Monthly Archives: June 2011

06.19.11
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Sorry Harold Camping, armageddon is actually in 2014

I’m amused reading Ray Ratto’s Twitter feed this morning. He’s fielding questions about the A’s stadium situation, perhaps in response to Chronicle Sports Editor Al Saracevic’s column on the front page of the Sporting Green today (paper/iPad app only until Tuesday). Ratto’s staying consistent in his belief that the Wolff/Fisher group doesn’t have the money to build in San Jose, making it the only reason the move hasn’t happened. As far as I can tell he’s the only media guy who has this particular opinion, though that shouldn’t discount it. It’s simply one of many takes on the subject.

Saracevic laments the possible loss of all three teams currently playing at the Coliseum. The A’s would leave for San Jose or Las Vegas (we’ve gone over that). The Raiders would be lured south to Los Angeles again, whereas the Warriors would head back over the bridge to San Francisco. The 49ers deal in Santa Clara will fall apart, forcing the team to work with SF again. The column is mostly prognostication without much depth, so like any opinion (including mine), take it with a grain of salt.

Howard Bryant mistakenly claimed that the A’s lease runs out after the 2012. In actuality, they could leave after the 2012 if they had a place to play. Since they won’t, they’ll be playing at the Coliseum through their last extension year, 2013. The Raiders’ lease also ends following the 2013 season. What happens in 2014? Jeffrey, Doug Boxer, and I puzzled over that question a few weeks ago. It’s been brought up in the comments with greater frequency recently.

With multiple tenants comes moving parts for stadium deals. When the Raiders sat down with the Coliseum Authority and hammered out their new stadium plan, the assumption was that the A’s would leave after the 2013 season for either downtown Oakland or San Jose. We’re now at the point were no permanent new home could be opened until 2015 at the earliest in either city due to the political process.

Oakland has 50% power in the Coliseum Authority relationship, and other than rejecting Lew Wolff’s most recent request for a lease extension, the city tends to rubber-stamp whatever the Authority does. By supporting what will probably be a $1 billion stadium at the Coliseum complex (plus carried over debt from the old Coliseum), nearly half a billion for Victory Court, and silently pushing for a new Oakland-friendly owner to take over should Wolff/Fisher give up the San Jose project completely due to frustration, they’re trying to have their cake and eat it too. Honestly, who could blame them? No private interests have ever invested a combined $2 billion in Oakland in this manner.

The harsh reality is Oakland will be fortunate to get $500 million in these economic times. (So would San Jose.) Both the A’s and Raiders projects will require varying amounts of redevelopment money, which as I’ve written several times, is near extinction. These projects have become much riskier and harder to pull off than ever before. It might be best if Oakland were to focus on one project it can really do well, instead of two in which having fewer resources available for both makes it more likely to half-ass both. The Raiders have a leg up in that the Coliseum Authority has its own ability to raise bonds, and with a few changes to the city charter could be given redevelopment powers over the complex. That isn’t possible at Victory Court, since Oakland is carrying the burden alone. Eventually, Oakland and the Authority are gonna have to make a decision about who to extend, whether for one year or several. Given their track record, it looks more likely that someone or something will make the decision for them.

As for the A’s, 2014 is a particularly dicey situation. Other than AT&T Park, there is no MLB-ready facility in the Bay Area if the Coli were taken away (natch). I went to a San Jose Giants game last week and tried to envision it with 10,000 extra seats so that it could host some MLB games. It didn’t work. I suppose Wolff could build a temporary facility alongside the Quakes stadium at Airport West and move some of the materials over when the time comes, but it seems like a logistical nightmare. If Bud Selig can’t convince the Coliseum Authority to re-up with the A’s for one year, we may see the A’s in some kind of yearlong barnstorming tour, a la the 2004 Expos.

06.17.11
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Howard Bryant reviews “high stakes game of chicken”

This one’s a must read, people.

