Quan takes it down to the wire

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

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

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

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

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

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

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

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

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

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

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

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

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

38 thoughts on “Quan takes it down to the wire

  1. Oh boy… this comment thread is going to get awesome

  2. “That’s a key difference between what Oakland is doing and what San Jose is doing: San Jose is selling redevelopment land to private buyers to help make the ballpark deal complete, whereas Oakland is selling City land to ORA to make the budget.”

    VC is viable!….RIGHT.

  3. “San Jose is selling redevelopment land to private buyers to help make the ballpark deal complete, whereas Oakland is selling City land to ORA to make the budget.“ – Yeouch….. :X

  4. I’m staying out of this one; got better things to do. Bash all you want, SJ boosters, if it makes you feel better. Especially you, ST.

  5. i’m out too! Have fun guys!!

  6. @jk-usa/David – Surely you have something to say about the post, not just the comments.

  7. Could it be that jk and David are waving the white flag?

  8. @ML — I always have an opinion, but i’m getting tired of the partisanship. No white flag in my hand by the way. You do a good job (as usual) presenting facts. I would object to a few assertions, but then the drama would start again …

  9. Oakland had 15+ years to do something for the A’s but instead chose to do less than nothing – beating back any attempts by people like Schott, Wolff and even City Manager Robert Bobb to get a ballpark done. Now, let the chips fall where they may.

  10. @David – Object away! I’d rather have a substantive debate than the same old debate. You can help steer it in the right direction.

  11. Ouch..well that basically convinces me that Victory court is indeed nothing more then Oakland’s last minute scramble. My beloved team is going to be stuck in the equivalent of a 3rd world stadium for years to come unless selig lets us move to San Jose already. Hell Oakland can’t even afford to keep its police officers….wellll hell I guess sj isn’t that much better off in that category either.

  12. …If Oakland is indeed knocked out of the box, that is bad news for all of us. Because then our only hope to keep the A’s in the Bay Area is for MLB to override Neukom and Selig has never shown the courage to do that.

  13. (not sure why my last message didn’t go through)…
    @ JK – i wasn’t trying to bash. I understand circumstances are dire for folks during these hard economic times and sacrifices must be made. It’s fortunate that SJ has the luxury to layoff folks as opposed to doing RDA switcharoos, but liquidating assets to meet rent is a tell-tale sign that things aren’t as rosy in the O.

  14. The HJKCC property may provide parking indirectly for Victory Court site. Peralta College District would swap their parking lot next to the freeway for the HJKCC site. the latter would be demolished to provide for necessary college parking. The former Peralta parking lot would be the site for a multi story parking garage to support the Victory Court Ballpark. I suspect BART will be asked to pay for part of the garage for joint use parking. All of this will certainly add to traffic issues in the currently impacted area.

    It should be noted that last year the Oakland RDA purchased the Fire Training Facility from the City for $3M.

    It should be noted that the budget analysis for the Fire Training Facility did not indicate where Oakland Fire Fighters would train and if off site what the cost would be.

    It should also be noted that all of the RDA land purchases are without any master plan and/or certified EIR. Is this legal????

  15. @pjk – I believe that SJ is very much possible in Selig’s eyes. I think he’s giving Oakland their chance because it is the easier route indeed, but once it’s been ruled out, he will lobby with the teams to get the rights overturned.

  16. “If Oakland is indeed knocked out of the box, that is bad news for all of us. Because then our only hope to keep the A’s in the Bay Area is for MLB to override Neukom and Selig”

    Not so: If this occurs, the A’s will build in Fremont. I know “We tried in Fremont but it was impossible” is part of the official party line. It has to be in order to support the argument for lifting T-rights to San Jose. I hope it works. But really, buying off a couple of big box stores at Pacific Commons seems by far the path of least resistance of any of the sites. And Fremont is the only place besides San Jose that is economically viable.

  17. Hasn’t Wolff made it clear he doesn’t want to revisit Fremont? Too many NIMBY problems. The Warm Springs site would be perfect, with the highway and BART right there, but the NIMBYs already came out with their “a ballpark brings crime and chaos” nonsense. Why would Wolff want to face lawsuit after lawsuit over the ballpark? How much would it cost to “buy off” the retailers? How many millions apiece?

  18. @pjk- What’s the difference in paying off the big box retailers or paying off the Giants? I’d much rather the park be in downtown SJ, because I think it’s a better location, but Fremont would not be impossible, if Oakland is financially handicapped.

  19. …The Giants don’t want to be paid off. They could have had money long ago.

  20. …also, is the ballpark site still even available in Fremont? Does that proposed Target and multiplex infringe at all on what was supposed to be the ballpark site?

