Guest Opinion | Sonja Berndt: Concerned About Rose Bowl Impact on Financial Resources

I have been a resident of Pasadena for over 19 years. I write to express my deep concern  about the severe impact the Rose Bowl’s massive debt has had on the City’s financial  resources and the lack of urgency exhibited thus far to address it. 

The Rose Bowl  Operating Company’s (RBOC’s) financial picture is bleak and the funds it says are  needed for Rose Bowl capital improvements are enormous. While the City owns the  Rose Bowl, it cannot afford to cover the annual debt service and/or fund these capital  improvements. 

The RBOC’s proposed strategic plan is flawed because it leaves out  obvious options for increasing the RBOC’s revenues. The Council must insist that the  RBOC urgently pursue all available options for generating revenue to avoid depleting  City funds needed to provide critical City services.  

1. RBOC/Rose Bowl Financial Woes and their Substantial Negative Impact on the City’s Financial Resources

For several years prior to 2016, the Rose Bowl underwent a massive multi-phase  renovation project, financed primarily through bonds. The renovation included 54 luxury  suites, 48 loge boxes, 1,200 club seats, state-of-the-art press boxes and a new broadcast  center. The cost estimate in 2010 was $152 million. Ultimately, the $152-million project cost around $183 million. As of May 2021, the stadium had collected $197.72 million in  outstanding debt from these massive renovations. 

The City had to step in and pay approximately $11.5 million of Rose Bowl debt in fiscal year 2021 and approximately  $10 million in fiscal year 2022. Last year, former City Manager Steve Mermell advised  the City Council that paying the Rose Bowl debt had exhausted much of the City’s  General Fund Operating Reserve.  

Interim City Manager Cynthia Kurtz reports that the City will not have to pay the Rose  Bowl debt obligation for FY2023. While the RBOC touts the fact that over the past 12  months it has exceeded financial expectations, the only reason the City is not having to  pay the Rose Bowl debt this year is because the federal government provided the Rose  Bowl with a one-time $10 million Shuttered Venue Grant. 

While the pandemic played a part in the RBOC’s dire financial picture, the RBOC’s  financial instability existed prior to the pandemic. Attendance at Rose Bowl events  hosted by anchor tenants UCLA and the Tournament of Roses Association (“Tournament  of Roses”) fell 30% in fiscal year 2020 (a 60% drop as compared to five years prior). The minutes from the RBOC’s December 11, 2019 board meeting note that it “has been  suggested to City Council . . . that the city should get ready to subsidize the Rose Bowl.  The [C]ouncil was not very receptive to the idea.” 

Much later, at a special City Council/RBOC joint meeting on June 8, 2021, the RBOC  presented a long list of options for increasing the RBOC’s revenues (Revenue  Enhancement Opportunities – Phase 1 Findings). The RBOC promised to come back to  the City Council to “present a second analysis and an update on their budget to the City  Council in approximately 4 -5 months.” (6/8/21 Mtg. Minutes.) But it did not.  Additionally, while Mayor Gordo appointed an ad hoc committee “to help focus on and  vet the [RBOC’s] budget issues/details, and provide guidance to the City Council,” that  committee reportedly met only once, back in August 2021. 

On June 6, 2022, the RBOC finally came back to the Council to present its strategic plan (Revenue Enhancement Opportunities Phase 2 findings). While the RBOC’s proposed  FY2023 budget was approved (over the opposition of Councilmember Williams), the  consensus was that the discussion of the strategic plan would be continued at a  “workshop meeting” in July 2022. 

According to the Agenda Report for RBOC’s 1/12/2022 board meeting, “[o]nly the music festival  agreement is an annual financial improvement for the next five years, as the others are all one-time  financial gains.” 

The five-year operating pro forma in the RBOC’s Agenda Report shows a budget deficit of $4.6 million starting this current fiscal year and increasing going forward. Rose Bowl  debt service payments increase annually. The RBOC states that necessary capital  improvements will cost at least $54 million, with $46 million still to be funded. It admits  its current revenue sources will not likely be able to fund the remaining $46 million of  needed repairs. The RBOC clearly warns that if additional revenue-generating initiatives are not implemented “then the City, as the owner of the stadium, will have to provide the  additional financial support.” 

1. The RBOC’s “Short List” of Recommended Revenue-Generating Opportunities is  Flawed and Inadequate

The RBOC requests authorization to “diligently pursue certain revenue generating  opportunities in a pre-development phase” and explore additional opportunities that  would broaden monetization opportunities. As a preliminary matter, the phrase “in a predevelopment phase” does not engender hope that  there will be urgent action. Further, some of the items on the list such as a Family Golf  Center and a South End Zone seating and in-stadium amphitheater project would require  substantial upfront capital investment.  