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Howard Bryant may be a Boston guy through and through, but he cut his teeth at the Merc’s sports department for years as the A’s beat writer. He’s also written some excellent books on baseball: Juicing the Game, Shut Out, and his most recent work, The Last Hero: A Life of Henry Aaron. Now he’s taken some time to write about the future of the A’s, and it’s fairly comprehensive (though he gets the last lease year wrong – it’s 2013, and he confuses Coliseum North with Uptown).

There’s too much meat in the column to cherry pick any one passage, so I’ll leave it up to you to read the whole thing. Then come back here to comment. As Bill King often said of the occasional high scoring game, “this one has become a donnybrook.”

06.17.11
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Sometimes a tree has to be chopped down

Nearly thirty years ago I went on a field trip with my brother and dad to a nursery in the Santa Cruz mountains. The nursery mostly grew coast redwoods. The afternoon was chilly as the marine layer wafted in over the mountains, giving the trees the moist, dense air that makes them thrive. As we left, my brother and I were both given redwood saplings in half-gallon milk cartons. We decided to plant them in the planter strip near the curb in front of the house. I forgot which brother was responsible for which tree.

Ten years later both trees had grown, though not taller than the other trees on the block. The western tree was taller than the eastern tree and had a thicker trunk. They required no maintenance. My dad laid down iceplant (just like at the old Coliseum!) around the trees and everything coexisted peacefully.

Another ten years passed, and from all appearances the western tree was growing like crazy, whereas the eastern tree was stalling out. The western tree also had much more substantial root growth, which could be identified by the uprooted sidewalk next to the tree. Its brother to the east posed no threat to strollers and skateboarders. Eventually the city noticed the problem with the sidewalk and told us that we had no business planting those trees next to the curb. We were told to put a tree in the yard next time, where it could have more space to grow. One day the city chopped down the western tree, which had grown to 20 feet tall. Later they pulled out the stump and fixed the sidewalk. The eastern tree still stands, growing little by little (I think). My dad calls it the Christmas tree and runs the holiday lights out to the former sapling every December. It remains the only redwood on the block.

San Jose’s redevelopment agency is much like the western tree. It grew as a mighty redwood was supposed to, big and tall and fast. Over time it became too big for its own good, and to keep it from destroying the street it had to be chopped down. SJRA’s mission was informed by a quest to become a big city, which meant putting tons of resources into it. Some of it was well directed (library, convention center, arena, museums) and some of it wasn’t (numerous retail failures). SJRA has a ton of fundamental problems that make it difficult to easily chop down. Yet that’s exactly what it’s done. In preparation for the upcoming fiscal year 109 jobs were slashed, or 91% of staff. Even as they expressed outrage at the passage of the twin “kill” bills, they clearly saw what was coming down the road and prepared for it.

Over the next year it’s expected that many RDA’s will be chopped down like the western tree. Most of those will be agencies that have grown too big or have become unmanageable. The loose definitions of blight and even the term “redevelopment” have allowed the agencies to grow unchecked. Controller John Chiang’s audit covered numerous instances of waste and abuse. Agencies who have mismanaged themselves are likely to get cut down, while the properly managed ones – and they do exist – have a chance to stay alive, like the eastern tree. What we don’t know is the criteria for separating the good ones from the bad ones.

With the first real salvo fired in the redevelopment war on Wednesday, every agency throughout the state is scrambling to protect or save themselves from the coming onslaught.

If you’ve read this far, you now get a treat of ballpark news! The Merc’s Tracy Seipel checked in with both Lew Wolff and San Jose Mayor Chuck Reed to catch their responses to the redevelopment shuffle. Wolff appears undeterred, still saying he can buy land if necessary, though he hasn’t actually done it. Maybe he’s waiting to find out what he might have to buy once the dust settles. Reed provided three scenarios under which the Diridon land can be made whole:

  • Wolff could buy the two parcels, and the city could sell him the rest of the ballpark site.
  • The city could sell agency assets to buy the last two parcels, then sell the entire site to Wolff.
  • The city could buy the last two parcels and lease the site to Wolff, with the city using the lease as security for financing to pay for the land.

