by Warner Todd Huston | November 17, 2010 1:09 pm
The 2010 elections are now history. If there was any lesson from this Republican tidal wave that swept across the country it is that the vast majority of Americans are furious at the overspending and flawed leadership of our politicians. Voters are no longer so easily fooled by claims that wild spending sprees are beneficial. California was spared the GOP tidal wave but California voters of all stripes voted in droves to impose a high threshold on imposing any new taxes (what was LA turnout). In the City of Los Angeles real pain is being felt as libraries are shut down due to budgetary cuts with police and firefighters next on the chopping block. Yet even with all these cuts in services, politicians in the City of Los Angeles are still considering a multi-million dollar subsidy — using taxpayer dollars — for the problematic Staples NFL Stadium project.
Across the country voters are starting to veer away from supporting public money going to fund stadiums and other such entertainment projects. Recently the Wall Street Journal reported that, “taxpayers are opposing agreements to fund baseball projects after a decades long boom in publicly financed ballparks.” It appears that L.A. has not learned its lesson from November 2nd.
L.A.’s budget is deeply in the red. In mid-September, the city announced that it was shutting down libraries on Mondays to save money. The Los Angeles Police Dept. similarly announced deep cuts that will affect its SWAT teams, its K9 program and other special units all due to the city’s budget morass. L.A.’s firefighters have said that budget cuts will hamper their efforts to fight brush fires and puts other emergency services at risk. Even L.A.’s celebrated Neighborhood Prosecutor Program has been slashed in half.
L.A. has continued to teeter on the brink of bankruptcy, yet Mayor Antonio Villaraigosa still announced new wild schemes for global warming prevention programs that he wanted to pay for by a massive raise in Department of Water and Power (DWP) rates. And then there is this stadium deal.
The media and the city are all happily selling citizens on the claim that the new Staples stadium is being funded privately. But the whole truth is not being revealed. For one thing not much notice was given to AEG’s Tim Leiweke’s not so subtle hints that the city might have to pony up about one billion for the project. But even if that ends up somehow going away, the city is already on the hook for millions and millions in previous obligations.
One problem is the whole convention center aspect of this project. Some 300,000 square feet of the facility will be torn down for the stadium project and that would be immediate lost revenue to the city. Then comes the re-building of that lost square footage which will cost the city at least $250 million as well as construction of new parking facilities that will cost between $75 and $125 million. And the convention center is already a troublesome financial burden as it is. After all, L.A. still has $500 million in bonds outstanding for the convention center.
Once construction begins the convention center will be effectively unable to compete with larger facilities in California and across the country and it is estimated that the city will then lose $25 million in revenue. This is not to mention the lost revenue from local hotels, car rental agencies, restaurants and the like. Nor does it mention the sales tax revenue the county will lose above and beyond what the city itself will lose.
Then there are the subsidies that the Staples center got that goes little discussed in the press nor is mentioned much by the politicians selling this deal to the public. As Ron Kaye notes:
Leiweke claims AEG built Staples entirely by itself when it got a $14 million subsidy and the land for it was seized by the Community Redevelopment Agency and turned over to it. He also ignores the fact that the luxury hotel at LA Live gets to keep the 10 percent hotel tax — a $300 million gift of public money — that other businesses don’t get and the public doesn’t get the benefit of the revenue so badly needed when services are being slashed.
None of these hidden costs are being born by the private investors of the Staples stadium. The City of Los Angeles — and therefore the taxpayers –will be responsible for all of it. So this claim that the new stadium project is not costing the taxpayers a cent is simply false.
As John Fleischman of the FlashReport reminds us, “during especially difficult financial periods, like the recession in which we find ourselves today, we all need to be incredibly diligent to guard against this sort of thing — and we expect our politicians to be looking out for us.”
With that said, one has to wonder why the City Council or City Controller Wendy Gruel are not raising the alarm here? This stadium deal will cost the city millions and millions that it simply does not have to spend, not to mention quashing current revenue streams. While the council and mayor are shutting down vital services and appear desperate to find ways to slash the City’s budget they are all turning a blind eye to the obscene costs that this stadium deal will bring down upon the City.
Yes, it seems that the City of Los Angeles never learns its lesson. But this time, there won’t be anyone in Sacramento or Washington D.C. to bail the City out. The cupboard is bare.
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