The Angels, along with sports teams across the country, are given too much of the revenue sports stadiums generate and taxpayers fail to reap benefits because cities don’t negotiate hard enough, according to experts.
“Cities tend to be remarkably bad negotiators when it comes to professional sports. And I don’t know exactly why that is. At least, in part, they don’t get a lot of experience in these negotiations,” said Victor Matheson, economics and accounting professor at College of the Holy Cross in Massachusetts.
Matheson, a national expert on stadium financing deals, said city leaders often become “starry eyed” at the prospect of hosting a professional sports team, like the Angels in Anaheim.
“I think that rather than being rational public servants, they fall all over themselves instead of being landlords,” Matheson said.
Under Anaheim’s current lease with the Angels, the team keeps all advertising revenue and the city won’t see any ticket revenue unless the team sells over 2.6 million tickets in a year. Anaheim got $972,000 in ticket revenue for the 2017-2018 fiscal year, but also spent $683,000 on stadium maintenance. The city gets $2 a ticket after the 2.6 million ticket threshold is met. Anaheim owns the stadium and the roughly 150 acres it sits on.
The Angels sold over $100 million in tickets last year, according to Forbes evaluation of major league baseball teams. The team made nearly $350 million in total and it spent $206 million on players, according to the numbers updated in April.
City spokesman Mike Lyster said the city doesn’t make much money directly from the stadium, but from the developments and businesses in the surrounding area the stadium helps spur.
“If you just look at the stadium in isolation, it doesn’t provide the context,” Lyster said, adding that the sales tax revenue around the stadium has doubled within the past roughly eight years to about $8 million.
“We still have a lot more to do and a long way to go yet, but that’s the benefit we see, and it’s not happening by accident,” Lyster said.
Experts, including Matheson, said Anaheim should be looking to get solid shares of the stadium’s revenue streams instead of focusing on the development around the stadium.
There also have been fights over the team name.
The lease, signed in 1996, mandated “Anaheim” be included in the team name.
At the time, having Anaheim in the team’s name was part of the city’s concession on stadium revenues.
When Arte Moreno bought the ball club from Disney Angels in 2003, he changed the name to “Los Angeles Angels of Anaheim” and the move drew the ire of both Anaheim and Los Angeles.
Anaheim ended up suing the Angels over the name change and a judge ruled in 2005 the name change still adhered to the lease so long as “Anaheim” was in the team name.
Now, the Angels are simply called “The Los Angeles Angels” and Anaheim no longer is in the name on any Major League Baseball websites or the team’s website.
Do Professional Sports Teams Make Cities Money?
Anaheim gets no money from advertising revenue on the stadium and very little money from the other events besides Angels games, like monster truck and motocross shows, according to the current lease that was originally signed by Disney and inherited by owner Moreno when he bought the team in 2003.
Although Moreno opted out of the lease in 2018, a January 2019 extension is basically a temporary reinstatement of the 1996 lease, according to the new lease extension.
The Angels are valued at $1.9 billion, according to Forbes. The biggest share of that value comes from the Los Angeles area media market, which Forbes valued at nearly $870 million of the team’s worth, or 45 percent.
Author Neil DeMause, who’s been following the Angel stadium negotiations, said taxpayers often shoulder the financial burden of stadiums.
“In terms of whether it’s standard for the team to pawn off a lot of the cost on the public and keep the profits for itself, I would say ‘yes’,” DeMause said.
DeMause wrote the 1998 book on stadium financing, “Field of Schemes.” He also runs a website by the same name that tracks developments on stadium deals across the country.
According to a five-year expenditure and revenue report on the stadium provided by Anaheim from 2013 to 2018, the highest amount in ticket revenue the city received was $1.26 million in the fiscal year 2014-2015. It was the only time during the report’s five years the city made over $1 million on ticket revenue.
The city gets 25 percent of revenue above $2 million generated by other events, like monster truck and motocross shows. The highest amount Anaheim received from other events during the five-year period was $444,000 in fiscal year 2017-2018.
But Anaheim also has to put money back into the stadium under the lease.
Lyster said Anaheim puts, on average, $600,000 into a stadium maintenance fund every year, as stipulated under the lease with the Angels.
The lease also allows for the city to make money on parking revenues, so long as the Angels made at least $4 million on parking in a year — that amount is adjusted yearly based on the consumer price index. After that threshold is met, the city gets 25 percent of any parking revenue above $4 million.