These are all scenarios we’ve discussed here on the blog. None of what San Jose has done has been sexy or attention-grabbing. I’ve noted in the past that I could often count all of the people present at a ballpark-related session on two hands. The point is that they get things done. Every time an obstacle has come up, they’ve figured out a way to deal with it. Consider the following:

  • PG&E substation move? Not needed, ballpark configured to fit within purchased land.
  • Fire training station move? Garage requirement eliminated, no longer necessary.
  • Sharks objections? Lifted once entitlements were made for garage/commercial development on north side of HP Pavilion.
  • AT&T land stalemate? Possibly resolved when city provided entitlements to AT&T for land near Santana Row.
  • Worries about parking related EIR impacts? Not if “enough” parking is found on the other side of Guadalupe Parkway. (*shakes head*)

We’re in for an interesting rest of the year. In the morning I’ll check on what ORA and City Hall did with the $100 million.

One more thing: Billy Beane obliterates Lowell Cohn in this interview.

06.16.11
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Redevelopment is only mostly dead

Update 6/16 10:50 AM – Governor Brown has vetoed both of the main budget bills, AB 98 and SB 69. The veto came as Brown has been is discussions with Republicans over tax extensions, which were half of his inaugural budget solution. The GOP has given no quarter on these taxes, which apparently has forced Brown’s hand. The trailer bills, such as the twin redevelopment bills, are still on Brown’s desk being held back by the Democrats for the time being. They are important for funding the “cuts” half of Brown’s budget plan, so don’t expect them to go away.

At one point during the current legislative session, there were at least a dozen bills having to do with redevelopment reform. In the end, the bills that prevailed were largely influenced by Governor Jerry Brown. With AB 26 and 27 passing and almost guaranteed approval by the governor, the only thing left that can save redevelopment as we know it is a lawsuit (or 400). A successful legal challenge by cities and RDA’s would completely upend the just completed budget process, since the budget is dependent on $1.7 billion in money flowing from RDA’s to the state.

The way this works is that as of October 1, all redevelopment agencies (city or county) would be dissolved. Any projects under contract before January 1, 2011 would continue to have tax increment (now simply named property taxes) as an ongoing funding source. Anything agreed to after January 1 is subject to review in order to determine whether any bond issues violate the spirit of the law.

In addition, redevelopment agencies could be reconstituted if they can perform their activities while taking care of their ongoing debt and these new payments. If they can’t, a successor agency will be appointed whose mission is to collect the these “excess” property taxes and send it to school districts and the like. Cities can apply to reconstitute or create new RDA’s via the mechanism described in AB 27, but they are bound to the aforementioned property tax revenue distributions.

The Merc’s Tracy Seipel reports that the City of San Jose’s share for the next fiscal year is $62 million, and $15 million per year after that. That’s going to be extremely difficult for San Jose to pull off because tax increment revenues have been so poor for the last several years that there’s been little excess to use for new projects. SJRA’s practice of landbanking has also tied up funds in real estate purchases, which have allowed SJRA to act semi-speculatively when it comes to encouraging new projects. Many cities practice this, few to the extent San Jose does. Now it appears that much of the landbanked property will have to be sold to cover these new payments, not to mention any shortfalls that might occur if the property tax receipts tank.

Remember that in December, Lew Wolff renegotiated the price of the Airport West property down to $89 million, a reflection of the depressed real estate market. Wolff doesn’t have to pay until 2015. I suspect that he may have no choice but to accelerate the purchase, if only to prevent the state from forcing the city to sell another piece of land Wolff covets, such as Diridon. It may be that the creation of SJDDA insulates the city somewhat, but my understanding of the bill language is that efforts to circumvent these new powers and responsibilities could turn into an ugly tug-of-war over dollars and dirt. San Jose’s moves aren’t nearly as egregious as what’s been squirreled away in LA, but if I were Wolff or a board member of SJDDA I wouldn’t rest easy until I knew how legal the new joint powers authority was via a court ruling. There seems to be a simple solution for Wolff if he wants his ballpark in San Jose: PAY UP. (BTW, you know what else probably costs around $89 million? The Fairmont SF.)

