The Knauss Plan, for now
Clorox CEO Don Knauss has been making the rounds, first on KQED yesterday, then on KNBR this morning, and finally on The Game during the lunch hour. All three are worth consuming, so if you haven’t done that yet, get through all three links, then come back and read the rest of this post. Cool?
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Okay. Knauss was very consistent with his messaging, which should be no big deal for a CEO of a high profile public company. The bullet points from his pitch were these:
- Knauss and other East Bay business interests would like to meet with Lew Wolff and perhaps MLB to discuss options in Oakland.
- If current ownership (Wolff/Fisher) continues to believe that there is no shot in Oakland, Knauss has put together a potential ownership group with members in the East Bay and others in SoCal that could buy the team, keep it in Oakland, and build a ballpark.
- The group has identified three sites in Oakland. The preferred sites are the two on the waterfront: Howard Terminal and Victory Court. The Coliseum complex is the third site, though it is not “preferred”.
- Financing for the stadium would be patterned after the model the Giants used to build AT&T Park. This includes the selling of seat licenses.
During The Wheelhouse, Mychael Urban pressed Knauss for answers about plan specifics and why the group has never directly contacted Wolff. Knauss replied that in the first case, he wanted to at least until after the May owners meetings (though he didn’t say anything would be released at that point), and in the second case, he “wanted to respect the process” MLB has put forth with the commissioner’s panel and so forth.
Well then, how does one go about making it work as the Giants did in China Basin? Thankfully, some very smart economists - John M. Quigley, Eugene Smolensky, and Stephen J. Agostini - have gone to the trouble of diagramming the process. The flowchart below comes from a paper titled Stickball in San Francisco. It’s better known as the San Francisco Giants’ case study in the book Sports, Jobs, and Taxes by noted sports economists Roger Noll and Andrew Zimbalist. Ready? Here’s the secret recipe:
Step-by-step instructions on how to follow the Giants' plan. Click for a larger version.
See? Easy peasy, no sweat right? Sure, there are a few things that are different, such as the need for a ballot measure. Oakland has long claimed that it doesn’t need one. That claim originated from two theories: that either Oakland could leverage redevelopment money or the powers within the Coliseum Authority (JPA). The latter still stands technically. The former? As long as Oakland’s pledge to take care of costs to put the site together stands, and those site costs keep rising (Victory Court was at last count $250 million), the Mayor and City Council are going to have an extremely difficult time convincing the voters that they shouldn’t vote on it. Even in the Coliseum’s case, going without a vote is inherently very risky because many of the people on the JPA board are standing office holders, such as Ignacio De La Fuente and Scott Haggerty. The stench of the Mt. Davis deal still hangs thick and heavy over the Coliseum, and the Authority is having trouble refinancing existing debt at the complex. Does anyone honestly think a $2+ billion megaproject like Coliseum City won’t go to a vote? The project is calling for its own streetcar! Maybe Knauss will don a Harold Hill costume the next time he does a press conference.
Then again, Knauss expressed a preference for one of the waterfront sites. We know that Victory Court is incredibly expensive and that some current landowners aren’t exactly going to roll over for a ballpark, even though they are great Oakland supporters. Maybe it’s time to revisit Howard Terminal one more time. It’s difficult to see how the Howard Terminal site would work. Matson, one of the key corporate supporters at yesterday’s press conference, consolidated operations at HT several years ago. There’s no readily available place to relocate Matson should they give up HT. I suppose it’s possible they could give up a portion, say 15 of 50 acres, in exchange for some kind of break from the Port. Then it just be a matter of dealing with the nearby power plant and prepping the site, which would require completely new pilings/foundation work (just like AT&T Park). Judging from the price tag for SF’s Piers 30 & 32, the cost would be around $80 million to start plus whatever the price is to compensate Matson. Whatever that total is, it’s probably cheaper than Victory Court. (Personally I’d pick HT just because of its proximity to Beer Revolution, but that’s just me.)
