PERSPECTIVE - The findings from two studies estimate the City of Los Angeles could earn $22 million annually if the downtown stadium proposed by Anschutz Entertainment Group (AEG) were constructed, according to David Zahniser’s article in the LA Times.
Sounds great except that both studies were commissioned by AEG.
The project would also entail demolishing and rebuilding a portion of the Convention Center, which would be financed by the city and paid down with some of the additional tax revenue. It is not clear how that was factored into the analyses.
An AEG spokesman called the studies “independent” and suggested they confirmed the optimism expressed by the backers.
Many years ago, doctors commissioned by the tobacco companies used to appear in ads urging their patients to smoke because it was good for digestion.
The city is conducting its own economic analysis, but given the longstanding experience and relationship between AEG and City Hall, we may have to take those findings with a grain of salt. Speaking of findings, AEG has no plans to make its reports public.
Let’s flip to the Business section of the Times where Michael Hiltzik reported on film subsidy findings.
Hiltzik states: “The great thing about hiring an economic consultant to support your position on a public issue is that it’s never hard to find one who will take your money to parrot your talking points.”
He was referring to consultants at the Los Angeles County Economic Development Corporation who claim that the $100 million annual production tax credit has been a huge success. According to the consultants, in two years the program produced $3.8 billion in economic gains and 20,000 jobs at a cost of $200 million.
The LAEDC study was commissioned by the Motion Picture Association of America (MPAA) whose role it is to lobby on behalf of the production companies. Objective?
Hiltzik writes that other states with film credits have paid more than they have taken in. Furthermore, the subsidies in California are paid on a first-come-first served basis. He concludes that this method of processing means some dollars are given away to productions which would have stayed in the state in any event.
However, his most critical point involves a lack of consideration for alternative uses of these monies.
Businesses use capital budgeting to assure they invest limited funds in projects with the best returns.
You will not find a comparable process at our state and local government levels. There is no thought given to whether it is better to invest in razing and rebuilding part of the convention center as opposed to improving streets for better traffic flow, or reducing the almost century-long backlog of sidewalk repairs.
Would it be better to invest $100 million per year in educating engineers or filmmaking programs at our universities rather than hand out the money to whatever production company is next in line?
Is it possible that AEG and the MPAA will receive consideration not available to core projects related to transportation, infrastructure or education?
Without truly independent studies, we will never know.
(Paul Hatfield is a CPA and serves as Treasurer for the Neighborhood Council Valley Village. He blogs at Village to Village and can be reached at: email@example.com ) –cw
Tags: AEG, City Hall, downtown stadium, tax revenue, MPAA, Los Angeles, Convention Center
Vol 9 Issue 58
Pub: July 22, 2011