I believe the City of Los Angeles should have held off an agreeing to a binding deal on a NFL stadium until AEG’s ownership got settled. Below is the text of a letter I sent to Councilmembers Eric Garcetti, Jan Perry, and the rest of the Los Angeles City Council urging them to better think through the deal to which they are agreeing:
I am writing this letter not only as a candidate for Mayor of Los Angeles, but more importantly as a concerned citizen of this great city. We feel that the City is moving too swiftly to approve a deal for a convention center renovation and stadium construction, especially in light of the recent announcement that Anschutz Entertainment Group (AEG) is up for sale. I join concerned Angelenos in asking that the City Council delay final approval of the deal with AEG and carefully consider what this proposal means for our City’s finances; what a sale of AEG could mean for the project; and what the environmental and community impacts of this project might be.
As currently written, this deal could add as much as $229 million in explicit obligations to the City’s General Fund—more than the City’s projected $216 million budget deficit next year. Another $110 million in implicit obligations could be added in Mello-Roos bonds. This City cannot afford to put its credit rating at further risk, just one year after being downgraded by the major credit agencies, and only months after the Chief Administrative Officer warned us about the possibility of bankruptcy. The Lease Revenue and Mello-Roos bonds that will finance the convention center renovation are not riskless. I understand that the City has identified potential revenue streams that in theory will service this debt, but councilmembers, you included, have admitted that the City Council has a poor track record when it comes to deals reliant on economic projections. If there’s any delay or default in payment, bondholders will hold the City, not AEG, responsible.
Moreover, approving any deal at this time does not make good business sense. Any businessman will tell you to know with whom you are doing business. The City doesn’t know who will buy AEG, if new ownership will keep AEG’s current leadership team in place, or if the next owner of AEG plans to honor the terms of this deal. It could take several years for AEG to find a suitable buyer, during which time little development can take place. It could also be that the new owners of AEG decide they don’t like this deal, and either reopens negotiations with the City or take the City to court to void the contract. Any of these scenarios would put the current development plan in jeopardy, as well as limit the City’s ability to move forward with any other proposal for convention center renovation. By agreeing to the deal now, without knowing AEG’s buyer, you would limit the City’s options in case future AEG ownership does not agree with all terms of this deal—a very real possibility.
A remodeling of the convention center and a new football stadium could be great additions to Los Angeles, but we must ensure that these additions are made with limited cost and risk to the City and its residents. This deal could negatively impact the City’s budget and ability to borrow, particularly since we’re not sure with whom we are doing business. And while we have commissioned an Environmental Impact Report, it is not clear we fully understand all the impacts of this project, nor have provided adequate safeguards for the City’s residents. I ask that you and your fellow Councilmembers not approve this deal until we better understand its financial, environmental, and community implications.
Candidate for Mayor of Los Angeles
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