Monthly Archives: June 2012
Many, many years ago, just a few months after I launched this blog, I pitched this idea:
I wrote to then-and-still-current Oakland Councilmember Nancy Nadel (District 3) about the potential of this site. After a bit of nagging on my part, I was told that other development was “in the pipeline”. Disappointed, I looked elsewhere.
The ballpark site was considered the southern end of Broadway Auto Row. In 2005, the City of Oakland was pushing to move several car dealerships out of the district, gambling on the idea that the area could become the city’s long lost retail mecca. The dealerships were meant to move to the Coliseum area (some did) or the Army Base (they didn’t). Now Broadway Auto Row sits either empty or with car dealerships still there, a fair albeit underwhelming use of land in the city’s urban core. It’s an area begging for redevelopment, but as a result of scuttling of the institution, it lacks the funding needed to make the sea change happen. A feature in the SF Public Press by Alexis Fitts chronicles much of the failed planning and good intentions.
There were dreams to build a retail district to rival Union Square, even as Emeryville ate Oakland’s lunch. Grandiose plans for a over 1 million square feet of retail with Nordstrom and Macy’s as anchors never materialized. It occurred to me that these massive scale plans from several years ago had much of the same lofty language being used now for Coliseum City. Oakland’s used JRDV as a master plan consultant back then, and they’re using the same firm for Coliseum City now. Sub in the Raiders, A’s, and Warriors for Nordstrom, Macy’s, and Target, and it’s very similar: big dreams, little realism.
Sights have shifted to include more housing in the plan, which is fine in that it’s in keeping with the region’s growth. The retail strategy could shift to a focus on hipsters with stores like American Apparel (the only A.A. in the East Bay is in Berkeley). Without public incentives to lure retailers in it’s a very tough sell.
It’s a similar tough sell for the pro sports franchises. During the S.O.S. meeting on Monday, I brought up the potential of infrastructure finance districts. They’re redevelopment in the new era, with less money to throw around and lower expectations in keeping with less money. I reported last week that the City of San Jose approved an extension of the Downtown Property and Business Improvement District. The PBID pays for Groundwerx, a downtown beautification program that cleans up litter and sidewalks, removes graffiti, covers utility boxes in vinyl wraps, and provides a welcome/concierge element to downtown with the crew of Segway-riding, neon-clad employees. Groundwerx will cost $2.2 million for 2013 and is worth the cost, as evidenced by the 91% approval among downtown landowners.
Before Oakland reaches for the stars again and starts dreaming about being San Francisco, it might want to see what’s feasible within city limits. If it wants to make Oakland more attractive to businesses and consumers, it should make downtown/uptown actually visually attractive to those contingents. This weekend, there are little gymnasts and their parents walking around downtown SJ, and the place looks clean, welcoming, and hospitable. Even with that image boost, there’s little hope for great retail there. Valley Fair and Santana Row have ruined downtown SJ for retail for next several decades at the very least, thanks to their free parking and safe, sealed environments. Whether Oakland goes mainstream or hipster or both, it’s going to take a long time to develop any significant retail in downtown or the Coliseum area. New measures are the new skin-in-the-game.
As for Broadway Auto Row, it’s too bad no one ran with the ballpark idea. There weren’t too many landowners. All it needed was a champion within City Hall.
A Sacramento judge has given the 49ers a temporary restraining order, preventing Santa Clara County from doing anything with the $30 million of redevelopment funds that remains in dispute. Furthermore, a hearing to determine what to do with the funds will be held on Tuesday.
It strikes me as strange that the State Controller is involved in many of these disputes, figuring out who gets what and when. In this case, it’s going straight to the courts, with little or no Controller involvement. If it sounds like there are no clear rules, you’re probably right.
The post-redevelopment landscape remains somewhat chaotic as new legislation and decisions by the State Controller’s office fill in some of the information and procedural gaps. On April 20, Controller John Chiang sent a letter out to all so-called “successor agencies” that were assigned to clean up after the dissolution of each municipality’s redevelopment agency. The letter asked for all property transfers that occurred after January 1, 2011 to be returned to the successor agency so that they could be disposed of under the auspices of AB1x 26.