Oakland’s situation is different in that it has much more bonding capacity and property tax revenues in several districts are good. However, it will be difficult for ORA or a successor agency to round up the money needed for Victory Court. As I noted yesterday, ORA is buying the Henry J. Kaiser Convention Center for $29 million just so that the city can balance its budget. Other properties, including the Fire Training Center, were bought under similar circumstances. Those kinds of quickfixes won’t be available for much longer, especially if the lion’s share of excess property taxes ORA collects will have to go to Peralta CCD and Oakland School District (my guess: $15-25 million for the first year, $5 million annually thereafter).

The last obstacle in Brown’s quest to kill redevelopment is a legal one, which has been been telegraphed by cities and their lobbying groups for months. Their biggest problem is that so far, pro-redevelopment’s solutions have been predicated on RDA’s voluntarily sending money to the state and education as they get it. It’s kinda difficult to base a budget on voluntary payments, don’t you think? And as long as they keep up with the rhetoric about this legislation and Brown’s efforts being “unconstitutional” they’re setting themselves up for a big loss. They may prevail on technical legal terms, but even if they do it doesn’t bode well for the state, cities or counties. The budget was passed strictly on party lines, with very little give on display and numerous battles to come before Brown has to make a decision. We’re getting to the point where it’s time to start thinking about working in a post-redevelopment era. Municipalities that can’t make such a transition are in danger of being left behind.

06.15.11
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Redevelopment: The Reckoning

Today is the deadline for the state to pass its budget. As part of the budget, two new redevelopment bills are being debated.

AB 26x/SB 14x
Redevelopment, Part 1
Eliminates redevelopment agencies and provides for orderly wind-down of RDA activities including payment of existing debt and the continuation of pass-throughs. The related bill (AB 27x/SB 14x) creates an alternative ongoing RDA program.

AB 27x/SB 15x
Redevelopment, Part 2
Creates a voluntary alternative RDA program that allows existing RDAs to continue with reforms. The new program requires community remittances to schools, fire districts, and transit districts, of $1.7 billion in 2011-12 and about $400 million ongoing. Results in $1.7 billion budget “solution.”

The bills have Assembly and Senate designations to help them move through both houses simultaneously. These are compromise bills which lean more towards Governor Brown’s plans instead of AB 1250/SB 286, which would more fully preserve existing redevelopment. Already the new bills have attracted controversy. Redevelopment proponents have called the dual bills “ransom”. And AB 27x has already been scrubbed due to language that seemed to favor Los Angeles’ redevelopment agency over others.

It’s starting to get hot and heavy in the Capitol. More to come.

Update 2:40 PM – Main budget bills have been passed in both houses. Trailer bills are flying through with the exception of redevelopment, for which one bill is stuck two votes short of 2/3rds majority.

Update 3:20 PM – After a recess and some strongarming, both AB 26 and 27 barely pass the Senate. Assembly is next, then the governor.

Update 3:55 PM – Now in Assembly. Republican Asyman compares bills to a Sopranos-style shakedown. Italian-American Democrat is enraged, the two nearly come to blows. Theater. Yowza.

Update 4:07 PM – Assembly passes both bills. Entire package goes to the governor to sign. I’m still trying to grasp the full impact. Old RDA is dead. New RDA is… Enough? Crippled? Analysis later, followed by lawsuits for certain..

06.15.11
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Quan takes it down to the wire

In light of how San Jose Mayor Chuck Reed used hardball tactics to get across-the-board concessions from public employee unions, it’s a good time to check in on how his counterpart in Oakland, Jean Quan, is doing.

In late April Quan presented three different budgets to the City Council, which included different mixes of cuts, union concessions, and new revenues from a parcel tax Quan supports.

The budget deficit is $58 million, or 2 x $29 million. Why am I using that notation? You’ll see shortly.