  21. Fremont is dead in the water because of “rich nimby’s” in Warm Springs and 2 large retailers in Pacific Commons.

    Unless they have another site in mind Fremont is dead and there is no way to revive it. If LW could do it there he would since he already sank in 24M non-recoverable and he could avoid Selig/Giants all together.

    In the end this is why the Giants will not negotiate San Jose to the A’s…they know full well the East Bay is not viable.

    If the East Bay was viable the Giants would negotiate San Jose because they know “full well” they get more season ticket holders by far from the East Bay than from the South Bay because of sheer distance.

    It would hurt the Giants business far more for the A’s to build ATT Park-East Bay than Cisco Field in San Jose.

    This article by ML shows clearly the Giants thought process. Why not let the A’s rot, get contracted, or move away? It is greed and selfishness in the worst ways, especially since that philanthropist of an owner Wally Haas gave away San Jose years ago for nothing.

    The Giants own the East Bay and the only place where the A’s can situate themselves again is San Jose….50 miles away from the Giants not 12 miles away in Oakland.

  22. They started work on ” The Block ” a couple weeks ago , the new theater/outdoor retail multi-fountained outdoor plaza ” hang out /gathering place ” district in Fremont’s Pacific Commons at the site of the now defunct Pacific Commons Ballpark location. LW et. al., lost $30 million to Cisco when they they walked away from Pacific Commons, leaving the 30 yr land lease back in Cisco’s original lap.

  23. @pjk – The Giants never said they don’t want to be paid off. Yes, they would prefer that the A’s leave, but the rest of it is posturing to get the highest payout as possible. The Fremont land is still owned by Cisco. The Block is on a small part of the land originally showing as being for the ballpark village, just north of the ballpark. Not sure who owned that section and if they sold it, or the artist in charge of the layout just used it since it was open.
    .
    Here’s a link to the Google map of the location. The Block is the chunk between Curie and Bunche streets. http://bit.ly/ing5Ox
    .
    @Sid- Fremont is ‘dead’ insomuch as no one is actively looking there anymore. But if you consider that a payout will be required in one way or another, why not pay off the Giants and go where the money is in SJ and finance the park that way? If it turns out that Bud doesn’t want to fight the TR, but Oakland is also not viable (based on no money or Wolff’s decision), then MLB/Wolff goes to the big box retailers at Pacific Commons and asks them how much money they think they’ll lose, and negotiations will begin. Then, part of the financing would be from the SV companies, and part of it would be future home sales after the economy gets better. Remember, it’ll take decades to pay off so it’s not like they have to get the houses and condos and everything built and sold immediately.

  24. LW had rights to the land that Catellus now reclaims to develop ” The Block” . LW’s Ballpark Village at this site and the development rights for the planned 3000 homes surrounding the Ballpark were to help defray the costs of the stadium. Don’t forget Fisher also spent another 20-30 million to buy property east of Christy/Bunche as well as the large low rise office property north of Automall , east of the Shell station for possible future ballpark parking garage . They sank probably 50 million around PC – most of which is money down the drain.

  25. @ob “LW had rights to the land that Catellus now reclaims to develop ” The Block.”

    As Lone Stranger has already pointed out, the land Catellus is using for The Block is a tiny piece of the overall site. The area which was to host the actual ballpark remains available. The fact that there is now ancillary development on a portion of the site which was always intended to have ancillary development seems no impediment whatsover.

    “LW’s Ballpark Village at this site and the development rights for the planned 3000 homes surrounding the Ballpark were to help defray the costs of the stadium.”

    Why are so many people stuck on the idea that, just because the ballpark village was originally intended as part of the financing, that is the only way to get the financing done? The whole point is access to the Silicon Valley corporate market. “Ballpark village” is not part of the intended financing mechanism in San Jose. As far as I know, the intended financing mechanism is “loan paid off by Silicon Valley sponsorships and premium seat revenue.” While this doesn’t work in Oakland, I see no reason the same financing mechanism doesn’t work (almost) equally well in Fremont as San Jose.

    “Don’t forget Fisher also spent another 20-30 million to buy property east of Christy/Bunche as well as the large low rise office property north of Automall , east of the Shell station for possible future ballpark parking garage . They sank probably 50 million around PC – most of which is money down the drain.”

    All of which is another reason why, if San Jose fails, Pacific Commons will come back to life. Then, that money is not all “down the drain.”