Following up that letter was another letter from Stand for San Jose’s law firm, San Francisco-based Pillsbury Winthrop Shaw Pittman LLP. The firm represents the San Francisco Giants, and Stand for San Jose’s astroturf war against the San Jose ballpark project has always been transparent, with the S4SJ throwing everything against the wall to see what will stick. The letter asks for all transfers to be reversed in keeping with the January 1 date, citing that SJRA transferred the land to SJDDA on March 8, 2011, and entered into an option agreement with the A’s on November 8, 2011.
Fortunately, the Controller will start a review of the case on July 9, with the process taking 4-6 weeks. While a decision on the land transfer won’t settle everything in the City and S4SJ’s ongoing legal battle, it should at least guide the next steps regarding use of the land, whether the transfer/option is allowed to move forward or the land has to be sold by the successor agency under new terms. For what it’s worth, the agency’s board consists of City and County pols. The chair is San Jose Mayor Chuck Reed, with general counsel being City Attorney Rick Doyle. Next meeting of the oversight board will be August 9, after the summer recess. The Controller may have rendered a decision by then.
In related news, at today’s oversight board meeting it was revealed that the successor agency expected to have all $86.9 million that the County withheld by this afternoon. This will allow the City to fulfill its August 1 debt service payment obligation. The resolution of this matter also allows the agency to get a letter of credit extension, which was completely up in the air until this week.
Added: The San Jose/Silicon Valley Business Journal reports that the City of San Jose and Santa Clara County worked out a deal in which the County wouldn’t challenge the Diridon transfers. The Controller still has to make its determination.
First we had Santa Clara County pulling $30 million in RDA funds back from the 49ers stadium project/Authority. Now we’ve got the flipside, as State Controller John Chiang has ruled that the County went too far in holding back $86.5 million in funds due to the City of San Jose.
The money came from collected property taxes and proceeds from the sale of numerous City-held properties. The money’s needed to service outstanding debt, which had already been downgraded to junk status by Fitch because of the holdup. The bond ratings should be restored to some degree, but the damage is done. The now-defunct SJRA’s successor agency oversight board is having its regular meeting on Thursday. I may attend it.
It’s a bit early to say what kind of effect this will have on either Cisco Field, 49ers Stadium, and City of Oakland (HJKCC) since it’s just one of a series of rulings that will be made in the coming months. A follow-on editorial from the Merc is pushing for the County to surrender the funds so that the bond payments can be made by the end of the month. In addition, a budget trailer bill (AB 1484) in the Legislature is trying to better define the limit and range of the powers of oversight boards and successor agencies.
Update 6/27 3:32 PM – AB 1484 passed and is headed to the governor’s desk. The big takeaway is that the carveout for affordable housing projects is now set. Until now, affordable housing was as much on the chopping block as any other types of redevelopment work.
I headed up the Nimitz to attend the biweekly Save Oakland Sports meeting at the Red Lion Hotel on Hegenberger. The meeting ran two hours and was, despite the organization’s rather young state, quite well run. S.O.S. is really just getting started with its various activities, so I’m going to refrain from appraising their efforts. I can tell you that it looks like an eager, resourceful group and broad coalition, though they’re aware that Oakland and the greater East Bay are under pressure to deliver for the three teams without much time to do so.
If you want to know more about what S.O.S. is doing, I suggest you attend one of the meetings. Again, they’re held at the Red Lion Hotel in Oakland near the airport, though the venue could change from time to time. If you’re pro-Oakland, I urge you to attend. The group needs people as a show of strength, and they’re soliciting creative ideas to help bolster support for the teams and new venues. I’ll even go so far as to say that if you are pro-Oakland and you’re not attending, you’re doing yourself a disservice.
At the previous meeting, Mayor Jean Quan gave her thoughts on the Coliseum City plan. One notable thing I picked up was that she said that the Pier 30/32 rebuild would cost $400 million, not the roughly $100 million many had estimated previously. I don’t know where that figure comes from, but it seems inordinately high. We’re talking about removing old piles from the bay, driving new ones, and building a 13-acre concrete deck on top of it. It doesn’t matter that much if you’re building on the water or on mud next to the water because around here that mud is a huge liquefaction risk (ironically, partly due to pile driving). I’ll try to verify this in the coming days.
