Stadium proposal shifts more risk to developer, officials say
Los Angeles officials unveiled a draft of the financing strategy for a downtown NFL stadium and new $275-million wing of the L.A. Convention Center, saying the deal would help shield taxpayers from harm by shifting a greater share of costs and debt to stadium developer Anschutz Entertainment Group.
The Convention Center portion of the project, involving demolishing and rebuilding part of the meeting facility, would require city officials to issue $195 million in bonds, according to a proposed agreement released Monday by negotiators for Mayor Antonio Villaraigosa and the City Council.
The bonds would be the responsibility of the city’s general fund and would be repaid with revenue from the project, including lease income paid by AEG, parking taxes, property taxes and a one-time construction tax on the project.
A further $80 million in bonds would be the responsibility of AEG, which hopes to open its stadium by 2016, according to a summary report on the proposed agreement. That debt would be covered by creating a special tax district around two AEG properties near the stadium site: Staples Center and the L.A. Live entertainment complex.
By creating the taxing district, the $80 million in bonds would become an obligation of AEG, rather than the city's general fund, wrote the city’s three advisors on the deal. If AEG fails to pay the taxes necessary to cover those bonds payments, the city could foreclose on L.A. Live, said Chief Legislative Analyst Gerry Miller, who co-wrote the report.
“Those bonds are not on the city’s books, so the developer is 100% on the hook for that,” added City Administrative Officer Miguel Santana, L.A.'s top budget official.
The proposal released Monday represents a change in direction from the deal announced in January by AEG Chief Executive Tim Leiweke. At the time, Leiweke suggested that the city borrow $350 million for the Convention Center construction, while his company would privately finance the $1-billion football stadium to be known as Farmers Field.
The Convention Center figure was whittled down to $290 million in June after it was announced that AEG, not the city, would build new parking facilities that would serve both the stadium and the Convention Center.
Miller said 27% of the Convention Center project would be paid for from new tax revenue generated by the projects, while 73% would come from various payments made by AEG. The project would provide the city with an estimated $410 million in “net new revenue” over a 30-year period, according to the report. Of that total, $210 million would go to city coffers and $200 million would be used to repay the bonds, Miller said.
Those estimates do not assume that any Super Bowls or Final Fours will be held at the stadium, Miller said.
The City Council is scheduled to take up the proposed agreement Friday; but Councilwoman Jan Perry, whose district includes the stadium, said she did not expect a vote. “It’s going to be a very long meeting,” she said.
The proposed terms released Monday are not binding and could be changed as the city continues negotiating with AEG.
The city’s document came out hours after NFL owners ended the lockout of its players, reaching a tentative 10-year agreement. That development paves the way for AEG –- as well as backers of a competing stadium in City of Industry –- to push ahead with efforts to secure a franchise.
-- David Zahniser at Los Angeles City Hall
Image: A rendering of the proposed stadium. Credit: AEG Digital Group