City-sponsored study finds Staples Center will bring L.A. profit. (Up Front).

L.A.'s $71.1 million investment in the Staples Center will reap a projected $49.2 million profit for the city over 25 years, according to a new study commissioned by City Controller Laura Chick.

The study, being released this week, singled out Staples as a rare example of a new sports facility that produced a return on public investment.

The report will undoubtedly add momentum to the civic push for a 1,200-room convention center hotel and $1 billion entertainment and retail complex near the Staples Center, as well as efforts to draw a National Football League team back to L.A.

"The whole point of our doing this study was to serve as a wake-up call to city government that we need to do economic development in a very thoughtful way," Chick said.

She plans to release the report publicly at Los Angeles Memorial Coliseum this week because it is a multi-use facility that has benefited South L.A. the way that Staples is improving the nearby South Park neighborhood of downtown.

"We need to go back and see how we did so we continue to do (projects) better and better. The study shows we did it right and we're one of the few that's done it right nationwide," Chick said.

She stopped short of endorsing the Coliseum as a future home for an NFL team, however. Chick said she wanted to link the report to the discussion of a site for a football team in Los Angeles.

Dividends

The city contributed $58.5 million in financing to the construction of the $400 million Staples Center. The Community Redevelopment Agency put in another $12.6 million.

That money will be paid back to the city in the form of property taxes on Staples Center, incremental sales taxes and rent and debt service on city-owned property. Over 25 years, those items add up to $121.7 million, adjusted for their present day value, according to the study, conducted by Robert Baade, an economics professor at Lake Forest College in Illinois who specializes in the economics of sports facilities.

After the initial investment is deducted, and other adjustments are made for services like police, fire and traffic control, the city winds up with a $49.2 million surplus.

What makes Staples a success is its high utilization rate -- five sports teams play there, plus traveling musical acts -- the report said.

Not all the findings are positive. Much of the money spent by local residents at Staples Center gets passed through to players, artists and owners who live outside the city, the report said. Further, many of the taxable goods, such as merchandise, food and beverages, are made elsewhere.

"Despite the positive economic impact, it is modest given the incidence of events and the number of people attending them," wrote Baade, who was out of the country last week and unavailable for comment.

He wrote that the key to success is having the money stay in the district "to be spent again and again," and noted that Inglewood, with an aggressive development strategy after the Lakers and Kings left the Great Western Forum, "has experienced, relatively speaking, substantial increases in economic activity."

Nevertheless, 33 small hotels, restaurants, flower shops, camera stores and other South Park businesses surveyed for the study generally consider the stadium's impact a positive since its opening in 1999.

While none of the businesses saw overall sales increase by more than 25 percent as a result of Staples Center's presence, 17 said sales increased by up to 25 percent, and 15 weren't affected. Only one business in the survey said sales dropped due to to the impact of Staples.

Before developer Anschutz Entertainment Group completed the facility, the area was blighted and had "relatively little economic activity," Baade wrote.

Restaurants were singled out as enjoying the most significant sales increases on game days.

"One of the biggest draws is the Staples Center," said Geoff Ellis, general manager of the 420-seat Palm Restaurant, which opened a block from the facility in April 2002. "It had a big impact on our decision to build the restaurant where we are."

Shaping debate

The report's findings appear to bolster arguments for combining numerous uses at any facility that gets built with public money.

With a capacity of fewer than 20,000 for basketball, Staples Center gets much less traffic per event than new baseball or football stadiums, which typically contain between 45,000 and 65,000 seats.

However, the facility hosts over 200 events a year, drawing more than 2.5 million people.

Much of the Staples Center's revenues are generated by its five major tenants: the NBA Lakers and Clippers, the NHL Kings, the WNBA Sparks and Arena Football League Avengers. Those teams alone ensure that the arena will have 150 highly attended events per year.

By comparison, a baseball stadium would host only 81 regular season games and sporadic special events each year, while a football stadium would host eight regular and two preseason NFL games, plus a smaller number of college football games if a team such as UCLA was a tenant. Beyond that, there's only the occasional large-scale rock concerts and international amateur sporting events.

A football stadium in particular would be difficult to justify in terms of return.

"Public subsidies in football stadiums are not just a questionable investment in general," said David Carter, founder of the Sports Business Group, Redondo Beach-based consulting firm. In Los Angeles, he said, it would be all but impossible to justify public investment in a football-only stadium.

City officials have yet to endorse any of the three possible sites outlined by the Community Redevelopment Authority last year: the Coliseum, a parking lot adjacent to the Staples Center or a rail yard near Union Station.