Monthly Archives: March 2011

03.07.11
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State Controller’s Redevelopment Audit Released

As promised, State Controller John Chiang’s audit of 18 different redevelopment agencies was released. It paints a picture of obligations not met, bloated salaries, and limited returns. Here’s the summary of findings from the report (PDF):

  • All 18 redevelopment agencies made deposits into the Low and Moderate Income Housing Fund in accordance with statutory requirements.
  • Of the 18 redevelopment agencies, 5 failed to deposit a portion of their tax increments into the Supplemental Educational Revenue Augmentation Fund (SERAF). Collectively, the amount was $33.6 million. On a statewide basis, we identified another three redevelopment agencies that collectively failed to deposit a total of $7.1 million into the SERAF. As a result, the state General Fund had to make more than $40 million in backfill payments to meet minimum funding levels for the schools for FY 2009-10.
  • Ineligible charges were made against the Low and Moderate Income Housing Fund. These charges were identified through review of a limited number of transactions.
  • Questionable charges were made to the RDAs. Again, these charges were identified through a review of a limited number of transactions.
  • All of the 18 redevelopment agencies reviewed had reporting deficiencies.
  • All of the 18 redevelopment agencies’ independent auditors failed to identify major audit violations and did not include all required information in the audit reports.
  • The City of Calexico has failed to repay the RDA for principal and interest for a loan. Under current legal standards, virtually any condition could be construed to be blight.

Specific observations include:

  • The redevelopment agencies do not have a consistent methodology to capture accurate and reliable data regarding the number of jobs created or retained as a result of redevelopment activities.
  • Significant variation exists among the redevelopment agencies for how indebtedness is determined.
  • Significant differences exist among redevelopment agencies for accounting for planning and general administrative costs.
  • Compensation of redevelopment agency officials appears to be in line with other local government officials.

Regarding the last charge, San Jose’s RDA appears to be an exception in that its top five highest paid employees earned more than $180k last year, the head making nearly $300k. 25% of salaries for Mayor Chuck Reed, the City Council, and 40 of their staff members are under the SJRA budget. In Fremont, the City Attorney and City Manager are on RDA payroll. Richmond’s agency neglected to pass through over $10 million in education-bound revenue. And then there’s Palm Desert, which will go down in ignominy by somehow declaring one of the best public golf courses in the state, Desert Willow Golf Resort, “blighted.” The report’s finding:

The fact that the RDA continues to insist that a 4 1⁄2 star golf course to be blighted further illustrates our point that virtually any condition could be construed to be blighted. Moreover, the renovation of all 18 greens, reshaping of greenside bunkers and fairway bunkers, new bunker drainage improvements, bunker liners, new sand, and restoration of all lake edges to maintain the publicly owned golf course is in violation of Health and Safety Code section 33445(a)(3) which prohibits RDAs from paying normal maintenance or other improvement of publicly owned facilities.

If you’re looking for that one item that the media, especially the national media, will pick up and run with, that’s it.

03.06.11
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San Jose Diridon Development Authority

The what?

That’s the name of the soon-to-be-formed joint powers authority. Joint powers are defined as the City of San Jose and the San Jose Redevelopment Agency. Despite the distinct possibility that the SJRA will be no more in a few months, the creation of this organization will effectively ensure that some kind of redevelopment arm will continue on for the next several decades. Here’s the full text of the resolution under consideration this Tuesday at the weekly SJRA meeting (1:30 PM, SJ City Hall Council Chambers):

RESOLUTION NO. ____

A RESOLUTION OF THE COUNCIL OF THE CITY OF SAN JOSE AUTHORIZING THE CITY MANAGER TO EXECUTE A JOINT POWERS AGREEMENT FOR THE SAN JOSE DIRIDON DEVELOPMENT AUTHORITY

WHEREAS, the City of San Jose and the City of San Jose Redevelopment Agency have many potential development and redevelopment projects on the horizon in the Diridon area including high speed rail, BART, and a potential sports stadium; and

WHEREAS, the Agency wishes to have the benefit of the City’s expertise and the ability to use the joint powers of the City and the Agency for the purposes of considering and facilitating future redevelopment in the Diridon area; and

