Not every idea is a good one

Over the weekend, the Santa Rosa Press Democrat’s sports columnist Lowell Cohn entertained a concept for privately-financed stadia at the Coliseum for both the A’s and Raiders. Put together by Sacramento developer Rick Tripp, the plan is neither new nor novel. In fact, we’ve heard it here several years ago, when the Lew Wolff trying to build a ballpark first north of the Coliseum and later in Fremont. The venue(s) would be paid for by a combination of surrounding area development entitlements and stadium revenues such as naming rights and concessions. During the housing bubble in 2005, it sounded like a decent plan since it wouldn’t have required a bond issue or  new taxes on Fremont’s or Oakland’s part. Of course, once that bubble burst, such a plan was no longer feasible.

Tripp revives that plan and adds a wrinkle in that “unconventional” sources such as real estate brokerage fees are also used. Tripp admits that he hasn’t lined up all of the necessary money, some of which could come from Middle East financiers. He has also pitched his plan unsuccessfully twice – first in San Diego for the Chargers, then in his hometown, Sacramento, for the Kings’ railyards arena. In both cases, his respective bids were rejected. No explanation is given as to why, but I have a few guesses as to why which I’ll get to in a minute.

Before that analysis, first let me turn your attention to a small article which also surfaced over the weekend. The Arizona Diamondbacks are pushing to have ownership of Chase Field changed from one public entity (Maricopa County) to another (City of Phoenix). The point? To allow the D-backs to exert more control over Chase Field’s revenue streams, which are currently somewhat split between the team and Maricopa County. The team pays $4 million per year in rent and maintenance costs, a decent amount compared to other leases throughout baseball. No new money is being raised by virtue of the D-backs’ proposal, and it might net the team a few more million per year. That’s enough to make the request worthwhile. It’s of utmost importance to team ownership that it gain control over as much of its local revenue stream as possible.

It’s in that light that if you read Tripp Development’s San Diego stadium proposal that you can see why it didn’t pass muster. The plan, which included a $900 million NFL stadium and a $400 million arena, would charge $15 million per year to the Chargers and $10 million per year to a relocated NBA team. Given the somewhat similar cost between a ballpark and an arena, let’s suppose that the A’s would lease a new ballpark from Tripp for $10-12 million a year. That’s three times as much as the D-backs, a team that is at best a mid-market franchise and is trying to scrape up every bit of revenue it can. Worse, the terms have the A’s (or Raiders) with precious little control of stadium revenue except for games. While it sounds nice that the A’s would get a “free stadium”, their inability to control revenue streams would leave them only marginally better than they are now, especially in years when attendance isn’t impressive. It’s a deal that, if presented to either Lew Wolff or Mark Davis, would be politely declined by both. It’s not something that would be approved by either the NFL or MLB. Similar lease terms helped allow the Seattle Supersonics to leave the Emerald City, and they’re making it easy for the Warriors to look across the Bay towards San Francisco – even though the price tage for a new arena will be huge.

Now, that isn’t to say that Tripp’s concept is bad. If you’re an Oakland-only partisan or someone who doesn’t scratch the surface like Cohn, it might sound great. And at least Tripp is being fairly transparent about the substance of the deal, whereas we have few clues about Oakland Mayor Jean Quan’s Coliseum City plan other than federal transit money or the exotic EB-5 visa program (neither of which will provide much money to build any stadia). The problem is that so much revenue has to go towards paying off the project that it severely limits the amount that can go to the tenant teams. That puts the teams at a handicap relative to their division and league competitors. Both owners and the leagues are going to agree to deals that give them the highest levels of revenue and control. A large mortgage for the A’s is somewhat mitigated by the fact that it can be deducted against revenue sharing. Any deal that doesn’t give the team revenue control is inferior, even if a high-revenue/control deal means creating greater risk (see: 49ers).

