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L.A. and Cirque du Soleil: Must this show go on?

Without solid evidence to back up optimistic economic projections, the city should reject a proposed $30-million loan to bring the famed circus to the Kodak Theatre.

August 04, 2009

Los Angeles is being promised more than 800 jobs, millions of dollars in new Hollywood tourism and a 10-year run of the famed Cirque du Soleil, and all the city has to do is approve a $30-million loan -- in federal money -- to the lessors of the Kodak Theatre in Hollywood. What could be bad? A lot. The city should reject the loan, then take a serious look at how it invests in economic development projects.

Financial investments such as this one, which would allow CIM Group to retrofit the theater for the Quebec-based circus, are major commitments that should be backed by careful study and economic projections. But city leaders are unable to support their optimistic claims about the CIM loan with anything but the flimsiest of evidence.

For example, the city Community Development Department and CIM estimate that the project will generate 858 jobs. There is no adequate study that supports that number, but there is this not-so-amazing coincidence: The federal Department of Housing and Urban Development requires that one job be generated or saved for every $35,000 lent. Cirque and CIM need $30 million. Multiply 858 by $35,000 and you get $30.03 million. It appears, in other words, that the city is seeking to justify the loan based on how many jobs it needs to make the project pencil out, not how many it really expects to be created.

Tourism is important to Los Angeles, and it is almost certain that Cirque du Soleil will bring tourists to Hollywood; its shows do extremely well in Las Vegas and worldwide. But where are the studies demonstrating how quickly the city will recoup the HUD money that it would be unable to use on some worthier project backed by honest projections and studies? The city's feeble answer is that it doesn't have to be as responsible with federal money as its own.

Proponents argue that the loan puts the city at little risk. But if CIM does default, perhaps because tourists get their fill of Cirque du Soleil in Las Vegas or Santa Monica (where a traveling troupe will appear this fall -- and again periodically over coming years, even if a permanent show moves forward in Hollywood), the city will be left with an interest in a shopping mall and a theater. Los Angeles has a poor track record of running commercial properties.

This page would love to see Cirque du Soleil at the Kodak Theatre. It would be a long-running show in a theater that sits largely empty in a complex that was expected to do better than it has. But the city hasn't made the case for a public investment. There are too many assertions and too little evidence to support the city's claim that it's not just throwing good money after bad.

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