WHEREAS, the City and the Agency desire to create an independent joint powers authority empowered to finance, develop, redevelop, implement, and operate future projects in or serving the Diridon area; and

WHEREAS, the City desires to enter into a joint powers agreement with the Agency to form the San Jose Diridon Development Authority (the “Authority”); and

WHEREAS, there are no specific projects proposed for the Authority at this time and any future projects will be considered by the Authority Board in a manner consistent with applicable law; and

WHEREAS, pursuant to San Jose Municipal Code Section 4.32.010, in order to enter into a joint powers agreement creating a joint powers authority with the power to issue revenue bonds, the City Council must find that the public interests and necessity demand that (a) the Authority acquire, construct, maintain, and operate the properties and the projects undertaken into pursuant to the Authority joint powers agreement, and (b) the Authority be empowered to exercise the power to issue revenue bonds; and

WHEREAS, those findings can be made based on the information in the memorandum dated March 4, 2011 from the City Manager and the Executive Director.

NOW, THEREFORE, BE IT RESOLVED BY THE COUNCIL OF THE CITY OF SAN JOSE THAT:

  1. The City Council hereby determines, based upon the information contained in the memorandum from the City Manager and Agency’s Executive Director dated March 4, 2011, that the public interests and necessity demand that:
    1. The San Jose Diridon Development Authority be empowered to acquire, construct, maintain, and operate properties and the projects undertaken into pursuant to the San Jose Diridon Development Authority joint powers agreement; and
    2. The San Jose Diridon Development Authority be empowered to exercise the power to issue revenue bonds.
  2. The City Manager is hereby authorized to execute the San Jose Diridon Development Authority joint powers agreement.

The Diridon area is not itself a specific redevelopment area, but it falls under the guise of redevelopment as part of San Jose’s Strong Neighborhoods Initiative. Approval of this resolution and other related actions would create a “son of RDA” just for Diridon. The new agency would be tasked with planning and infrastructure for a ballpark (or alternative), transit hub, and a whatever ends up in the six acres between the arena and ballpark site. Included would be properties in the Autumn Parkway project.

Creation of SJDDA does not mean the City has somehow sidestepped the public referendum requirement for a ballpark, as that is enshrined in municipal code. It does mean that the new body would have potentially broad and sweeping authority to raise funds for projects within the area. At this point my guess is that fundraising would be limited to transit infrastructure, as the cost to construct San Jose’s “Grand Central of the West” will be enormous – well into nine figures on its own. Attempts to include the ballpark would be unpopular and highly transparent, creating a situation in which one project could drag another down. This is especially critical as it applies to raising bonds, as bond issuers have been very skittish about dealing with California’s cities in light of the near and long-term prospects for RDAs.

One of SJRA’s related actions is a one-year extension of the time limits for both redevelopment activity and indebtedness for all existing project areas. Diridon has the latest dates on the schedule, with a current activity end date of July 2033 and a debt end date of July 2048. BART and HSR should be in place by 2034, right? Er… By extending the dates for project areas, the relinquishment of tax increment to state/county would be further delayed. SJRA is by far the most indebted in the state.

I mentioned last week that I wasn’t thrilled about the possibility of this happening, notably because it replaces one bureaucracy with another. This is clearly a reaction to what’s coming from Sacramento, and cities feel they are being backed into corners by the Governor’s demands. It’ll be interesting to see how the Governor’s office reacts to these types of arrangements, and to find out what new funds will be recognized by the state after these “sons of RDAs” squirrel away their share. Whether a ballpark or something else gets built at Diridon, that new development will be extremely important as its tax increment (or possessory interest taxes) will help fund the future transit hub.

03.06.11
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Lacob makes an oops

I guess this marks the end of the honeymoon.

We may be a few months away from Northern California being a one-horse NBA territory, that horse being the Golden State Warriors. That makes it the perfect time for the W’s owner to open his mouth and insert a foot, no? The internets are abuzz with a quote Joe Lacob made during a panel at the annual Sloan Sports Conference back east. Asked whether bloggers (such as those at Warriors World and Athletics Nation) are fans, Lacob replied:

“They are not real fans, because they don’t have season tickets.”

Ouch.