Finally, there’s the matter of seat licenses. Knauss and his partners think there’s a market there. Lew Wolff has said there isn’t a market from the beginning. Who’s right? I’ll defer to Wolff, who has access to the season and advance ticket sales rolls and has a pretty good idea of what people are willing to pay for tickets and premium offerings. The Giants’ $255 million financing package included $75 million from 15,000 charter seat licenses. That’s a $5,000 average upfront payment (available in installments, of course). Is the market really there as Knauss claims? Consider for a moment that the 49ers are selling seat licenses right now. The Raiders, if they get a new stadium built at the Coliseum, will require their own seat licenses. They may also be in the mix for whatever venue the Warriors cook up. The A’s would be entering the fray with, if using the formula the Giants used, 20% of the ballpark cost, or $100 million of seat licenses. The A’s don’t have the Giants’ 25,000-strong season ticket roll, or the reputation of having a large number of premium ticket buyers (Green Collar Baseball, anyone?). So you’d have three, possibly four teams selling seat licenses along with more expensive tickets. That’s a good way to oversaturate the East Bay, a market which has historically shown trouble maintaining solid fanbases unless the teams are ultra-successful. These financing terms don’t work unless great support can be maintained through thick and thin, or at least if some of the load can be sloughed off to corporate interests. Otherwise someone has to make up the shortfall, and as we saw from the OFMA debacle, the results can be disastrous. MLB and Selig know this, and they won’t be impressed just because someone says “we can work it out”. Selig will want to see pledges, upfront payments, real tangible proof that seat licenses can be supported and that there won’t be a shortfall that drags down the franchise. The CBA has a provision that the A’s have to come off revenue sharing by 2016, unless they’re still at the Coliseum. MLB is not going to approve a plan that creates huge risk for the team and causes them to stay on revenue sharing even with a new ballpark.
Perhaps the best predictor of how portable the Giants’ financing model is comes from a 2002 AP article which quotes former owner Peter Magowan and Rob Tilliss, the JP Morgan consultant who put the deal together. Magowan:
“You cannot expect a private ballpark to be built in Cincinnati or Milwaukee, there’s not the economic base there. It’s not the Silicon Valley,” he says. “And we couldn’t do it today. We were very lucky in our timing we had low interest rates and a very good economy.”
Tilliss:
“It definitely is not a one-size-fits-all kind of model.”
Knauss’s argument is that economically, Oakland is closer to San Francisco or Silicon Valley than it is to Cincinnati or Milwaukee. I find that hard to believe.
Has anyone asked Knauss etc: Are you prepared to pony up $500 million or more for the team and another $500 million to $700 million to build a ballpark in what Al Davis described as an “economically depressed” area? And to do it with no public funds? If so, let’s see your books and let’s put it in writing. And we want to know which banks have committed to funding this project. If not, step aside.
I was never a fan of the Fremont rendition. That triangle bleacher section just looks weird and my eyes keep getting drawn to it. I like the first drawing. It’s nice to see the skyline and it’s great to see the hills again. Makes me feel like they really did destroy Mt. Davis. For you Oakland folks who have seen the HT site live: Isn’t HT essentially next door to JLS? When I look at the maps that’s the way it looks to me. Where else at or near JLS could they put a stadium? I followed one of the links regarding the troubles with the HT site and after reading it, I’m curious where Knauss plans on getting the money to make that site happen.
@JL – That figures. Not realistic in the slightest. You’d think they’d have popped open Google Earth and put together something like this:
@pjk – Urban and Lund asked those types of questions in their interview with Knauss. Could you at least listen before going off half-cocked like that?
Oakland Tribune Field? Does whoever made that drawing ot realize how large of an investment aming rights are for a privately financed stadium? Floating in the Estuary? As ML pointed out, they could have just followed our lead and ised Google earth. Good grief get this over with…
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Food for thought…. When Don Knauss (I had no idea that wasn’t a silent k) says it is time for the business community to take a lead, is he not just saying the political leadership in Oakland can’t get it done? Additionally, why does be keep saying he helped get Enron Field built by contributing a naming rights deal when Minute Maid wasn’t a naming rights sponsor until well after the stadium had been rocking and rolling for years? Further, why does be keep throwing out the red herring of the Giants suing MLB? If anyone has a case against MLB, it’s San Jose and a far fetched Anti Trust law suit.
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More chest beating and PR spin from LGO members… Go figure
Mindboggliing that the Knauss group would bank on selling seat licenses after the confirmed disaster the Raiders already had with this. And the Raiders didn’t personally take a bath – the city and county did. This all gets down to Oakland’s “build it on your own dime, your problem if you go bankrupt doing it” plan for the A’s
Mrsteve, the triangle bleachers were an Oakland plan, not Fremont.
