Irvine city leaders are publicly grappling with an amphitheater proposal from Live Nation – one that would see the multi-billion dollar entertainment giant keep a bulk of revenue generated from the venue for decades.
[Read: Irvine Continues Negotiating Publicly Funded Amphitheater With Live Nation]
It’s a situation many cities across America find themselves in: publicly financing an entertainment venue that could be a drain on city coffers instead of the boon the music industry claims it is.
The current Live Nation proposal to Irvine would have the city chip in $114 million to build the theater, while Live Nation pays $3.5 million annually for rent, with 3% increases each year. Total construction costs are estimated to be $134 million, with the entertainment company on deck to pitch in $20 million.
Under the current plans, a Voice of OC review found it could take the city 23 years to break even on their investment in the facility just off the rent payments.
Live Nation declined an interview with Voice of OC on Friday, but provided a statement saying the company looked forward to continuing negotiations with the city.
“Live Nation is ready to move forward on the next steps to bring a world-class amphitheater to the Great Park and we are excited about the future of live music in Irvine.”
Economist and College of the Holy Cross professor Victor Matheson – an expert on publicly financed entertainment venues – said cities are often on the losing end of these types of proposals.
“You’re not going to generate much in economic impact on this,” Matheson said in a Thursday phone interview, adding that the money generated – based on the current proposal – could barely be enough to cover the city’s debt for building the venue.
“Live Nation, which is this gigantic corporation of billionaires who run Ticketmaster – you’re building their facility for them and it’s not clear why you do that for a private firm. I mean you don’t build In and Out burgers for people, you don’t build Walmarts for people,” he said.
In their proposal documents, Live Nation claimed the development would help bring in tax revenue to the city.
But the proposal, written by the entertainment giant, only calls for a minimum of 25 shows a year.
Matheson said a recent study he helped conduct shows that while concerts do bring in additional hotel bookings, it’s generally not enough to offset construction costs.
“Here’s the thing, even if you get 1,000 nights in hotel rooms, 25 nights a year is only 25,000 nights,” he said, adding it could generate up to $400,000 in hotel taxes. “It doesn’t generate that much revenue for the city … That’s like 10% of what it costs to pay the mortgage payment on this.”
In an interview last Thursday, City Manager Oliver Chi also acknowledged that any benefits for the surrounding community’s sales tax and other revenue would be “not a notable generator,” for the city.
“From concert goers, there’s sales tax and jobs produced, so it does produce activity,” Chi said in a Thursday interview. “But it’s not something that demonstrably impacts the city on a day to day.”
In the current proposal, the city also won’t get any money from advertising revenues or ticket sales – outside of a maintenance fee that would be spent on amphitheater upkeep.
Despite reassurances from city staff and Live Nation that the deal is still being negotiated, some council members didn’t hold back their thoughts on the proposed deal at Tuesday’s council meeting.
“Suffice to say, I think they must take us for chumps,” Councilman Larry Agran said. “This is so bad, and it is getting worse every step of the way.”
Councilman Mike Carroll, said he wouldn’t sign the current deal “with a gun to my head,” but encouraged staff to continue working with Live Nation and find a better deal.
It’s unclear how much room the city has to improve upon the proposal they’ve already put in front of council members.
Why Build It?
At last Tuesday’s meeting, some council members said it was imperative to keep live music acts in Irvine and said it’ll help the city develop its reputation heading into the future.
“I want to make it clear that I am deeply passionate and committed to ensuring live music continues here in Irvine,” Councilwoman Tammy Kim said. “I really do believe that Irvine Meadows and live music put Irvine on the map. At least it did for me.”
Mayor Farrah Khan also said they need to make the city a destination.
“Today we have the opportunity to build the Great Park in a way that will be a draw or destination for years to come, or we can build a mediocre park,” Khan said.
Matheson, the economist and expert on publicly financed entertainment halls, said cities like Irvine often fund these projects because officials feel like they’re in the shadows of bigger cities.
