Greg Nelson was chief aide to then City Councilman Joel Wachs, who stiffened the city’s back during negotiations over Staples Center in the mid 1990s and improved the deal. I asked Nelson what was difference between then and now, when the city is negotiating a much bigger deal with the Staples Center developer. AEG, for a downtown Los Angeles National Football League stadium.
“The Staples deal opened with AEG wanting to float $70 million in bonds to buy up the land that would later be used for L.A. Live,’ Nelson said in an e-mail. “It offered no guaranty that the bond payments would be made. It asked the city to take a chance with them. After Joel threatened an initiative, a guaranty was accepted by the city and the developers.”
Substantially more city bonds are required for this project, which involves tearing down a convention center building to make way for the stadium and putting up another one. The bonds would total $275 million, with 73 percent to be repaid by AEG and 27 percent by the city. The city’s share would come from AEG lease payments and taxes generated by the stadium, such as parking taxes.
The kind of concern Wachs expressed over bond repayment in the Staples deal is now being voiced by city officials and a private consultant to the city in the current project
The consultant, Convention Sports and Leisure International, said that the profitability of a National Football League team “may fall short of expectations.” The CSL report urged the city to protect itself from shortfalls by insisting the AEG share of repaying the bonds is guaranteed by a company “with stronger assets not tied directly to the stadium.” That would be AEG’s big guy, Phil Anschutz, a billionaire whose web of holdings could more than guarantee repayment. AEG is just part of his empire and the consultant indicated that other holdings should back up bond repayment.
City Administrative Officer Miguel Santana and Legislative Analyst Gerry Miller in a report to the council said a NFL team might face financial difficulties. They said the National Football League might impose a relocation fee to any team, such as the San Diego Chargers, that wants to move into a new Los Angeles stadium. “The fee could exceed $500 million,” they said. “If such a fee is assessed, the team could be forced to operate at a loss for a number of years. “ AEG would be a part owner of the team, so the relocation fee could be another threat to its ability to pay off the bonds.
As Nelson pointed out to me, “This is something being discussed behind closed doors in the negotiations.”
In the original Staples deal, Councilman Wachs, an intelligent, skeptical former tax attorney, pried opens the secrecy doors that had enveloped the negotiations. I was writing a column for the Times during this period, crusaded against the secrecy and followed Wachs’ efforts every step of the way. We need some of his smart skepticism now.