Damage Control

Floyd Kephart spent much of the week trying to rescue the badly damaged image of Coliseum City by giving interviews on three radio shows, while also assailing Matthew Artz, the BANG reporter who got access to part of the proposal given to Oakland/Alameda County. It was all flailing and little substance for Kephart, who until the PR disaster had mostly kept his message under control.

Kephart appeared first on Fred Roggin’s show in LA, then with Scott & BR on a podcast for the Mighty 1090 in San Diego, and finally with Damon Bruce on The Game.

Among the notes I gathered from Kephart’s interviews:

  • None of the money from the public land sale will pay off the existing Coliseum debt. If that’s the case, what is paying off the debt?
  • Some of the stadium debt would be repaid from project taxes. We know that different kinds of taxes would be used for infrastructure, though that was for a much larger project. Somehow the infrastructure would be downsized, yet the project would still have 4,000 housing units, a hotel, and large commercial square footage. How does that work?
  • Kephart believes that the proposal excerpt was leaked to kill the deal. Probably true, especially if others would rather start moving forward with an A’s deal. Though in all honesty isn’t the leak simply accelerating the process?
  • When pressed, Kephart refused to talk about buying a 20% stake in the Raiders, citing the confidentiality agreement. Smart on his part, since he’ll have to continue to work with the private equity groups he needs to provide that confidentiality. Everyone else, from municipalities to sports interests, can be thrown under the bus.
  • The point of buying the 20% stake was that private equity was not going to make money on investing directly in the stadium, so having a stake in the team was the only way to get access to the stadium’s (really the team’s) net revenue. In the same breath, Kephart said that New City doesn’t have a “burning desire” to buy into the Raiders.
  • According to Kephart and a number of Raider fans, 81 baseball games can’t possibly compare to 10 football games.

The pretzel logic used to argue that the NFL would be preferred is mindbogglingly awful. Sure, the NFL is the highest profile sport with the greatest cachet – at least in the US. It has bigger ratings and bigger national media coverage. Those factors, however, have absolutely nothing to do with bottom line arguments. The City and County are looking for the option(s) that provide the greatest economic impact. There is no way that hosting the NFL can provide this, with the possible exception of hosting the Super Bowl every year. We know that’s not going to happen, since the Raiders stadium will be too small, Levi’s Stadium already exists as host stadium in the Bay Area, and LA will have its own West Coast option soon.

Not including playoff games, the Raiders will bring in 550,000 per season (55k x 10 games). In a new ballpark, the A’s are projected to get around 2.2 million in attendance per season, 4x the football total. The important thing to remember is that the revenue streams (tickets, concessions, parking) will by-and-large remain with the team. The City and County are set up to recognize very little of gameday revenue. What, then, are football stadium backers relying upon to boost revenue? Out-of-towners. Fans of the Raiders and visiting teams will fly into Oakland, rent cars at OAK, stay at Oakland hotels, eat at Oakland restaurants. Sounds like a reasonable claim. What economic impact does that make?

The NBTA did a 2009 study on the top 50 cities in the US and tax impacts from visitors. It was focused on business travelers, but the basic tenets are the same. The study calculated hotel and car rental taxes, along with sales taxes from meals in each target city. Care was taken to separate downtown (center city) locations from airport locations, since they can have different dynamics.

visitor-taxes

Each city is ranked based on combined taxes, which mostly range from $25-35 per day. Bay Area cities are in the middle of the pack statistically. Oakland comes out at $32.45 per visitor, per day. Now let’s take those 550,000 football fans, and let’s estimate that 10% of them are from out of town and fly in, stay for a night, and eat locally.

55,000 fans x $35 per day (adjusting for inflation) = $19,250,000 per year

55,000 fans x $35 per day (adjusting for inflation) = $1,925,000 per year

Less than $20 $2 million in economic impact? That’s good, but remember that the ongoing debt and operating subsidy for the Coliseum and Raiders is $22 million per year. How is less than $2 million per year supposed to work, especially if the debt isn’t being addressed?

(Ed. – Commenter Victor pointed out my bad math. Corrected it’s even an even worse deal.)

Kephart wondered aloud why so many people had problems with the deal as proposed, claiming that it worked for everyone. If the Raiders are paying the full freight on the stadium and the City/County aren’t getting the old debt addressed, it’s not working for anyone except New City. Frankly, he shouldn’t be surprised at the cold reception.

