August 31, 2011 – Daily Brief

Kevin, you must be blind. Have YOU seen the area around Staples Center, including but not limited to: – Nokia Theater – Club Nokia – ESPN Zone – Landmark Theaters – JW Marriott – Ritz Carlton And the recently opened: – Hooters Not to mention events like: – Grammys – XGames – Pac-12 Mens’ and Womens’ Basketball Tournaments Staples Center is a boon to Los Angeles and Downtown specifically. An LA Times article even highlighted how real-estate speculators instantly started making offers on all the blighted properties west of the 110, as soon as AEG announced their intent. Why? Just to leave it in shambles? Nope… to improve it and make money!!!!

Kevin never lets facts, reality, or market success get in the way of his union busting. That’s the key word from his illogical, unsupported rant “union”

Todd, the reality is that if there is ANY public subsidy of all of the facilities you list, it is going to the very affluent people who can afford to use/stay at those facilities. My daughter, who is a young adult with very little income, wanted to go to the “Anime Convention” down there. While the ticket price was reasonable, the hotel developed in connection with those facilities, Marriott, jacked up its room rates by $100 per night for the event, just to rip off the people who wanted to attend the event. And the rates charged for parking were again prohibitive for the average young adult. I have no problem with a private sector developer building a stadium in some God forsaken part of LA County at their own expense. However the County is broken financially, the City of LA is broken, and the taxpayers who need basic services cannot afford to subsidize (1) rich developers/sports team owners, (2) rich patrons of events at the places you list or (3) construction unions who turn out obnoxious masses in pre-printed T shirts to demand construction jobs. And yes, I was and will continue to be disgusted when the Los Angeles County and California Democratic Party organizations hold events in those “elite” places.

Correct me if I’m wrong, but my recollection is that AEG built Staples Center without any public monies and has stated publically that they will do the same for Farmers Field (hence, why they’ve already sold the naming rights before its been built). In fact, AEG has to fork over cash to the City to pay for the part of the convention center they’re demolishing, and rebuild it elsewhere. On the surface, the city is getting a good deal. As for the jacked up hotel rates, show me a single conference/convention/expo/major event when that doesn’t happen. Supply and demand, counselor. As for parking, etc…. Jeff would beat me with a noodle if I didn’t remind your daughter that she could take public transit (via SCT, Metrolink and Red/Purple and Blue lines) right to Staples Center. (Oh, and another retort to Kevin, Staples Center and the revitalization of the downtown area has also served to allow the LA Auto Show to once again be a major player in the automotive world with many manufacturers making world and North American debuts of their new products, even in front of the Detroit show 6 weeks later. Trust me when I say that speaks volumes. There hardly EVER used to be any debuts of new cars at the LA Show….

No sane person rides Metrolink or the subway lines, if they want to avoid the risk of death, dismemberment or disability in the flying tin cans made by a Quebec company and purchased by public agencies led by Mike Antonovich and Zev Yaroslavsky.

All the respect and sympathy in the world for what you went through CS, but rail travel is safer than driving in your car alone everyday. 30,000+ Americans die in car crashes every year

And people being good citizens, and using public transit and injured in the Chatsworth Metrolink crash got NOTHING for their injuries other than their old medical bills being paid, even though Veolia (as employer of the texting engineer) had a $700 Million insurance policy. If you look at the actual court records, Metrolink has viciously turned against its passengers in every single crash since Glendale, with the Antonovich led Metrrolink Board’s conduct in the Chatsworth crash being heinous, siding with Veolia in signing critical court pleadings against the passengers. Metrolink and the subway are merely a scam to allow continued home development in the far suburbs, without concomitant local job creation, as a means of evading compliance with the Clean Air Act. Metrolink and MTA also have no interest in passenger safety. Instead, their only interest is operation of their scam at the lowest cost.

There are plenty of hotels to stay at in the area. Of course the ones in the complex are high end thats the whole idea. A college student “affordale” hotel would certainly have no place there. The prices go up – that is supply and demand, not a plot to try and gouge the anime community. But thanks for the laugh! I can just see all those Marriott suits at the HQ in Maryland deviously planning how to gouge poor kids.

