THE NFL LOS ANGELES STADIUM IN CARSON: AN ECONOMIC IMPACT ANALYSIS MARCH 2015 INSTITUTE FOR APPLIED ECONOMICS Los Angeles County Economic Development Corporation THE NFL LOS ANGELES STADIUM IN CARSON: AN ECONOMIC IMPACT ANALYSIS INSTITUTE FOR APPLIED ECONOMICS 444 S. Flower Street, 37th Floor Los Angeles, CA 90071 www.LAEDC.org/IAE March 2015 This research was commissioned by San Diego Chargers and Oakland Raiders. The LAEDC Institute for Applied Economics specializes in objective and unbiased economic and policy research in order to foster informed decision-making and guide strategic planning. In addition to commissioned research and analysis, the Institute conducts foundational research to ensure LAEDC’s many programs for economic development are on target. The Institute focuses on economic impact studies, regional industry and cluster analysis and issue studies, particularly in workforce development and labor market analysis. Every reasonable effort has been made to ensure that the data contained herein reflect the most accurate and timely information possible and they are believed to be reliable. This report is provided solely for informational purposes and is not to be construed as providing advice, recommendations, endorsements, representations or warranties of any kind whatsoever. © 2015 Los Angeles County Economic Development Corporation. All rights reserved. Economic Impact Analysis NFL Los Angeles Stadium in Carson Executive Summary FL has been absent from Los Angeles for more than twenty years. During this time, there has been interest in moving at least one existing NFL franchiseN or an expansion team into the market—the most recent being the announcement of the Oakland Raiders and the San Diego Chargers (collectively, the “Teams”) indicating their potential interest in pursuing a shared stadium in the city of Carson. The Los Angeles County Economic Development Corporation (LAEDC) has quantified the total economic Annual Impacts of Ongoing Activity impact of the development of the Los Angeles Stadium in Once completed, the stadium may host one or two NFL Carson in Los Angeles County and of its annual ongoing teams, and will be a regional cultural and entertainment operations once occupied. The findings are as follows: venue for non-NFL-related events. The total annual economic impact in Los Angeles County of all ongoing activity occurring at the stadium, including direct, One-Time Project Development Impacts indirect and induced impacts, is shown in Exhibit E-2. While the total cost is estimated to be in excess of $1.7 7,560 jobs with one team (13,380 with two teams); billion, the development cost of the Los Angeles Stadium $343 million ($609 million) in local labor income; in Carson is currently estimated to be $1.6 billion $507 million ($891 million) in total output; (excluding financing and other costs). The total $299 million ($528 million) of regional GDP; and economic impact of this net development cost in Los $33.2 million ($60 million) in state and local taxes, of Angeles County, including direct, indirect and induced which $9.3 million ($16.7 million) will be earned by impacts, is shown in Exhibit E-1. the County each year and $4.4 million ($8.0 million) will be earned by cities. This excludes additional 16,740 annual jobs; property taxes generated by the increased assessed $1.1 billion in local labor income; value of the redeveloped site. $2.6 billion in total output (business revenues); $1.4 billion contributed to regional GDP; and Exhibit E-2 $118 million in state and local taxes, of which $32.3 Annual Economic Impact of All Stadium-Related Activity million will be earned by the County and $14.8 One Team Two Teams million will be earned by cities. Direct Activity ($ millions): $ 280.9 $ 531.3 Exhibit E-1 Team and stadium operations 130.0 240.0 Economic Impact of Los Angeles Stadium in Carson Development Net player incomes 115.0 230.0 Other on-site revenues 34.1 57.6 1 Direct Development Expenditures ($ millions) $ 1,600.0 Off-site revenues 1.8 3.7 Total Economic Impact: Total Economic Impact: Output ($ millions) $ 2,634.5 Output ($ millions) $ 506.7 $ 890.5 Employment (jobs) 16,740 Employment (jobs) 7,560 13,380 Direct 10,080 Direct 5,020 8,840 Indirect and induced 6,660 Indirect and induced 2,540 4,540 Labor income ($ millions) $ 1,074.2 Labor income ($ millions) $ 343.1 $ 609.4 Value added ($ millions) $ 1,351.0 Value added ($ millions) $ 299.3 $ 527.5 Total Fiscal Impact ($ millions): Total Fiscal Impact ($ millions): Federal tax revenues $ 220.3 Federal tax revenues $ 59.5 $ 105.4 State and local tax revenues $ 118.0 State and local tax revenues $ 33.2 $ 59.5 State $ 70.9 State $ 19.5 $ 34.7 County 32.2 County 9.3 16.7 Cities 14.8 Cities 4.4 8.0 1 Excludes previously completed site remediation and preparation work and financing costs Source: Estimates by LAEDC Expressed in 2015 dollars Source: Estimates by LAEDC Expressed in 2015 dollars Institute for Applied Economics 