P.S. – Now let’s apply the same economic impact to baseball. Far fewer tourists visit ballparks except during the summer, so it stands to reason that a smaller percentage of attendance could be attributed to baseball fans from out of town. If only 2.5% of fans, or 600-700 per game, fit that tourist description, that’s still 56,250 total visitors, more than the football tally. And while that football total is maxed out, the ballpark still has headroom of 500,000 or more fans per year, which means more tourists. Plus there are 2 million locals and casual fans to boost economic activity per baseball season, compared to 500k football fans.

 

51 thoughts on “Damage Control

  1. It was a terrible proposal when it was leaked early, and it would’ve been a terrible proposal 20 days later if it hadn’t been leaked. All the phony outrage being projected at Artz doesn’t change that.

  2. You’re right Jacob Jackson.

  3. Just a hunch, but the fact that the major terms of the deal leaked within 72 hours of delivery might mean that the City or County, or both, consider it a non-starter. A better use of FK’s time might be planning a graceful exit, rather than trashing a reporter for doing his job.

  4. The Mercury News has an article today questioning the supposed $900 million price tag for the Raiders stadium, noting the 49ers stadium was supposed to cost $937 million and ended up costing $1.3 billion. Who pays for the cost overruns?… Bottom Line: Kephart has no magic solution to get a stadium done in Oakland sans public funds anymore than the previous developers who looked at and took a pass on Coliseum City.

  5. BTW, Matthew Artz hit a home run with his story. Congratulations to him. The more Kephart bashes him, the more of an award candidate the story becomes.

    • A confidentiality agreement was broken and Artz and his “source” of the leak are D Bags and the source of the leak is a snake in the grass.

  6. Instead of Kephart whining about a reporter reporting, if he’s going to complain about a leak he should be focused on the people the proposal went to. Someone leaked it from there.

    And yes, a bad proposal is a bad proposal whether it gets leaked early or not. If his plan was to somehow control a narrative for three weeks or something like that…well, good luck when the main details are still crap.

  7. I think Damon Bruce had the most relevant and concise summary of the heart of the issue… something to this effect: “cash-poor owners in cash-poor towns can’t build stadiums.”

    Very well said. Props to him for saying it directly to FK during the interview.

    • Bruce also said the A’s should be focusing on Howard Termimal by te water instead of the CC site and they should have been there for the past two years instead of Fisher and Wolff playing games in Oakland, Fremont, SJ and now kissing Oaklands ass again. The Howard Terminal ballpark near the water with new bars, restaurants and lounges and a hotel and some housing around it would $$$$$$.

      • Someone is still flogging the Howard Terminal dead horse as a site for an A’s ballpark? Guess we shouldn’t be surprised.

  8. Devil’s advocate – it seems too obvious here. How do we know Wolff is going to build with Raiders gone? Why not just say, “hey, I can or can’t build here. Yes or no way.” Me thinks East bay partisans would back that. All day long. I get the leverage part but we are getting down to the wire here. Why not make a case?

    • We don’t. He’s said before he won’t build unless he has 100% site control of the whole project and he wants tons of surface parking.

      I certainly don’t expect any movement from him until the SCOTUS decides one way or the other on San Jose vs Commissioner of MLB — or MLB caves when they hear SCOTUS is going to hear the case.

      • Exactly. We also don’t know IF Fsiher and Wolff get their ballpark…will they finally start spending the money to keep good talent and pay FA’s??

    • …or until Manfred grows a pair and tells the Giants to go pound sand.

    • Nothing is guaranteed, but the way things are going at this point, there’s more to suggest the A’s will have a new stadium in Oakland compared to the Raiders, even if Wolff has remained non-committal.

      The Raiders are actively courting SoCal, Kephart’s proposal is subpar to say the least, and Wolff has the ability to build without the public being required to fund a sizable part of it, if at all.

      Still doesn’t mean it will happen, just that the A’s are in a potentially better situation than the Raiders.

    • Down to the wire for whom? For the NFL & Raiders, yes. For Coliseum City, yes. For MLB & the A’s, absolutely not.

      • Well, down to the wire in terms of the Raiders. I guess I’m thinking with this FK proposal being so bad, why not slam the door and say “we can do this much, much better.” From the A’s standpoint that is. Otherwise this thing will keep dragging along. Defined sometimes becomes better than poker.

    • And, like it or not, Wolff hasn’t made a case yet because he hasn’t had to. That’s the part a lot of people hate, since it also makes him look like he’s just playing games and isn’t really serious (and for all we know maybe that will end up true as pertains to Oakland), but what is the point of him unnecessarily setting up a situation where he may be essentially bidding against himself?

