Rose Bowl Operating Company Presents Gloomy Financial Outlook for the Stadium

Despite recent successes of the Rose Bowl Operating Company (RBOC), there are extensive threats to the current RBOC business model.

The RBOC made its budget presentation to the City Council on Tuesday in a special meeting. The meeting included a financial analysis, and an analysis on revenue enhancement opportunities.

“What we have before us is one of the challenges facing the city and that challenge is largely due to the pandemic,” said Mayor Victor Gordo. 

During the pandemic, the city was forced to carry $11 million in the stadium’s debt service.

Gordo said that the city may have to consider a Sports and Entertainment or Hospitality Operating Company.

“The reality is that the RBOC has a fragile business model, and one or two significant events can cause short and long-term damage, including exposure to the City’s General Fund. Most recently, the unexpected pandemic has caused major damage to the organization that must be immediately addressed,” according to a city staff report. 

The major threats are listed as, but not limited to:

• Significant debt service. 
• The stadium now is in the most competitive stadium market in the United States. A new stadium was recently built for the Rams and the Coliseum was renovated after USC took charge of the stadium. According to the report, in order to remain competitive, substantial additional capital is needed for both the stadium and clubhouse, as well as for the golf course. 
• Water expenses at the golf courses continue to significantly increase and reliance on potable water as the only golf course supply cannot be relied upon in the long term. 
• Security expenses continue to rapidly increase with the need to constantly change with regard to public safety. 
• The College Football Playoff continues to evolve and could have a significant impact on the Rose Bowl Game, which is, by far, the most lucrative event of the year for the year.
•  Attendance at college football games throughout the country has been declining, and the presence of two NFL teams in Los Angeles means increased competition for ticket sales for UCLA, which impacts concession and parking revenue as well. UCLA performance/attendance will have a very significant impact on RBOC net revenues.
•  Limited development rights for ancillary types of revenue opportunities, that are viable at similar venues.

According to RBOC President Steve Haderlien, there are no painless solutions to the problems facing the iconic stadium.

“The Rose Bowl stadium faces major challenges,” Harderlien said. “Operating a major stadium has never been easy.”

The relationship with nearby neighbors is also considered an ongoing threat. The relationship has improved over the past several years.

“The relationships impact the RBOC’s ability to secure events and cause an increase in operational expenses,” according to the report, which is signed by Haderlein and Rose Bowl General Manager Darryl Dunn. “Given the Stadium and golf courses’ locations, it is critical that community and neighborhood relations remain a top priority for the RBOC and the RBOC must strive to manage neighborhood impacts associated with events in a fiscally responsible manner.”

Dunn called the situation a critical time for the stadium.

“We have gone through some challenges and have always tried to be proactive,” he said. “We are where we are and this is the time for us to come together and focus on the future and make it happen.”

According to the Arroyo Seco Public Lands Ordinance, only 15 displacement events can be held every year. A displacement event is any event with an expected attendance of 20,000 people or more.

The ordinance can be amended from time-to-time to allow for additional displacement events – requires City Council approval. 

But the costs to put on those 15 displacement events continue to increase.

In 2015, the RBOC opted not to hold negotiations with the NFL that could have allowed a team to play in the stadium while a new stadium is being built, largely due to opposition by neighbors living near the stadium.

In 2006 voters shot down a ballot measure that could have brought a team to the Rose Bowl permanently. 

“When we agreed that the NFL was not the correct fit we took on a tremendous responsibility of renovating the stadium,” Gordo said.

The clubhouse, golf course and stadium all need capital improvement dollars.

Since 2015, public safety costs have increased about $70,000 per major event. 

The increase has been driven by metal detectors and neighborhood/street management. 

In addition, the cost of water for the golf course continues to increase. Despite significant water conservation efforts, the water bill for Brookside Golf Course alone is approximately $1 million annually. The supply of water on a long-term basis is also a significant concern for the RBOC. 

But the stadium does have reason to be optimistic: the RBOC has long-term contracts with UCLA and the Tournament of Roses and short term agreements with AEG, for musical festivals and soccer games. 

There are 94 projects in the pipeline that could help make revenue for the stadium, including physical modifications to the stadium, developing nearby property in the Arroyo Seco around the stadium, naming rights and sponsorship opportunities and seeking another tenant.

“The financial health of the RBOC is the primary focus moving forward. Challenges are significant as several revenue streams are under attack and could conceivably decrease. UCLA (approximately $4.4 million annually), the Tournament of Roses ($4.5 to 5 million, Brookside Golf Courses ($1.5 million annual net) and music festivals ($2 million plus annually) are four of the RBOC’s most important revenue streams and must remain so, although all have significant challenges,” according to the staff report.

“The strengths and the opportunities vastly outweighs the threats and the weaknesses,” said Councilmember Steve Madison, who serves as the city’s liaison on the RBOC. “It’s America’s stadium and it’s one of a kind in the country.”

Madison said a development in the Arroyo is a nonstarter, and said the city is going to have to step up and support the nearly 100-year institution.