Now, if you’re wondering how I was treated, I’ll put it this way: When I introduced myself, I got a good amount of applause. One of the members expressed reservations about having me there because he considered me a pro-San Jose guy. Given the chance to clarify my stance, I said, “No offense to Oakland, I’m just a get-it-done-quickly guy. I’m not particular about cities.” Everyone I met was friendly and respectful, even if we had disagreements about actions and motivations. Folks, we can have a clear, reasonable dialogue on these issues without resorting to name calling, accusations, and recriminations. I don’t know how S.O.S. is going to do in the future, but I have the utmost respect for what they’re doing and how they’re going about it. Good luck, Save Oakland Sports.
As redevelopment agencies were threatened with extinction last year, the 49ers and the City of Santa Clara made a structural change to the stadium financing plan. Instead of using $30 million of redevelopment money set aside for the project, the 49ers loaned the funds to the City to get construction moving. The idea was that once the redevelopment situation was resolved and the money given back to the project, the 49ers would be paid back.
Of course, the best laid plans often go to waste. Santa Clara County, which has a board overseeing all redevelopment work and funding countywide, decided yesterday to take that $30 million and use it for various county services, including education. The county has every right to do this, as City officials admit. The 49ers also have the right to sue to get the money back, though that money is anything but guaranteed. The team could say that the funds were “under contract” before last year’s June cutoff, which from looking at previous news, appears to be the case. They could also say that the County’s clawback move creates a breach of contract situation. I’m not clearing on what the best criteria would be, but if the 49ers wanted to, they could make it get messy. Perhaps they should call San Jose City Attorney Rick Doyle for some advice on dealing with the County.
A comment from the team’s front office indicates that the 49ers could also simply eat the loss. If the clawback happened last year, it could’ve jeopardized the deal. Now that the financing package is complete and construction is underway, there’s no way to stop the stadium from being built. It all goes back to the fundamental change in the deal last year which created the loan. Both the City and the 49ers knew that any redevelopment money could be subject to clawback and was subject to the discretion of the County. $30 million down the drain? Nonsense. Better the 49ers than the City or County.
Fox Sports’ Ken Rosenthal got the tip last night that the San Diego Padres are about to be sold. Three bidding groups have been pared down to two: the O’Malley family led by Peter Seidler, and Gary Jabara, with the O’Malley family reportedly in the lead.
The total price of the sale is expected to be $800 million, with $600 million for the team itself and $200 million for the Padres’ equity share of the recently launched Fox Sports Net San Diego regional sports network.
Jeff Moorad was supposed to be the owner, having negotiated a $530 million price a few years ago with a five-year phase-in of the acquisition. During the last offseason, it became clear that forces within MLB (the “Lodge”) were not going to approve the sale, so when combined with John Moores’ realization that he could get more thanks to the new TV deal, the Padres were pulled out from under Moorad (and minority partners such as Bob Piccinini).
Compared to this year’s Forbes valuation of $458 million, the combined $800 million sale price represents a 75% premium over the appraised value. Even when the TV component is separated out, the premium is 31%. In the wake of the Dodgers’ record-shattering $2.1 billion sale price, some sort of premium was to be expected, and I wrote then that $600 million for the Padres was a good starting point. The Padres serve as a good benchmark for any potential sale of the A’s, because the teams’ market dynamics are similar. San Diego represents the A’s if the A’s got a new ballpark and TV deal, thus the higher valuation ($458 million vs. $321 million).
All of this makes it fairly easy to project what the A’s would be worth on the open market. Lew Wolff has said unequivocally that the team is not for sale, but it’s still a worthwhile exercise – at least on the blog. If I apply the 31% premium to the A’s now, the new asking price is at least $420 million. That’s not going to be enough for Bud Selig, as one of his main responsibilities over the last decade has been to raise franchise sale prices on behalf of outgoing owners as much as possible. If he wasn’t able to lobby to get San Jose for frat buddy Lew Wolff, he’d at least give Wolff and John Fisher a massive golden parachute. It would be practically inconceivable to have any starting price be any less than $500 million. Add at least $500 million in private funding for a new ballpark (more depending on the site), and the cost to keep the A’s in Oakland becomes a cool $1 billion. That’s why I thought it curious when the fan letter to Fisher from the spring circulated, imploring the majority owner to either work to stay in Oakland or sell the team.