SJ has less of a case than the Giants, who are smartly going after the developmental challenges and not the move itself. If San Jose and Wolff “are getting their legal guns ready” as the main blogger on this site claims than its over for SJ. Also unless us as fans are 100% committed to San Jose only we should not be amused with the prospect of an extended legal battle, further sending this franchise into deeper pits of mediocrity. At that point we are no longer fighting for the fans or the team, just John Fisher and Lew’s pocketbooks and real estate dreams. Two things that neither you or I should have any concern about.
@djr- extended legal battle compared to how long it would take Oakland to even have a site ready for construction- legal battle would be over and done well before Oakland has anything real- let’s see- 17 years and counting and still no agreed upon site-
@D Jr – To think that any significant money will have to be shelled out by Wolff/Fisher or even San Jose on the legal pursuit is severely mistaken. Regardless of what anyone thinks the limits of the antitrust exemption are, MLB desperately wants to avoid a legal challenge on any grounds other than labor. Especially if that challenge happens to be filed in the 9th District Court in SF. MLB will settle before it gets to a trial, book it. That is what the nuclear option represents.
BTW, the Giants’ case has little merit. The EIR has stood for years now. It’s pretty difficult to overcome a certified EIR, especially one that was definitely not rushed as San Jose’s was.
djr, my point was that only one of the interest groups involved in this whole thing really has a case against MLB. That is San Jose. The A’s, the Giants, Oakland and San Francisco don’t have much to get past a summary judgement. It is absurd that Knauss says Oakland’s economic vitality is a red herring in the same breath he trots out a real red herring: the Giants suing MLB.
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As far as fan commitment to SJ. I am committed to either, but i feel that one city and it’s boosters are showing real signs of desperation, and it isn’t San Jose. Unless “shouting outside the walls and hoping someone hears” is not desperate.
SCOTUS now has 3 new justices: Roberts, Thomas and Sotomayo. In the past, SCOTUS has always let Congress handle ATE but MLB don’t know that today. If SJ files a suit, BS will move his azz so fast, it would be hilarious.
It has been obvious to me what BS wanted to do: delay delay delay and when Lew and Fisher are tired of the whole thing, BS will tell them to sell.
The G’s have no case against MLB or The A’s. Now we have this guy Knauss out there with his plan and of course we are looking at more delays and bogus plans.
David Boies is in town for the Oracle/Google battle. I hope Mayor Reed gives him a call.
I doubt we will see movement unless SJ sues.
@ML/Jeffrey
I have to admit, it would be one kick-ass view if it were possible. And that Google Earth render you guys made… one of the reasons why I personally favored the JLS West site over the three that were proposed back in ’09. Guess I’m just a sucker for skyline views.
Funny, we’ve already had one floating stadium proposal (980 Park) thrown out there, anyone up for a floating stadium on the estuary?
The whole Knauss thing is a giant, lame distraction.
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There isn’t enough money to be made that would pay off both 1) the price of acquiring the franchise and 2) the cost of building a new stadium.
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Thank you for your analysis, ML.
@pudgie,
THANK YOU!!
JL, me too. It’s why I have desperately tried to find a reason for a trip to Pittsburgh for the last few years.
re: There isn’t enough money to be made that would pay off both 1) the price of acquiring the franchise and 2) the cost of building a new stadium.
…that pretty much says it.
@Jeffrey,
Target Field appears to have a nice skyline view as well. Must be nice…
Scott Ostler on the subject, http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2012/05/05/SP051OE1KM.DTL
@eb,
Scott Ostler and Carl Steward are in dire need of reading this blog (if they find the time to take their heads out of the sand).
Snow Park?
OT: Newest A’s fan, Adelaide, born May 3rd, 11:28pm at 20in and 6lbs 15.8oz.
With her brother Hunter:
I guess img html code doesn’t work:
Great looking kid in a great looking hat. Gratz!
Welcome Adelaide!
Congrats LS!
I’m confident LS your daughter will one day watch our A’s in a spanking yard right here in the Bay Area.
@LS – Fixed that for you. Congrats.
@LS Congrats! Thanks for sharing.
good to know the fan base is still growing!
congrats!
Congrats LS!
I know it will be hard.. but Oakland has a long history with baseball.. ever since the early 1900′s with the Oakland oaks. There’s so much history that it would be nice if something could be figured out to keep them in Oakland. I know many people just plain and simple.just hate the city. But the team makes the team not the city. If it is financially possible, all should be done to work out a plan in Oakland.