Moreover, while the plan doesn’t say redevelopment explicitly, it’s effectively a redevelopment plan when it talks about entitlements. That may be the most risky thing of all. Tripp and his investors probably have a target in terms of real estate sales and fees associated with those sales that will help pay back the debt ($90-100 million per year if separate football and baseball stadia are built). If they don’t hit those targets because of an Oakland real estate market that trails the rest of the Bay Area, what does it mean for the teams? Investors want to counterbalance risk with return and protection if possible. With limited government help, the risk may be excessive. Remember that former New Jersey Nets owner Bruce Ratner faced several delays in trying to move the team to Brooklyn, which eventually forced him to sell the team and the development to Russian billionaire tycoon Mikhail Prokhorov. Bailout guys like Prokhorov don’t grow on trees.

Tripp’s plan is the first of many such proposals for Coliseum City, and he admits that he’ll know if it’s workable in 18 months, around the time several studies regarding Coliseum City are due. If nothing else, his proposal should stimulate discussion within Oakland about how Coliseum City can get accomplished – not just to keep the teams in place, but to allow them to thrive. For any team to stay in Oakland the financial terms need to make the teams more than merely competitive. As long as the teams face revenue limitations from any proposal, they’ll keep looking for better deals elsewhere. That said, if Tripp is able to successfully get commitments from one or both teams, he’ll deserve extreme kudos. Third time would be the charm, I guess.

24 thoughts on “Not every idea is a good one

  1. So the A’s would have: Sky-high rent and little of the money coming into the stadium. Where do they sign? (Not)

  2. You guys knew I would chime in on this….

    Since Mr. Tripp is publicly declaring an effort to develop in Oakland, I will publicly announce my 100% support of that effort, despite any potential flaws in the numbers. Deal points can be ironed out – hey, every deal has hiccups.

    Pick a spot in Oakland – make one if you have to. Get it done. I will go door-to-door down my block asking for donations if need be.

  3. It’s not really a good idea from the revenue standpoint. But then again, I think the hopes of a lot of Oakland folks is that Fisher is a billionaire and would spend out of pocket. but who has done that ?

  4. Actually, wouldn’t the A’s be even in worse shape now given MLB’s edict they go off revenue sharing with a new stadium? So in actuality, they lose 40-50 million a year to star (35 mill revenue sharind + 15 million lease). Yeah, sounds great…for Tripp and Oakland city partizans who want the A’s to remain perpetual revenue bottom dwellers.

  5. I love how the “feasibility” of this project will become clear after the 58th month of this process. I’ll get my popcorn ready.

  6. Rick Tripp is one of at least three Save Oakland Sports members who have proposals to finance new stadiums in Oakland. Rick has never developed a Stadium before, but he has been very successful developing malls in Sacramento, Las Vegas & San Diego. I don’t know if he is coming today or not, but next time he shows up @ S.O.S. I’ll ask him for a response to this article. We have some important guest scheduled to speak @ Save Oakland Sports in the near future. Today Fred Blackwell Assistant City Administrator at City of Oakland who is in charge of Oakland re-development & the Coliseum City project will speak today, & Amy Track CEO of the Oakland Raiders has promised to meet with us in sometime in August or September .

  7. So Tripp is a real estate developer? And SOS hasn’t ripped him apart yet?

  8. I can see LW going “whoa! Why didn’t I think of that?”.
    You cannot blame Oakland centric people working to come up with a plan. Who knows, if someone like him was mayor (or in a political leadership role), maybe the situation wouldn’t be where it is. However, it’s an academic argument since we unchangeably are where we are. LW’ and Co’s intention is to move to SJ. They see greener pastures, bigger crowds, better franchise value in SJ. That’s the reality. Short of MLB saying “no” to a move or SJ Pols doing an about face-saying no to the A’s, the ideas from Oakland centric/SOS people are moot.

  9. I just find it funny that one of the arguments against Wolff is that he’s only in it for the real estate development. Now, here comes another guy, but he’s OK because he’s only in it for real estate development in Oakland.