$500 million for the team, $500 million for the stadium. Those two parts are attached at the hip, because Selig wouldn’t approve any sale without a bulletproof (and underway) ballpark development plan. The problem with such a plan is that any future franchise sale price would be less than the combined $1 billion, because of the nature of the stadium financing. Building a new ballpark is like buying a new car and driving it off the lot – depreciation immediately kicks in. Since much of the ballpark revenue would be directed toward paying debt, it would reduce the attractiveness and market value of the franchise. Anyone who bought the franchise would be burdened by that debt until it was cleared 30, 40 years later – and that doesn’t even take into account debt incurred to buy the team. The same revenue/valuation drag goes for San Jose, except that at least Wolff/Fisher bought the team in 2005 for the relatively low price of $180 million, and they would presumably be able to service the debt better thanks to Silicon Valley’s economic strength.
So there you have it. $1 billion to keep the team in Oakland. Good luck with that, Don Knauss and company.
Good stuff in this edition.
- Save Oakland Sports is having one of its regular meetings next Monday, June 25 @ 6 PM, at the Red Lion Hotel, 150 Hegenberger, Oakland.
- CBS Radio and Cumulus (parent of KNBR) announced a new sports radio network that will launch in January. The network is expected to feature talent currently on CBS Sports and CBS Sports Network. A key talent on the latter is Jim Rome, whose daily TV show launched in April. Rome’s radio show is syndicated by Premiere Radio Networks (a News Corp. subsidiary), so there’s some natural friction there. I have to think that Rome came to CBS-SN with the idea that he might jump to this new radio network too at some point, though at some $30 million per year, his radio persona doesn’t come cheap. Both of the KNBR stations were identified as future network affiliates for the CBS Sports Radio, which creates a bit of a juggling situation for Cumulus. Will Cumulus continue to pay decent money to be an ESPN Radio affiliate and carry some Fox Sports Radio programming on the side? If not, does that free up ESPN Radio to move to The Game? And how does an ESPN Radio relationship conform with The Game’s cozy relationship with Comcast Sportsnet? Fantasy radio operators, start your typewriters.
- Oakland’s City Council approved a $1 billion plan to finally remake the Oakland Army Base. Unlike some of the more glamorous or controversial plans that have been proposed (movie studio, casino, big box retail, auto row), this one will stay true to the base’s largest neighbor: the Port of Oakland. The plan will include new infrastructure, warehousing by ProLogis, and a logistics center. Every so often the base has come up in discussion here as a potential stadium site, but it’s an idea that’s never had legs within City Hall.
- Greg Jamison’s quest to purchase the Phoenix Coyotes has hit a big roadblock in the form of a lawsuit by the Goldwater Institute. Now there are questions as to whether Jamison, who is not a billionaire, can pull off the acquisition without the sweetheart deal approved by the City of Glendale that would subsidize the team’s continued operation at Jobing.com Arena. The franchise, which is owned by the NHL at the moment, is being forced to lawyer up to complete the sale. If that can’t happen…
- The City of Seattle and Chris Hansen are getting ready to finalize their new SoDo arena plan. Hansen would pay around 60%, with the remaining 40% coming from public sources. The political minefield is being negotiated right now, as the City Council doesn’t want the plan to come to a public vote, and the Port of Seattle is objecting because it fears that the arena will adversely impact port operations. Any team (NHL, NBA) that relocates to Seattle would play temporarily at Key Arena while the new arena is being built.
- This week’s cautionary tale about public stadium financing comes from Chester, PA, where not only has a MLS stadium not been a development catalyst, the stadium tenant Philadelphia Union missed a $500k PILOT payment in 2010.
- The BCS will have a four-team playoff starting in 2014. Semifinal games would rotate among the four current BCS sites, with the championship game going to the highest bidder among them.
- Jim Caple has another one of his ballpark column series, this time an elimination tournament of all 30 MLB parks. In the tournament, fans can vote online for their favorite ballpark in each matchup. We’re at the semifinal stage, with Fenway Park (seeded #2) facing off against AT&T Park (#3) and Camden Yards (#4) vs. tourney Cinderella Miller Park (#24). The Coliseum was seeded #28 and lost in the first round to Target Field (#5) by a whopping 91% to 9% with over 60,000 votes, which is about right. Don’t feel bad though. New Yankee Stadium also lost in a landslide. The Coli’s Mt. Davis was also awarded Worst View. Finally, Caple gets a shoutout to Shibe Park, which ended up #8 in his list of places he wishes were still around.