Matier and Ross say there are THREE potential buyers of the A’s:
Rally time: The home crowd is definitely turning up the heat on Oakland A’s owners Lew Wolff and John Fisher to keep the team in town – or sell to someone who will.
There are deep-pocketed investors who are interested. None is willing to be publicly identified just yet, but we’re told one group is based in Oakland, one in the South Bay and the third is from Southern California.
http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2012/05/06/BAOU1ODKM8.DTL
Out of curiosity, is the Al Davis flame still flickering at the Coliseum?
“Matier and Ross say…,” enough said. Someone needs to tell those idiots the A’s aren’t for sale and that Oakland, East Bay biz community have no power to “turn up the heat” on Wolff/A’s. Funny how tps brought this thread full circle with that one. Oh well, going back to positivity…Congrats again LS!
Let’s just have these three groups come forward and put $1.2 billion in escrow to pay for the team and a ballpark. Money talks…
This is what happens thanks to Selig’s inability to make a decision. Sit around and do nothing and allow throngs of outsiders to come in and gum up the process from a PR standpoint. If he tries to approve San Jose now, we’re going to hear “Several groups are ready to build in Oakland!” How many of these groups will be ready to put in writing their commitment to such an endeavor and be willing to put more than $1 billion in escrow to cover the costs? How many will be willing to sacrifice their own personal fortunes? None, I suspect
To PJK:
“Outsiders”?
People from Oakland – the city where the A’s have played for 44 years – are “outsiders”?
A’s observer.
Where have these people been for 20 years, if they’re suddenly so concerned about the A’s? Are any of them leasing suites at the Coliseum for A’s games now? I suspect not. I figure once these people get the full price tag on what it’s going to cost to buy the A’s and build a ballpark with no public funding, they will retreat back out of the picture.
@A’s observer,
Simply put: to little, WAY to late! These folks should have come forward when Uptown was a real possibility. Oh well…
According to San Francisco Business Times by Blanca Torres, Reporter “Clorox, based in Oakland, is one of the Bay Area’s largest public companies with revenue of $5.31 billion in 2011″, Also Oakland is the shipping center of the Norther California. Because Oakland is several hundred miles closer to mainland Asia than Los Angeles/Long Beach, more than half of all the products from Asia imported into the U.S. are shipped into port of Oakland the 5th largest port in the nation, the port best served modes of transportation in the country: Railroads, Highways & proximity to the airport. Oakland is the Bay Area industrial center & one of the 1st places hit hard by “Out Sourcing” in the early 80s. As the county makes an effort to stop out sourcing an make product in the U.S. Oakland is a perfect location for Manufacturing
mr steve: “Where was this coalition when the A’s were winning, in the playoffs and some corporate sponsorship could have really helped? ”
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I realize times are different 20 years later, but remember Lurie was ready to sell the Giants to the people in Florida because he couldn’t sell tickets to Candlestick — even in the flush times of the Al Rosen/Roger Craig years. Imminent loss of the team apparently galvanized the corporate sponsors. I don’t know if something similar is happening now in the East Bay — but it’s possible.
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The weather in Oakland is the key. Hell, that’s why I live here. I guarantee you from April to November the temperature and the wind is always better on the east side of the bay than it is directly across the bay, at China.Basin. Will many people take the ferry from SF to JLSq to see the A’s? Maybe — after all they’ll be playing at home primarily when the Giants are out of town. Baseball fan tourists in SF during such weeks would be attracted to a beautiful new park featuring an exciting team. And I’m sureI some of those people who now get on the ferry at JLSq to go to China Basin will choose to see some games at a new A’s stadium — either instead of, or in addition to, games in SF. The JLSq area (either of the alternatives proposed down there) would be a delightful destination for people who live and work in CoCo County or South Alameda County.
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One minor note, about the fanciful ballpark renderings: A guy who was deeply involved in the legal side of the China Basin ballpark development, throughout the mid to late 90s, told me that an engineer convinced the Giants owners, fairly late in the process, to drastically alter their ballpark plan. He demonstrated to them that a park open to views of the downtown SF skyline would create a wind tunnel nearly as bad as the one at Candlestick. He then convinced them to turn the high walls of the park around, to block the afternoon fog-wind that comes in every day, and to forego the city skyline fantasy. The result still was terrific. It’s a great place to see a game. Simillarly, I think at this point all you can know for sure is that however it gets aligned, a ballpark near JLSq should be terrific, too.
