Coliseum City Draft EIR Review: Owning vs. Leasing

I’ve done my initial run through of the EIR (except for the traffic data) and have taken lots of notes along the way. Over the next few weeks, I’ll write up specific subjects, the first being the most germane to what we normally talk about, the ballpark at Coliseum City. Before I dive into that, I wanted to touch on something in the language of the EIR that had me curious, and frankly a little baffled.

From Project Description, page 3-34:

NFL Stadium and Multi‐purpose Event Center
…The Oakland‐Alameda County Coliseum Authority would control the use of the Stadium through a management agreement with a professional management association (currently AEG). The Stadium would be leased to the Oakland Raiders, a National Football League (NFL) franchise, for playing home games during the NFL pre‐season, regular season, and post‐season and for other NFL related events.

Page 3-38:
The Ballpark is expected to be developed by the Oakland A’s professional sports franchise on land owned by the City of Oakland and Alameda County. Like the Stadium, the Oakland‐Alameda County Coliseum Authority would control the use of the Ballpark through a management agreement with a professional management association.

The Ballpark would be leased to the Oakland A’s for playing its 81 home games during the MLB regular season6 and potential post‐season games,7 and for other MLB events.

Page 3-39:
The new Arena would be leased to the Golden State Warriors, a National Basketball Association (NBA) franchise, for playing home games during the NBA pre‐season, regular season, and post‐season.

Notice the common theme? All three venues would be owned by the City/County/JPA and leased to the teams. Since this is merely the Project Description of an EIR and not a DDA (Disposition and Development Agreement), it’s not exactly iron-clad. It’s a little strange that the City would continue to want to own and operate these venues, when it has shown frequently over the last 20 years that it’s not all that good at managing venues.

Currently, the structure is set up so that the JPA owns the venues and the land. They collect rents and other revenues and pay for expenses (except for the A’s gameday ops). The JPA is not a “professional management” group, so they hire another company to do that such as AEG or SMG previously. The various agreements with the teams have caused City and County to hemorrhage red ink, whether we’re talking about the ongoing subsidy for the Raiders, the Coliseum’s debt service, or the cloudy nature of the Arena’s debt once the Warriors leave for SF. It’s this difficulty and mismanagement that has caused Alameda County’s Board of Supervisors to be a lot less sanguine about Coliseum City’s prospects than Oakland. Supervisor Keith Carson has been upfront about wanting to get out of the stadium management game.

Now we’re looking at the JPA (or a successor public agency) absorbing billions of additional debt liabilities. Start with at least a half-billion that would cover the infrastructure costs at Coliseum City, plus the $120 million of remaining debt at the existing Coliseum. Add to that $1 billion for the football stadium, $600 million for the ballpark, and probably $700 million for the arena. That amounts to around $3 billion in debt load. Naturally, when dealing with such enormous figures, some questions will arise such as:

  1. How would that debt be structured?
  2. How would City and County taxpayers be protected from shortfalls or defaults, they way they weren’t with Mt. Davis and the redone Arena?
  3. How would the JPA balance out the lease agreements so that no one team benefited more than the others? (This plagued the JPA in the past)

If the City is willing to cover infrastructure costs and pay off the remaining stadium debt, should it also have to go the extra mile to finance these venues? That’s S.O.P. for the NFL (see Santa Clara), but it doesn’t have to be that way. The City & County could say, Look, we’re giving you enough help to get this started, you take it the rest of the way. And the biggest reason to have the JPA do the financing is to provide availability to tax-free bonds. The franchises don’t need that kind of help.

That’s not to say that all publicly-financed stadium deals are terrible. Some of them work out well, like SAP Center and Chase Field. However, the risk the City & County would have to take on is more than a bit much. There are actually multiple privately-financed venues completed over the last 15-20 years: AT&T Park, Gillette Stadium, Staples Center, American Airlines Center. They are also among the most successful venues in their respective sports.

At some point some within Oakland is gonna have to playing hardball and stop giving everything away. If not, maybe they should find new negotiators.

P.S. – Notice how, because all the talks with the Raiders are behind closed doors, there’s little hubbub about them? Contrast that with the very public lease extension talks with the A’s, which only grew more rancorous as they became more public – even though they were over a deal that cost less than $30 million total. No, it makes much more sense to keep quiet on a deal that is worth 100 times as much, right?

28 thoughts on “Coliseum City Draft EIR Review: Owning vs. Leasing

  1. Didn’t Selig and Wolff go to the media with the “done deal” narrative? You have to lay the blame at the feet of Wolff and Selig for making the lease issue a public event.

    • Of course, Elmano. Because we all know Oakland is utterly blameless in the A’s stadium mess.

    • When you look at the relatively minor set of concessions Oakland received, if you were Wolff or Selig you’d think the deal was done earlier too.

      • Marine Layer,

        I think the implication in your last paragraph was that Oakland official decided to deal with the A’s lease publicly, but now, are hiding their dealings concerning the Raiders situation. Was I interpreting your last paragraph incorrectly?

        Also, as far as banning me, I’m perfectly fine and at piece with that. In fact, it’s probably a good thing for me since I seem to lack the discipline to stay away from this site.

  2. Totally baffling why the EIR, would be worded that way, other than the tax free bonds, I thought the whole idea was to get the city and county out of the mix altogether, so these teams could own and operate third own venues?

  3. I hope leasing is never an option, if the A’s and (or), the Raiders ever build in new venues at the coliseum site. I just don’t see any good in it; I hope this language is there simply to secure potential tax free bonds. I realize politics is never too far away, but let’s get as far from it as possible, no city, no county, no JPA, no new governing board with a fancy new name, please no…

  4. Wait, they expect Wolff to build the stadium and then give it to them for him to then lease back from them? Is there a big bong being passed around at Oakland City Hall we’re not aware of?