Actually, they DID plot against the Anime kids. The first year the hotel was open, in 2010, during the Anime convention, its room rates were the same as the room rates in nice hotels on Bunker Hill. However, when the taxpayer subsidized Marriott saw the large numbers of people at the Anime Convention in 2010, they realized they could get away with gouging for 2011. So this year, the room rates increased by $100 per night or more over and above the room rates on Bunker Hill hotels which stayed the same during that weekend. How much did LA City taxpayers get from each extra $100 paid to Marriott? Nothing, except the sales tax on top of that $100.

Todd You were doing great right up until you equated the Pac 12 Mens’ basketball tournament with an “event.”

HA! The final usually pulls a crowd. And I buy tickets… too bad my Sun Devils are bounced in the first round nearly every year… (once we made it to Friday!!!! That was an exciting year!!!!) Good luck to your Nebraksa Bride’s Huskers… I pick em to win the Legends (is that what it is???) division on the Big 10 with 12 teams.

I was down there 6 months ago and was blown away at how re-invigorated the neighborhood has become. There are tons of loft residences and the whole LA Live thing is HUGE.

Did you check on the rents at those residential lofts? By and large, redevelopment areas in downtown Los Angeles have benefitted the very rich and very well politically connected and no one else.

I have several friends who live in downtown lofts… trust me… they’re not rich. Are they middle class? You betcha. Rich? Not a chance. The penthouses of these loft buildings may be for the rich… but I’m pretty sure most of them still would rather live on Wilshire with the doorman, valet parking and no bothersome views of skid row.

LOL, this is a keeper. Either we wasn’t in Downtown before, or he hasn’t been lately. Night and day difference.

A misuse of redevelopment authority and kudos to The Guru.

Oh crimany, I agree with Petz.

Hey Scott! CS says your daughter is wealthy!

Scott, look at the numbers in the Multiple Listing Service for that area 90014 at realtor.com. The cheapest residence is one room with 650 sq. ft. for $131,900 in a 90 year old building. If you were a secretary working downtown and had 2 kids, the least expensive downtown housing you could buy would be a $760,000 2 bedroom in an 80 year old building. The “housing boom” downtown, such as it is, is designed to cater to well compensated young people without families. I have no problem with that, but the point is that there is no reason for LA County taxpapers to subsidize the re-developers of downtown if this is the housing product they are producing. I would be fascinated to see someone develop not-subsidized 3 bedroom, 2 bath family condos downtown, to compete with “houses” offered for sale in Santa Clarita and the San Gabriel Valley. Would families be able to afford to move downtown without a subsidy?

Research fail. There are many zip codes in downtown. Compare this: http://www.realtor.com/realestateandhomes-detail/27005-Edgewater-Lane-12_Valencia_CA_91355_M23255-05894 to this: http://www.realtor.com/realestateandhomes-detail/100-S-Alameda-St-Unit-304_Los-Angeles_CA_90012_M14948-68243

The problem, Mike, is that no secretary who works downtown is paid enough to support the mortgage on even a $290,000 two bedroom condo, let alone pay for her two kids. The condo you show has also been on the market for 159 days, showing that the demand for downtown “family” sized condos is low. It’s also important to point out that the LA City Housing Authority also forces the condo buyers in projects built with some public funds (or in the coastal zone) to subsidize the monthly HOA assessments of their low income neighbors who are entitled to reside in 10% to 20% of the units in these condo buildings. (Ask Lennar about their being forced to set up this sort of subsidy deal in LandSource’s ocean view high rise complex in Venice, CA). Also Mike, I focused on 90014 because that’s where ScottE’s daughter bought a loft. I bet she’s not a secretary supporting two kids. The point is the same regardless of whether the condo price is in the $600,000′s or $290,000, housing built or redeveloped Downtown with direct or indirect taxpayer subsidies is not affordable for the vast majority of people who work Downtown.

What is the point you’re trying to make? The housing in DTLA doesn’t accommodate the number of people that work downtown as is… so commuting is a necessity. What do the secretaries who work in Beverly Hills do? Where do they live? Your point is moot. There is no requirement that housing prices be commensurate with the salaries of the employees in the area. Otherwise, most of Santa Clarita would be a lot cheaper than it is, no?

