West Ham's Olympic Stadium Defense Is Bullshit
Keeping the Olympic Stadium around was a bad idea that has only gotten worse. Here's how West Ham ghosted in and put one past London's taxpayers.
Last summer, the BBC aired an investigative report titled "Olympic Stadium: How the Hammers Struck Gold," about just how sweet a deal West Ham United FC got for its new home, which cost taxpayers £272 million to convert for football use. While estimates were floated, nobody knew exactly how much West Ham would pay in rent until last month, when a court decision forced the full disclosure of its lease and occupancy contract with E20, the partnership between the City of London and Newham Council. The annual rent was confirmed to be a paltry £2.5 million, and the lease leaves taxpayers on the hook for many of the stadium's operational costs. Folks are pissed.
Earlier this month, West Ham defended itself, claiming that the deal would actually "benefit the taxpayer." The club also argued that since they will only use the stadium on match days—by their count, that's only 25 days a year—they should not be responsible for all the costs of maintaining the stadium the other 340 days of the year.
After reviewing hundreds of pages of documents obtained by information requests, looking closely at the lease and related contracts, and running calculations on likely costs, one conclusion remains: West Ham's arguments are bullshit. Here's why.
Back in 2005, London, bid for and won the right to host the 2012 Summer Olympics. UK taxpayers paid over £480 million to construct the Olympic Stadium, which was originally planned for long-term use as a 25,000-seater for athletic events such as track and field.
That all changed when Boris Johnson was elected mayor in 2008. Johnson wanted a bigger stadium and a long-term football tenant, which he argued would be a financially superior alternative and also ensure the legacy of the Games. In 2009, he and the national government formed the Olympic Park Legacy Corporation (OPLC) to review bids for the stadium lease. After a contentious process, they selected West Ham in 2011.
The original terms for West Ham to take over the Olympic Stadium were so favorable that the European Union ban on "illegal state aid" arguably came into play, and the bid was abandoned amidst serious legal concerns. On their next go-round, the mayor's office and West Ham tried to avoid any pesky legal problems with what looks and smells like a de facto sale. Basically, West Ham submitted a second bid, based on a long-term lease; the City of London failed even to try to get preapproval from the EU Commission, West Ham's new bid was accepted, and, on March 22, 2013, the city and club signed a 99-year lease.
Now we can see this horribly one-sided deal in all its atrocious detail.
When West Ham moves into Olympic Stadium in August 2016, they'll pay £2.5 million a year in rent. West Ham also paid £15 million, or 5.5 percent, of the £272 million stadium conversion costs. By comparison, Arsenal Football Club shelled out over £470 million to build, own, and operate the Emirates stadium. If stadiums only have a shelf life of, say, 50-100 years, then West Ham's total of £262.5 million paid out over the next century is 50 percent of what Arsenal paid.
Still, you might say, the Olympic Stadium was built by London for the games, and so West Ham saved us from a white elephant situation. Yes, compared to the stadiums leftover in South Africa and Brazil after the last two World Cups, this may be true. However, compared to other affluent countries that have hosted the games, that's not the case. For example, when Atlanta hosted the 1996 Summer Olympics, they converted their track-and-field stadium into Turner Field, a new home for the city's baseball team. The total construction and conversion cost to the city, much of which was paid by TV broadcast partners, just north of $200 million. The Braves, though, paid $23 million dollars toward those improvements—about 11.5 percent—and signed a 20-year lease for $500,000 a year in rent and $1 million per year in capital costs. Even ignoring the exchange rate (which fluctuates) and inflation (20 years have passed), Atlanta got a much better deal than London. That's true even though the Braves are now, two decades later, leaving for a new stadium and further public subsidies in the exurbs of Cobb County.
Perhaps the mayor also hoped the stadium could spur development in the borough of Newham. It's a nice thing to hope for, but a silly one to expect, as similar promises of development around stadiums elsewhere around the world have not come to fruition. And that's not even considering the moral question, which is especially relevant to London, of whether "development" really just means "gentrification" that pushes low-income residents out of affordable housing.
The devil is in the details: the lease is 207 pages long, and the nickel-and-diming is both skillfully done and shameless. Taxpayers are on the hook for a lot of operational costs. For example, in the lease, Section 28 states clearly and unequivocally that E20 Stadium LLP, the partnership between Newham Council (a London neighborhood) and the City of London, is on the hook for police services on match days. Nobody can say with certainty how much this will cost. West Ham will play at least 19 home games, but likely more.
West Ham claimed that this lease term is normal for a rental agreement, but that's not true. In fact, a 2012 High Court ruling held that London-area football clubs must reimburse the Metropolitan police for all policing that happens inside their stadiums (not outside). Except, of course, for West Ham: their barristers stuck a provision in the lease that shifted the cost of policing inside the Olympic Stadium to London taxpayers.
