Decisions, decisions, decisions

We all have different opinions about what’s happening with the teams at the Coliseum. One or more will likely leave, maybe one or two stay, maybe everyone leaves or stays. Perhaps the remaining Coliseum debt will be paid off by private interests, maybe not. There are different timelines for each team, different project costs, different levels of financial wherewithal, and differing approaches. And that says nothing about a third party like Floyd Kephart, who has to figure out how to keep a team and make money off the deal, or the City and County, who are scared to death of being ripped off as they were 20 years ago.

Take all of those factors, throw them all into a bowl, mix them up, and see what you get out of it.

Kephart announced that he submitted his June 21 deliverables on time. City/County/JPA will take 20 days to review the documents, and decide after that review whether to continue with the plan as offered by Kephart, with no leaks or public release prior to that date. For me it’s frustrating, but I get their caution. Coliseum City is extraordinarily complex, so due diligence is of the utmost importance.

While I’m certain many behind the Coliseum City effort have been nothing but sincere in their desire to retain teams while revitalizing Oakland, there’s also been an underlying feeling that the whole thing is a stalling tactic. To that end it has worked to an extent. Both the A’s and Raiders could’ve been gone as early as after the 2013 seasons thanks to their short-term leases. Instead the Raiders are in Oakland through at least 2015, and the A’s could be in the Coliseum until 2024. Yet while Oakland treads water, the teams aren’t standing still… actually, they are standing still. The A’s chose to wait this process out in hopes of getting the Coliseum all to themselves, a strategy that Andy Dolich called “intelligent inaction” on YSTL tonight. They pushed for the lease extension last year, and so they have a sort of first-mover advantage because the lease is solid and they have fewer complications than the Raiders. The Raiders could’ve taken a similar approach, but Mark Davis chose to use one-year leases to help spur Oakland – a strategy that hasn’t worked so far. Meanwhile, Davis has given some broad strokes about what he wants:

  • Raiders would buy some of the Coliseum land (for how much and for what purpose aren’t clear)
  • City/County/JPA would provide free infrastructure, costing $100-140 million
  • City/County/JPA would retire Mt. Davis’s debt

There’s still no word on how exactly the funding gap on the stadium would be addressed. I figure that 1 & 2 are related and would offset each other somehow. The Mt.Davis debt has to be added to the total cost of the stadium, as the City and County have been adamant about not subsidizing the old venue more than they have to. Does that make the gap $400 million? $500 or $600 million? Hard to say at this point.

This project has been marked by a series of decisions made on all sides. The teams chose not to negotiate, waiting either for a stadium to fall into Mark Davis’s lap or for the project’s demise. The City chose to partner with three different entities in hopes of finding someone that had the resources and connections to make the project take off. The County chose to sit out for three years, not becoming a party to the talks until this spring.

Ironically the City/County/JPA, the Raiders, and A’s all would benefit if they didn’t have to make choices of their own free will. If the Raiders leave on their own the public sector gets a little political cover, since they can point the finger at Mark Davis for abandoning Oakland. Should the A’s wait and the Raiders put together a stadium deal, the A’s can say that the Raiders caused hardships, forcing the A’s out. And the Raiders can point to either the A’s no-sharing stance or Coliseum City’s expected demise as their own obstacles to staying in Oakland. Even when they don’t actively decide, there are consequences.

Try as they might, the big decisions can’t truly be avoided. Because in multibillion dollar stadium deals just as in life, eventually if they don’t make choices, someone else (NFL, MLB) will make choices for them.

P.S. – At the end of the Dolich segment he expresses amazement at how the City/County/JPA aren’t in direct negotiations with both the Raiders and the A’s. That sentiment is completely understandable if the goal is to wrap up a deal ASAP. The problem is that the teams aren’t on a level playing field. If both had separate stadium projects with similar costs and similarly sized private contributions, working out fair deals for both should be simple. That’s not the case here because of the football stadium’s massive funding gap. If the public sector attempts to make any kind of public contribution (land, infrastructure, direct or indirect funding) for the football stadium, you can be assured that Rob Manfred will ask about the same kind of contribution for the ballpark. He’ll have every right to ask, and he’ll have every right to be severely disappointed if City/County/JPA can’t deliver. That’s the danger in making the deal. 

