Posted by John Vrooman on Tuesday, March 1, 2016 in National Football League.

Interview with LA Times.

Lots of enthusiasm in L.A. about the economic impact in Inglewood. Jobs, taxes, tourism.

I don’t mean to piss on the parade, but even with a year-round commercial facility built into the plan, I’m skeptical.

correctomundo

What about the impact on nearby existing businesses?

Monolithic NFL Stadiums are notoriously terrible economic development anchors. Pubs sports bars that do spring up in the cracks of vast scorched earth parking lots around the stadium are usually seasonal and are directly in competition with monopoly overpriced venue concessions. The self-defeating argument for economic impact derives directly from an exclusionary economic architecture that hermetically traps all potential gains inside the cash-cow venues.

What about the high percentage of temporary low-wage jobs rather than true economic development?

Most, if not all of the stadium jobs are seasonal, low paying and not exactly the best drivers of economic development. There is obviously real monopoly money to be made from fans chasing $100 pizzas with $20 beers while sitting in the lap of opulence, but most of the big bucks accrue to the home team in an luxury stadium that pays for itself several times over.

What about drawing dollars from other places?

Most urban and regional multipliers are zero-sum at best in the wider metro economy because an increase in spending in one location usually come at the expense of spending someplace else. On any given Sunday, Inglewood will look like a ghost town at game time.

What about public costs such as infrastructure, police OT etc?

Most economic impact estimates are overstated self-promotional exaggerations that completely ignore the direct and indirect social costs of congestion. Given the cost of congestion most impact estimates should be adjusted by moving the decimal point one place to the right. In some case the congestion and game day inflation could move the needle into the red making the economic impact negative sum by the time the smoke clears.

What about the super box economics that make tickets out of reach for ordinary folks?

The basic rule in the exclusionary economic architecture of the new luxury venues is to charge less than half of the fans more than twice as much. There is a perverse incentive in the NFL to sacrifice everyday gate revenue for luxury long-term contractually obligated venue revenue from sponsorships, luxury seats and concessions. This is because gate or ticket revenue is asymmetrically shared with the rest of the League, while all of venue revenue is kept by the home team.

The new venue economic architecture is completely inside out. Multiple layers of luxury suites sandwich a mezzanine of expensive club seats to form an exclusive luxury motel in the middle. The upper deck of normal fans is placed on top and the lower bowls is appended to the front and the LA Rams have a natural money machine.

None of the revenue form the new luxury motel is shared (except for the seats themselves) and the almost certain cash flow from the high rising motel will retire almost all stadium debt after ten years of easy money.

Each seat will probably require an personal seat license (PSL) which is the present value of a season ticket discount paid upfront by Rams fans. A $1000 season ticket is roughly  the equivalent of a $500 season ticket with a PSL of $5000. So Rams fans who can afford the hit should get ready to pay about 10 times the ticket discount upfront before the first kickoff at Hollywood Park.

The good news and the bad news  for LA Rams fans are the same. The Rams may pay for the stadium upfront, but the fans, taxpayers and random bystanders will ultimately pay the price down the road several times over. Ultimately the Rams need LA more than LA needs the Rams: Are you ready for some football?

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But does a year-round L.A. Live type development, shops and restaurants etc, change the economic dynamic.

Yes a year round LA Live co-development changes the dynamic big time, but the economic pretzel logic of the Rams in Hollywood Park is still upside down for two reasons. First, there are positive economic spinoffs from smaller and more frequently used downtown ball parks and NBA/NHL arenas like Staples Center/ LA Live that are synergistically linked and integrated with the economic development grid.

Second, monolithic NFL stadiums are just bad development anchors that amount to a waste of good concrete and valuable land. Shopping centers and wider development projects like LA Live have more of an economic impact/multiplier effect by themselves than a hermetically sealed NFL stadium at Hollywood Park.

So the overall Hollywood Park development will probably take off because of LA Live type development surrounding the stadium and in spite of the drag of the Ram’s new venue, rather than because of it.