Good choice, Larry Ellison, good choice.
Word spread earlier tonight that Oracle CEO and twice-spurned NBA franchise-bidder Larry Ellison secured a deal to buy 98% of the Hawaiian island of Lanai. Initially the reports did not list a price for Lanai. Newer reports had the asking price at $500-600 million.
Ellison greatest love is yachting, so it stands to reason that the billionaire 36 times over would eventually seek out a dominion of his own to practice his sport. Lanai is one of the best yachting venues in the world. It’s secluded and secure enough for Ellison’s BMW Oracle team to develop and sail without much interference, and it’s “halfway” to New Zealand just in case the Kiwis win again.
Lanai has either over 3,000 residents or less than 2,000 depending on who you ask. It has two Four Seasons resorts – the same number as the Bay Area. Security can be remarkably tight since a private company runs the entire island (which is public).
In celebration of Ellison’s crazy-like-a-fox purchase, I’ve put together the following table comparing Ellison’s Lanai purchase to a typical NBA franchise.
I’m sure that Ellison has had this in the works for months, just as he did with the America’s Cup San Francisco development. Since that part had to be curtailed due the cost of developing Piers 30/32, it could be that he was motivated to pull the trigger on Lanai. It probably didn’t help the man’s legendary ego that some mere near-billionaire half Ellison’s age negotiated a deal to buy the Memphis Grizzlies.
On a related note, SF’s Pier 29 suffered significant damage from a four-alarm blaze that destroyed much of the pier’s warehouse structure. The structure was meant to house concessions and sponsor exhibits for the 2013 America’s Cup. Officials from the City and developers said that the fire wouldn’t impact the development.
I got to the session just as public comments were ending. YES!!!
Council has their questions, though they seem to be on the verge of approving the deal with few reservations. Observations:
- One of the key issues is financing. The $10 million shortfall in funding would be covered by the sale of commercial paper (with either HUD approval or from city reserves) and a Parks Trust Fund loan of up to $8 million, or both.
- The loan or other funding would be paid back by a projected $500,000 in annual revenue from renting out the fields. The Quakes would be paid at least $333,000 every year to manage the stadium.
- It should be noted that the land that the Quakes stadium and the new soccer fields would sit on would remain City-owned in the end. The Quakes paid a $2 million option at the end of 2010 for the land, and would pay another $5 million. Under the previous agreement, the land would be deeded back to the City.
- The picture from the previous post had shown three soccer fields. There will be four, and they would be artificial turf.
- The Earthquakes would partner in the facility.
- The Quakes would move their youth development soccer academy from Danville to the facility.
- Team would also give away $78,000 in Quakes tickets annually to the community.
- Councilman Don Rocha would prefer one of the fields be grass, citing his 8-year-old daughter’s tearing of her ACL on an artificial turf field elsewhere in the county. Staff indicates that if a single grass field were instituted they’d have to do a new revenue pro-forma and re-bid the project, temporary delaying the project. The facility’s business model is based on rapid turnover, which is impossible with grass fields. Note: the Quakes second team isn’t allowed to use the Quakes’ training field.
- Councilman Xavier Campos would like some anti-gang nonprofits to have access to the fields, perhaps via a new scholarship program being put together by the City and the Quakes. Mayor Chuck Reed counters that the facility will be revenue driven, which could make an equal-access facility impossible. (*tension*)
- Hunter Storm, the Quakes, and the City have had an ongoing dialogue regarding the development.
- Each of the districts would provide $100,000 towards the construction of the facility.
Update 4:16 PM - Item approved unanimously, with an amendment regarding the availability of an extra suite for low-income or underprivileged residents also approved. Interestingly, Mayor Reed “rallied” staff to get both the stadium and public fields built by 2014, not 2013.
One other Cisco Field-related item – The City Council/Diridon Development Authority unanimously approved a resolution which allows for an extension of the Property Based Improvement District, defined as essentially Cisco Field, HP Pavilion, everything in-between, and properties north to Julian Street. In addition, properties within the district would be assessed $4,000 per year. Previously, a vote was taken among property owners. 91.4% were in favor.