The point is that publicly subsidized or built urban renewal and redevelopment benefit the super-rich and young childless urban professionals. Like the rich man from Chicago (my client) who got the LA City Redevelopment Agencies to subsidize his building of the hotel at 333 S. Figueroa, by paying for part of the land, the sidewalks, the utility and sewer connections, the driveway and its palm trees, and mordida to CALTRANS who were mad that the hotel’s exist driveway was too close to their freeway offramp. The average Los Angeles County taxpayer gets no benefit from subsidies of redevelopment projects, be they stadiums, hotels, office buildings or downtown housing for Generation X or Y.

CS, no, my daughter is not a secretary with two kids. But she’s not the CEO of KPMG either. She makes a good living for a 26 year-old .. enough to afford an 800 square foot studio/loft. One block over, a similar loft costs almost half. Two years ago (maybe 3) Her current loft cost double. What’s the point? Why shouldn’t government subsidies benefit her again? She pays taxes. How do you and I benefit? Well, while you may prefer to hang out in the coastal .. I like having a thriving urban scene within 35 minutes (weekends). When I have to go downtown to meet with clients during the week, I like the fact that the downtown area is much more user friendly. I know a lot of people who feel the same way. So … aren’t we “benefiting?” What does that even mean? “Benefit?” Hockey? Live Rock’N'Roll? Football? Art? Theater? I like it all. I benefit from it all. What do you like to do Coastal? Just Non-government subsidized activities? Ever go to the park? Play soccer? Take your dog? Tell me. I’m curious.

No Scott, I paint and slay dragons. I’m currently working very hard to keep your drinking water from being poisoned by a certain British company, a Federally owned insurer, and some profoundly lazy and corrupt state employees. The Chinese killed my dog with the phony protein powder they exported to America’s largest dog food manufacturer. And my family’s part of Santa Clarita, Canyon Country, still doesn’t have a wheel chair accessible large public park, let alone a useless little one.

Sorry about your dog..

I believe they stated that if Farmer’s Field is built, that they will get an additional 5 t0 15 events at the convention center…I know Microsoft is hosting their convention there next year. As to financing, I believe they are following the Staples Center model, but that AEG or monies received from taxes pay for the actual bonds and if they come up short than AEG makes up the difference. Also, the dems don’t go to the Marriott, they do use the convention center, Dems either go to the Biltmore or the Universal Sheraton or the Sheraton near LAX…

Mike- You’re absolutely right…. The bonds that will finance construction are to be paid back by special district taxes including a new tax on the Staples Center parcel. So, in part, Staples Center will pay for the Farmers Field. And because its taxes, if AEG defaults, the city has the ability to foreclose on the property and take control of Staples and Farmers. In addition, Farmers Field and the subsequent improvements to the Convention Center will not only bring new conventions, but other events (I’d be willing to bet my entire week’s wages that the Pac 12 Football Championship will sign a deal there within the next year, as well as a possibility of a second bowl game…heaven forbid the Rose Bowl get some competition, but like the Holiday/Pointsetta bowls, the first one would be much earlier in the bowl season), and conventions that have been here and are looking for sweetheart deals and improvements will get it and stick around (E3 anyone?).