      The Raiders are more on the clock than the A’s are, and if the Raiders fail the ball is squarely in Wolff’s hands. We know he wants control over his own project, and who wouldn’t if they had the ability to get that? Why would he partner up with the Raiders/Kephart/etc? Why should he? He has no obligation to help the Raiders stay in Oakland, and the same goes for the Raiders related to the A’s.

      • I am not questioning Wolff’s “obligation,” because he doesn’t have one. I am merely asking with the door open with this FK proposal, why not jump all over it?

        Ramifications? None. He can simply say that the Raiders deal is a joke, and he will make more of an impact in such and such a way. He’s not.

        Therefore, I am simply saying it’s a mystery to me. I am not a developer so perhaps his experience is leading him this way. If he really wants the land all to himself, this would be a great opportunity to tell Oakland all about it. After all, if it is that bad of a proposal from FK, you don’t need much leverage.

        OTOH, if he still sees SJ as an opportunity via the SC, then that would explain things. If that is so, if I was LW, I would be advising MD on how to remain at the Coli. Unless he sees all 3 teams leaving for whatever reason.

        I think the end result is that the Raiders leaving puts pressure on LW to make a decision. Like be careful what you wish for. He doesn’t want Oakland and he will find a way to SJ even with the Raiders gone.

      • Djhip – Setting aside your speculations about LW’s intentions–from the City’s perspective, the sooner they can redevelop the Coliseum area to produce new, higher revenue streams, the better. Whether this involves sports teams or new housing/offices is immaterial. If LW decides to leave, what does it matter when he decides to do it? The City cannot control his preferences or sense of economic self-interest — beyond the lame calls for him to sell the team. Better to know now, and come up with an alternative plan for the area, than to keep the status quo of a rapidly deteriorating facility.

      • @Djhip – The reason why Wolff would not jump all over it, is that he has absolutely nothing to gain by doing so.

        The city has given first dibs to Coliseum City. If Wolff submits a proposal now, he’s competing against the ENA as well as New City. Because the city is obligated to fully evaluate the New City proposal (they’re not obligated to evaluate anything Wolff presents), any proposal from Wolff would have to overpay to kick New City to the curb.

        If New City and Oakland somehow reach a deal, because of the ENA, Oakland almost for sure goes with New City even if Wolff submits something. If they don’t reach a deal, he’s now in the driver’s seat and hasn’t had to show his cards to the city.

        Considering that the New City deal gives first dibs to the Raiders, Oakland has always favored the Raiders and Davis supposedly really wants to stay in Oakland, I think the better question is why haven’t we heard anything from Mark Davis, or is he too busy in LA?

      • Yeah….a “genius” move by Wolff to wait. He has had no choice but to squat on his lease. Not a genius move by any stretch.

        BTW….NFL still owns MLB! Get a look at the TV ratings.

      • Wolff doesn’t want Kephart involved because he wants the money to himself with kickbacks going to Miley etc…

  9. August 21st is the deal or no deal date right?

    • City/County set a 20-day evaluation period after they received the first set of deliverables from Kephart on 6/21. They could choose to kill the deal as early as next weekend, or keep going with the final deadline on 8/21. Problem with the latter is that some activity is expected during the next NFL owners meetings on 8/11, so Coliseum City may need to show more earlier.

      • If Davis wants to sell a percentage of the team as part of deal here….that is on him. Just as long as no new public funds are used. BTW…do people really think Wolff will really not want any public dollars used? Get out of here with that. Fisher/Wolff and SJ will wait for SC to rule in their favor.

  10. Wow thx ML great analysis even more reason to keep NFL football in East Bay.

    • Exactly! NFL owns MLB! Keeping NFL here in East Bay without using new public tax dollars is just fine. Have A’s go to Howard Terminal (where they should be) or in San Jose!

  11. TTV – my sentiments exactly. I would just add that Oakland should just let the A’s go and try to keep the Raiders. Wolff is going to find a way to leave no matter what and the east bay will have no teams. Make the deal with NFL. If not, Oakland will have no pro teams in 5 years. Then plan for a Coli revitalization for commerce only. Forget the A’s because they’re gone for sure.

    • Personally, I’d rather not the City pay the Raiders way. And I’m not convinced Wolff will leave no matter what.

      • Meant to include that Oakland should accommodate the Raiders as long as doing so doesn’t require public funds. Otherwise, let them go too.

  12. I think by the year 2020, all three teams will be gone. I hate to say it, but I think that the writing on the wall is clear. The Raiders will be gone by 2016, the A’s and Warriors by 2020 or sooner.