    • @ Dan
      Yeah, I’m with you, perhaps there is a good or simple explanation, but it’s really kind of weird. I hope I’m not just overreacting.

      • Yes, strange. Privately financed, publicly owned stadiums? Even Levi’s Stadium, owned by the Santa Clara stadium authority, has some public financing for construction. I suppose if they’re publicly owned, the teams don’t have to pay property taxes, which could be pretty massive on structures this size.

      • @ pjk

        Thanks, I appreciate the explanation.

  5. The City strategy here seems very simple: throw together the basics of financing and general acreage/build-out, speak in vague generalities about who will be responsible for what, shoe-horn the A’s into the most undesirable position, get the Raiders more committed by promising tons of giveaways and then proclaim the whole thing a done deal – then blame the A’s when they don’t play ball and have them be the scapegoat when the particulars of Coliseum City fail to pencil out for anyone involved.

    The City gets to say they “put a viable option on the table” and the greedy A’s sank it.

  6. Wollf has commented that if the A’s build at the Coli site – they must own the land and develop it to their own tastes. They will 100% not lease from Colony Capital or Oakland. If Oakland officials expect the A’s to give in – good luck with that. The A’s will not build at the Coliseum site if they are required to lease.

    • @ duffer
      I think it’s just a lease in name only, as pjk brings up it may be to avoid the large taxes that would have to be paid otherwise, and as ML mentioned they would be able to purchase tax free bonds for the project, if they do it through Oakland and Alameda County.
      It sounds weird, but whatever works if it’s something Wolff believes is a benefit, if not then I would have a problem with it.

      • What does a “lease in name only” mean? Someone has to be responsible for the stadium’s upkeep, insurance, property taxes or the like. If the A’s are lease-bound, chances are they aren’t paying for all of those things. If they own the stadium it’s their responsibility, but they get to control every single penny that comes in too.

      • @ ML
        I’m really not sure, that’s why I said “I think it’s in name only”, then I went on to give the examples that you (tax free bonds), and pjk (tax brake on such a large projects) alluded to, as possible reasons why this might be the case, as you can see by my first two comments I’m as confused as anyone, and don’t profess to have a deep knowledge, as to why the EIR would call for a lease, when all this time I and many others were under the impression that the city and county would defer to Wolff, or whoever is going to be the lead developer.
        If it is indeed “in name only”, I’m sure they can work out the details of who is responsible for what, as long as they can take advantage, of whatever opportunities are afforded the A’s and (or) Raiders by agreeing to a lease, on land that they would purchase (or be given), for a ballpark they would build, if such significant advantages existent I’m sure Wolff knows all about them.

      • @Lakeshore/Neil – You’re right to be confused. The ballpark paragraph dictates that the ballpark will be “developed” by the A’s, yet it will be owned by the JPA in the end. How? Someone has some ‘splainin to do.

      • would definitely say, someone has some “splainin to do.”, big time.

      • ML, it could be something like what the Earthquakes are doing in San Jose. Where the city will own the stadium despite the fact Wolff paid for it. The Quakes then have a nominal lease on the place for a term of years that is escaping me right now that gives them full control but they are also are responsible for the stadium’s upkeep for 55 years.

        This was all done to avoid tax liabilities on the stadium.

      • Teams can’t completely avoid property taxes. The teams would still have to pay a possessory interest tax in lieu of property taxes. Mayor Chuck Reed has even said that he’s looking forward to seeing PIT.

      • I’m sure teams can’t avoid paying all taxes, but to whatever extent it will befit Wolff (A’s), or the Raiders, to have an agreement structured (worded), in such a way, where it appears the JPA or whatever governmental body has more control or outright ownership, then what they actually do, is something I would guess Wolff, or any other developer won’t mind.
        I would guess it would come down to control, not who looks like they have control (JPA or other governmental body), but who actually does, as long as Wolff is the person that’s controlling everything and every cent goes through him first, it really does not matter what it looks like, It only matters what it is like.
        As far as whom, is reasonable for what? I’m sure Wolff or any developer can work out those things in the details, but again its odd and I don’t pretend to understand exactly why it would be worded that way, I sure hope it’s for the reasons we have assumed, because if it’s not, someone really should be in a different line of work.

  7. I thought the Quakes did own their stadium, but the land is leased to them from SJ.. Same as Cisco @Diridon. City provides land, team builds stadium, owns it, city leases land to team to avoid prop taxes. At least this is my understanding. Hashtag confused …

    • Nope, city is going to own the stadium. Team will be providing the maintenance for 55 years and control the venue. That was the arrangement for the Earthquakes place from the beginning.

      • @ athletics68
        Sounds reasonable, well perhaps it doesn’t but I am sure they know what they are doing.

  8. I don’t have a problem with Oakland “giving everything away.” They should have some skin in the game.

    • I agree all parties should have some skin in the game.

    • Oakland’s setting itself up to give away $1 billion in benefits. The Raiders are pledging $200 million of their own money (not cash, from stadium revenue) and the NFL’s G-4 $200 million. I don’t see how that’s equitable – especially if the City isn’t offering similar terms to the A’s.

      • @ ML

        As you would know more then most (and certainly more than me), the majority of what is being said at the moment is rather pulmonary, if and when the A’s and ( or ) Raiders ever actually commit to any project at the coliseum site, it’s likely either or both teams will have to give more, and let’s hope the city and county give a bit less, although I can understand why anyone would be concerned that Oakland might give too much.

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