The Anaheim City Council, for the first time publicly this year, laid out potential provisions it would like to see in a new stadium lease with Angels baseball, with Council members agreeing on fair market rent or sale of the land.
At the Tuesday Council meeting, Council members also seemed to agree that no subsidies should be given to the team.
“Certainly there should be no public subsidy or giveaway of tax dollars, from a development,” Councilman Jose Moreno said.
“I also agree, no public subsidy, no tax giveaway,” Councilwoman Lucille Kring said.
The two are often on opposite sides of votes on an array of City Council issues.
Mayor Harry Sidhu said the new lease needs to include market rates for rent or potential land sales.
“We have a chance to get a new, better deal for our residents,” Sidhu said. “We must protect Anaheim’s general fund and all it does for the residents. Any deal must not take away from what we spend on the neighborhoods. In fact, we should add to it. Keep taxes low.”
He also said the stadium land should produce sizeable revenue for the city.
Moreno, who often disagrees with Sidhu, said he agreed with the mayor’s initial negotiation provisions.
“You may be surprised, but I 100-percent support those principals,” Moreno said.
But there were disagreements on how soon to show residents the final framework, the stadium land appraisal and when to let residents see the final lease proposal.
“So I still believe strongly that we should make that appraisal public,” Moreno said.
He also wanted to give residents 10 to 15 days to review and provide input on the city’s negotiation guidelines, like market rate rent, developments on the parking lots surrounding the stadium and local hiring agreements.
“And any final deal that is struck between our negotiating team and Angels baseball should have a 30-day window for review,” Moreno said.
Kring said while she agreed with some of Moreno’s proposed negotiation guidelines, she didn’t agree with releasing the appraisal or the final offer too soon.
“There’s many of them I cannot agree with. First of all it is a draft appraisal, it is not a completed appraisal,” Kring said. “When it is the time and it’s appropriate and the city manager and city attorney tell us now is the hour, fine. Now it is not.”
She also said “negotiations are done in secret for a reason,” because too many people giving input on the negotiations throughout the process could kill a potentially good proposal.
Councilman Jordan Brandman compared the proposed increased transparency in the Angels negotiations to the more closed session-focused the Anaheim Ducks deal was done.
“How is that not good enough? It worked before. How is that not good enough now? So where’s the beef, as Walter Mondale said,” Brandman told his colleagues.
He also said he won’t vote for any lease proposal that doesn’t have a community benefits agreement, which could bind the Angels to help fund affordable housing, job training and require local hiring, with promises of good-paying jobs.
“We must have a full community benefits agreement over and above a project labor agreement that long term invests in our communities,” Brandman said. “It is absolutely binary for me. A yes or no. That either happens or I’m not going to be supportive.”
Moreno said he wants to see Anaheim back in the Angels team name
Angels spokeswoman Marie Garvey previously told Voice of OC the name is not going to be addressed in the upcoming negotiations.
Councilman Trevor O’Neil said if the city’s going to push for Anaheim in the name, then it’s likely the city would have to give some subsidies to the Angels.
“If we demand that the name comes back, to me, we have to negotiate a taxpayer giveaway,” O’Neil said.
When the 1996 lease was negotiated, Anaheim made concessions on stadium revenue streams in order to have the city in the Angels’ name.
Under the current lease, Angels baseball doesn’t pay annual rent because it paid $87 million up front for stadium upgrades when the lease was originally signed by Disney in 1996. Current owner Arte Moreno (unrelated to Jose Moreno) took over the lease when he bought the team from Disney in 2003.
The Angels team owner told the OC Register in February that the team will only stay in Anaheim if the city helps pay for upgrades to the ballpark.
According to a city document, the stadium needs an estimated $150 million in renovations over the next 20 years, including infrastructure like plumbing and bathrooms. It also needs to upgrade its elevators and escalators, pedestrian ramps and concrete.
Neil deMause, an expert on stadium leases and negotiations, said sports team owners often try to control development revenue on parking lots surrounding stadiums, which could turn into subsidies for stadium renovations.
“If Arte Moreno says, ‘Hi, I would like to use many acres of land that I can develop, so I can do necessary upgrades to my stadium,’ then it becomes a reason to negotiate. So, I think that’s what’s going on with this new stadium boom,” deMause said in a Tuesday phone interview.
deMause, who wrote “Field of Schemes,” a book about stadium financing, said sports teams usually don’t make enough revenue to cover the upgrades at publicly owned stadiums like Angel Stadium.
