Gameplan: Oakland

When the NFL instituted a new stadium loan program concurrent with its new CBA in 2011, a horserace was implied. Enshrined in the CBA is an earmark of 1.5% of the league’s annual revenue for stadium construction and renovation. This includes anything from planned stadia to ongoing debt for stadia built during previous CBAs. The league’s 2011 revenue was around $9.5 billion, putting that earmark at $142.5 million per year and rising. With the 10-year CBA in place, banks and lenders can feel secure knowing that the funding mechanism for whatever loans that make to teams and municipalities are practically the gold standard in pro sports. That paved the way for the following projects:

  1. 49ers stadium in Santa Clara: $200 million in G-4 program loans, plus $500 million in additional loans from Bank of America, US Bank, and Goldman Sachs
  2. Vikings stadium in Minneapolis: Up to $200 million (possibly $163 million) in G-4 funding out of a total of $477 million team contribution, though public share is somewhat shaky
  3. Lambeau Field expansion: $58 million in G-4 money for $143 million expansion project allotted earlier in the fall

Discussions continue for G-4 funds to help with renovations to Ralph Wilson Stadium in Buffalo ($200 million project), along with the new stadia being requested by the Raiders and Chargers. And this week, the Atlanta Falcons announced a framework for a new, $1 billion stadium. The framework is really quite simple.

  • $300 million from hotel taxes in the Atlanta area (public share)
  • $700 million from the Falcons, which would presumably include up to $200 million in G-4 loans.

While the Falcons fanbase has recently been solid (above 95% sold the last 6 years), it’s not expected that PSL revenue yields will be as high as for the 49ers, Cowboys, or Giants. A vaguely modest $100-200 million chunk from PSL sales is part of the equation. But it’s that top line item that is worth studying further.

The Atlanta metro area has a whopping 94,000 hotel rooms, 15,000 in downtown Atlanta alone. That enormous inventory allows Atlanta to host large events on a regular basis, whether it’s the Super Bowl or large conventions. The City of Atlanta even has the power to levy an occupancy tax on hotels in neighboring College Park, next to Hartsfield-Jackson Airport. So if Atlanta and Fulton County want to raise money through a hotel or car rental tax, it can raise a lot of money.

  • 40,000 rooms (<50% occupancy) x $1.25 (1% occupancy tax increase) x 365 days = $18,250,000

$18 million per year would go a long way towards funding a new stadium. Could Oakland and Alameda County pull off something like this?

According to visit Oakland, the entire city of Oakland has a little over 3,500 hotel rooms. There are probably 10,000 or less rooms throughout all of Alameda County. Even with a higher occupancy rate, Oakland/Alameda County would be lucky to pull in a sixth of what Atlanta gets, or $3 million/year. It’s not horrible, but it’s definitely a secondary funding source. Worse, Oakland already hiked its bed tax from 11% to 14% in 2009 (Measure C), in order to help fund the Oakland Zoo, Chabot Space Center, and visit Oakland. Citizens who approved the previous hike in a landslide may be less inclined to go to the same well a second time.

Yet there needs to be a clear definition of what the public share is going to be. The Coliseum JPA might be able to get away with pledging only $100-150 million as Santa Clara did. Of course, Santa Clara’s Stadium Authority (the Coliseum JPA counterpart) is technically liable for up to $800 million. At least they negotiated protections that everyone hopes never gets tested.

Oakland Mayor Jean Quan may be pushing for EB-5 funding to help. The controversial program has had allegations of fraud, but could provide a sort of triple-threat with the Coliseum City project. Hotel projects are reportedly a popular project for EB-5 funds. Should a “package” of 100 applicants put in their $500k-$1M and get approved, Coliseum City would have $25-100 million available for a hotel and/or stadium. That would not only help defray the cost, it would also provide additional hotel rooms (and tax revenue) to further pay off the project. Another potential federal program threatens to undercut EB-5: a visa to any foreign investor who buys a house worth $500k or more. Now, if I’m a Chinese national who wants to put my kid through Stanford, would I rather go with the EB-5 and be forced to invest in some other business, or buy a house in Palo Alto/Menlo Park for my kid to stay in and flip it for a profit when he went off to grad school? The latter seems a lot cleaner to me.

Then there’s the prospect of a sales tax hike similar to the failed Measure B1 campaign. Yes, sales tax-funded stadia are anathema in California and should be considered nonstarters. Yet if Oakland really were in a hurry to get things like Coliseum City and OAB funded, they could go it alone and impose a citywide tax. Again, it’s not going to provide a ton of sales tax revenue since Oakland is not that big a city (400k population) and is severely underretailed. Plus Alameda County would not be happy with Oakland levying its own tax hike because it would complicate any Measure B1-like planned hikes.

Oakland has a lot of ways to put together a Coliseum City deal. While I talked exclusively Raiders here, the same public options would be available for an A’s ballpark nearby. It’s up to Mayor Quan and the City Council to start having that adult conversation that I’ve been harping on them to have for at least a year. If December 17th’s presentation occurs without any talk of how to fund Coliseum City, it will show that Oakland isn’t ready to have that discussion. It’ll be hard to take Oakland seriously. At some point, you have to decide to stop kicking the can down the road. The Raiders and A’s have leases that end in 2013. Time to stop talking about a deal, and start making a deal.

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