Now we’re having the same old already-studied-and-ruled-out sites brought up yet again: Howard Terminal, Victory Court…
CFL: Has Clorox come forward ready to buy naming rights for an Oakland ballpark for $120 mill, matching what Cisco would pay in San Jose? Clorox is only offering 40% of tha, figure, no?
@cfl,
Let’s see Blanca Torres do a report on Cisco and the economy of San Jose/ Silicon Valley. You’ll soon realize why Oakland isn’t happening for a privately financed ballpark.
@suit,
That’s some awesome vision for a JLS waterfront ballpark…if it were still 2001. Alas (again), to little, WAY to late for Oakland.
Enough from me on this thread. I’m out!
I will likely get slammed for this comment. However, in light of the many questions regarding the East Bay’s economic abilities, not just as it pertains to the ballpark but in general, I just wanted to point something out. One caveat is that this report was from 2000 as I couldn’t find anything in this format that was more recent. The MTC did an economic study on the Bay Area and put together a comprehensive 27 page report. I was particularly interested in economic output and found it in their report broken down by the 9 counties into 14 different sectors. The top 5 counties in order (billions of dollars) were: Santa Clara 191.7, Alameda, 136.7, San Francisco 108.5, Contra Costa 87.8, and San Mateo 81.7. Bay Area total was 792.5 billion in economic output. The economic output per capita for the entire Bay Area was $116.8k versus $38.9k for California. If we assume the same growth rate of California from 2000-2010 the economic output per capita of the Bay Area in 2010 would have gone to $159.9k versus $51.0k for California. Whatever side of the aisle you fall into on the ballpark situation, I just wanted to point out that the East Bay is not an economic wasteland like some may believe.
Columbo, the issue isn’t that Oakland (or the east bay) is (in private dollars) broke. It’s that the Giants are easily able to siphon off too much of it from all the surrounding counties because their areas of influence heavily overlap. If the Giants were in SJ (or out of the bay area), building in Oakland would be perfectly viable.
Just one more thing. To put this into perspective, if we took the numbers in the previous post, calculated an estimate of the present day, and compared them to countries here’s what we’d have: In the top 50 countries in the world in output as of 2011, California would be #8, the Bay Area would be #14, Santa Clara County would be #36, Alameda County would be #49, and SF would be in the low 50′s. We live in a very vibrant, successful area.
@ dmoas – I do realize the geographical argument as well and I meant to put in my post that I was merely attempting to point out the economic vibrancy of the East Bay. Nor was I attempting to compare the East Bay to the South Bay’s economic strength because as I showed the South Bay has the greatest output in our area. This was intended to quell any misunderstanding people unfamiliar with the East Bay may have about the area’s economy. After all, since this whole ballpark saga began long ago, it has been argued that the East Bay is economically challenged.
townsend said it on fri that the plan the business leaders want to follow for an park in oakland for the a’s is what sf did when they built at&t but townsend said that’s not happening due to sf having 3 banks giving them loans because they have sj in their “territory” and the a’s with just only two counties out of the 7 that make up the bay area just don’t have that advantage.
@ letsgoas – It would definitely be more of a challenge today than it was for the Giants at that time. As the article said they were “lucky” with their timing and you couldn’t do that today in Milwaukee or Cincinnati. In fact, the economic output of those 2 metro areas is 85b and 100b respectively so I definitely agree that it couldn’t be done there today. The output of the Bay Area would be 12-14 times that of Milwaukee or Cincinnati. By my rough estimates, based on the Giants model, it would take about a $240-$260m bank loan; a lot of scratch. We would at least need $100m for committed seat licenses and another $140 or more for naming rights/sponsorships, etc. Not to mention possibly another $150m or more from some other source for prep work. That’s a huge amount of dough. Impossible? IMHO, no. Challenging? Extremely.
We know why people like Tony D and others don’t want A’s,Raiders or Warriors in oakland……do I need to say it?….they’ll never go to SJ. Lew Wolff was the same punk who tried to move the Warriors to the non basketball city(like SF) of San jose. When it didn’t go through in the 80s what did that scumfk do? Sell sell sell baby.
Won’t be any different this time. Oakland is on the rise as a city and anyone with eyes can see that. All 3 teams will stay in Oakland and in 2020 when Super Bowl,Mlb All Star,Nba All star and NcAA Final Four choose the 510 as their venue you haters will shut up and cry forever about the city full of “minorities” being on the come up.
Yes that’s exactly what a lot of this boils down too. You can only hide yourselves for so long no matter how much you deny it