Glendale, AZ voids lease with NHL Coyotes, leaving team’s future uncertain

The City of Glendale, Arizona called an emergency city council meeting tonight for one purpose: to vote on terminating the Arizona Coyotes’ lease at Gila River Arena. You may remember two years ago, when the Coyotes seemed bound for anywhere but the desert as the franchise’s reported financial losses piled up and the city faced bankruptcy in what could be considered the worst stadium deal in North America.

The Coyotes' demise in the desert is at hand

You may not see that banner up there for much longer

The NHL even bought the team and operated it for a while, waiting for an ownership group to come in and operate the team, hopefully not at a loss. The deal struck included a payment from Glendale to the Coyote owners’ arena management wing of $15 million per year over 15 years on top of $50 million in subsidies up front. That’s right, the city is paying the team to stay. Glendale was supposed to get limited event revenues, and because the team’s future was supposed to be secure, there were fewer worries about the city’s ability to handle ongoing arena debt. Eventually the team would start winning again and the money would roll in for both parties.

That money never came. The Coyotes haven’t averaged more than 13,000 per game in attendance since 2009. They haven’t been in the playoffs since 2012. Other than the small number of hardcore fans, no one came. The $15 million operating subsidy from the city roughly covers the lost revenue from 4,000 empty seats every home game when compared to other teams. No one’s happy. The current mayor and council have expressed displeasure with the Coyotes, the NFL over the Super Bowl, and its two spring training MLB tenants, the Dodgers and White Sox (at Camelback Ranch). Glendale has overextended itself time and time again, spending so much on pro sports and getting less than zero out of it. And unlike the arrangement at the Coliseum for the two venues there, Glendale, a city about the same size as Fremont, funded the arena itself.

All of this drama set the stage for the big vote. Supporters of the Coyotes came in from all around the West Valley to denounce the plan to kill the lease. The trigger for the lease termination was not about the losses, though the Coyotes have the ability to leave on their own if they accrue $50 million in losses over five years. Instead, Glendale cited a conflict of interest, which allegedly occurred when Glendale’s former city attorney took a position with the Coyotes shortly after the lease was approved in 2013.

After public testimony was cut off, those on the dais made a few comments, culminating with a 5-2 vote to terminate the lease. The Coyotes responded within minutes, threatening to sue Glendale for up to $200 million.

FOR IMMEDIATE RELEASE:
Wednesday, June 10, 2015

GLENDALE, ARIZONA — Arizona Coyotes Co-Owner, President and CEO Anthony LeBlanc issued the following statement following tonight’s Glendale City Council meeting.

‘We are disappointed with the city’s decision to violate its obligations under the agreement that was entered into and duly approved only two years ago. We will exhaust any and all legal remedies against the city of Glendale for this blatant violation of its contractual obligations to us.’

One thing to note is that the Coyotes had themselves reported $34.8 million in losses for 2014-15 season alone. The team’s well on its way to hitting that $50 million mark, and the only consolation it can provide to Glendale is that the city’s loss will be $6 million as opposed to the projected $7 million before the season.

Coyotes fans don’t deserve to go through all of the drama built up over the past decade. Yet they’re powerless, as fans often are. Their limited numbers don’t impress NHL brass, who stalled as long as they could while fighting off relocation rumors and threats. Right now three cities are considered frontrunners for a move, which could come this fall.

  • Las Vegas – A new arena on the Strip is being built by MGM and AEG. While its primary purpose is to be a major concert venue, it will have the capacity to host NHL and NBA teams. The arena won’t be ready until 2016, so a relocated Coyotes squad would play at the MGM Grand Garden Arena or Thomas and Mack Center for a year or so.
  • Seattle – Arena efforts have largely stalled since efforts to buy and move the Kings to the Emerald City died. NHL is also on the radar, though basketball is clearly the primary focus. A rival arena plan has been proposed for Tukwila, not far from SeaTac airport.
  • Quebec City – A brand new venue is nearing completion, and could be ready to host the Coyotes in September. The downside is that a move to Quebec would also cause the league to embark on another round of realignment. The already shorthanded Western Conference (14 teams) would send another one to the East (16 teams), forcing another team to move to the West.

