Los Angeles officials produced their financing plan Monday for a downtown Los Angeles NFL stadium and new $275-million wing of the city Convention Center, saying it would protect taxpayers by requiring the developer to absorb a greater share of the costs and risks.
Demolishing and rebuilding part of the Convention Center — a move that is central to the stadium deal — would require issuing $195 million in bonds, according to a proposed agreement released by negotiators for Mayor Antonio Villaraigosa and the City Council.
The bonds would be backed by the city's general fund and repaid with new revenue generated by the project, including lease income paid by developer Anschutz Entertainment Group, parking taxes, property taxes and a one-time construction tax on the project, officials said. The general fund pays for basic services, such as the police and fire departments.
A further $80 million in city-issued bonds would be the responsibility of AEG, which hopes to open its stadium by 2016, according to a summary report on the proposed agreement. That debt would be repaid via income from a special tax district covering two existing AEG developments next to the stadium site: Staples Center and the L.A. Live entertainment complex.
If AEG fails to pay the taxes required to cover those bond payments, the city could foreclose on L.A. Live, said Chief Legislative Analyst Gerry Miller, who co-wrote the city analysis of the proposed deal. "Those bonds are not on the city's books, so the developer is 100% on the hook for that," said City Administrative Officer Miguel Santana, L.A.'s top budget official.
The proposal sets the stage for what is expected to be nearly a year of more detailed negotiations between the city and AEG. And it represents a change in direction from the deal announced in January by AEG Chief Executive Tim Leiweke.
Leiweke initially wanted the city to borrow $350 million for the Convention Center construction, with his company privately financing the $1-billion football stadium to be known as Farmers Field. Last month, the Convention Center figure was whittled down to $290 million after AEG said that it, and not the city, would build parking facilities to serve the project.
Santana said the revised financing plan was pursued, in part, because city officials refused to accept AEG's plan to use new hotel and sales taxes to finance the convention center construction. "Those were just non-negotiable," he said.
AEG representatives said they agreed to the new tax district in exchange for two key concessions: an extension of a city ground lease at Staples Center to 2067 and more favorable terms for an existing billboard agreement covering the convention center.
In a statement, Leiweke said the reworked proposal would make sure the city's interests are "well protected."
But Councilman Bill Rosendahl said he still wanted city negotiators to explore opportunities to share in stadium profits.
"I'd like to know what the sign revenue is going to be and how we can participate in that revenue stream," he said. "All this should be on the table."
Miller said 27% of the Convention Center project would be paid for from new tax revenue generated by the projects, while 73% would come from various payments made by AEG. Of the $410 million in new revenue generated for the city over 30 years, $200 million would be used to repay the bonds, he said.
AEG would also provide a series of financial guarantees, including a $50-million letter of credit during the first four years of the deal. Between 2016 and 2019, that guarantee would drop to $28 million.
The release of the so-called memorandum of understanding comes as AEG is heating up its campaign for the project. The company held a news conference last week to announce the support of various labor leaders, including the powerful Police Protective League, which represents rank-and-file police officers.
The City Council is scheduled to take up the proposed agreement Friday. Councilwoman Jan Perry, whose district includes the stadium land, said she did not expect an immediate vote.
"It will be a very long meeting," she said.
Even with council approval, officials said specific terms of the proposed agreement could be changed during final negotiations with AEG.
The city's document came out hours after NFL owners ended the lockout of its players, reaching a tentative 10-year agreement. That development paves the way for AEG –- as well as backers of a competing stadium in the City of Industry –- to push ahead with efforts to secure a franchise.