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The Truth About the Current Farmers Field Proposal — An Analysis by an Economic and Management Expert

EDITOR’S NOTE: On the day the City Council closed the deal on Farmers Field without knowing who they were doing business with, Quentin Fleming — author, management consultant and adjunct professor of managerial decision-making and strategic planning at USC’s Marshall School of Business — sent a letter to mayor and Council urging rejection of the proposal. Fleming leaped into the debate in July with a devastating analysis based on the overwhelming evidence that new stadiums do not provide a net economic benefit to cities . A few days later, Fleming and LA Neighbors United founder Cary Brazeman, now a candidate for City Controller, combined to raise a long list of serious questions to the deal finalized last week without the mayor or Council improving the deal or waiting prudently until a new owner for AEG was found. You can read Fleming’s comprehensive report submitted Friday (Reynolds 9-28-12 Council Submittal). Here is his cover letter:

Dear Mr. Mayor:

I have spent over 300 hours researching and analyzing the proposed deal between the City and AEG regarding the downtown stadium and event center.   The information in this document is a summary of my research/analysis and supplements the information in my prior letters of 7/28/11, 8/3/11 and 8/9/11 (available in the Council File).

You must reject the proposed deal for a number of compelling reasons.

Farmers Field will not be an engine of economic growth, nor will it generate badly needed additional tax revenues to the City’s General Fund:

  • Farmers Field will only create approximately 70-130 full-time jobs and between 1,000-1,500 part-time day-of-game jobs, not the 20,000-30,000 jobs claimed by AEG.
  •  Farmers Field will create an economic loss of $58 million annually to the Los Angeles economy.
  • Mega-events such as Super Bowls, Final Fours, etc., do not produce an economic gain for the host cities — in most cases they actually produce an economic loss.
  •  There will be no new bed tax revenues from any new downtown hotels because the City Council has recently awarded $700 million in subsidies to the developers of these hotels and will be compelled to continue to do so.

AEG can and should pay much more for the use of our valuable public property — we are not being properly compensated:

  • The true revenue to AEG will be $2.6 billion greater than those reported by the City’s consultants over the next 30 years.
  • The true IRR (Internal Rate of Return) to AEG will be approximately 22%, not the 6.7% per the City’s consultants.

The deal, as structured, represents taxpayer funds being used to build facilities for the benefit of a private business:

  • Contrary to popular belief, Los Angeles taxpayers — not AEG — have fully paid the cost to build Staples Center through hidden subsidies and other incentives granted by the City Council.  Farmers Field will be a repeat through the deal as currently structured.
  • The City is relying on a flawed economic forecast designed to help AEG advocate for economic concessions, preventing the taxpayers from being properly compensated for the use of public property by a private business.

Finally, AEG is in the process of being sold.  We do not know the identity of the eventual buyer or what their intentions will be. It is irresponsible to proceed with this deal.

Enclosed are attachments that support  the assertions I am making in this letter. Submitted in the spirit of a better Los Angeles,

Quentin  Fleming

This entry was posted in 2013 Election, 2013 LA Elections, Community Activists, Hot Topics, NFL Stadium and tagged , , , , . Bookmark the permalink.

10 Responses to The Truth About the Current Farmers Field Proposal — An Analysis by an Economic and Management Expert

  1. Anonymous says:

    Wow! intelligent comments from people who know the deal is screwed. Heck, if I the Mayor and Council wanted such comments, I’d hire you rather than the scum scribes in City Hall who say what I ask them to. Go away.

    • El Quixotian says:

      Biggest, scariest point:

      “Every $1 million expense to the General Fund requires $133 million in new taxable sales to break-even”

      Redevelopment, arguably conceived as offering welcome symbiosis, a pragmatic prosthesis for crippled neighborhoods; itself evolving from mere parasitic leech to hideous doppelgänger…is now dead.

      Leiweke, the head of the pride, gulps down the last fresh meat of the down(town)ed gazelle that the lioness Perry had stalked. It’s time for him to rinse the blood from his fangs and smile for the cameras.

      The hyenas join in….will there really be anything left for the would be buyers circling overhead?

      LA Zoo? Meet the jungle!

      There is no shame in those who scavenge so…that is just what certain political animals do. But woe to the less ignoble beasts that come merely to quench their thirst for righteousness at this watering hole. It’s more than the pecking order of those already in power…Feuer tells a story of his first innocuous comment from the horseshoe, pro forma objections from others just to quash a future rival. But it’s worse than that.