Northern California cities such as San Francisco and Sacramento are not in the offing because both have built-in revenue competition from basketball teams, and the Warriors’ and Kings’ new venues won’t be optimized for hockey. If the NHL is going to move the Coyotes, they’ll go to a place that has minimal competition and an arena with few scheduling conflicts.

The Coyotes and Glendale could also reach some sort of truce, allowing both to co-exist and renew their partnership. It’s hard to see that as every bridge has been burned. The team is bringing legal action Thursday, so the battle is just beginning.

Oakland Mayor Schaaf to speak with MLB, NFL commissioners in NYC next week

BANG reported yesterday that Oakland Mayor Libby Schaaf will meet with the commissioners of MLB and NFL next week, as part of a trip to New York for the World Cities Summit Mayors Forum.

Chances are that she will provide an update on Coliseum City, while explaining to both commissioners that the project is the best chance to keep either team despite misgivings on the part of Lew Wolff and Mark Davis. What the commissioners will probably ask – and this is the challenge for Schaaf – was what happens after Coliseum City. Whether Floyd Kephart some or all of the deliverables expected on June 21 (he won’t be able to provide the biggest, a commitment from a team), Schaaf and the City Council will be under pressure from both leagues to cut bait and start looking at alternatives. Those options are expected to be proposals from Wolff and Davis, though neither has offered one yet.

Let’s be clear about one thing – Schaaf’s talks with Roger Goodell and Rob Manfred will not be negotiating sessions. Neither league is participating in the Coliseum City process, and no other proposals are on the table, so there are no points to negotiate. Schaaf has remained adamant that Oakland can’t incur additional debt in the effort to retain any teams. Council member Noel Gallo took that no-giveaway notion a step further, announcing earlier this week that he’s against selling public land.

The problem is that everyone involved is talking around the problem at this point. Goodall and Manfred should by now be well aware of Schaaf’s no-subsidy stance. The land giveaway idea is practically a moot point. Neither team wants to extensively develop the Coliseum complex, so there’s no point to selling the land or figuring out a way to fund costly infrastructure when none will be built. Coliseum City point man Floyd Kephart keeps plugging away, even though he’s close to achieving persona non grata status in some circles. Manfred indicates that the A’s shouldn’t worry about what’s happening with the Raiders, though the current arrangement has their fates in Oakland intertwined and he knows it. Neither commissioner is going to tell Schaaf to boot the other’s team off the Coliseum property, yet that’s exactly what it will take for something to move forward. And neither is currently offering a solution for any funding gaps (NFL G-4 funds are limited, keeping the A’s on baseball’s revenue sharing plan is a subject for the next CBA talks in 2016).

What can we expect, then? Some words of encouragement. Renewed talk of urgency, moreso on the NFL’s part. The City of Oakland will probably keep its June 21 and August 21 deadlines, since they have little to lose over the next three months. It will be in their best interest to start formulating an exit strategy and plans to accommodate both teams on different sites if they haven’t done so already. That may be why the BANG item mentioned Howard Terminal. Dismissed out of hand from the start and declared dead last year, Howard Terminal is the only available large patch of land outside the Coliseum complex. It remains a difficult site to pull off because of regulatory hurdles and major infrastructure costs, but it’s something. And if someone can figure out how to pay for all of it, it may be viable after all. But who’s going to do that? No one talking in NYC next week will. Neither will either team.

Again, where are we with all of this?