First the parcel tax. Quan has heavily advocated for a $80 parcel tax which would raise up to $11 million for the upcoming fiscal year. Nevermind that parcel taxes aren’t frequently used to take care of general fund shortfalls, she’s pushing ahead anyway. Fundamentally it’s difficult to base a budget, which has to be approved in June, on a tax whose fate is unknown until a few months down the road via a special election. Council is expected to vote on the tax on the 21st. If approved the special election would follow.

On the cuts side of the budget, Quan is looking for nearly $29 million (ding!) from the unions. Ever the consensus builder, she chose to start talks with labor in May, which put a huge crunch on Mayor and Council to wrap up the budget. There are allegations that the different unions are not being treated as equal partners, and are being given more or less favorable deals based on who they are. The final budget can’t be voted on unless the true amount of concessions from the unions is known. They’re six days away from the deadline.

The last part of the tale is a sad but increasingly common deal. Should the parcel tax not pass, City will need to take care of another $29 million to balance the budget. It turns out Oakland’s had something up its sleeve for while, courtesy of Oakland Redevelopment Agency. Last week ORA offered to buy the Henry J. Kaiser Convention Center (SFGate) from City. The price: $29 million (ding!). An appraisal done last year pegged the value of the auditorium and land at – you guessed it – $29 million. Whether a building that hasn’t been used in several years is worth $29 million is up for debate. The fact is that $29 million is being transferred from ORA to the City to address a budget problem. Coincidentally, that money is coming out of the coffers of two ORA districts, Central and Central City East. Both of those districts meet at the Victory Court site, and it is assumed that additional fundraising from those two districts would be required to buy land and improve infrastructure at Victory Court.

That’s not to say that this is currently problematic for Victory Court’s prospects. Since the EIR has only begun and no decision by MLB has been made, neither the City nor ORA were in the position to buy additional Victory Court land. San Jose used a similar “rob-Peter-to-pay-Paul” tactic when it sold its old City Hall to Santa Clara County as part of a settlement. Money’s extremely scarce for all municipalities, so if they have assets they might have to liquidate them.

However, taking money from ORA to pay the bills leaves ORA with an asset that isn’t useful in the near term. It’s too expensive to run and renovate. Peralta Community College District isn’t interested in buying HJKCC. While the setting is absolutely beautiful, it has limited redevelopment prospects. The actual lot has shrunk in recent years thanks to the 12th Street Project. Any new commercial development would require a good deal of new parking, which is lacking in the area.

Yet there are a couple of juicy pieces that come out of all this activity. One, ORA suddenly owns a large piece of land outright, on which a ballpark could be built (HJKCC), right? Well, not quite. The shrinking of the lot makes its size around four acres, much too small for a ballpark. The distance from the sidewalk on 10th Street to the new 12th Street curve is less than 400 feet, making it difficult to plant a regular baseball field, let alone a gigantic grandstand behind the diamond.

Finally, there is a real opportunity cost with this money move. An advisory council for the Central City East district expressed disapproval of the sale via a 13-1 vote against. That doesn’t matter since the ORA board is essentially the City Council in a different guise. A rubber stamp is a mere formality. The sale also gives Oakland a very good excuse for not pursuing Victory Court with more alacrity – the money is sworn to other obligations. That’s a key difference between what Oakland is doing and what San Jose is doing: San Jose is selling redevelopment land to private buyers to help make the ballpark deal complete, whereas Oakland is selling City land to ORA to make the budget.

The upshot for Oakland is that it’s even more important than ever that redevelopment (the institution) survives the state’s budget negotiations. If redevelopment takes a big hit in either legislation or from Governor Brown, Victory Court is basically dead. How can I be sure of this? This is how:

If the State of California eliminates redevelopment as been proposed in the Governor’s Budget, unencumbered bond funds would be used to defease corresponding bond debt, and unencumbered operating funds would be used to pay Agency’s obligations. The net funds available, after expenses related to eligible Agency activities, will go to the taxing entities, including approximately 27% to the City of Oakland. Without Redevelopment funds, the City will have significantly less capital funds for City infrastructure – streetscapes, parks, public facilities, etc. – but will have an increase in property tax revenue. This increased revenue will not offset the current staffing funded through redevelopment, let alone provide additional funds for capital projects.