This led to the expected evisceration of Lacob by those aforementioned bloggers and commenters pretty much everywhere, including this excellent post by Bay Area Sports Guy. Is this Lacob’s real opinion of fans, or did he simply not think his response through? We’ll find out in a day or two.

It’s strange that Lacob could show such disdain for fans. Many people who participate online are incapable of being season ticket holders for any number of reasons:

  • Familial responsibilities
  • Distance
  • Work schedules
  • Economic means and status

Many fans, due to circumstance, can only take in a game here or there or buy a miniplan of some sort. The Warriors’ season ticket base may have eroded thanks to the mismanagement of Chris Cohan, but overall ticket sales are still strong, as evidenced by this season’s 18,651 average attendance. The W’s are one of two teams in the top 10 in the NBA to have an under-.500 record. The other team, Cleveland, presold tickets last season with the idea that they would retain LeBron James. That didn’t work out so well.

While NBA tickets are generally thought of as expensive, in the W’s case they’re actually quite reasonable. Team Marketing Report has the team’s average ticket price (PDF) at $34.13, the lowest of all four California teams. Tickets in the ends of the lower bowl can be had for $35 a game as part of a season ticket package, which is a fabulous deal when considering the proximity of those sections to the court in Oracle Arena’s basketball-friendly layout.

At the heart of Lacob’s quote and the subsequent outcry is the question of what a “real fan” is. We’ve talked plenty about how much corporate interests mean when it comes to allowing a team to thrive or even survive on an annual basis. When it comes to classifying fans, though, that’s really dangerous territory and it’s something we’ve tried to avoid here. Fanhood can’t be quantified. Consider the following examples:

  • The college student who grew up loving the W’s and can’t afford season tickets yet.
  • The professional firm who buys four club seat full season plans mainly to hand them out to clients.
  • The former season ticket holder who is now married, has three kids, and is too busy to see more than 3-4 games per season in person.
  • A couple who moved to the East Coast for work and follows the W’s on NBA League Pass (TV and online) and gets tickets whenever the W’s come to their city.
  • A night security guard who listens to KNBR constantly, reads WW and GSOM, and whose best chance to attend games is the rare day game.
  • A poor teenager who idolizes Monta Ellis or Stephen Curry and whose single mother works two jobs and doesn’t have the time to take the kid to a game.

Which of the above seems the least like a real fan?

Lacob’s gonna have a lot of explaining to do in the coming days. Perhaps he should take some pointers from Andy Dolich’s Virtual Season Ticket concept, which could use some fleshing out for the NBA model but has potential. It’s incredibly obtuse to rule out huge demographics who contribute to the W’s bottom line – indirectly yet significantly. Whatever he does, he probably won’t be so dismissive the next time around. Then again, there’s one sure fire way for W’s to get new season ticket buyers: win more games. Just a thought.

P.S. On the venue front, Lacob mentioned that the team’s lease runs through the 2016-17 season, which we’ve discussed here when the possibility of moving to San Francisco has come up. Makes me wonder if he’s already mentally checked out of Oakland.

P.P.S. Tim Kawakami has a clarification from Lacob, in which he was referring more to profanity-laced emailers than bloggers per se:

“The last thing I’d want to do is denigrate the online community,” Lacob said. ”I think I’ve demonstrated an openness to media, the fans, everybody, to answer every question, take it head on. And I’m willing to listen.”

Let’s hug it out, bitches.

03.04.11
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Ray Ratto: Ballpark Feasibility Detective

Several hours ago I listed to the latest installment of Dale Tafoya’s Athletics After Dark podcast, this one featuring Ray Ratto. Ratto thinks that the San Jose stadium plan is near death:

The “Blue Ribbon Committee” is a fraud. The territorial rights argument is a fraud. This is about one thing and one thing only, and it’s always been about this: Do the A’s have the money to put a shovel in the ground? If they had the money to put a shovel in the ground, we would’ve gone to Bud Selig and said, “We’re ready to go now.” And then Bud Selig can either tell the committee to produce a report or he could just go without it and start harvesting votes if they really want this to happen. I think it is incumbent upon the A’s to show that they’re ready to go right now and the fact that they keep saying, “well we haven’t seen the blue ribbon report…” You know what? That’s due diligence and you’re supposed to do that. If you’ve got that stuff down you’re already working at that.

