We hate to be a Debbie Downer, but Mayor Eric Garcetti's claim today that a two-day, Jay Z-curated concert on the streets of downtown would “inject millions of dollars into the Los Angeles economy” is dubious at best.
It appears that most of the revenue from the $155, two-day passes for the event is going to concert promoter Live Nation. While venues normally make money via rent, and control the profitable concessions, the Made in America fest has as its main sponsor Budweiser. That suggests Budweiser, not the city, will benefit from concertgoers' thirst.
Economists have consistently debunked the idea that one-off events result in net economic gains for metropolitan regions like L.A. One reason is that people spending money downtown will not be spending that money closer to wherever they came from, which is often not that far:
Another reason, says Robert A. Baade, professor of economics and business at Lake Forest College near Chicago, is that the costs of such events are almost always downplayed by city boosters.
Those costs include the lost income to people missing work because of traffic or street closures, and the lost income to retailers forced to close up shop – as they have, for example, during championship team celebrations – to avoid a rush of drunk partygoers.
“The problem with these kinds of analyses has to do with the fact that the benefits are exaggerated and the costs are underestimated or ignored” by municipal officials, Baade says today.
In a look at Lakers championships in the early '00s, Baade told us he found that “the parade down Figueroa essentially kept a lot of people out of work for at least a half-day and disrupted commercial activity in an important commercial corridor.”
L.A. City Councilman Jose Huizar, who represents the area around Grand Park where the event will be held, has expressed those very concerns – that residents will be trapped or shut out of their own community and that local business could be disrupted.
Today Garcetti mentioned a study claiming a $10 million economic impact following the first Made in America event in Philadephia in 2012. But those kinds of studies are often carried out at the behest of city boosters (that study was touted by the Greater Philadelphia Tourism Marketing Corporation) and are often full of it.
In 2009, we debunked a study by the L.A. Economic Development Corporation, notorious for its boosterish reports, which claimed a $4 million economic impact from the Michael Jackson memorial at AEG's Staples Center, which cost taxpayers $3.2 million, mostly for extra police.
“There are vested economic interests that stand to gain from these kinds of events,” Baade says. “Who's coming up with these estimates and what's their motivation?”
For Jay Z's festival, L.A. taxpayers will be footing the bill, at least initially, for extra police, for shutting down city streets that will be filled with stages and concessions, and for cleaning up the mess left by 50,000 fans.
Will the city's taxpayers get reimbursed for all those costs?
We asked the mayor's office to account for those costs today but have yet to hear back. Given that the sole beneficiary outside of Live Nation, Jay Z and Budweiser mentioned at today's press conference was United Way, it would appear on the surface that the mayor gave away the farm to have this concert on public grass and public streets.
(We also asked the mayor's office what United Way's cut would be. We'll let you know if we get an answer.)
As we said previously, venues normally get some form of rent and, on top of that, lucrative concessions. In this case, early indications are that city taxpayers may not get either. Given that Garcetti's office negotiated in secret with Live Nation and Jay Z's folks, we have to wonder if the mayor was taken for a ride by the kind of notorious sharks that rule the music business.
Grand Park is run jointly by the city and county, but this event will require extra space, including streets around the park, to accommodate 50,000 people.
The LAPD has expressed concern that the party will set a precedent for allowing future events, including raves, which the department has claimed are difficult to police. The Jay Z party will feature a rave-like electronic dance music stage. And at today's press event, a photo of superstar DJ Skrillex was displayed on the City Hall steps. He performed at last year's Made in America in Chicago.
The Aug. 30-31 party plans come at a time when major concert promoters are desperate for large venues in Southern California. Raves in particular have had a tough time finding big enough sites for the crowds that show up. The HARD Summer festival is moving this summer to the Whittier Narrows Recreation Area and promoter Insomniac said earlier this year that it had not secured homes for its largest SoCal fair-weather parties in 2014.
In Chicago, where Lollapalooza's annual party at Grant Park, organized by Venice's Perry Farrell, is said to bring in $20 million in revenues, the city is getting an estimated $4 million or so. Not bad, even if the park was torn up to the tune of $1 million in damage a few years back.
If that happens at our long-awated and relatively new Grand Park, aka “the park for everyone (with $155),” who's going to pay?
Listen, we're down for a concert in the park as much as the next guy. In fact, it sounds downright fun. When the mayor said today, “We are a world-class city, we are the 'City of Angels,' and we throw a world-class party,” that's reason enough right there.
But don't bullshit us that letting one of the largest entertainment companies in the world use downtown's public backyard for free is really a favor to the people (and to the United Way). That's just false. You, the taxpayer, should be just a little offended.
[Added at 6:30 p.m.]: Garcetti's spokesman, Yusef Robb, tells us that the promoters will pay for policing, any damage that might need to be repaired, and “other costs” presumably incurred by L.A. taxpayers.
He argues that any disruption to downtown residents and businesses will be minimal because the event will happen on Labor Day weekend.
The United Way's cut will not be known until after the receipts from the event are counted, he said. We asked what percentage the organization would be getting, a question that wasn't really answered.
We also asked if the city was getting “rent or concessions,” a question that Robb ignored. That leads to believe that our initial reading of the deal, that Live Nation is getting this public resource essentially for free, is valid.
Editor's note: A previous version of this story incorrectly described the ownership of the promoter putting on the event. We regret the error.
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