  26. @sid “Unless they have another site in mind Fremont is dead and there is no way to revive it.”
    .
    Why on earth would you assume, just because a business negotiation stalled, that “there is no way to revive it?” Business negotiations stall and come back to life all the time.
    .
    A lot has changed since the Pac Commons negotiations. There may be different faces on the other side of the table. If the two stores are struggling due to the economy, they may be a lot more cooperative than they were before. Plus, as I recall, the supposed dealbreaker issue in the first go round mainly had to do with the siting of the ballpark. While it wasn’t attractive the first time, if all other options have been eliminated and that’s the only contentious issue, the A’s might reconsider.
    .
    Finally, everyone has always assumed lifting the T-rights will require a substantial payment to the Giants. If San Jose is eliminated as a possibility, why wouldn’t the A’s contemplate making a substantial payment and/or giving financial assurances to the big box stores to gain (almost) equivalent access to Silicon Valley revenue streams?
    .
    As I’ve said before, I’ve always believed the A’s saw an opportunity to make a run at San Jose and gave up a little too easily on Pacific Commons. If San Jose is conclusively ruled out, it’s a no-brainer to restart those negotiations. Mark my words.

  27. The problem is , “The Block ” under construction at PC completely walls off Bunche Rd and turns it’s back to where a Ballpark was /could still be, anchored by a giant Target store – not the vision of a grand grassy plaza stepping out from just beyond centerfield that the original Ballpark Village was to be , featuring specialty upscale retail and restaurants and outdoor attractions like the wildly popular Spectrum in Irvine . Now it;s just gonna be a very suburban looking thing not unlike McCarthy Ranch and Union Landing just a few exits north and south of the 880 Automall exit

  28. If something went down in Fremont, I am pretty sure it would be an entirely (or mostly) new plan. Not a resurrection of the dead on in the exact state it was left.

  29. @ Jeffrey “If something went down in Fremont, I am pretty sure it would be an entirely (or mostly) new plan. Not a resurrection of the dead on in the exact state it was left.”
    .
    Why? Assuming most of the same revenue streams would be available in Fremont as in San Jose, why not cut a deal with the big box stores, borrow the money (as the A’s would in San Jose) and just build the ballpark without the ballpark village (at least for now)?
    .
    I really don’t see the logic in the “Pacific Commons is dead” line of argument. So far, no one has cited any factor which seems to make it impossible (or even more difficult than Oakland or San Jose). The big box stores can be dealt with if the will is there, more easily than the Giants, and more easily than sixteen small business owners who need to be moved out of VC.

  30. @bartleby- You have to understand why Pac Commons died.

    Lowes, Kohls etc….They have a clause in their lease that states if “anyone” develops the adjacent land and it hurts their business then that “anyone” is subject to unlimited liability.

    You are a lawyer and who in their right mind would accept that as a business person?

    Not to mention Lew Wolff was going to pay for the Pac Commons site with Residential entitlements from the ancillary development he was planning since there is not an existing downtown.

    With the recession crushing the housing market Wolff cannot pull that off anymore on top of the unlimited liability problem.

    Wolff needs an existing Downtown site in a major city in order to build. San Jose would garner far more Silicon Valley support than Fremont by far. The site is more centrally located and San Jose is the “Capital of Silicon Valley”.

    Fremont is dead my friend….You need to let it go.

  31. Also, I agree with Jeffrey….Fremont would have to be a completely new project or site. Not an old one being re-hashed.

    Wolff sunk 24M into Pac Commons that is non-recoverable, if he could get it back or leverage that investment who in their right mind would not try?

  32. Bartleby, to be more clear… I would be surprised if it wasn’t at Pacific Commons. What I meant above is that looking at the site plan and saying “Where there was a park before there is a Target, this won’t work” is probably a bad idea. I would expect that a plan, even at Pacific Commons, would be updated/changed to deal with anything else that may be developed before it. Like, the parks positioning within the available land would probably move if the center field park thing was still in the cards (something I hope would be after seeing the Park at the Park in San Diego).
    .
    I agree, that should San Jose not happen, it is probably most logical to assume that if a) Wolff/Fisher didn’t sell and b) they wanted to stay in the Bay Area then c) Fremont would get a rehash before they would do anything in Oakland. Right, wrong or indifferent.

  33. Fremont would be the same Pacific Commons location, even if it doesn’t include the land now slated for The Block. The layout wouldn’t have to be the exact same, which I think is what Jeffrey was trying to say.
    .
    @Sid – If numbers are bounced back and forth and both sides are happy, the “unlimited liability” clause becomes unimportant and is stricken from the lease contract. It would have served it’s purpose exactly as intended; get something back if someone tries to build nearby. As I said before, Wolff could still use the real estate part to finance some of the park, but I’m sure a lot of SV companies would still be on board. The real estate part could be planned to go into action when the economy gets better however many years down the road.
    .
    I agree that a downtown site is probably better in the long run for fans. I’d rather have things to do before and after rather than show up and leave like we do at the Coli now. But have to disagree when you say Fremont is dead.