…In the current economic climate, where you really need help from cities and states to get buildings done if you don’t want to go into your own personal debt. I think that the idea of a San Jose stadium is really fading. It may be dead at this point. It’s taken too long for the A’s to get what ducks they have in a row, in a row. So I think the problem here is the A’s needed more help than they let on and now they’re stuck.

The bedeviling thing about how MLB works is this black hole of information around Selig. We know a lot about what San Jose is doing, we know a decent amount about what Oakland is doing. We have Wolff and his media campaign, we have responses from Neukom and Baer. The only thing we don’t have is the really important stuff. We don’t know what Selig’s, and by extension the other owners’, motivation is. To fill that void, Ratto theorizes that money is the problem. Which it may be, none of us have a financing plan in front of us.

But unlike the territorial rights issue or the progress of environmental impact reports, there is absolutely zero data or precedent to back up Ratto’s supposition. He is quite literally going on a hunch, making the analytical leap that it must be the money and everything else is a sham.

That makes little sense when you consider the following:

  • The Giants have been spending millions on preserving T-rights to the South Bay over the last two years. They bought a majority share of the SJ Giants. They’ve been redoubling marketing efforts in the South Bay. Their stance on T-rights has gotten more hardline with the passing of time. They’ve threatened legal action – not directly, through intermediaries. No organization goes to this much trouble if they don’t believe that something major is at stake.
  • They don’t call Selig “Slug” for nothing. The man is interminably slow when it comes to big decisions and is more than willing to say the sky is green when it is obviously blue (his remarks about competitive balance are a good example). This one’s a very big one since it involves something the big market owners consider sacred. I’ve said before that Selig isn’t going to act until at least one of these cities has all of their ducks in a row. That means the site, legal/political clearances, everything. San Jose isn’t there yet. Oakland isn’t there yet. And the Grim Reaper is coming fast for cities. Plus there’s the possibility that upcoming CBA negotiations will come into play, especially because the biggest debate will be about revenue sharing. If you’re Selig, why would you lift a finger until this other stuff shakes out? I wouldn’t. I guess you can call me “Slug” too.
  • The money is a lot more “there” than “not there.” Wolff hasn’t been afraid to say when money is an issue – look at what’s been happening with the Quakes. He also hasn’t been afraid to bail on a project when it couldn’t work out financially, as was the case in Fremont and Oakland. Is it all locked in and under contract? Probably not. The timing of the hiring of Darrin Gross to the business side of the A’s may be a clue. Wolff hired David Kaval under the same auspices with the Quakes last year, and now we’re a few months away from groundbreaking. And let’s not forget that Cisco and SVLG are nothing to sneeze at.
  • This stuff takes a long time to pan out. Peter Magowan took over the Giants in spring 1993. It took four years to get a ballpark deal in place and another three to build it. Magowan never had to worry about complications like T-rights. San Jose has been handicapped by the T-rights debate, which has strung the effort out to five years to get to this point (though there were two silent years). Ratto makes it sound like either Selig or Wolff can just forcefully say, “Make it so,” and things start happening, chop-chop. That’s not reflective of how this works. It’s an ugly, dirty process, borderline corrupt (if not outright) at times.

This post is yet another case of devoting nearly 1,000 words to something that was not news, merely a theory from a columnist. Who knows, maybe Ratto will be proven right in the end? If not, I suspect that when a groundbreaking ceremony occurs at Diridon this very interview will be played over the loudspeakers, an audio version of the “Dewey beats Truman” moment. Tech writer John Gruber calls it claim chowder. I’ll just call it a hunch.

