AEG football stadium could be win-win — if L.A. plays it smart

Take it from me: If you attend a City Hall hearing on the proposed downtown pro football stadium/convention center project, you better be spry enough to keep out of the way of the stampede.

I refer to the stampede by downtown politicians, business groups and construction unions to drape the proposal with the label of that elusive municipal quarry, the “win-win.” That was the case at a hearing last week of the Los Angeles City Council’s ad hoc committee on the downtown project, which convened to consider the tentative memorandum of understanding, or MOU, negotiated by city officials with AEG, the operator of Staples Center and the L.A. Live entertainment complex.

AEG, which is owned by Denver billionaire Phil Anschutz, is the promoter of the project, which would be wedged next to Staples Center, L.A. Live and the existing convention center. AEG’s president, Tim Leiweke, has displayed a deft touch for making urban commercial developments work. He’s also a master salesman. Under his leadership, AEG has built up a reservoir of good will in the city, not least by spreading around millions in political contributions. At the public event where AEG unveiled its proposal in February, the slobbering by L.A. Mayor Antonio Villaraigosa and other politicos was so copious you needed scuba gear to breathe.

So it’s perhaps encouraging to see that the city has refashioned AEG’s original proposal to shift more financial risk off the taxpayers’ shoulders and onto the company. The council even refused Leiweke’s demand that it meet a spurious deadline of Monday to approve the tentative MOU, which in any case would still be subject to final revisions. The ad hoc committee will meet again this week, followed by another session of the full council a few days later, presumably for a vote.

AEG has put the council under the gun to approve the tentative MOU before it takes its summer recess in the next few weeks. The implicit threat is that any greater delay could put the deal in jeopardy. Yet nothing good can come of haste, and that sounds like a bluff. More to the point, there are still lots of questions about whether the taxpayers are as protected, and whether the project pencils out as neatly, as the promoters claim.

The supposed win-win is this: AEG would get to build, entirely with private funds, a $1.2-billion NFL football stadium, and Los Angeles would obtain an expanded and upgraded convention center. There would be thousands of jobs, although once construction is completed it’s unclear what quality of jobs we’re talking about. Minimum-wage ushers and concessionaires? Or better?

The taxpayers won’t feel a thing, we’re promised. AEG will make the deal pencil out by renting the stadium — on which it’s already sold naming rights to Farmers Insurance — to the NFL team that will relocate here and by capturing revenues from other sporting and entertainment events.

AEG will demolish part of the convention center to make room for the stadium, and it will build a new convention center wing to connect to the stadium so the latter can also be turned into convention floor space. The city will float tax-exempt bonds to build the convention wing, and pay them off with new sales taxes and other revenue generated by new conventions and the stadium.

If revenue falls short of debt service, AEG guarantees to make up the difference.

So far, so good. But there are still numerous issues with the project that may not be getting the attention they deserve.

One is that the linchpin of the deal is the NFL, which must approve the relocation of a team to L.A. (Among the leading candidates: the San Diego Chargers.)

But as I’ve written many times, the NFL is the quintessential unreliable partner. The league has toyed condescendingly with Los Angeles for years. It hasn’t yet publicly committed to playing at Farmers Field, though there are signs that it quietly favors the deal. The city’s financial consultant, Texas-based Conventions, Sports & Leisure International, observes further that if the league imposes, say, a $500,000 relocation fee on the team’s owner, that could raise costs enough to scuttle the deal economically. (Anschutz has indicated that he would want to own part of the L.A. team, but not a majority.) Any sizable upward revision of the cost of the stadium could also wreck the fine financial balance of the MOU.

Councilwoman Jan Perry, head of the ad hoc committee, insisted last week that the project would not “cost taxpayers a dime.” That’s only true on a “sorta” basis. The city bonds financing the new convention hall will be paid off from the rental and property tax payments AEG makes to the city for the land under the stadium, totaling $10.3 million a year to start, as well from parking taxes charged at city and AEG lots around the project (estimated at $715,000 a year).

That’s just a portion of what the city hopes the project will generate, but it does show that a large piece of what the city expects to gain in additional revenues will just be cranked back into debt service. No one would expect to build a new convention center for free, but these revenues are, in a real sense, the taxpayers’ “dimes.”

As for the financial guarantee, the city’s consultants are unhappy that the guarantor is AEG. If the project turns out to be a bust, AEG’s bottom line could be the first casualty — possibly hindering its ability to cover losses. CSL says it’s “imperative” that the guarantor be an entity with bigger pockets — Anschutz personally, perhaps?

All the financial projections, moreover, implicitly assume that when the bonds are paid off in 34 years, the city will have a lovely stadium and convention complex free and clear.

To the NFL, however, a 30-year-old stadium is a slum, no matter how fancy it was at birth. Convention centers have a shelf life almost as short — the downtown facility opened in 1971, was rehabbed twice in the 1990s and today, less than 20 years later, is a superannuated white elephant compared with its competitors. This raises the issue of who is to pay for the upgrades sure to be demanded by the NFL, AEG or other interested parties long before the new bonds are paid off. From what I could glean, the MOU’s 111 pages, incorporating CSL’s findings, are silent on the point.

CSL also expressed some misgivings about the value of an expanded convention facility. The firm found that even with additional state-of-the-art space, the number of major conventions — the mega-events that bring in out-of-towners to fill hotel rooms — might increase from an average 24 a year now all the way to 29. That’s a lot fewer than the 38 projected by consultants hired by AEG.

As CSL observes, L.A.’s chief regional competitors (Anaheim, San Diego and San Francisco) are upgrading their own convention centers, so they’re likely to maintain their competitive lead over L.A. Also, downtown Los Angeles offers only 1,685 hotel rooms within half a mile of the convention center. In Anaheim and San Diego, the figure is closer to 8,000. In San Francisco, it’s 19,000. The marketing challenge for even a spiffy new L.A. convention center “should not be underestimated,” the consultants wrote, understatedly.

If the city can really get a football stadium built entirely with private funds and upgrade the convention center with a reasonably modest investment, this deal could indeed be a win-win. But there are still plenty of points on which the city could be bamboozled or steamrollered. Would another month’s delay to provide for careful scrutiny really be fatal? So far, the council has shown admirable spine in dealing with AEG. This would be the wrong time to convince itself that the road to a stadium has no more hidden potholes.

Michael Hiltzik’s column appears Sundays and Wednesdays. Reach him at mhiltzik@latimes.com, read past columns at latimes.com/hiltzik, check out facebook.com/hiltzik and follow @latimeshiltzik on Twitter.