-out period by three years. Kring would like to see the issue settled by spring training. With Murray and Brandman apparently being respectively guided by Disney’s Nocella and (whoever he’s working for besides himself’s) Curt Pringle — it looks like Eastman may be in for a rude surprise from the rest of her majority. Spring training in Tempe’s Diablo Stadium (yup, “Diablo”) starts on February 28 and ends on March 29. After Tuesday night, the Council has four regular meetings left before the former date and two more before the latter. Opening Day, March 31, will be followed by a Council meeting.
If Eastman really won’t approve a deal until its “complexities” have been addressed, then unless Nocella or Pringle decide otherwise on behalf of their charges, “there won’t be a swing if it ain’t got that Kring.”
Not a bad position for someone who wants to raise money to run for Mayor. Maybe a very bad position, though, for someone who wants to be elected — and stands to alienate either the voting public if she rushes or the big donors if she doesn’t.