  10. Hey the A’s just swept NYY this past weekend. Right now anything is possible.

  11. @LoneStranger
    I’m not Oakland-only, I’m just Oakland first.
    I never had any issue with Wolff building a real estate development to finance the stadium. Far better for the city because it would have done three things:
    1. Limit the loss of public dollars
    2. Improve a blighted area (the flea market area idea)
    3. Keep the A’s in Oakland
    So what if Wolff would have made money? I hope he makes a ton of it and galvanizes others to invest in Oakland as well. It’s too bad that the owners were not willing to sell – I’m absolutely against eminent domain – but since the economic collapse, maybe they’ve changed their tune. Of course, I’m sympathetic to Wolff wanting to make the most by going to SJ, and we all just want a thumbs up or down from Caesar. But it doesn’t hurt to know that if Selig says “No to SJ” then the A’s have plenty of people waiting in the wings to step up.

  12. Somehow I doubt MLB is taking seriously all the “We can build a stadium in Oakland with no public $$” folks who seem to be suddenly popping up all over the place. Tripp, Knauss, etc.

  13. @Lonestranger – I never had a problem with Lew being a developer. I only had a problem with his logic in justifying leaving Oakland, personally. Sure, I’m just as Oakland-first as most people in the Bay Area are Oakland-haters. So if somebody, ANYBODY comes up with a plan to keep our teams in Oakland, I’m all ears every time.

    @pjk – That’s the problem; the MLB isn’t taking anyone in Oakland seriously. There are groups (that you mentioned) that are willing to make a plan, put together an ownership group, finance the new sports complex, buy the team out from LW…all of those ideas get laughed off the table just because they come from Oakalnd-centrists. But those people who have proposed ways to keep the teams in Oakland have what they believe are viable offers – it’s everyone else who refuses to try to come back with another idea to keep the teams where they are.

    • There are groups (that you mentioned) that are willing to make a plan, put together an ownership group, finance the new sports complex, buy the team out from LW

      Please name those groups and their “plan”. If you are referring to DK, please provide his responses after his last pow wow with LW.

  14. Are there really folks willing to commit to spending $1 billion (more than that if the ballpark goes downtown) to buy the team and pay for a ballpark in Oakland? I’d like to see a group come forward with at least $1 billion in escrow – proving they can get the job done. So far, we’ve heard lots of talk and seen no cash. We had Knauss propose personal seat licenses, which have already failed miserably with the Raiders, now this Tripp plan…

  15. More info on Tripp: According to this interview at 27×7, Tripp’s preferred Sacramento plan would’ve been to build an arena in Rancho Cordova on a Superfund site owned by rocket manufacturer Aerojet, surrounded by retail and residential development.

    I ran some quick numbers: 10,000 housing units X $500,000 each X 6% brokerage fee = $300 million. That’s an order of magnitude or two greater than what Wolff proposed in either Fremont or Oakland. There isn’t enough land in and around Coliseum City to support this, unless Tripp thinks he can build a bunch of high-rises in East Oakland.

  16. Why do i get the feeling that pro-Oaklanders are continually grasping at straws as desperation stirs. First VC, then CC, then DK, and now Tripp?! Has SOS even friggin asked their white knight DK what went down in the the LW summit and why we haven’t heard from him since then?! Meetings with dog and pony shows are cool (i guess it’s an Oakland thing), but without substance they’re going to getting ridiculed not only by us realists, but also by BS/MLB.