“The dirty little secret of stadiums and arenas is that most of them don’t make a profit. Most of them don’t bring in enough new revenue to pay for the renovation costs,” deMause said. “The reason most of these teams want a new stadium is because of the subsidies.”
Under the 1996 lease, which was reinstated in January, 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. The city also gets 25 percent of parking revenue above $4 million annually and 25 percent of other event revenue — like motocross and monster truck shows — above $2 million annually.
If a new lease isn’t made and the Angels don’t use their termination right by Dec. 31, the current lease runs until 2029.
According to a stadium cashflow document provided by the city covering fiscal years 2013-2014 to 2017-2018, the city made no money on parking and averaged just under $1 million on ticket revenue except for 2014-2015 when it made $1.26 million from tickets. Other event revenues also vary, ranging from the lowest of $36,600 in 2016-2017 to the highest in 2017-2018 at $444,000, according to the years provided.
When bond repayment is factored in, the stadium sometimes costs the city money. In 2016-2017, the stadium cost the city $440,000, but then made Anaheim nearly $710,000 the following fiscal year.
Some councilmembers said they felt Moreno’s proposed public input guidelines were too much because the city’s negotiation team meets with itself Sept. 13 and expects a proposal from the Angels sometime in October. The city hopes to get the lease done before the Angels termination window expires at the end of the year.
“You got all these next steps … these are too rigid,” Kring told Moreno.
Victor Matheson, an economics and accounting professor at College of the Holy Cross in Massachusetts, said the lease doesn’t incentivize the Angels to go over the ticket or parking thresholds.
“The way that lease is structured, all the risk of the lease payments is on the city. If things go badly, the city get’s nothing and the city only gets things if things go really well for the Angels. That’s kind of a terrible rent set up. Nobody sets up a rent contract like that in a lease,” Matheson said in a Tuesday phone interview.
Using a hypothetical example, he said it would be beneficial to Anaheim to have a lease where the city gets $4 for each ticket sold and after hitting 1 million tickets sold, either Angels keep the ticket revenue or Anaheim’s share drops, along with a similar payment structure on parking tickets and other event revenues. It would encourage the Angels to do as much business at the stadium as they can, he added.
Matheson, a national expert on stadium finance, said new and upgraded stadiums do bring in some new revenue for cities, but only for a short period of time.
“So here’s the positives and negatives: Number one we do have evidence that new stadiums do generate some localized economic development, on average. Especially some of these recent ones, where we’re really trying to avoid moats of parking lots and we do have evidence of property values rising in the immediate area of the stadium,” he said.
But, Matheson said, the benefits are contained to a small area around the stadium.
“Remind you these benefits are extremely localized. So this is within half a mile or so. It’s a very specific sort of economic development. You’re not getting hospitals, manufacturing or commercial — you’re getting bars and restaurants and that sort of stuff,” he said.
Councilman Stephen Faessel said if the land around the stadium is developed, it should include features for residents, like a park and a grocery store.
“We need a healthy number of parks and open spaces in the Platinum Triangle,” Faessel said. It’s hard. That land is darned expensive and here we have 155 acres we may be able to incorporate park land into that.”
Faessel told other Council members, “there’s likely to be more places and commercial development for our guests and visitors to enjoy around our stadium. But our locals need a place to shop too.”
The city should be looking to develop the parking lot around the stadium itself and hold onto as much revenue as it can, deMause said.
He also said the city could use bonds to help finance upgrades to the Big A, with the Angels paying the bonds back, with interest, using revenues directly from the stadium.
But that may not be beneficial for the Angels because it might not save them as much money, deMause said.
“That’s not a very difficult financing move anymore. Arte Moreno might accept it, but it doesn’t save him that much money,” deMause said.
Both deMause and Matheson said Anaheim gave away all its leverage when it nullified the Angels’ October 2018 lease exit and reinstated it January, while also extending the team’s lease termination window to Dec. 31.
“Basically Arte Moreno had a gun and it was out of bullets and the city of Anaheim said, ‘Oh, here’s enough bullets to last another year,’” deMause said, adding the team has at least that amount of time to leverage negotiations against the city.
“At this point, any concessions you make, basically you are bargaining with yourself rather than doing a real arms-length business transaction with a team,” Matheson said.
Correction: An earlier version of this story incorrectly stated the city would meet with the Angels Sept. 13. The city’s negotiating team will be meeting with itself that day. We regret the error.