03.04.11
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Redevelopment is a dead man walking

Governor Brown is lining up votes to get his budget proposal finalized before next Thursday’s deadline. Now he has the backing of Democrats in the legislature, including Assembly leader John Perez. Redevelopment proponents are starting to admit that their only tactic going forward may be litigation, as an attempt to broker a deal by borrowing has gone nowhere in the Capitol. The last step is to get a few Republican votes, and that’s more a matter of compromise than a lengthy debate. Perez:

That would clear one of the most contentious hurdles confronting Democrats. “My preference is to not eliminate them, but the realities of the day indicates there’s not yet a viable alternative to elimination,” Perez said. “It’s a likelihood that we’ll see action to eliminate redevelopment agencies.” Mayors from California’s largest cities had proposed a borrowing scheme to keep the current redevelopment agency system intact, but Perez said Brown’s approach of replacing it with more localized efforts to focus on blight and affordable housing is a better way to go.

Seeing the writing on the wall, Oakland moved to secure some funds slated for redevelopment projects. Mayor Jean Quan took a wait-and-see approach going into this week, and now that the barbarians are at redev’s gates, it might be a good time to take what you can. Unfortunately, this puts the Victory Court plan in a fiscal limbo. No one knows how much the final cost will be, and VC would have to get in line behind other projects for a very limited pool of funds.

Should the League of Cities or its individual members decide to sue, chances are that it wouldn’t be 400 lawsuits against the state. However many there are, the courts would probably combine them into one and then rule on the issue. That issue may have to be decided sometime before the start of the fiscal year so that a state budget could be finalized. The Governor’s office is extremely confident in its stance and the cities are by-in-large showing desperation, so it’s easy to guess which party feels like it’s on more solid footing. No wonder San Jose is getting ready to create a new joint powers authority to handle the ballpark deal – a drastic step born of not being willing to take chances when so much is at stake.

The other side of the legal scale is the Governor’s office looking to stop the individual RDA’s from tying up funds or keeping assets. That part isn’t so clear as various cities are going to different lengths. The court(s) would have to set a standard by which the RDAs are/were overstepping their authority, and it’s hard to know what that standard would be. San Jose, which is somewhat unique in its landbanking strategy, may have a different standard applied as it relates to seizing or liquidating property.

Looks like we’re in for a bumpy ride, folks.

03.04.11
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Sacramento is now Plan B, Anaheim is Plan A

Sacramento Mayor Kevin Johnson came out of a 40-minute meeting with the Maloofs with the notion that Sacramento is only a fallback in case a deal between the Kings and Anaheim’s Honda Center doesn’t work out. The team was granted an extension to April 15 (tax day!) to get its affairs in order.

More and more I think the tipping point for this was the Lakers creating their own network, thus creating an opening for Fox Sports to hook up with the Kings. It’s a potentially huge deal which makes the LA market superior to any other potential relocation spot.

I know many of you are Kings fans and this has to hurt. Look on the bright side though – at least you’ll never have to worry about this again:

Pithy commentary provided by “The King” Jerry Lawler, of course.

03.03.11
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Caltrain declares fiscal state of emergency, cuts service

It’s official. Caltrain is drastically cutting service starting on July 1st because of its $30 million budget deficit. Twitter user DCdoozy has been keeping a running log on today’s hearing.

Up to seven stations will have service suspended for the upcoming fiscal year. To add insult to injury, a 25-cent fare increase will be instituted. The service will essentially be a commuter train only based on the hours, with virtually no leisure service possible. VTA offered a $7.1 million payment it already owes Caltrain, as well as an offer to buy Diridon Station from Caltrain (that would’ve been interesting). VTA’s proposals went nowhere.

An example of leisure service is the Wet Your Whistles pubcrawl, which occurred during Beer Week. It was the third annual crawl and was held on a weekend. That kind of scheduling is no longer possible. I’ve been trying to get my friends who run the site and the crawl to do it once a quarter. Now it’s going to be difficult to do it just once a year.

We’ve had a lot of talk among local business interests, from the Giants to SVLG members, about saving Caltrain. Very little action emanated from those town halls. Come July we’ll see how this affects the Giants, as the service drop will occur right before a homestand.

03.03.11
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News for 3/3/11: Quakes site demolition + Redevelopment

A couple of A’s business-related items from the Silicon Valley Business Journal:

  • Neil Kraetsch was named the team’s general counsel. He had previously been assistant general counsel. His predecessor left to take a similar position with the Tampa Bay Buccaneers.
  • Darrin Gross, who spent more than a decade with the Sacramento River Cats, was hired by the A’s to become the Senior Director of Corporate Partnerships.

