Convention Center: No NFL for DTLA Calls for a Realistic Plan

This will force our cash strapped City to resort to “Plan B,” a truly frightening thought given City Hall’s dubious track record and byzantine decision making process.

In the fall of 2012, the City and AEG entered into an Implementation Agreement where AEG would construct a new $1.2 billion, 72,000 seat football stadium with a retractable roof and replace the 43 year old West Hall with a new Event Hall, all at no cost to the City. However, this deal is contingent on securing a pro football team by October 18, 2014, a mere five months from now.

There are many moving parts to this complicated transaction.

The NFL believes, with some justification, that the new stadium will cost significantly more than the advertised $1.2 billion and wants AEG to be responsible for any cost overruns, a frightening prospect from AEG’s perspective.

The NFL also wants the relocated team to be entitled to all of the $700 million in naming rights revenues over the next 30 years despite the fact that AEG arranged this transaction.

The NFL also insists on a relocation fee from the new LA team, rumored to be in the range of a mere $500 million. After all, a team in star studded Los Angeles, the nation’s second largest market, is worth more than a small market team in Jacksonville, Minnesota, St. Louis, or Oakland.

Finally, the NFL wants AEG to pay the full retail price for its ownership interest in the team despite the fact that AEG will own a non-controlling minority interest, negotiated the complex deal with the City, and secured the lucrative sponsorship with Farmers Insurance.

The NFL is also concerned that the 15 acre site in DTLA is not a suitable venue because it does not provide adequate space for a tailgating, an integral part of the NFL game day experience. And who knows, maybe DTLA is not ready for the post-game shenanigans of NFL fans.

Unfortunately, the City does not have the management expertise or experience, the financial resources, or a well thought out strategic plan to make our outdated and poorly designed Convention Center and the surrounding area into a “world class” destination. Rather, it is a seat of the pants operation focused on building speculative hotel rooms, whether it is a 1,000 room hotel on City owned property (as reported by David Zahniser of The Los Angeles Times on Saturday) or hotels on adjacent parcels subsidized by generous giveaways from our City’s depleted treasury.

The City would be well advised to enter into a 99 year lease for the Convention Center, the surrounding land, and the development and air rights with a well-heeled buyer such as AEG which has the experienced management and financial resources to turn this part of DTLA into a world class destination.

As part of the deal, the City’s new partner will be required to pay off the Convention Center’s existing debt of $322 million, freeing up almost $50 million in the budget. The partner will also be required to make annual lease payments based on the market value of the land as determined every five years through mutual agreement. The partner will also pay real estate taxes and not be eligible for any subsidies, giveaways, or other incentives from the City.

The partner will also be required to operate the Convention Center in a first class manner which may require significant renovations to the existing, outdated facilities or the construction of a new state of the art, high tech, architecturally significant Convention Center.

More than likely, the partner will need to invest billions to build out the property, whether it is to finance hotels, convention halls, retail space, offices, or residences. And if the investor does well, many will no doubt complain that the City lost out.

But in reality, if the new partner does well, the City will do very well through increased property and sales taxes and from ever increasing lease payments on the land.

Most importantly, the Convention Center, an important economic engine for the City, can be operated in an efficient manner without constant interference from the City Council and the City’s bureaucracy.

As for the NFL, who cares, just as long as we do not have to subsidize the NFL and its billionaire owners!

(Jack Humphreville writes LA Watchdog for CityWatch. He is the President of the DWP Advocacy Committee, The Ratepayer Advocate for the Greater Wilshire Neighborhood Council, and a Neighborhood Council Budget Advocate. Humphreville is the publisher of the Recycler Classifieds -- www.recycler.com. He can be reached at: [email protected]. Hear Jack every Tuesday morning at 6:20 on McIntyre in the Morning, KABC Radio 790.)
-cw