Anaheim made no money on parking from 2013 to 2018, according to the cash flow report.
And almost none of the revenue from teams like the Angels goes back into the local economy, Matheson said.
“Half of the money that comes in goes to millionaire players and most of the other half goes to billionaire owners,” he said.
Lyster said it’s too early to talk about if city officials will look at capturing a bigger share of the stadium’s revenue streams or any potential developments on the parking lot in the upcoming negotiations.
“It would be premature for us to start talking about things like that. We’re both in the information gathering stages — we would expect to come together in the weeks or months,” Lyster said.
According a document on the city’s website laying out some specifics of the current lease and other general information about the stadium, the city sometimes loses money on the stadium.
After the city paid its yearly stadium maintenance fees and some bonds stemming back to the 80’s for an unused exhibit hall, the stadium cost the city $126,000 in the 2015-2016 fiscal year, according to the stadium information document.
The Angels currently don’t pay rent either because the team made an advanced payment of $87 million in 1996 for stadium upgrades. The city also chipped in $30 million for upgrades during that time.
A 2008 academic article, which pooled various economists’ sports stadium studies, found most economists said stadiums don’t help drive local economies.
“The clear consensus among academic economists is that professional sports franchises and facilities generate no ‘tangible’ economic impacts in terms of income or job creation and are not, therefore, powerful instruments for fostering local economic development,” the study reads.
But Anaheim officials point to development around the stadium that they said will increase revenue streams in the city.
Lyster said two areas have been rapidly growing over the years — the Platinum Triangle area, near the stadium and the resort area surrounding Disneyland.
While the stadium may not be a major revenue stream, Lyster said, the developments and businesses popping up around Angel stadium is where the city sees new revenue.
Rick Eckstein, sociology professor at Villanova University in Pennsylvania, said developments and businesses around stadiums just shift revenue streams around the city.
“That’s not new spending, that’s old spending,” Eckstein said. “It’s not any new spending in Anaheim that wasn’t there before, they’re just spending it in a different place. It’s called the substitution effect.”
Eckstein authored the 2004 book about stadium financing, “Public Dollars, Private Stadiums: the Battle over Building Sports Stadiums.”
He also said if new revenue is created, it often doesn’t match a city’s spending on the stadium.
“It would rarely come anywhere close to equalling the public subsidies laid out,” Eckstein said. “The teams will claim that so much business is going on, so much activity, that sales will go up. But they never go up that much.”
Lyster said the area around Angel Stadium currently generates an estimated $8 million a year for the city, more than doubling the $3.5 million it made during 2009. He said city staff is still gathering property tax numbers in the area.
The substitution effect doesn’t apply to Anaheim because the city has the Platinum Triangle and the resort district that both generate new revenue for the city, Lyster said. Experts disagree and said it’s Disneyland that brings the city new revenue.
While there are no new studies on the various developments and businesses that are spurred by the presence of the Angels, Lyster said those types of studies could be conducted soon after the stadium land appraisal is completed in June.
“What I can tell you, anecdotally, in the case of Anaheim, I certainly don’t believe that’s the case (shifting revenue streams),” Lyster said. “It grows every year (Platinum Triangle). The amount of visitors that come every year is increasing” along with the resort district.
The Angels owner also wants the city to chip in more money to upgrade the stadium.
At a news conference in February, Moreno said he wants Anaheim to help pay for ballpark upgrades before he commits the Angels to stay past 2020, according to an OC Register article.
According to information provided by Anaheim, the stadium needs an estimated $150 million in improvements over the next 20 years, including plumbing, elevators, concrete and pedestrian ramps.
Moreno has spent over $25 million on upgraded stadium features like scoreboards, parking lot pavement, LED parking lot lights, repainting architecture at the home plate entrance and the Big A sign.
The lease calls for the Angels to maintain the ballpark on the level of “first class professional baseball stadiums…”
“Tenant (Angels) will maintain the Baseball Stadium in good condition and repair, subject to ordinary wear and tear, at its sole expense,” reads the lease.
Eckstein said new stadiums may temporarily increase attendance, but the teams don’t necessarily attract people from out of the area to create new revenue.