    Sorry.

  13. The only lesson so far, which is a good one, is not to give the raiders any money. By the way, Libby on Comcast for an interview tomorrow

    • Totally agree there. I would add though that the same should be said about the Warriors and the A’s (even though Oakland hasn’t given the A’s anything in close to 50 years now).

  14. “55,000 fans x $35 per day (adjusting for inflation) = $19,250,000 per year”

    Actually, your math is wrong. It’s closer to two million ($1,925,000 not $19,250,000)

    • You know, the first time I ran the numbers I got the lower number. Subsequent times the extra zero got in there, not sure how. Anyway that’s even worse. I’ll correct in the post shortly.

      • Oh, that’s not as good and really does not justify using public funds. Only winning can turn this around and hopefully we have found a quarterback to at least winning divisions. Even though I can’t stand the A’s ownership, they are justifiably better for the community as long as they don’t stiff us.

      • There is one thing to remember though, $2 million over 20 years is $40 million adjusted for inflation probably about $50 million. So if stadiums rebuild every 20 years it is a start but only a drop in the bucket for repayment of loans.

  15. Prove where the Raiders stated they needed public funds? What dont you people get? As far as Lew Wolff–he should just go away. Mr talk down to his host city for a decade can go jump in a lake, oh and brilliant move by him moving the A’s minor league team from Sac to the Midwest…go from a hub of 85 miles away in a charming beautiful 12k ballpark, and then SF promptly moves in–what a dope Wolff is. Wolff tried to build ballpark villages before and now is against it and wants nothing but parking lot around a new ballpark at the CC site? Wolff talks out of both sides of his mouth!
    Lew Wolff should be forced to sell the team! If he doesn’t want to be a part of Coliseum City then move forward with a new Raiders stadia. Baseball plays second fiddle to the NFL anyways.

  16. Oh… to the the people who keep talking down to the City of Oakland (inlcuding Wolff) Oakland is a Special Sports City. Look at the Franchises, there now 13 Championchips between them!

    • The Oakland A’s won in ’72, ’73, ’74, ’89
      The Oakland Raiders won in ’76, ’80
      The Golden State Warriors won in ’75, ’15

      13 championships?

  17. Hey Wolff fans/followers who are on Wolffs payroll who post here.

    Stop making Wolff the good guy when he hates the Oakland/Coliseum City and has been actively trying to leave the area for years to the South Bay. In addition, Wolff and GM Billy Beane also decided to dismantle the team with the best record in baseball (A’s) in August 2014, which became the last team in the AL to make the playoffs and fade badly thereafter. Obviously, there is another agenda and what “genius” decides to alienate his fanbase in Oakalnd for years by talking down about the city and saying a waterfront ballpark Howard termina;/JLS will bnotwork for them> Fisher and Wolff need to go!

  18. “Damage Control” like what Wolff has practiced for the last 3 years?

    In a July 2010 public letter to fans, Wolff explained the importance of a ballpark village to financing a new facility and all of a sudden he is against a stadia/ballpark village at the CC site saying he needs a lot of open parking space? So why is Wolff now against a ballpark village, when he was still touting them l five years ago? Perhaps it’s because he knows all too well that a new stadium on the Coliseum site can’t be financed without one….and so if he blocks it, then no new stadiums will get built, and he’ll once again be able to revive his true desire — leaving the East Bay.

  19. As most of the regular commenters hear may know, I’m about as big of an Oakland cheerleader (not politicians), as you can get. But, man I just listened to the mayor of Oakland, over at CSN Bay Area. Wow, she really doesn’t seem to be looking at this situation objectively at all. She is still talking about all three teams, which is fine I guess since they are all still in Oakland, but can we talk about a realistic back plan for one or two of the team’s?

    • What do you expect her to say? The city is going through a public review process on the Coliseum City plan, after which it will be up to the city council (and board of supervisors) to make a decision. The mayor just can’t go on TV and directly answer those questions until they have all of the info and go through the process and make a public decision. The city needs to decide on the CC plan on it’s merits, and if that plan gets rejected, then they can focus on the A’s. Re: the Warriors, she said that she no control over their decision to move to SF, but would talk to Lacob if he gets snubbed there. Ratto knew every well that she couldn’t answer those questions directly, but she still handled them pretty well, I thought.

      • @ Jerry

        I respect your opinion, I just think at this point any mayor would answer the questions in a more pointed and realistic manner.
        Sorry she was off the mark.(IMHO)
        And again, there are not many people that want to see one, two, or all three teams stay in Oakland than myself.

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