  17. BTW before you Oakland pundits try to flame me as some pro-SJ only guy, please keep in mind my Oakland “CC” proposal last Sept. Kinda funny singing it now be the final proposal from JQ lol. Too bad, the rest of the bulleted items are completely ignored by Oakland proponents and politicians otherwise their might actually be some teeth to CC! =/

    What the Oakland should do to keep the A’s (and what pro-Oaklanders can do about it) – by an A’s fan (me):
    #1 – Stop with the penis envy: You are not as popular as SF, you do not have the corporate support as SJ. Recognize this first of all as this drives all other decision making.
    #2 – Seek public support: And not to just a small minority of A’s fan, but to the greater population at hand. State history, marketing opportunities, etc. The economic impact report was a good start. Take it and run with it through the entire city, county, and east bay region populace.
    # 3 – Be open and transparent – If you are going to require public funding, state as such. If you haven’t started the EIR because of x,y,z reasons be open about it. It may be not be politically correct to sensationalize an A’s hearing, proclaim an EIR afterwards, only to see it fizzle or in limbo, but it is the right thing to do for your constituents. If your plan revolves around private financing as well, state so. Are you there to serve the public or to serve your own career gains?
    # 4 – Reconciliation with the A’s owner – Sure, you think LW is a carpetbagger or needs to spend his own damn money on the stadium, but threatening with lawsuits and / or coliseum lease holdback isn’t going to make matters better. Perceptions of secret deals with MLB also won’t get you anywhere when the final say in the matter is with the owner himself. It is a business deal, so act professionally and business like, even if you think Haas would turn over in his grave if he knew the situation.
    # 5 – Present the business ramifications for the A’s to stay. Discuss a possible joint venture with the Raiders, however feasible it may or may not be. Keeping in mind #1, entice the owners with attractive lease rates ($1 / year), guaranteed 20k seats for x number of years, or showcase a Santana Row East Bay Entertainment hub with development rights granted. Get signatures out in public supporting Oakland.
    A call to arms for Pro-Oaklanders:
    – Demand more government transparency from financial impact to city funds, EIR process,etc. Write to your district rep / mayor / etc. everyday seeking answers
    – Take the enthusiasm and emotions to the public with fundraisers events, sellout a day exclusively for pro-Oakland folks, organize petitions for referendum on public ballpark funding, etc.
    – Stop with the nonsense namecalling, put downs, comparisons, etc. Emotions are great, but when projected negatively usually has the opposite impact intended. State the case for Oakland and not “why others don’t deserve it”.
    – Drive up the Coliseum attendance. Yes, this goes against the very backbone of your hatred for LW, but if you have already accepted that LW doesn’t want or care about Oakland, then you are in fact not supporting Mr. “Oil slick”, but instead making the case for Oakland itself. Showing business that they made a wrong decision leaving by presenting monetary loss is much more of a statement then continually berating the owners and the team itself. You show 22K average attendance in an antiquated venue like the Coliseum due to the phenomenal support of the Oakland/East Bay community, and I’m sure both LW and the corporations surrounding will listen much more profoundly then libeling and slandering with banners and columns. Go out with a fight. If LW still chooses other cities in the face of the overwhelming support then it only reinforces your notion that he had made up his mind a while ago and you tried his best. Feel free to go “carpetbagger” loco on him…

  18. #6, Hop in a time machine, and start doing all this stuff in 2001.

  19. Seems to come down to two non-starters with anyone, Tripp included, who wants to build in Oakland. First of all, where? It has been 17 years and there is still no agreed upon site. At the very least, is there a site? One that hasn’t been rejected by MLB and one that hasn’t been rejected by Oakland (Umm, all of them).
    Second, the owners are not selling. In addition, the A’s are also not for sale. Furthermore, the owners don’t want to sell the A’s. And finally, see the last three sentences.

  20. Daveybaby, MLB has the power to tell Wolff and Fischer where they can or cannot build within Alameda County?

  21. MLB can’t force Wolff to build anywhere.

  22. Ted, I think you’re missing my point. There is no “agreed upon site.” Is MLB behind the current home? Nope, Selig said they need to get out of there. Victory Court? EIR that never got started.

  23. Davey and PJK, I am under the impression that MLB has no say over where Wolff can build within A’s territory. Selig wont force them to “get out of there” if they choose to build a yard in Oakland.

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