      A good candidate, with integrity to maintain, and good reputation to keep, must be subjected to every attack possible by those who seek the status quo…often ‘represented’ by politicians who have no shread of propriety to begin with.

      Good public servants, if there any still to be found, have to learn from the mammoths and sabertooths over towards La Brea….

  2. Noel Weiss says:

    One simple question:

    Who will be able to afford to attend games? The middle class? Not likely. . . . Maybe they will pay the workers partially in ‘scrip’ (tickets). . . . .

    What was needed here was the functional equivalent of a ‘social impact’ analysis along with an economic analysis. . . Does this project contribute (long term; middle term; short term) to the preservation or enhancement of the middle class in this City?

    Maybe it was there. . . but it just got drowned out in all of the self-aggrandizement and patronizing orchestrated by our incredibly mediocre City Council, Controller, Mayor, and City Attorney. . . . All of whom have let the people down. . . .

    Of course AEG wanted the entitlements. . .Of course, AEG is going to say anything and everything the City Council wanted to hear to get them. . . So, knowing this, why didn’t the City Council at least drive a harder bargain?. . . . .

    In Green Bay, where the people own the team and the stadium (not the government, the people – the same could have and should have occurred here. . . maybe with the sale of AEG we can revisit the question. . . with 10 million people in the County and 4 million people in the City, it is possible. . It would, of course, empower the people economically so our acquiescent, appeasing City Council would not go for it). . . Anyway, in Green Bay, 60% of the gross concession revenues are recycled back into the community for youth sports programs. . . Just one example of how economically empowering the people can generate growth from the ‘middle-out’, rather than from the ‘top-down’. . . .

    Not feasible you say? Well, with little debt (there is some borrowing going on), and mostly equity, there is money in Green Bay for such an undertaking. . . . That’s what Peter Ueberroth did with the 1994 Olympics. . The $100 million profit earned that year still servomg youth sports in Los Angeles to this day. . . .

    The true economics of the project were never seriously discussed. . . . No really serious business plans were presented to the decision-makers (not that they would have understood them anyway). The Controller has subpoena power. . as does the City Council. . . Why not get at the true underlying facts and hidden taxpayer subsidies?

    As with so many land developments (speculative undertakings), the City Council, the Mayor, the Controller, and the City Attorney were the object of a classic ‘bait and switch’. . . . . They were conned (or out negotiated. . . however one wishes to characterize it. . . When Mr. Lieweke starts praising (and patronizing) the City Council for the hard bargain they drove, that’s when I begin to get concerned. . . . .

    Groveling politicians. . . . feasting at the trough of billionaires. . . . paying due deference to discredited ‘trickle-down’ social economic theories. . . . when they had an opportunity to implement some real ‘citizen-empowerment’. . . ‘bottom-up’ economics. . . .If only they had confidence and faith in the people. . . Which they do not. . . . This does not add up to a pretty picture. . . . and it is certainly not a justification for promoting or electing Garcetti, Greuel, Perry, or Zine to another office.They have screwed things up enough. It is time for all of them to be retired, not rehired. Hopefully with a new buyer, the City can renegotiate a better deal because this deal will be renegotiated. . . it is not likely the new buyer is going to love even the relatively insubstantial concessions AEG made by way of ‘baiting’ the Council into action. . . .

    Of course the issue here (and Mr. Lieweke you are ‘good’), we have simple matter of the election. . . . and where AEG and its new buyer is going to put their money. . . . There will be new ‘game’ in town. . . Staring Mr. Lieweke. . . . “Groveling for Dollars” and for a nice pat on the bat. . . recognition and praise from the Billionaires in town. . . Mr. Lieweke has it set up where all of these politicians will be bouncing around and around and up and down seeking approval.

    Will the media report on this phenomenon? How badly does the LA Times or the Daily News want AEG advertising revenue? So Mr. Lieweke has that covered also. . . A paucity of coverage. . . . A compliant media. . . . Could not be more perfect. . . .

    Then, as problems with enforcement of the relatively meager concessions gleaned from AEG arise, and one problem or another occurs, the City Council will be most compliant to either waive the offending condition or simply not enforce any violation (same argument. . . can’t jeopardize the project . . . (for the sake of jobs. . . . One reason the unions have lost credibility and membership is that they keep allowing themselves to get ‘bought off’ (literally and figuratively) by the ‘trickle-down’ crowd. . .Why can’t the union advocate for the people? Collective ownership of this project (or a significant equity stake would provide more benefits to the present and future members of the union. . . . Not to be (so far). . . .

