Will the LA Angels Leave Anaheim? It Depends on the Money

It's possible the Angels could leave Anaheim without an MLB team as early as 2016. But will they actually do it?

May 6, 2014 at 11:40AM

In Anaheim, most of the MLB-related drama is related to Albert Pujols' recent resurgence and Mike Trout's statistical otherworldliness. But there may be a bigger story on the horizon. According to the Los Angeles Times' Bill Shaikin, the Angels are "exploring" the possibility of a new home in Irvine, Calif. Although the distance between the cities is less than a 20-minute drive, one of the team's biggest markets -- L.A. -- would be farther away.

To some, a move doesn't appear to make economic sense, especially in a period when Angels fans continue to be some of the most devoted in baseball. So what is the team thinking?

Diving into the negotiations
To understand this question, one must delve into the spellbinding, sometimes sensational discussion that's taken place between Angels ownership and the city of Anaheim. Both sides are currently negotiating a new stadium lease to cover Angel Stadium (below) and the 100-plus acres of surrounding city-owned land.


Angel Stadium of Anaheim. Image via Pyro Spectaculars by Souza's, Flickr.

As The Orange County Register points out, the Angels' current lease goes through 2029, with an opt-out clause in 2016. This agreement allows the team to keep all sales from the first 2.6 million tickets it sells each season, and 100% of concession, event, and ad revenues. It also mandates the Angels include the word "Anaheim" in their name.

According to the Register, the terms of the proposed lease are a bit different, and would run through 2057, with opt-out clauses in 2036, 2043, and 2050. The other key points are:

  • The Angels keep all sales from the first 3 million tickets sold (they hit 3.01 million last year, and 3.06 million in 2012).
  • The word "Anaheim" can be removed from the team's official name. 
  • The team pays for stadium upgrades, which could cost as much as $150 million.
  • The Angels can also "develop" the 100-plus acres of surrounding land, at an annual rental cost of just $1.00.

The last detail is the most controversial. Anaheim Mayor Tom Tait told the Register"we certainly value the Angels, but the economic value to the city doesn't merit giving away the land for free [or very close to it]." And that's understandable. A recent appraisal estimated the entire Angel Stadium plot to be worth more than $200 million, the Times reported. 

Why the Angels would leave Anaheim
Even if the Angels agree to pay a higher rental cost, there's another sticking point: the money made from the land once it's developed. Assuming office buildings, apartments, and parking structures are built, the resulting revenue could well surpass the $150 million -- or more -- the Angels expect to spend on stadium upgrades.

If that happens, it's reasonable for the city to get a cut. The only question is: how much? According to Shaikin, Mayor Tait thinks a 50-50 split is fair, and "he is not in favor of letting the Angels keep a majority of [the] money under any circumstance." Hence the reason the Angels would leave Anaheim. If the team does want more than 50% of revenue from the land surrounding its ballpark, it may be an impossible deal to attain in Anaheim.

How much would relocation cost?
Although it's tough to estimate the odds of a move, there's at least the possibility it could happen. In that scenario, the Angels could bolt town beginning in 2016. So how much would a relocation cost? There are two major variables that will affect this figure: land and stadium development costs.

Given that a Major League team like the Angels can generate millions of dollars in local economic activity -- it improved spending in Anaheim by $120 million in 2012, according to an economic impact study by Conventions, Sports, and Leisure -- it's reasonable to think a competing city could give away the land required for a new park. Irvine is only the latest name in the rumor mill. Tustin, Calif., about five miles north of Irvine, is also a possibility. Both cities have large plots of land near freeways and public transportation.

Actually building a new stadium, though, is an entirely different animal. The Atlanta Braves' next park will likely cost close to $675 million, with about half that coming from taxpayers. Marlins Park, completed in 2012, cost almost $650 million, and the Minnesota Twins' Target Field cost $545 million. In Miami, the local government covered about three-quarters of the park's cost, while Minneapolis taxpayers were responsible for $350 million of Target Field's total bill, according to the Wall Street Journal.

Given recent history, a city like Irvine could conceivably be convinced to pay for half of a $600 million to $700 million stadium for the Angels. If that happens, and the land is free, it may be a better deal for the team to leave Anaheim, especially if the alternative is to make expensive upgrades to an aging Angel Stadium. The park was built in 1966, and would be almost a century old by the end of the proposed Anaheim lease. 

On the other hand, if free land isn't available, and a new group of local taxpayers aren't willing to foot a significant portion of stadium development costs, it might make sense to stay put. It's this scenario that Mayor Tait was likely envisioning when he told the O.C. Register earlier this year that a move could cost $1 billion. 

The bottom line
So what will the team do? Like most things in life, it depends on the money. Instead of paying attention to ongoing negotiations between the Angels and Anaheim, though, it may be smarter for concerned fans to keep an eye on what nearby cities like Irvine or Tustin are offering.

In my opinion, a team that brands itself with the "L.A." name should stay as close to Los Angeles as possible. But if the cards fall right, and the combination of free land and public subsidies allows a new stadium to have a similar price tag as upgrades to Angel Stadium, it makes sense for the team to consider a move.

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David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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