1 NFL Los Angeles Stadium in Carson Economic Impact Analysis 1 Introduction os Angeles County and its surrounding region have been without an NFL team for more than twenty years. There has been periodic interest in either Lmoving an existing NFL franchise or creating an expansion team in Los Angeles. As the second largest media market in the country with dual franchises in almost every professional sport, the absence of an NFL team has been marked. Momentum has been building recently in actively recruiting teams to the region, including two franchises, the Oakland Raiders and the San Diego Chargers (collectively, the “Teams”). The two NFL rivals jointly issued a statement on February 19, 2015, indicating their interest in pursuing a shared stadium in the City of Carson financed solely by stadium revenues. The site proposed for the stadium is a 168-acre site at the southwest intersection of the I-405 Freeway and Del Amo Boulevard, which is currently unoccupied. The project calls for an approximately 70,000-seat capacity stadium that could expand to 75,000 seats. The project will also accommodate a mix of on-site and off-site parking totaling 18,000 to 20,000 spaces. induced economic impact is estimated. Second, ongoing The Chargers and Raiders both have ties to Los Angeles annual activity associated with NFL games is reviewed County. The Chargers were established in 1960 as part and its direct, indirect and induced economic impact is of the American Football League and played their first estimated. This includes not only the on-site activity season in Los Angeles. In 1961, they moved to San Diego occurring at the stadium but also the off-site activity and have been playing their home games at Qualcomm related to visiting teams and visiting members of the Stadium since that time. The team joined the American media and NFL organization who spend money in the Football Conference (AFC) in 1970. regional economy before and after the game. The Raiders were also established in 1960 as part of the The third aspect to the analysis considers that the American Football League and joined the National stadium will be a cultural center hosting events other Football League in 1970 as part of the American Football than NFL games. Activity associated with all other events Conference (AFC). The Raiders played in the Los Angeles occurring at the stadium is reviewed and its direct, Memorial Coliseum from 1982 through 1994 before indirect and induced economic impact estimated. returning to Oakland, CA where they have played since. The Los Angeles County Economic Development Economic Impact Analysis Corporation (LAEDC) has been retained to quantify the total economic impact (including direct, indirect and Economic impact analysis is used to estimate the overall induced effects) of the development of Los Angeles economic activity, including spill-over and multiplier Stadium in Carson and its ongoing annual operations. impacts (often referred to as indirect and induced activity), which occurs as a result of a particular The analysis is taken in three parts. First, the initial one- business, event or geography (direct activity). time economic impact of stadium investment and construction is reviewed and its direct, indirect and 2 Institute for Applied Economics Economic Impact Analysis NFL Los Angeles Stadium in Carson The initial economic activity related to the construction of the Los Angeles Stadium in Carson and to its ongoing operations as well as ancillary activities is the purchase of goods and services from local vendors and the wages and benefits paid to local workers. This injection of funds into the county circulates from the Los Angeles Stadium to the owner and employees of establishments that help supply the goods and services that the stadium and franchises purchase. These suppliers in turn hire workers and buy goods and services to facilitate their business. The developers will spend millions of dollars for the wages and benefits of construction employees. These workers, as well as employees of all suppliers, spend a portion of their incomes on groceries, rent, vehicle expenses, healthcare, entertainment, and so on. This recirculation of the original expenditures multiplies their impact through these indirect and induced effects. Approach and Methodology The extent to which the initial expenditures multiply is Economic impact analysis typically begins with an estimated using economic models that depict the increase in final demand for an industry’s output, such relationships between industries (such as construction as a purchase of football game tickets, concessions, legal and its suppliers) and among different economic agents services, or rent and utilities. Alternatively, analysis may (such as industries and their employees). be conducted using detailed expenditures, such as the team’s spending on employees, medical care, rent, legal These models are built upon actual data of expenditure costs and so on.