We’re All Screwed

Great sentiment to take into a new season, isn’t it? Things may not seem that dire, but consider that I’ve been writing this blog for ten years and we’re no closer to a stadium than we were in 2005. As Howard Bryant explains in his latest ESPN The Magazine article, we may actually be further from a solution than before. There remains a single site in the Bay Area that baseball is willing to consider, and it is encumbered by a competing development process (Coliseum City). Everyone involved has acted and looked bad and has generally failed abysmally:

  • A’s don’t want Oakland, still covet San Jose
  • Giants remain greedy and recalcitrant
  • MLB provides no leadership
  • Oakland interests trashed A’s ownership, tried to force sale of A’s to no avail
  • San Jose sued MLB, making them a non-entity in terms of negotiation while lawsuit was ongoing

Bryant goes on to explain that MLB is banking on the Coliseum City falling through and the Raiders leaving, which would leave the A’s at the Coliseum to work out a deal, a solution presenting itself with no intervention required on Commissioner Rob Manfred’s part. Convenient, right?

Of course, progress made recently on the EIR process won’t necessarily translate into actual deal success. City archives all over the state are full of dead EIRs from projects that were never built.

An under construction Coliseum in more hopeful times

An under construction Coliseum in more hopeful times

Nevertheless, that’s the outcome MLB sees. It’s one that A’s management is willing to play along with, for now at least. It doesn’t mandate getting a ballpark built right away or even soon, thanks to a lease that can take the A’s through the 2024 season.

Like Lew Wolff assuming that The Lodge would work out a deal for San Jose, MLB assumes that the Raiders are in LA after 2015. But even that’s difficult to forecast at this point. Stan Kroenke’s Inglewood stadium plan has the most momentum at this point, and the Carson concept is being spearheaded by the Chargers. Both teams have plans to accommodate a second team, though they have both declared that a second team is not a necessity. The NFL wants no more than two teams in Southern California (including the San Diego market). Those two teams could be the ones spearheading separate stadium projects. Or they could partner together on a single stadium. The Raiders, not having their own stadium plan to push, have to hope that Kroenke’s plan falls through and Carson succeeds, allowing the Raiders and Chargers to be the LA teams. If Kroenke gets his stadium, it doesn’t matter whether the Chargers stay in San Diego, move to Carson in their own stadium, or partner at Inglewood, the Raiders are the odd man out. There’s the odd chance that either the Chargers or Raiders could move to St. Louis, but few outside of St. Louis are considering the idea seriously.

Therefore, MLB’s hopes rest with a very silent man who has little interest (and zero actual financial interest) in baseball. Kroenke owns or has owned franchises in every other major sport, including top tier English soccer (Arsenal).

Whither the A’s in all of this? As usual, that depends. If the Raiders are shut out of LA because of the Rams’ and Chargers’ activity, the Raiders would effectively be forced to work on a stadium in Oakland, ostensibly at the Coliseum. Naturally, that would conflict with the A’s and MLB’s plans. Don’t believe for a moment that either team or league is going to actively work with the other on a joint development plan. With no public subsidy in sight, the Raiders and A’s will look to horde whatever revenue-generating opportunities they can, whether we’re talking entitlements or parking. Either way, that will run into conflict with Oakland’s designs on the Coliseum land, which are to create a new neighborhood with up to 10,000 new residents. Strangely enough, a “same as existing” use plan for the Coliseum lands would work best for entrenched interests in the area, including East Oakland residents concerned about gentrification and businesses west of 880 fighting against losing industrial land.

Should the Raiders look elsewhere in the East Bay, the A’s would be in the driver’s seat for the Coliseum. Yet as previously investigated sites are eliminated – Camp Parks and Concord NWS have their own plans underway – the Raiders will be even more boxed in at the Coliseum. Worst case they stumble to Santa Clara, where they would play tenant to the 49ers instead of the JPA. Chances are that they’d partner with a developer (SunCal?) for the Coliseum. Finally, that choice that I’ve been talking about for years, the one nobody in the East Bay has wanted to talk about publicly, would have to be made.