Today’s a pretty big day for Quakes fans, as a ceremony for the demolition of the remaining FMC plant will happen at noon. The entire demolition process should take 12 weeks, including cleanup, and should be followed by groundbreaking shortly thereafter.

Articles in the Oakland Tribune and the San Francisco Business Times go over Oakland’s challenges in saving redevelopment.

The Merc’s Tracy Seipel reports that as the Cinequest Film Festival begins in San Jose, the City’s redevelopment agency must decide if it should subsidize over $800k in rent for operator Camera Cinemas on the Camera 12 multiplex, which is owned by Forest City. Absent that freeze, the multiplex would probably shut down and remain vacant for years, just as it did when UA vanished over a decade ago. The Camera 12 is the flagship venue for Cinequest and it would be a shame for downtown if the Camera 12 closed.

An almost hidden item in the article above is San Jose’s interest in creating a joint powers authority that would hold the Diridon ballpark land in case Sacramento wanted to seize or liquidate it. That’s different from the successor agencies that other cities have been creating, and I’m curious as to why they’d move in this direction. I’d also like to know what the joint powers would be (two or more public agencies) and what its “powers” would entail. Frankly, I don’t like where this is headed. Next Tuesday’s City Council meeting should explain this further.

03.02.11
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Requiem for a Finley (or Peterson complains about Wolff’s complaining)

One of the problems I have with Lew Wolff pleading his case in the media is that it gives the media plenty of fuel for columns – columns that are almost invariably anti-Wolff. Such is the case today, with a Bloomberg article followed up by a rejoinder by Tribune columnist Gary Peterson. None of it moves the conversation forward, and it creates a cloud over a team at a time when all teams should have unfiltered hope on their side. You’ve got pro-Oaklanders and most local columnists on one side and Wolff, Beane, and the national columnists on the other side. And there isn’t much room for convincing either.

Peterson has plenty of good points (the beer size scandal) and some bad ones (the non-existent big development in SJ), but he makes one rhetorical mistake in comparing Wolff to Charlie Finley. In no way is Wolff as cheap, colorful, or rebellious as the maverick Finley. MLB wouldn’t have a Finley in the current era. As much of a mixed bag as Finley was, his honeymoon in Oakland may have ended as early as April 18, 1968. That was the date of the second ever home game for the Athletics in Oakland. After a sellout, 50,000+ crowd on opening night, game two brought in a whopping 5,304, most of those probably season tickets. Out of curiosity, I did a check of every first and second home game ever played in Oakland, and the results are only marginally better, sometimes worse.

Bold/italic figures indicate doubleheaders. Blue years are in Kansas City, Green years are in Oakland. Home games played outside of Oakland were not counted. Data source: Baseball Reference

There’s a story – possibly apocryphal – of how Finley said that he made a mistake in moving the A’s to Oakland when he saw the crowd for that second game (that may be how Selig got the basis for his famous quote). To be fair, BART was under construction. On the other hand, traffic was not nearly as bad on the Nimitz, then also known as Highway 17. Seriously though, 5,304? And less for the second games the next few years? The Haas era bumped things up, but even then the A’s had two years whose second games had four-figure crowds. Increased season ticket sales this year should ensure that a <10,000 crowd won't occur this year. Still, no matter how much Oaklanders and columnists despise Lew Wolff, hate alone won't save the A's. Showing up just might. I know that many of you will be there on Opening Day. What about the following day?

03.01.11
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Judge rules NFL can’t take TV advance during lockout

In a development that can only be described as a victory for the players, US District Court judge David Doty ruled that a special master mistakenly allowed the NFL to keep $4 billion in TV revenue for the upcoming season, despite the threat of a lengthy work stoppage. The money is considered an advance as the various TV networks would be owed additional weeks to match the contract. based on how many weeks of the season are eventually played. The money has been in escrow while this issue was waiting for resolution, and the league looked at the funds as a potential warchest.

While the league is expected to appeal, the possibility that the owners would not have access to these funds is a huge hit to their offseason strategy of hoping to break the union over time by having a financial advantage (not that they don’t already have one). It’s possible that there will be more pressure on them to make a deal should the ruling stand.