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 Corp., told L.A. 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.”

It now appears likely that the city received little net benefit for its $3.2 million investment in what later became a 90-minute TV show featuring Jackson. Kyser’s estimate was not broken down in a spreadsheet or even a stand-alone report. It was forwarded to city officials as an e-mail. “He didn’t give us a document,” says June Gibson, the city’s assistant chief legislative analyst. “He just provided an e-mail of the estimate and how he arrived at that estimate.”

When the Weekly asked for a copy of the e-mail, Gibson said “yes” before checking with a superior and then changing that to a “no.” “If you want the information, you would have to submit a Public Records Act request,” she said. The Weekly filed its request on November 25 and has yet to hear back from her boss, Chief Legislative Analyst Gerry Miller.

Kyser’s estimate was made when city officials, particularly Los Angeles police brass, were bracing for as many as a million fans in the streets around Staples Center, where the 90-minute function was opened to holders of 17,500 free tickets.

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. City Attorney Carmen Trutanich has vowed to recover the city’s memorial costs — mostly policing and officers’ overtime — and Councilman Dennis Zine says he has a commitment from AEG to pitch in.

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 tribute, AEG leaked footage 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, in which AEG has a 10 percent stake.

One question has been, Who benefited more from the memorial: AEG, which would reap profits from the world’s continued fascination with Jackson (31 million people worldwide viewed the memorial on television), or city businesses, thanks to Jackson-related tourism in this depressed 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 Jackson. Many of the celebrities listed as official guests, however, already live in or near L.A.

Meanwhile, LA Inc. itself stated that hotels and restaurants downtown would reap $1.2 million. That number was presumably included in Kyser’s larger estimate.

Anecdotal evidence suggests that there was little basis for these estimates. 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 2008, despite the purported influx of guests who came for Jackson’s memorial.

Although down from the previous year, a sizable amount of the July 2009 hotel business can be attributed to the July 2–5 Anime Expo, a celebration of Japanese animated film, which brought an estimated 44,000 people to the L.A. Convention Center near Staples. Its official hotel was the Bonaventure.

Officials at Santa Monica airport, a hub for celebrities arriving in their private jets, says there wasn’t a big increase in air traffic for the Jackson memorial: “When the Michael Jackson event happened, we didn’t really see a huge increase in aircraft here,” says Airport Director Robert D. Trimborn. “It didn’t tax us very much at all.”

One worker at a popular restaurant at L.A. Live, the complex adjacent to Staples, reports that the night before and the night of the memorial were “dead.”

Although people who held no ticket to the Jackson event 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 increase in business. “I don’t think it was anything major,” he says of the day.

A 2003 study by then–City Controller Laura Chick, which estimated that “Staples Center contributes approximately $36 million annually” to the city’s economy, included the effects 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 rushed, city-touted e-mail 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 in an arena that holds roughly 250 major, 20,000-plus-capacity events annually.

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.”

Coates has been critical of studies that show economic benefits from public sporting events, arguing that money people spend because of a venue like Staples Center is almost always money that’s displaced from another part of town.

Moreover, anecdotal evidence emerged after the 2002 Salt Lake City Winter Olympics that people avoided the crowds, which dampened revenues. Coates thinks that might be the case with the Jackson memorial: People were scared off by the possibility of dealing with 1 million fans downtown. At one point during the day of the memorial, then–LAPD Chief William Bratton estimated that there were just 600 people outside Staples.

“It very well could be that a bunch of people said, ‘I don’t want to go there and hang out with those loonies,’” Coates notes. “So you had a small number of people who came to town, and others who wanted to avoid a mass of people.” In fact, he says, “The net impact could have been negative.”

An AEG spokesman said he has no comment on the city’s $4 million benefit claim. Carol Martinez, associate vice president of LA Inc., insists the $4 million number didn’t come out of thin air. “We have a research department and they don’t just make this stuff up.” When asked for a breakdown, she says, “I don’t have the answer to your question, but I will tomorrow morning.” She never called back.

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