That doesn’t mean any choice would be made immediately, let alone a stadium built. Look at what happened for the San Jose Earthquakes. The team was reborn in 2008, had a stadium promised in 2010, didn’t start construction until 2012, and didn’t open until 2015. Seven years, and for a city that Lew Wolff actually loves. It’s easier to start construction when you’re absolutely sure the checks will come in.

Having to privately finance an entire stadium is hard enough, now the A’s would have to do so in small market Oakland. It’s not even so much about whether Wolff and John Fisher want to do it, does MLB want to subsidize it for 30-40 years via revenue sharing? If the A’s are going to carry a big mortgage in Oakland with iffy corporate support, revenue sharing seems an absolute necessity to keep the A’s in good financial health. That’s the alternative to negotiating with the Giants.

And if the Raiders build at the Coliseum instead? Well, the A’s would be able to leave the Coliseum, but for where? San Jose is not a player in this scheme, but you’d be surprised at what avenues can open up once MLB runs out of options and leverage. That might mean Diridon, it might mean Howard Terminal. It would be fitting for MLB to actually do something after years of actively sitting on its hands. As long as the A’s remain in the Bay Area, even severely delayed progress would be well worth it.

Oakland approves Coliseum EIR & Specific Plan, Raiders lease, Arena refinancing

Thank Jeebus for meeting minutes. I was only able to catch part of the Coliseum City agenda item during the March 31 City Council meeting. Oakland voted 7-0 with one abstention to certify the EIR and Specific Plan, figuratively paving the way for financiers and developers (and, Oakland hopes, at least one team) to make CC happen. The good news is that a major bureaucratic hurdle has been overcome. The bad news is that several key issues related to the project haven’t been resolved.

As has become commonplace over the past few months, a litany of residents and business in the Plan area and surrounding neighborhoods made their way to the mic to address specific concerns. The business owners got their biggest concern dealt with, housing in the Airport Gateway area west of 880. Zoning has been changed to eliminate housing in that area, referred as C/D/E in the Plan. They also got housing eliminated from Area B, along Edgewater facing the Estuary.

D-CO-4 (along Estuary) has become part of D-CO-3

D-CO-4 (along Estuary) has become part of D-CO-3

The change is nothing to sneeze at since it removes 1,750 units out of 5,750 total. All 4,000 units will be located in either around the BART station (2,300) or as part of the “Ballpark Village” at the Coliseum (1,700). That puts even more pressure on money men and developers to figure out creative ways to bridge the football stadium funding gap. It’s also a blessing in disguise because putting housing right on the water was expected to be highly contentious, any development requiring numerous approvals from outside agencies (ALUC, BCDC, EBMUD, EBRPD to name a few).

Residents of East Oakland found less to agree with, thanks to a lack of consensus on just how much affordable and low income housing would be built there. In the post-redevelopment era, Oakland has set targets of 15% of units as affordable or below market rate. Unfortunately, funds used to help subsidize affordable housing have dwindled to practically nothing. The normal instrument for replenishing such funds, housing impact fees, continue to be merely a study topic for Oakland with no release of the study – let alone decision on how to enact such fees – until next year. Larry Reid, in whose district lies the Coliseum and East Oakland, continued his protest against having affordable housing at Coliseum City, running directly in opposition to many of his own residents who maintain concern over gentrification and rising rents in the neighborhoods surrounding the Plan areas.

A community benefits agreement negotiated weeks ago is meant to provide jobs, but that’s the low hanging fruit of the project that is entirely dependent on what gets built. Those jobs won’t materialize on their own. They need a catalyst and willing developers to bring those jobs to fruition.

All of that is not to diminish the accomplishment of getting the EIR work done. It’s done, and while it’s not perfect, it’s an important benchmark to getting something built. The actual deal – that’s the hard stuff. As of today Floyd Kephart has about 11 weeks to start making good on his deliverables.

Not reported elsewhere were two other important items that were also on the agenda. The Raiders lease, which was approved at the JPA level a month ago, was approved 7-0 by the City Council last night. One year, no drama. At least until the fall.