Without explanation, absent from the RBOC’s recommended “short list” are Rose Bowl  stadium naming rights, increasing admission taxes, and the sale/lease of all or a portion of  the Rose Bowl and surrounding property. These options must also be considered. 

1. Stadium Naming Rights

The RBOC’s PowerPoint presentation to the City Council on June 8, 2021, included slides discussing the sale of stadium naming rights “which could have a positive impact  on RBOC cash flow” and could result in a long-term deal. The presentation mentioned  potential obstacles including “[t]he sale of naming rights has long been an issue in the  City – political support will be required.” Significantly, the RBOC recommended this  option for further study in Phase 2. 

The RBOC engaged Elevate Sports Ventures to provide a valuation analysis on stadium  naming rights. According to Elevate’s PowerPoint presentation, valuation in year 1 for  just stadium naming rights is $4.2 million, with a potential long-term deal value of $48.2 million. Further, with additional naming revenue opportunities, the potential (package)  naming rights investment would be $4.7-$5.0 million in year 1. 

While selling naming rights to the stadium is in the RBOC’s list of potential revenue generating opportunities in 2021, it was not in the RBOC’s “short list” of revenue generating opportunities recommended to the City Council on June 6, 2022. Why is that?  Significantly, in a November 23, 2021 email, former General Manager Darryl Dunn stated that he had spoken to a representative from the Tournament of Roses and that  

Tournament of Roses leadership may be more open to stadium naming rights than in the  past for the reason stated therein. 

In response to my Public Record Act requests, I received no documents detailing any  discussions between the RBOC and the Tournament of Roses or any other RBOC partner  related to stadium naming rights as a way to generate much-needed revenue for the  RBOC. Were/are there serious negotiations on that issue? If these negotiations have not  taken place, please direct the RBOC to do so. Assuming that the RBOC is correct, and  the Tournament of Roses has veto rights over selling naming rights to the stadium,  consider whether the Tournament of Roses and/or UCLA would prefer that the City  sell/lease the Rose Bowl property or portions of it rather than sell naming rights to the  stadium. 

2. Increase Admission Tax and Capital Maintenance User Fees

According to the City’s Amended and Restated Master Lease Agreement with the  Tournament of Roses, the City can charge an admission tax for each ticket in an amount  to be determined in its sole discretion (Section 2.8(B)) and can charge $15 in capital  maintenance user fees for each ticket with a face value over $100 (Section 2.8(E)). How  much does the RBOC currently generate from the admission tax and capital maintenance  user fees annually? Can the RBOC increase these fees and taxes in order to generate  revenue from the persons who actually use the Rose Bowl? 

3. Sale/Lease of the Rose Bowl and Surrounding Property

The RBOC’s June 8, 2021 PowerPoint presentation of possible revenue-generating  opportunities also included slides discussing a sale or lease of all (or part) of the RBOC  property, stadium, and/or golf course, including selling ownership shares of the stadium. The RBOC suggested that this option be explored in Phase 2. Yet without explanation,  this option was not included in the RBOC’s short list of recommended options in its June 2022 PowerPoint presentation. This option could raise substantial revenue and should be  considered. 

4. Potential Increases in Parking Tax and Transient Occupancy Tax

The RBOC’s “short list” of revenue-generating opportunities does include potential  increases in the city-wide parking tax and Transient Occupancy Tax. I support these possible opportunities for the RBOC to generate revenue. But revenue generated from  these taxes should not be limited to helping only the RBOC. Our hundreds of unhoused  residents and those residents suffering from mental illness should also benefit from these increased taxes and a portion of the increased revenue should be dedicated to fund more  affordable housing. While the City has a legal obligation to pay debt on the Rose Bowl if  the RBOC cannot, it has a moral obligation to care for and protect its most vulnerable  residents. 

1. Why is this Important? 

According to Ms. Kurtz, with the resumption of debt payments, FY2024 and beyond are  projected to have deficits in the General Fund. (C. Kurtz FY 2023 Budget Transmittal  Ltr., p. 6.) This can result in a decrease in City services. 

Our City has a substantial need to adequately fund critical programs such as shelter for  our hundreds of unsheltered residents, increased mental health services, assistance for  renters who face eviction, and affordable housing. We have over 500 unhoused residents,  nearly 300 of which have no shelter at all. We need increased City funding for these  programs, not the threat of decreased funding for our Housing and Public Health Departments. The fiscal year 2023 City operating budget notes a mere $1.6 million from  the General Fund for the Housing Department and no General Fund allocations for the  Public Health Department.  

1. Conclusion

Our City cannot continue to pay the huge Rose Bowl debt obligation or fund the very  substantial capital improvement needed on the Rose Bowl and yet fail to provide for the  basic and critical needs of all of our residents. Please ensure that Pasadena works for all  of its residents. Thank you. 

Sonja K. Berndt, R.N. (inactive) is a retired state prosecutor