Another burden on the taxpayers is that E20 must pay to maintain a Premier League-quality pitch, including lighting. Keeping a field that nice is expensive. For example, The Guardian reported that Aston Villa's pitch cost £800,000. The lease requires taxpayers to pay for grow lights, which, according to the groundsman at Crystal Palace, cost £50,000 per rig.
West Ham's response to the criticism that they are shifting the operating burden to taxpayers may, at first blush, appear reasonable: "Someone renting the stadium for 25 days a year cannot be responsible for 365 days' running costs." The City of London does have a summer tenant and plans to host track-and-field events in July and August. There are also plans to try and host concerts at the stadium. Still, what makes West Ham's "25 days argument" so laughably disingenuous is the actual text of the lease. There are numerous one-sided provisions that ensure West Ham's control over the stadium and stadium operations extends beyond those 25 days.
For example, West Ham can ask that no activities on the pitch happen for the "preceding 48 hour period" before a game. This is a big deal because in England, football is played 10 months out of the year. Thus, if West Ham is playing EPL games on Saturday or Sunday, E20 can't do anything on Friday or Thursday if West Ham says so. Also, E20 has the obligation to make sure the stadium is "restore[d] to Football Mode" after any activity. Basically, if a concert happens and the dancing fans trash the field, E20 has to spend a lot of money to get that grass green and pitch-perfect again.
Additionally, West Ham's claim of only 25 home games may be a conservative estimate. First, they will have a guaranteed 19 home games every Premier League season. Still, what about a deep FA Cup run or a barnstorming run in the Europa League? Even worse, what if West Ham gets drawn into those pesky group qualifying games in Europe that take place in July and August? That would conflict with E20's summer sublet tenant, UK Athletics, but you can probably guess who would get priority based on the written terms of the lease between West Ham and E20. Yes, it's West Ham. So, West Ham may claim they only use the stadium a few days per week and a few months out of the year, but, if push comes to shove, they're more than an anchor tenant: they almost have exclusive use and enjoyment if they want it.
Of course, there are some positive aspects to this deal for the taxpayers. For example, City of London will keep the first £4 million of any naming rights deal and 50 percent of any annual revenue thereafter. However, if West Ham is just a tenant, why should they get such a big slice of revenue from the name of a stadium? Yes, they add prestige and glamour and plenty of press, but the club itself says they are not an anchor tenant; they're just soccer players and fans that show up 25 days per year. The math is deeply troubling. For example, if the Mahindra naming rights deal is agreed for £6 million per year for 20 years, then West Ham will profit to the tune of £59 million. West Ham does not want to pay the costs of running the stadium year round, but wants 50 percent of the naming rights profits. How is that fair? By their own "we are only tenants for 25 days a year" logic, 25 days out of 365 is six percent.
Still, the former Mayor of London claimed that E20 can generate revenue and maybe turn a nice profit off of concerts. After all, the concert and event market in London is large and growing. Sadly, there are numerous obstacles to this. First, West Ham's 10-month lease and the likelihood of bi-weekly games—and their 48 hour right of refusal and pitch requirements—means trying to organize a concert at the Olympic Stadium would be difficult. What happens to, say, a Beyonce concert scheduled for the day before a West Ham FA Cup replay or a Europa League quarter final? Under the current terms of the lease, West Ham could, in theory, make E20 move the concert or cancel it altogether.
Knowing this potential for complications and/or lost revenue, tour planners might prioritize other London venues. There's this quaint venue already in London named Wembley, which has no 10-month soccer club tenant. As it happens, Wembley hosts plenty of concerts.
Still, recall that taxpayers also helped build Wembley, so even a best case scenario for the Olympic Stadium's schedule hurts taxpayers. If the Olympic Stadium succeeds, it may compete with Wembley for profits that would have gone to taxpayers. This "concert cannibalization" risk is one reason why Minneapolis turned down an MLS stadium recently. London is a bigger market than the Twin Cities, of course, but the situation could possibly turn lose-lose: the Olympic stadium may just steal acts that would have performed their summer concert at Wembley. At the least, tour promoters can draw on thew new competition to push for a better deal.
Prestige. Legacy. This is what Boris Johnson wanted, but not quite what he got. Many Londoners associate the Olympic Stadium with very different things. The former Mayor's plan to generate revenue by landing a tenant ran into a serious problem: a cunning, profitable company (or "soccer club") that nickel-and-dimed throughout negotiations and got a steal of a deal. West Ham deserves a healthy dose of shame for this deal, but we can't forget the faulty organs of democracy, and those in power, who keep buying the snake oil of stadium deals. The Olympic Stadium and the West Ham lease are millstones that will hang around the necks of future generations for decades. Worse still is how easy this outcome was to predict.