As the L.A. City Council takes up the strange saga of the Michael Jackson memorial next week, the critical question will be whether area businesses really reaped a $4 million windfall for an event that cost taxpayers $3.2 million, and whether memorial organizer Anschutz Entertainment Group should be formally asked to cover that cost.
AEG's defenders, including Councilwoman Jan Perry, have repeatedly cited a $4 million windfall to city restaurants, hotels and other businesses as a result of visitors, celebrities and dignitaries spending money here during the July 7 Jackson tribute.
But what if the $4 million estimate was based on assumptions that proved to be faulty?
Jack Kyser, chief economist at the Los Angeles Economic Development Corporation, told the Weekly that he came up with the $4 million estimate just two days before the memorial at the behest of city officials and LA Inc. — the Los Angeles Visitors and Convention Bureau.
“We had to put our heads together very quickly,” Kyser says. “So we put together an estimate on people traveling to the city, use of hotels, limos, shopping, and who would come in on private planes. We came up with a rough estimate before the memorial. We were asked to do this very, very quickly.”
Kyser's estimate was not broken down in a spreadsheet or even a stand-alone report. It was forwarded to city officials as an email.
“He didn't give us a document,” says June Gibson, the city's assistant chief legislative analyst. “He just provided an email of the estimate and how he arrived at that estimate.”
Kyser's estimate was made when city officials, particularly Los Angeles police brass, were bracing for as many as 1 million fans in the streets around Staples Center, where the 90-minute function was open to holders of 17,500 free tickets. Most of the city's cost came in the form of officers' salaries and overtime. At one point during the day of the event, then-Chief William Bratton estimated the crowd outside Staples at 600.
The issue of who should pay for a pricey memorial held by AEG, a private firm controlled by billionaire Philip Anschutz, has become a hot topic because the city is strapped for cash and faces an estimated deficit of $400 million next year.
The company had been preparing to stage Michael Jackson's “This Is It” show in London when the singer suddenly died. The memorial became a television special broadcast live around the world.
Even before the memorial, footage was leaked of Jackson rehearsing for his 50-date London showcase. That footage ended up being the backbone of a blockbuster, $200-million-grossing concert film, “This Is It,” for which AEG has a 10 percent stake in profits.
One question has been: Who benefitted more from the memorial – AEG, which would reap profits from the world's continued fascination with Jackson (31 million people worldwide watched the memorial on television), or city businesses, thanks to Jackson-related tourism in this down economy?
Kyser says he based his $4 million estimate more on the hoped-for spending by high-dollar celebrities who would come to town, stay at posh hotels, fly in on expensive charter planes, and eat at high-end restaurants while mourning for Jackson. Many of the celebrities listed as official guests, however, already live in or near Los Angeles. Even an AEG official said that “people who travelled here from around the world were in town anyway” to give their last respects to Jackson.
Meanwhile, anecdotal evidence suggests that there was little basis for Kyser's $4 million estimate. LA Inc.'s own hotel occupancy figures found that stay-over rates in Los Angeles during July actually dropped by 9.5 percent over July of 2008.
Officials at Santa Monica airport, a hub for arriving celebrities and their private jets, says there wasn't a big increase from the Jackson memorial: “When the Michael Jackson event happened, we didn't really see a huge increase in aircraft act here,” said Airport Director, Robert D. Trimborn. “It didn't tax us very much at all.”
Although people who held no ticket to the Jackson memorial were kept out of the area, the big-spending celebrities cited in the $4 million number had access to the restaurants, but apparently had little effect on one popular nightspot just a few doors north of Staples. Uno Thimansson, manager of the Hotel Figueroa and its Moroccan-themed bar, noticed no uptick in business. “I don't think it was anything major,” he says of the day.
A 2003 study by then-City Controller Laura Chick estimated that “Staples Center contributes approximately $36 million annually” to the rest of the city's economy, including the spoils of such events as 20,000-audience Lakers games and concerts where fans and tourists buy t-shirts, patronize concessions and eat at L.A. restaurants.
Using Chick's $36 million number as a baseline, the hurriedly created, city-touted email estimate of $4 million in benefits to L.A.'s economy would mean that the Jackson memorial somehow contributed a whopping 11 percent of Staples' annual economic impact.
That would mean that the memorial generated more than one-tenth of Staples-related spending by consumers citywide over the course of a full year, an outsized amount of economic activity for a single event.
The economic-benefit numbers “don't make any sense,” says Dennis Coates, economics professor at the University of Maryland Baltimore County and an expert in the public financing of sports facilities. “They might have just as well come up with those numbers by drawing them out of a hat.”