    Then we have the City Attorney, who is so grossly conflicted in representing the myriad of different legal interests inherent in this project that he can’t adequate give legal advice to the people’s representatives. . . . . As is noted in one particular document both the City and the Convention Center. . . There are inherent adverse interests which the Council completely ignored. . . . In the bonding (and the representations made to the investors), how can one issue bonds when one does not know who the developer really is? Paragraph 12.2(b) of the Implementation Agreement states that the City has relied on the Developer’s capabilities, deemed by the City to have been ‘critical’ (that word is in the agreement) to its implementation. . . . So already, before the ink is dry on the deal, ‘critical’ has morphed into ‘optional’ or ‘less than optimal’. . . . Critical implies ‘unique’ (the City bargained on AEG doing the build-out. . . . Too bad for us, AEG never did. . . .)

    The beauty of AEG’S accomplishment here was tie the Convention Center (a City asset operated by a separate City Agency (the LA Convention Center & Exhibition Authority – a separate entity that needed separate legal counsel). . . on City land) to AEG’s broader economic interests. . . . Combining the two as a practical matter hid the potential divergent legal and political interests that exist. . . . so that, in the end, what was good for AEG became what was good for the City. . . . A powerful incentive to keep the deal going in the next round. . . This is a classic ‘promise for performance deal’. . . precisely the type of deal which disadvantages the City and the people. . . . AEG gets the ‘performance’ (the land use entitlements). . . What do we get? A mere ‘promise’. . . Not a fair or adequate trade by any stretch of the imagination. . . Yet the City Council continues to fall for this obvious negotiation tactic. . . . Why? These are not stupid people. . . . . They must be blinded by money and the power of having Billionaires and their minions fawning all over them. . . . Again, not a pretty picture. . . . No one was there representing the broader public interest. . . . . It was mindless. . . There is only so much Gerry Miller (the CLA) can do. . . .

    Why no serious debate or discussion about the facts which supported the decision to put millions upon millions of dollars into AEG’s pocket (that’s what land use entitlements do. . . deposit major dollars into the land use entitlement speculator’s pockets). It is poor public policy to encourage speculation in land use entitlement rights, or any speculation at all. . . . That is what got us into the Wall Street mess. . . Excess speculation is capitalism’s excess. . . Not good for capitalism. . . Not good for us, because it is, in the end, the people who gave away valuable land use entitlement rights on the strength of a mere ‘promise’. . . . .

    This should have been structured as a ‘performance for performance’ deal. . . .

    Equally galling was how each Council person was more anxious and excited than the next at embracing AEG and Mr. Lieweke. . . . Did they stop the Council session to take pictures? Then, when confronted with having been ‘duped’, ‘dumped’, and ‘baited’, the Council members demeaned themselves further by reiterating the strength of their endorsement and adoration for the Billionaire who succeeded in speculating in land use entitlement rigthts on the backs of the people. . . . .

    Mr. Lieweke and Mr. Anschutz must be laughing all the way to the bank. . . There’s a reason Mr. Anschutz is a Billionaire. . . and we all just got to witness it. . .

    I don’t think the City’s interests have been adequately protected by the City Attorney, who, instead of representing the broader public interest, chose to represent the narrow political interests of the Council members. . . . .and the special interest of a well-connected City Hall insider who did not need the City Attorney’s representation because he was well-represented by exceedingly competent private counsel.

    If the City Attorney can’t protect and look out for the broader public interest (which I contend is his job) from the legal perspective (just like AEG’s private lawyer looked out for its legal interests, and you would want your lawyer to look out for yours), then he needs to be fired and replaced at the next election. Mr. Trutanich needs to be soundly defeated and retired (permanently) from politics.

    I think what Mr. Fleming is saying is directed in some measure to the opportunity costs to the City which attend this project. . . There is no free ride. . . . If, after a reasoned, thoughtful debate, the City decides to proceed, so be it. . . .But my guess is that a large minority of the City Council members failed to read through the documentation thoroughly or completely. . . .or at all. . . .

    What was needed here. . . and what is needed going forward is ‘open source’ negotiations. . . . fully open and transparent. . . . I also think the City Council should exercise the power it possesses under Section 908 of the Charter and commission the Neighborhood Councils to hold public hearings (at their expense) Citywide to develop all of the facts. . . including the facts from a social impact perspective. . . . . and then report back to the City Council. . . . Say during the next 90 days. . . .