—-

Oakland is also wrestling with what to do with the Arena. The Warriors may be hell bent on leaving, but that isn’t stopping the City from incorporating the Dubs into Coliseum City, hope against hope. In the near term there’s also the problem of the ongoing debt at the Arena, whether or not the Dubs are there past 2017-18. Despite the ongoing uncertainty, the City and County have until June 21 of this year to refinance that debt. Without refinancing in place they could be liable for $19 million per year thanks to the expiration of a letter of credit. Refinancing at current historically low rates could save $10 million per year regardless of the Warriors’ plans. Refinancing would also require meeting of some sort of “seismic criteria,” which could involve a retrofit or other additional work to keep the venue in good shape.

Refinancing was approved 7-0. The Warriors may not be much longer for Oakland, but the City and County appear to be getting ready to move on after the Warriors leave.

The small market A’s and some serious equity

Like clockwork, the annual Forbes MLB valuations roteere released yesterday, just prior to the start of the regular season. Unlike last year (which I didn’t bother to write about), there were several surprises. The biggest was the Giants’ 100% boost from $1 billion to $2 billion, on the strength of the team’s third World Series win and development potential at Mission Rock.

The other surprise was the huge gains for small market teams, led by the Royals, Indians, and yes, your Oakland Athletics. Forbes awarded the A’s a 46% gain, from $495 million last year to $725 million this year. While many revenue-related factors are responsible, Forbes also chose to up its revenue multiplier in determining the valuations, which had been falling behind actual sale prices in what has been over the last several years a hot seller’s market.

Higher enterprise ratios are being fueled by the stock market’s six-year bull run (which has inflated asset values and created a lot more buyer than seller of teams), baseball’s unmatched inventory of live, DVR-proof content, real estate development around stadiums, higher profitability (which reduces the need for capital calls) and the incredible success of Major League Baseball Advanced Media, the sports’ digital arm that is equally-owned by the league’s 30 teams.

Even the new A’s valuation may be behind the teams a bit. When Bloomberg released its own independently derived valuations after the 2013 season, then-PR man Bob Rose suggested that the number was closer to $700 million based on revenue. Before franchises started going for insane amounts, it was common for franchise owners – including Lew Wolff – to claim that Forbes’ numbers were incorrect, overselling certain aspects of a franchise’s operation. Now we’re starting to approach $1 billion for a team that has at best average TV/radio deals and no new stadium. A 300% return in a decade is pretty impressive, no matter how slice it – though Wolff and John Fisher can’t realize that until they sell the club. They’ve shown no indication that they’re interested in selling, despite how much the stAy crowd clamors for it.

As nice as the new valuation looks, it’s miles from where the Giants, Dodgers, and almighty Yankees ($3.2 billion) are. The Bronx Bombers recorded more than $500 million in revenue last year, confirming a quote from an unnamed Yankee exec in the fall. The luxury tax was designed to dissuade teams from profligate spending, but until recently that hasn’t stopped the Yankees and the Dodgers don’t seem to care one iota about the luxury tax. Redefining luxury tax penalties may become a sticking point in the next CBA negotiations, one that goes hand-in-hand with shifting the revenue sharing model for lower revenue (small market) franchises.

Let’s do a deeper dive into the Forbes figures. First the A’s:

numbers

Forbes breakdown of the A’s valuation

 

Now the Giants:

Forbes Giants valuation

Forbes’ Giants valuation

In nearly every key measurable, the Giants double or even quadruple the A’s. The Giants hit a perfect storm of on-field success and savvy management, which was parlayed into impressive revenues. The Giants are a money-making machine. They are also a big market club, no doubt. Though they aren’t profligate spenders in terms of payroll, everything else about them is big market, just like the Yankees, Dodgers, and Red Sox.

The A’s, on the other hand, bear all the marks of a small market team. Gate revenues are abysmal compared to the Giants. It’s so lacking that the A’s could untarp all the regular upper deck seats, sell out the entire season, and still only reach 50% of the Giants’ revenue. The flipside to that is that the A’s are a far more affordable, accessible product for baseball fans in the Bay Area. The market itself, which is defined as the East Bay, compares to a lot of other small markets like Tampa Bay and Kansas City. As long as the A’s are pigeonholed to the East Bay, it’s likely they’ll remain small market, or perhaps boost themselves to a medium-sized market if a new stadium comes.