And, for those who don’t know, every year the Federal government gives each state a quota as to how much they can issue in “tax exempt municipal bonds”. That covers everything from bonds for sidewalks, sewers, storm drains and schools to public housing to infrastructure for redevelopment projects like high rises and stadiums from which corporate mega-developers and union contractors benefit. In California, it’s the State Allocation Board which has the task of dividing up California’s quota each year, so every dollar which the State Allocation Board allows for funding of the project Todd describes takes away the ability of other localities to issue bonds to build schools, sewers, streets, storm drains and other needed infrastructure. For every dollar the Allocation Board budgets for the new LA Stadium, it will be a dollar less which some other community in California can issue for their needs. Given the massive dollar size of the stadium construction project, allowing the use of tax exempt bonds will bleed other California communities dry. (I lived through the era of the building of Anaheim’s public stadiums, when projects my clients were working on in other cities and counties couldn’t be funded because the Allocation Board didn’t have enough allocation from the IRS to go around.) Later, as a lawyer for the trustee of public agency pass through bond issues, I’ve had the experience (I won’t use the word pleasure) of foreclosing on collateral for “municipal bond” financed projects which didn’t produce the revenue necessary to make payments to the bond holders. Todd’s comment above unwittingly shows some of the more horrifying aspects of the most extreme stadium deals (1) if a public agency is to be the foreclosing party that means the public agency’s general fund (collected from taxpayers) is on the line to make payments to the bond holders when the stadium developers fail (a situation laymen call “full faith and credit bonds”) and (2) the public agency also has to bear the cost of maintaining the failed stadium, or stadium which is vacated when the pro sports team moves because it gets a better deal elsewhere. Then there’s the argument that AEG could have the city/county stadium authority to issue taxable municipal bonds. However, under that scenario there’s the dual questions of whether AEG could afford to make the higher interest payments on “taxable municipal bonds” as well as the practical question of who in the investment community would be willing to buy those bonds. If it was the stadium building alone was at risk of “foreclosure” if the taxable bonds weren’t paid, that would be one thing, but if the city/county stadium authority is ultimately liable for payment of the taxable bonds, as described above, after a default by the developer, then once again it is LA County taxpayers who would be at risk of a long period of using public funds to pay interest and principal to the bond holders as well as subsidizing cost of maintaining an underutilized stadium. Do some reading on the fact that Harris County Domed Stadium aka the Astrodome is now largely unused, with that County’s stadium authority making payments on bonds for the old stadium as well as bearing the cost of maintaining its old stadium, because its teams moved to a new stadium before the bonds were paid off. Do some reading on how the City of Glendale Arizona massively indebted itself to build an arena for the perennially bankrupt Phoenix Coyotes hockey team. This year, the city will actually subsidize the operations of the bankrupt hockey team, so that there will be some revenue coming in to help pay the bonds. If you work really hard, you can find financial news stories showing that every failed or outmoded stadium in the United States was financed by full faith and credit bonds, and that taxpayers around the country are seeing their real estate taxes not used to maintain roads and parks, and to fund police and fire services, but instead to make the payments of principal and interest on the bonds. From a financial analysis point of view, if AEG truly believes they will be able to “make the mortgage payments” on this new stadium, for the entire course of its repayment period, they should go to a legitimate investment bank in New York or London or Germany or Switzerland, and ask the investment bank to form a now common group of investors to make the mortgage loan. If AEG can’t get Deutsche Bank or Credit Suisse or Barclays Bank to make such a mortgage loan, and if Goldman Sachs or JPMorganChase’s investment banking are not interested in organizing private construction and long term mortgage financing, then Los Angeles County taxpayers will know it’s a bad deal. Frankly, I trust the number crunching and risk analysis skills of MBA’s at Goldman Sachs more than I trust the number cruching of the “finance departments” of the County, the City of LA, or their Joint Powers Authority, or the outside “financial advisors” they hire. Generally, financial analyses by public agencies’ outside financial advisors, which say “this project is a dog” never see the light of day because political forces shut them up. Bottom line, if a stadium cannot attract “taxable financing”, where the lenders or bondholders pay income taxes on the interest payments, then you know public financing is going to be a financial blood-letting for local taxpayers.

Hockey in Arizona … duh.

the Phoenix metropolitan area is the #2 retirement destination for Canadians and for people from the East Coast and midwestern cities, with great hockey traditions. Statistically, the projections showed large attendance from that population base. And an NFL team in LA? Last time I went to a Raiders game, we paid $130 per ticket to be in the second-from-the-top row of seats. With the LA Region’s high unemployment and depressed economy, who is going to be able to afford the lowest priced football tickets? The rich. Should they pay the extra $20 to $30 per ticket for a totally privately financed stadium? Yes. The problem with the “special tax” financing which Todd describes is that it is just another form of tax increment financing (aka redevelopment) which provides zero reimbursement to the community for the needed police, traffic control and emergency services generated by 80,000 fans coming to the stadium. So everyone else pays for rich people to watch football live, by having their own police, fire, park, street cleaning and other municipal services reduced. Stadium developers want this sort of financing because financial institutions won’t lend them money to build these sorts of facilities at interest rates low enough to “pencil out” for the operation of a team and the payment of a mortgage.

Thanks for the facts. * – Note to self: CS..no sense of humor.

Retirees have never supported a sports franchise, of any sort. And just because it may have the largest number of a certain type of retirees, it doesn’t mean there are enough to matter. Hockey never got off the ground in Phoenix. Statistics will do little to predict the success of a team before it even exists. And the Astrodome? A 40 year-old godawful stadium? I’m no fan of public financing of stadiums, but that’s a very poor example. It so happens that I went to the last LA Raiders game (vs. the Joe Montana Chiefs), had better seats, and paid less than $50.