That came from Interim City Administrator P. Lamont Ewell’s April report supporting a separate $4 million City-to-ORA land sale. It’s possible that the compromise plan being worked out in the Legislature will save Oakland’s bacon in this regard – but there’s no guarantee that will happen.

06.15.11
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Wolff & investor group to sell SF Fairmont

After an attempt to convert part of the Fairmont San Francisco into condos was derailed by objections by the local hotel workers union, the owners of the hotel, who include Lew Wolff and Saudi Prince Alwaleed Bin Talal, have decided to sell the property.

The hotel was bought in 1998 by the same group as part of a portfolio of Fairmont hotels located in SF, Dallas, and New Orleans. The group also included members of the Fisher family and former Pepsi/Apple CEO John Sculley. Wolff and Prince Alwaleed bin Talal had partnered previously on the Fairmont San Jose.

Wolff said this about the state of the hotel:

“We think it’s time for a single owner to revisit the future of this area,” Wolff said. “Maybe they actually can do better than we did. They certainly couldn’t do any worse.”

The pro-Oakland crowd might take this as a sign that Wolff may be willing to sell the A’s if he found himself at a similar dead end. I wouldn’t bank on it. Compared to owning a hotel, owning a baseball team is a couple orders of magnitude more prestigious and expensive, with the potential payoffs that much greater as well. Wolff is in the process of divesting himself of hotels acquired over the past 20 years, there will always be other hotels and opportunities to buy. An MLB franchise? Well, the collective of owners is called The Lodge for a reason. Teams aren’t commodities. The general public typically doesn’t remember hotel owners. They most definitely remember team owners for good or ill.

06.14.11
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San Jose City Council passes budget

After a lengthy four hour debate, the San Jose City Council approved a $2.5 billion budget, a 10% drop from last year. The budget includes the first ever layoffs at SJPD, totaling 100 officers. The 7-4 vote included dissenters who wanted additional funding for police in light of an increasing homicide rate.

Couple that with Mayor Chuck Reed possibly backing off his pension reform ballot measure, and it looks like the political skies will be relatively clear for a ballpark referendum over the next 6-9 months. (Or at least until the next budget crisis hits next year, which would start the process all over again.) Remember that to make Opening Day 2015, shovels must be in the ground no later than late Fall 2012.

06.14.11
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KBWF May ratings plummet in SF market, rise in SJ

95.7 Sportsradio’s ratings took a 33% dive from 0.9 in April to 0.6 in May in the SF-Oakland market. Conversely, they rose 33% in San Jose from 0.6 to 0.8.

Ratings for the twin KNBR’s have stayed steady. As for still-in-receivership KTRB, it’s possible that their AM license may be turned back in to the FCC, a rarity in the business.

Going back to KBWF, it looks like Dan Dibley was brought in to cohost with the temporary guys in the morning/mid-morning, with the idea that he’d get his own show or cohost at some point. I think it’s time to take the training wheels off and let him do his thing. While they’re at it, bring in the “permanent” local talent.

06.13.11
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Redevelopment bills keep moving after changes

Last week I wrote that redevelopment bill SB 286 (Wright) was stalled, with similar bill AB 1250 working the other house. Turns out that last Friday SB 286 was amended and brought to committee again. This time its language largely matches that of AB 1250, which should make it easier to get a unified plan through the legislature.

SB 286’s changes include the elimination of restrictions against sports facilities, just as AB 1250 didn’t contain such restrictions. Will Governor Brown maintain a hardline stance against redevelopment? Somewhat surprisingly, redevelopment has become something of a plank for Republicans in budget negotiations. Whether that’s simply to have a bargaining chip in place or actual support for the institution is something we’ll find out over the next few weeks. Then there’s the matter of the governor’s veto power, though I suspect that if a budget deal is done under Brown’s watch, he probably won’t be so intransigent as to create a budget crisis by killing one or more budget-compromise bills.