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,