    Can every aspect of environmental mitigation be anticipated in advance?
    Probably not.

    So why not mirror the TRAPAC Agreement reached in 2010 at the Port which created a $50 Million Port Mitigation Trust Fund, whose proceeds would be distributed by a vote of the people who would have a ‘beneficial interest’ in the fund. . . . Let AEG put $100 Million into an environmental mitigation fund which would be managed by a collective of the people, possessed with the flexibility (backed by openness and transparency) to disburse the funds, as needed, to mitigate adverse environmental and social impacts. . . . .

    There is precedent for this alternative. . . . Any public mention or discussion during the City Council sessions?

    Affordable housing. . . . to compensate for any possible adverse impact on the local neighborhood; or to provide housing for those who might work in the stadium. . .

    Discussed? Nope
    The idea of citizen-ownership, a la the Green Bay Packers model. . . Unlike Major League Baseball, the NFL is not exempt from the anti-trust laws. . . Citizen-ownership (by the people, not the government) of the stadium and/or the team (in whole or in part) should be on the table. . .

    Discussed? Nope

    How is the project going to economically empower the middle class of this City?

    Discussed? Nope

    Can we substitute some ‘sweat equity’ for cash? Is there a possibility that those who help build the stadium can obtain equity in the project? Any reason here not to expand the pie in that manner? There is precedent. . . Market Creek in San Diego. It might impact the evaluation of the true economic benefit to the people of Los Angeles. . . .

    Discussed? Nope

    How can the project benefit youth athletic programs in the City?
    Any discussion of that? Nope

    And finally, I get back to my initial question. . . .

    How many of those workers sitting in the audience will be able to afford attending games and events at the stadium or the convention center?

    Discussed. . . at all?
    Nope. Likely answer? Zero (given that the cost of a ticket and concessions will likely run a couple of hundred dollars. . . .That’s $400 for two; $600 for six (maybe there should be a lower charge for ‘kids’. . . like at the movies (student rates). . . .

    Instead, what we had is the specter of City Hall insiders talking to each other. . . commending themselves on how wondrous and wonderful they are. . . . ‘Mirror, mirror on the wall. . . Who has the biggest ego of them all?’. . . .

    This is what has to change the next election. . . . .

    What is needed is better balance. . . Between ‘ego’ and ‘imagination’. . . Between ‘hubris’ and ‘humility’. . . . .

    It can start now with four very simple changes. . . . Which are symbolic and substantive. . . .

    1. Demonstrate discipline by showing up and starting City Council Meetings on time;
    2. When the public speaks, the City Council needs to listen and to show respect for the public. If they don’t want to listen, then fake it. . .
    3. The Council members need to stop eating at their desks. It demeans the Council as a body, and it looks terrible. . . If the members are hungry and have to leave the Chamber, then call a recess. . . . . Do they permit eating in the State legislature or the US Congress?; and
    4. Show up to Council Committee meetings where the council member is not the Chairman. . . . . and have the Clerk record for the minutes who showed up, when they showed up, when the meeting started, and who left early. . . . . It would be nice. These people are paid enough money. . . They need to show up for Committee Meetings. . . all the time. . . and on time. . . .

    Congrats to Mr. Fleming. . . . His materials will contribute to the future debate which will occur as the new buyer renegotiates the deal (with an economic backstop (no doubt) from AEG. . . . . . Quite a vote of confidence Mr. Anschutz has for Los Angeles. . . . But he did manage to exit with his land use entitlement rights. . . . . .

    Tim Lieweke. . . . . Simply the best. . . the smoothest. . . . the most competent negotiator and lobbyist-representative Los Angeles has seen. . . An incredibly impressive performance and effort!

    Now that he has achieved his economic mission on behalf of Phil Anschutz, I think President Obama needs to send Tim to the Middle East and/or Iran so we can get those problems solved as well. . . .

    Of course, it is not clear whether they do ‘bait and switch’ in the Middle East.

    Noel Weiss

  3. Steve Presberg says:

    As Ron has pointed out repeatedly, virtually all of the “usual suspects” for City-wide offices are completely in the pocket of the mega-interests in this town and that includes the Anschutz’s of this world along with the City’s public employee unions. This whole fiasco is just the latest evidence of how badly we need a City Controller like Cary Brazeman – smart, and unafraid to challenge the go-along, get-along mentality that pervades City Hall.