“If it was a brand new stadium in a brand new place, yeah you might get a bump out of that. But nobody is going to visit Anaheim to see a new stadium,” Eckstein said, adding the city is already known for Disneyland.
“This is a question I’ve been asking for 20 years now: Why do cities keep caving?” Eckstein asked. “You look around and see none of the promises come true.”
He also said city leaders sometimes believe that money will trickle into the local economy from stadium deals, which often doesn’t happen.
“Sometimes what we found is politicians they buy into this logic is what’s good for big businesses is good for the community,” Eckstein said. “It doesn’t matter if they’re Republicans or Democrats … but if they believe it’s true, they’re going to make decisions to that effect.”
Eckstein, Matheson and DeMause all said Anaheim should focus on getting an increased share of the revenue streams directly tied to the stadium in order to provide benefits to the city.
Anaheim Gives Away Leverage in Angels Negotiations, Causes Public Concern
Anaheim had leverage over the Angels in negotiations because the ball club exercised its exit clause in October 2018 and would have had to leave the stadium in a year.
But Mayor Harry Sidhu spearheaded a lease extension in January, which essentially keeps the team at the stadium until 2020. The City Council voted 5-2 for the extension, with Councilmembers Denise Barnes and Jose Moreno dissenting.
Moreno tried, but failed, to get the Council to push for an exclusive negotiating agreement with the team.
“They blew that if they were looking for leverage. That’s a rare thing to have for a city — usually it’s the other way around. So that was some pretty poor negotiating by the leaders of Anaheim. They were in a position to call the bluff and they didn’t,” said Eckstein.
“That’s just an absolute terrible negotiating strategy,” DeMause said.
Shortly after Anaheim council members extended the lease in January, news broke that the Angels were talking with Long Beach for a downtown stadium.
According to a Long Beach Press Telegram article, a new stadium in downtown Long Beach could cost up to $1 billion and the city has been speaking with the Angels as far back as 2017. But an Angels spokeswoman told the Telegram those talks were unrelated to the current negotiations between Long Beach and the Angels.
“I don’t’ know anybody who thinks Long Beach is serious. It doesn’t pass the smell test even by looking at Google Maps,” DeMause said of the relatively small acreage of the Long Beach site compared to the stadium in Anaheim.
“At this point, Anaheim is negotiating with itself,” DeMause said.
It’s common for teams to pit cities against each other in order to get a favorable deal from a city, Matheson said.
“It is extremely common to see teams play off other cities against one another. The prime example of course is right there in your hometown, where for two decades, NFL teams threatened to relocate to LA every time they wanted improvements to their stadiums or new deals,” Matheson said. “We had at least a dozen NFL stadiums built around the country because LA was a great threat.”
Meanwhile public skepticism and concern over the negotiations is growing, especially after the Anaheim City Council, in March, removed the monthly negotiations update at its meetings.
Orange County Communities Organized for Responsible Development (OCCORD), a Garden Grove-based nonprofit civic engagement group, held a community meeting about the Angels negotiations May 15 and nearly 200 people attended to learn about current lease specifics.
During the community meeting, OCCORD director of organizing, Andrew Hauserman, said Anaheim City Manager Chris Zapata is going to use the 2014 stadium deal proposal as framework in the current negotiations.
One of the major points of the 2014 proposal was to rent the land to the Angels for $1 annually for 66 years.
Many residents booed and jeered when bullet points of the current lease and last proposal were presented.
But Lyster said the negotiations are starting from scratch and 2014 is not a frame of reference for Zapata.
“We are starting fresh. That was a long time ago. We don’t have any need to go back to that time, which of course was very divisive for our City Council at the time. Yes, we are taking a fresh look at this, and we have no predetermined parameters except that the deal has to be good for our residents,” Lyster said.
OCCORD leaders and labor union leaders encouraged people to start going to City Council meetings and voicing their concerns about the negotiations and provisions they’d like to see in a new deal.
Executive director for OCCORD, Shakeel Syed, jumped on stage at the community meeting and began to rally the crowd.
“We got to do something about it. We got to take action!” Syed said. “We are going to fill every seat. We are going to make noise, we are going to make our voice heard to the entire city council that they will not sign any deal without the input of each and every one of us!”
Spencer Custodio is a Voice of OC staff reporter. You can reach him at scustodio@voiceofoc.org. Follow him on Twitter @SpencerCustodio.