New and improved national media revenues are the tide that has lifted the A’s boat. As big market teams keep getting bigger and bigger annual revenues, the A’s will continue to be a club that receives a nice revenue sharing check, at least as long as they play at the Coliseum. Per the current CBA, they’ll continue to be eligible for revenue sharing until they start playing in a new Bay Area ballpark. So the A’s are in a sort of limbo in which right now they’re considered a small market team in that they receive revenue sharing, but will be redefined as a big market team once they open a new park. That arrangement could continue into the next CBA, or it could change. I suspect that if the A’s build a new park in Oakland, they’ll remain a small market team by definition, simply because they don’t have the same direct access to big sponsors as they would in San Francisco or San Jose.

The other big takeaway from the valuation news is that the A’s debt position has significantly improved from doing nothing. Forbes reports that the A’s debt is now 8% of franchise value, or around $60 million. That leaves an astounding $665 million of equity for the ownership group. Wolff has suggested that he would use equity to help finance a ballpark. He could conceivably cover the entire cost with the team’s equity, but MLB rules about debt load preclude such a plan. The most debt the A’s can accrue without running afoul of MLB is 12 times their operating income if they’re building a new ballpark, 10x if not. If you take the average of income from the last three years you get $25 million. Multiply that by 12 and you get $300 million. The A’s have $60 million of existing debt, but according to MLB rules they can exempt $40 million of that. Combine all of those together and the A’s can in theory finance $280 million of a stadium. Even with the added debt, chances are that by the time the stadium opens it would hit only 35-40% of the franchise’s value, an acceptable amount for a sports franchise.

Naturally, the problem is servicing that debt. $280 million over 30 years at 4% is $16 million a year. To ensure that gets covered and it doesn’t have a deleterious effect on payroll, the A’s would have to get 30-32,000 average attendance per game for several seasons, at much more expensive prices than the Coliseum to boot. Then there’s the combination of suite sales, sponsorships, and maybe even seat licenses if fans are willing to invest. If this sounds similar to what the Giants did, that’s because it is. Maybe there’s a real estate component that can come in to offset that debt service requirement, but Wolff indicated in recent comments that grand development concept such as Coliseum City is not forthcoming from him.

Nevertheless, if Wolff and Fisher want to build, and fans are willing to pay, the path is there. Getting to a deal is the hard part.

P.S. – Speaking of getting to deal, there’s been some noise about wanting Wolff to show his plans. Show a rendering, something to indicate that he actually wants to build in Oakland. To which I say – come on. He just finished opening a soccer stadium, the spring training facility renovation, and is finishing scoreboards at the Coliseum. Are those not indicators of wanting to build?

All of these sentiments, while well-placed, are based on some unrealistic expectations. Fact is that the stadium development process is dog slow. It’s tedious. No premature release of renderings will do anything other than getting a small handful of fans excited. Believe me, I’m one of them. But I’ve also learned over the years is that all of that is sizzle, not steak. If you want real progress, you need rules. You need a framework. Here’s the “framework” for the A’s right now:

framework

That’s not a framework for anything other than random discussions between the A’s and East Bay pols. If the A’s, City, and County are going to work on an actual deal, they need to establish a real framework for talks and for a stadium/development deal. It would help if Oakland or the JPA started by creating an RFP (request for proposal), that would allow the A’s to formally propose something. The A’s are in the process of hiring a person to interface with City/County/JPA. If the Raiders wanted to present their own vision, the RFP could accommodate them too. That is how the Coliseum City process started, and is the proper – not to mention legal – way to do government business. Frankly, I’m past renderings. I want steak. You should too.