  4. Ricardo says:

    What nerve of these incompetent morons to think their endorsement of someone matters. Greuelsome and the other corrupt politicians are endorsing candidates. Are you freakin kidding me? Any endorsement from an already corrupt politician is NO Vote in my book. I agree with Noel’s statements. Timmy Lieweke is the John Gotti of LA and all the whimpy council members were too afraid or stupid to vote against him. Everyone needs to show their dismay by not respecting them when they attend a meeting or event. Question for a lawyer? How can the Alarcon who is going on trial for 8 felonies be able to vote on this or any other issue?

  5. John Walsh says:

    On the day of the big vote , every L.A. City Council member demonstrated the same shocking lack of basic debating skills versus opponent AEG that was exhibited shortly thereafter in a different context by President Barack Obama.
    After analysis must come concerted action. Mayoral Candidate Eric Garcetti is one of AEG’s chief enablers/ringleaders /cheerleaders. This is an invitation to join “The Anybody But Garcetti For Mayor Movement “.
    An attitude of “Who cares who wins because there’s really not a dime’s worth of difference among the Big Money candidates?” is ultimately smug and self-defeating.
    We can end Garcetti’s political career in a few short months, giving him an opportunity henceforth to devote himself full time to his budding Show Business Career.We must
    make an example of Garcetti who has already been crowned Mayor by Hollywood in a dull cop movie called:”End Of Watch”. We have the concerted power to terminate the first of thenmany political careers bolstered by AEG.

    Twenty years ago, we Hollywood activists successfully led “The Anybody But Woo For Mayor Movement”. Too bad Mike has never been elected to political office since then. In fact, when Woo was interviewed on Bill Rosendahl’s cable program , Mr. Sour Grapes blamed us as one of the two reasons he lost to Richard Riordan.

    Google “Anybody But Garcetti For Mayor” and check out the many entries so far. “AnybodyBut Garcetti For Mayor” is not a rigid top down organization. Stay on message and you are entitled to call yourself a movement leader. Let’s transform Little Ricky from a member of the 1 % into a lowly member of the 99 %. SI SE PUEDE!

  6. Bob "Mitt" Blumenstuff AEG support rebuttal says:

    AEG purchased a 1/2 interest in my soul back in 1999 with an option for the other half. I sold out for a small sum, since my mamma told me I’m a “bad Jew” and that my daddy was a Goyam! (Later on I found out I am a full Jew and mamma loves me!) In 2012, AEG exercised its option to purchase the other 1/2 interest in my soul. To undo this deal, I filed for Chapter 7 bankruptcy and got a stay of removal of my soul. On election day this November 2012, my Ass belongs to AEG as (I didn’t learn this on the Bar Exam—you CAN buy and sell souls, not people!) Therefore, since I need them to buy me CD3, I must respectfully object to the words of the Anti-Farmer’sFieldists and the comments of Rabbi Noel Weiss. I do agree with John Walsh on Garcetti (but that’s because I have to support Gruel for mayor to get my CD3 seat.) Remember—vote YES on all taxes and for all Democrats so we can continue to make California a jobs-free Zone.

    • El Quixotian says:

      Wait, so the Chapter 7 Stay means you keep both halves of your soul (one for each office) and only need to render your ass?

      That’s so cool! Because there’s so many people who value the souls of Assembypersons turned City Councilpersons…or City Attorneys Matt? Watsa matter, didn’t want to wait for the quadrennial special election for Currently Price’s seat, should he successfully opt out into CD9?

      Oh, sorry Bob…don’t mean to make you the poster child for this phenomenon…just the lowest hanging fruit to pluck out of the festering tree…come November, AND March!

  7. Anonymous says:

    The City Hall bureaucrats who are supposed to protect our interests, don’t. Even if they did they know next to nothing about intricate finance to be able to call a spade a spade. And, does it really matter even if they did when smart people like Fleming’s analysis is tossed out without a glance. Bottom line, reduce city staff by at least 30%. They are worthless and unneeded. The Council can continue to approve AEG and other mega projects without meaningless input from city staff. Let’s save the money paid for salaries and pensions for the much needed infrastructure.

  8. Jay says:

    I stopped reading this column when the guy stated that there will only be about 130 FTE position created. With farmers Field come an NFL team and that alone will employee more than 250 workers. No doubt will be closer to the 20k number than the 130 estimated here.

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