“I think we’re seeing this in Irvine and this is the same thing that happened here in my hometown Worcester, Massachusetts – it’s this kind of inferiority complex,” Matheson said, adding that Worcester built the most expensive minor league baseball stadium in the country to become a “destination town.”
He said when people mention Orange County, “They think about Anaheim maybe or Disneyland even – no one thinks about Irvine, so Irvine councilors get this idea of we need to put ourselves on the map, so they do these kinds of things.”
Meanwhile, Khan said officials need to consider future revenue streams.
“Think 10 to 20 years in the future when development starts to slow down. Where is that revenue going to come from?” Khan said. “We have to come up with a new revenue stream. And that revenue stream is the Great Park.”
But Matheson said if officials truly want the Great Park to become a revenue generator, they’d consider opening shops and restaurants because those are open nearly all year, as opposed to a minimum of 25 days a year.
Last Tuesday, Khan openly accused Chi and city staff of rigging their report against Live Nation in favor of a smaller, city controlled amphitheater, calling staff’s presentation of the issue “very confusing and very deceptive.”
“The staff report seems very biased,” Khan said. “I read through the entire report and it doesn’t match up. It’s not apples to apples.”
Despite Khan’s critiques, Chi defended staff’s work after the meeting.
“The mayor is absolutely entitled to her opinion,” Chi said in the phone interview. “But the nature of what they submitted, we weren’t trying to be biased but present the facts. I 100% believe our team did a great job at presenting the facts.”
Who’s Making Money?
So far, the only public projection on how much tax revenue the facility would generate comes from Live Nation, which estimates around $2.3 million for state and local taxes a year connected to the amphitheater.
There’s no public breakdown of how much of those tax dollars would go to the city of Irvine.
For comparison, Live Nation claims the existing FivePoint Amphitheater brought in $1.9 million in state and local taxes in 2022, according to a letter company representatives sent to the city council.
Yet again, it’s unclear how much of that went to the city, or what restrictions there were on those funds.
Live Nation is also seeking to keep control of the amphitheater’s naming and sponsorship rights, an area they’ve been unwilling to negotiate on, according to Chi.
“A lot of the sponsorship deals Live Nation does isn’t just for one venue,” Chi said. “We discussed any direct sponsorship money, given the city was having to pay for the venue, we felt it was fair to get a split. Ultimately we couldn’t get agreement with Live Nation.”
As of now, the city is not set to get any revenue to the general fund from the tickets sold at the amphitheater.
Chi confirmed the city tried to negotiate for a percentage of the facility’s profits for the city’s rent payment instead of the flat rate of $3.5 million, but that was rejected by Live Nation.
“As we enter negotiations, some type of revenue or profit split is on our mind,” Chi said. “We suggested that model initially, but it didn’t make it into the final version of the agreement, primarily I think because there was hesitation from Live Nation.”
At last Tuesday’s meeting, Councilwoman Kathleen Treseder said Live Nation had given the city a one-sided proposal.
“I’ve been hearing from Mr. Chi about the progress of negotiations and he said they’re working at a stalemate, with an option that’s very lopsided, and I have to say I was offended at how lopsided it was.”
For a nearby quick comparison of taxpayer-subsidized large event venues, consider Anaheim’s Angel Stadium.
Under that city’s current lease with the local MLB Franchise, the ball team is required to pay the city $2 on each ticket sold after the Los Angeles Angels pass an annual sales benchmark of 2.6 million tickets.
That’s a threshold that’s not always met.
Angel Stadium has also struggled to generate money for its host city, giving the city around $1.6 million in total revenue from 2010 to 2019.
Meanwhile, the Angels regularly made over $100 million a year.
[Read: Angels Make $100 Million a Year at Stadium While Anaheim Barely Gets a Slice]
Noah Biesiada is a Voice of OC reporter and corps member with Report for America, a GroundTruth initiative. Contact him at nbiesiada@voiceofoc.org or on Twitter @NBiesiada.
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