Billionaire Philip Anschutz’s backing of Los Angeles-issued bonds means public funds won’t be at risk in a $1.35 billion plan to lure professional football with a new stadium, said First Deputy Mayor Austin Beutner.
Anschutz Entertainment Group, a Los Angeles-based owner of sports teams, stadiums and concert venues worldwide, proposed a 72,000-capacity stadium in downtown Los Angeles in December to bring the National Football League back to the second-most populous U.S. city. Mayor Antonio Villaraigosa named Beutner, 50, in February to serve as co-chairman of a commission studying the proposal.
“There’s no public money for stadiums,” Beutner said in an interview this week in Bloomberg’s Los Angeles office. “We’re the only city that can privately finance a stadium.”
Anschutz’s closely held company would privately finance the $1 billion cost of the new stadium, according to a copy of the proposal. The plan includes tearing down a wing of the Los Angeles Convention Center to make room for the arena and building an extension and parking facilities adjacent to the main convention center. Those improvements would be financed with as much as $350 million in municipal bonds.
The estimated $25 million in annual debt service on those bonds would be paid from sources tied to the stadium, such as ticket fees, with Anschutz agreeing to make payments if revenue falls short, Beutner said. The two sides are negotiating other funding sources for the bonds, he said.
“The bottom line is they’ve guaranteed the payment of principal and interest on the bonds, not a nickel from the city,” Beutner said. “If the city were coming up with $350 million, it’s a very different proposition. I wouldn’t be for it.”
34th Richest American
The panel weighing the proposal held four public hearings in the past week and met privately March 9 with Anschutz to discuss details. The mayor put Beutner, the retired co-founder of New York-based investment bank Evercore Partners, in charge of Los Angeles’s economic development efforts last year.
Anschutz, 71, is ranked 34th in the Forbes Magazine list of richest Americans, with a net worth estimated at $7 billion.
The new wing will be contiguous to the main convention center, making the facility more attractive for conventions, Beutner said.
A professional football stadium would create thousands of jobs, spur hotel construction and generate new tax revenue from events such as the national college basketball championship finals and the NFL’s Super Bowl, he said. Los Angeles faces a budget deficit of $350 million in the coming fiscal year.
“Where other communities have gotten off track is when they say, ‘We’ll dig into our public coffers, and somehow there will be a payback,’” Beutner said. “We don’t have the money, even if we thought it was a good idea. We’re broke.”
There is little evidence that stadiums generate revenue for cities, said Brad Humphreys, an economics professor at the University of Alberta in Edmonton, Canada, who has studied sports facilities.
“The economic impact is negligible,” Humphreys said in a telephone interview. “There might be a few people coming from out of town, most of the people would be in Los Angeles anyway.”
Anschutz controls the Staples Center arena in Los Angeles for professional hockey and basketball, adjacent to the site proposed for the football stadium. A deal to move one of the NFL’s 32 football teams to Los Angeles hasn’t been reached. The city hasn’t had a team since the Raiders departed for Oakland, California, in 1995.
Stadium Name, No Team
Farmers Insurance Group signed a 30-year accord to name the stadium Farmers Field. While financial terms weren’t disclosed in a Feb. 1 press conference, the Los Angeles Times reported that the deal may be worth $700 million, citing unidentified people familiar with the negotiations.
Bill Rosendahl, a member of the Los Angeles City Council, wrote city officials this month asking what would happen to the city’s existing $445 million in convention-center bonds. In the interview, Beutner said revenue to fund the $48 million in annual payments on that debt would increase because of upgrades to the convention center.
Anschutz’s backing would help sell the $350 million in new convention-center securities, Beutner said.
“Bank of America or Goldman Sachs will call up the bond buyers and say, ‘Here’s an interesting one for you,’” Beutner said. “‘Tax-exempt rate, Phil Anschutz guarantee.’ They’re not going to talk about how many hot dogs are sold or what the sales taxes are.”
It isn’t unusual for private investors to commit to making payments on facilities such as hotels and stadiums built with municipal bonds, said Douglas Charchenko, head of fixed income at the investment bank Wedbush Securities in Los Angeles. The convention center’s debt would require financial disclosure from Anschutz, he said.
“We have said from the beginning that this will be at absolutely no cost to the taxpayers,” Anschutz spokesman Michael Roth said in an e-mail. “It is and has always been our intention to enter into an agreement with the city where we, as developers, would agree to pay the city for any debt-service shortfalls on the bonds.”
Such a commitment “could be an enhancement” to the convention-center borrowing, said Jim Russell, partner in the Collingwood Group, a Washington-based firm that advises municipal governments.
Rosendahl, the councilman, said that while he was happy to hear Beutner’s promise that the city wouldn’t have to pay for stadium construction or convention center improvements, he wanted to see a commitment on paper.
“I think that’s all great, but I want it in writing,” Rosendahl said in a telephone interview. “I have to have something to take a deep breath and take a look at.”
The downtown stadium proposal has competition from Majestic Realty Co. Chairman Ed Roski Jr., who proposed building a stadium in the City of Industry, 18 miles (30 kilometers) east of Los Angeles.