Alameda County approves ENA, draws line in sand at public money

Early during the Board of Supervisors meeting, President Scott Haggerty hinted that the assembled gallery could see how the Supes were going to vote, as they all had roughly the same comments during their part of the discussion. Nate Miley said he was going to vote for the ENA, but didn’t support “wholesale” use of public resources (land, money) for the project. Richard Valle called the project an “opportunity for private investment” before affirming his long-held no public funding stance. Wilma Chan felt the same while talking about community benefits. And Keith Carson considered the ENA a prudent step so that they could find out if the project had legs.

That sentiment of limited public support didn’t begin yesterday. It was brought up in public in December 2013, at the joint discussion between the Supes and Oakland City Council. It’s a topic that City and County haven’t been able to reconcile when County wasn’t part of the ENA. Now that they are equal partners, they’ll have no choice. It’s impossible to undersell the impact of this. County has taken a hard line on this, and it’s hard to see how City or Floyd Kephart’s New City will be able to reconcile it. In other words, it’s a potential showstopper.

The public contribution issue is big enough for the County that at the same meeting they commissioned a $200,000 study by CB Richard Ellis to appraise value of the Coliseum complex, land and buildings. Even that proved divisive:

Why would the County want the appraisal so badly? If the County wants to work from the notion that it could sell the complex at fair market value, it would help to understand what that FMV is. That doesn’t mean that they’d actually sell it at FMV. They could do a deal like San Jose, offering land at a discount provided that there was a certain price based on use. If County trends towards FMV pricing, that may be to force a decision on preventing a land giveaway by the City. While there are no deal terms yet, Coliseum City has long operated from the idea that the value of the land would offset sunk cost items like new infrastructure or writing off the Coliseum’s debt. The money saved by not spending it on land could be funneled towards the football stadium’s funding gap.

parcels

ENA covers ~140 acres of Coliseum area land

 

But if FMV was sought for the land, there’s no redirection of money to the funding gap. How, then, does that gap get addressed? If all three parties are going to have even a rough framework of a deal by the June deadline, they’ll have to come to some serious compromises that satisfy all three. That problem is one of those proverbial above my pay grade type of problem.

Miley made sure to mention his contingency plan of retrofitting the Coliseum instead of building new. While all five Supes approved the ENA, they didn’t express a ton of confidence in the project coming together. Left unsaid was another even more radical option that may prove more viable in time, one that was briefly mentioned in the adult conversation 16 months ago.

What if the City bought out the County?

If the County were leaning in that direction, an appraisal would make even more sense. Then they could start to figure out how to split the property, the remaining debt, and the JPA itself. Divorces are always messy, so don’t expect anything like this to happen as long as talks with Kephart continued. It’s not hard to see Coliseum City’s demise leading to a divorce. After all, if the sports teams are the JPA’s kids, and the kids have all grown up and moved away, what’s left?

Yet another possibility is that the County, which has a good relationship with Lew Wolff, is waiting just like Wolff for Coliseum City to die. Then they can work with the City on ballpark plan at the Coliseum. The no public funding demand would arise yet again, which would scare off many developers – but not Lew Wolff, who is not thinking about developing the Coliseum extensively right now. But that would be at odds with the City, which has grander visions for the Coliseum area than a stadium surrounded by parking.

Going back to the next-six-months-narrative, Friday’s City Council approval had optics that were designed to look good in reporting progress to the NFL. However, the NFL’s LA point man, Eric Grubman, continues to maintain that Oakland is neither “aggressive” nor “specific” about its plans. It’s easy to figure out what he means by “aggressive,” but “specific” appears to be a vaguely coded term. Is that just about Oakland’s desire for a 80,000 dome? That appears to have been put aside in recent weeks, especially by Mayor Schaaf. Does it mean something else? Coliseum City continues to be this amoeba that could contain anywhere from three to zero teams. The next three months are meant to provide some specificity, and the following two months even more fine tuning. The NFL signaled that it may announce or authorize moves during the fall, before the 2015 season ends. That puts Oakland, San Diego, and St. Louis under the gun to resolve their stadium problems, or else become abandoned. Even as it seemed the NFL had lost control of this game of musical chairs, they may have regained it.

Are we having fun yet?