  34. @Sid “Also, I agree with Jeffrey….Fremont would have to be a completely new project or site. Not an old one being re-hashed.”

    Again, why? You still haven’t cited any reason Pac Commons wouldn’t work other than “the big box stores were hard to deal with several years ago.” The big box stores are not homeowners worried about their neighborhoods nor are they a rival baseball which sees the presence of a competitor as central to their future. They are businesses, and can be expected to behave rationally. As such, they have their price (and it’s probably a lot less than the Giants).
    .
    Anyway, if push came to shove, I don’t remember the last big-box demands as being so wildly unreasonable that they really needed to kill the deal if the A’s really were out of options. If it came down to a choice between just waving the white flag and giving the big box stores what they want or staying at the Coliseum indefinitely, it’s hard for me not to see Pac Commons as not being the better option.

    “Wolff sunk 24M into Pac Commons that is non-recoverable, if he could get it back or leverage that investment who in their right mind would not try?”

    Why do you keep saying “non-recoverable” like that’s etched in stone? Everyone keeps calling Wolff a liar, yet on this you take his statement as the word of God? The A’s HAD to say “non-recoverable” so they could get the write-off. If circumstances change in later years and they actually do recover it, it becomes a windfall. Win win.

    Any why would they not try? Easy: They perceive a better opportunity. Pac Commons may be a good opportunity; Diridon is a better one. So, they take the fact that the big box stores are being unreasonable, throw up their hands and say “we’re all out of options, there is no Plan B.” Let’s face it: It would be harder to get the T-rights lifted if they don’t convince MLB they’re out of options. Writing off 24 million will look like money well-spent if it actually gets them to San Jose. And if not, there is nothing to prevent them from restarting the Pac Commons negotiations.

  35. @Sid – “You have to understand why Pac Commons died.
    Lowes, Kohls etc….They have a clause in their lease that states if “anyone” develops the adjacent land and it hurts their business then that “anyone” is subject to unlimited liability.
    You are a lawyer and who in their right mind would accept that as a business person?”
    .
    I am well aware of all this, and I’ve already answered this question at least once before. First of all, companies are subject to potential “unlimited liability” for many actions they take day to day. If they refused to take any action that carried the potential for unlimited liability, they would be paralyzed and couldn’t conduct business at all. Savvy risk assessment is fundamental to running any business.

    Second, as a lawyer I am telling you that “unlimited liability” does not really mean unlimited liability in this case. Lowes and Kohls could only recover their actual, proven damages – which tops out at the value of the affected stores. I don’t know what that number is, but the A’s can view that as an absoute worst case. And it is an unlikely one; the more likely figure would be some fraction of that (or zero).

    “Not to mention Lew Wolff was going to pay for the Pac Commons site with Residential entitlements from the ancillary development he was planning since there is not an existing downtown. ”

    I get that. Just because that was once the intended financing mechanism doesn’t mean it is the only possible one.
    .
    “Wolff needs an existing Downtown site in a major city in order to build.”
    .
    This is highly debatable. I think most people would agree this would be better, and I believe that’s why the A’s are taking a run at it first. But “better” is not synonymous with “necessary.”
    .
    “San Jose would garner far more Silicon Valley support than Fremont by far.”
    .
    I agree it would garner more. That’s why it’s the first choice. I don’t believe the difference is so great that Fremont doesn’t still work as a second choice.
    .
    ” The site is more centrally located”
    .
    While downtown is better served by transit, it actually is debatable whether it is more centrally located than Fremont .

    “and San Jose is the “Capital of Silicon Valley”
    .
    Agreed. That’s why it’s first choice. That doesn’t mean Fremont is not viable.
    .
    “Fremont is dead my friend….You need to let it go.”
    .
    We shall see. I hope we never get to find out if I’m right or not, because San Jose comes to pass.

  36. @jeffrey and LoneStranger I totally agree with your most recent comments.

  37. Just my 2-cents: Fremont is still being used by Wolff/A’s as a “if you don’t let me move to SJ!…” threat to Giants/MLB.
    Most likely, as Bartleby stated, Fremont is a fallback just in case the whole San Jose thing blows up.

  38. Fremont’s not gonna happen. Beter staying at the Coliseum for awhile and get with the Raiders for 2 stadiums there, if VC falls apart. Fremont’s suburban setting, transportation issues and genric name change (Silicon Valley A’s of Fremont?) just sucks big time. I can just see the SV on their caps and Fremont on their jerseys..lol.. Bush league looking to say the least.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.