A long day and night of talking and grandstanding is over. Alameda County’s Board of Supervisors approved the Ronnie Lott-Fortress Investment Group stadium deal framework around lunchtime. It’s a term sheet, so it has some basic details worked out, but not some extremely important ones, such as the approval of the Raiders and owner Mark Davis. Oakland’s City Council approved the same term sheet late Tuesday night. For what it’s worth, the AlCo BoS vote was 3-1-1. City Council voted 7-0-1. The voted and the completion of the term sheet were needed this week in time for the NFL’s owners meetings, which are taking place in Irving, TX. Updates on stadium plans for the Raiders and Chargers are expected.
I figured I should set the table for my readers and followers, so I tweeted the following shortly after the Council vote:
There may be other votes, including an extension of the ENA if the Raiders are resistant to the proposal, or it changes in major or fundamental ways. As for the cryptic acronyms, drop them in the search box at the top right of this page. Then read.
Let’s take a look at how this framework works.
Lott-Fortress estimate the stadium’s cost to be $1.3 billion for a 55,000 open-air NFL-compliant stadium. The capacity is lower than the average NFL venue by design; it’s what Mark Davis requested. Fans seem to be comfortable with the capacity as well, as that’s nearly the same capacity as the Coliseum’s football configurations over the last several seasons. Curiously, there haven’t been many questions about how the cost ballooned from $700 million to $1.3 billion in a matter of a few years. Some of that can be explained by the new estimate’s inclusion of infrastructure spending, an item often omitted due to it being a table stakes requirement for cities to cover. Oakland and Alameda County are also throwing in the land via lease or sale. The land has an appraised value of $150 million. Combine that with the $200 million in infrastructure and the total public contribution is projected to be $350 million.
City and County are both touting the claim that the $2oo million in bonds that will have to be issued to cover the infrastructure piece won’t affect either party’s general fund. That’s possible because half of the infrastructure will be paid by taxes backing an EIFD (Enhanced Infrastructure Financing District) bond issue, the rest backed by private bonds. This is essentially the new, limited form of redevelopment that Governor Jerry Brown supported after he dismantled legacy redevelopment agencies in 2011. Restrictions include the inability to use the funds for anything other than actual infrastructure (roads, utilities), so cities can’t raise funds directly for stadium construction. Raised money is also restricted from affecting the general fund, though it’s unclear what would happen if an EIFD defaults on its bonds. It will take some education by pols to explain to constituents how Oakland will be kept safe, especially given the debacle that was Mount Davis.
$81 million in debt remains on the stadium, draining city and county coffers every year. Another $100 million remains on Oracle Arena, which will need to be paid off even if/when the Warriors leave for San Francisco. City/County have not factored the debt into the term sheet, so they will continue to pay for it now and into the future. City has been negotiating assuming the debt from the County for years. The Lott-Fortress proposal shifted that a bit, so that the County remains half-ownership of the land but assumes no other risk.
Paying the debt off early would allow Oakland to demolish the existing Coliseum, which sits on a key, central portion of the Coliseum complex.
I don’t know nearly enough about Fortress to comment on them, so I’ll refrain from doing that here. Lott and Fortress say they don’t need an ownership stake to be successful. I can’t see how they can get any kind of good return on a $400 million investment from mostly ancillary revenues. There are no charity cases in the NFL.
Does this move the needle for the league? Not according to stadium/relocation veep Eric Grubman, who threw a bucket of cold water on the proceedings today. Grubman even called the Lott-Fortress proposal a ‘carbon copy’ of last year’s failed Coliseum City plan, which was widely ridiculed in league circles.
Why would Grubman and owners think this way? Because, as I noted previously, what Oakland is offering is table stakes. They aren’t pledging any money towards the construction. They (nor Lott-Fortress) have convinced the Raiders to sign on, though that’s because Davis is committed to Las Vegas, at least until the relocation vote next January or March. Vegas aside, the NFL usually requires a much larger investment from interested cities. The limited risk and exposure that Oakland and Alameda touted in the term sheet is actually a negative for the NFL, whose position is that interested cities prove their worthiness by spending (How else would cities get into such bad stadium deals?). Pro football has kept Oakland in the game in hopes of the City showing the NFL more love. The combination of Oakland’s intransigence and Davis’s recalcitrance makes for a proposal that Grubman characterizes as not a deal at all.
If, as expected, the NFL laughs off the proposal, what will Oakland do next? Will Mayor Libby Schaaf bite the bullet and walk away from the table, or will she rally for Oakland to put together an improved plan that actually includes more public money? At least two Council members (Annie Campbell Washington and Abel Guillen) mentioned that they had many calls and emails asking them to oppose the deal. That sentiment will only grow if more public money is put on the line and the claims of insulation from the general fund become invalid. Vegas has plenty of issues of its own surrounding funding and the potential for Sheldon Adelson to become involved. Deal terms are stronger there thanks to a pledge of $750 million from Clark County.
The Oakland and San Diego questions are not just tests for the incumbent cities. They’re also tests of the NFL itself. In the league insatiable thirst for revenue, it has demanded king’s ransoms from communities. How much is it willing to upset existing fanbases in Roger Goodell’s never ending quest for the almighty dollar? How much does the NFL value regular fans? If history is any guide, it doesn’t look good for them.
P.S. – The funniest and most surprising moment of the proceedings came during the County Board meeting, when noted Raiders ‘superfan’ Dr. Death spoke during the public comments period. After his plea for support, Supervisor Keith Carson asked Death if he was singling Carson out as a ‘No’ vote and spreading rumors. Death didn’t deny this, and Carson blew up at him, yelling that Death didn’t attempt to call Carson’s office and only assumed Carson was a No. Death left, his manhood squashed. He was right, though, Carson did provide the one No vote. Carson later apologized, perhaps after Death left to return to his home in the Sacramento area. If only I had video of the moment…
P.P.S. – There were no new renderings presented.
P.P.P.S. – From SBJ’s Daniel Kaplan:
Saw something to the effect of this on twitter last night, and that is I am more convinced now that Vegas will be put off (not rejected) and Oakland plan will die. Meaning the raiders will be at the coliseum just as MLB did to the A’s. One thing that has driven me nuts about fans for both the Raiders and A’s, is that they always thought no San Jose, or no Vegas, meant a new park in Oakland. You would think that fans would have learned their lesson from watching MLB operate.
If this does progress through each vote, the city council would be the one to squash this, as it seems constituents will really start raising question and start asking, “what do we get”. More than ever, (see the election results) people have had it with being left behind. If anyone has seen an Oakland council meeting, people that show up to speak have no problem raising hell.
If there is anything I have learned from watching all of this play out of almost 20 years, it’s that trying to predict what is going to come next is a losing game, until there is a shovel int he ground… and then, if it is is San Diego, even then you can’t be sure 🙂
Agreed, If Grubman and the NFL don’t like Oakland’s proposal then no way Vegas gets approved as it is essentially the same thing but here is the difference.
The dome in Vegas pushes the stadium up big time in cost hence the public 750M. Even with this they still need Sheldon Anderson to pitch in 650M more himself.
No one knows what he wants, does he own the stadium? If so, do the Raiders pay him rent? Or does he want partial ownership of the team?
The same thing goes for Fortress, no one understands what is in it for them much less the NFL.
If the NFL has to pick one, Fortress wins hands down. Keeps the team in Oakland, keeps Sheldon Anderson out of the fray, but I say this plays out over time like you are predicting.
@ML I think I’m interpreting that ESPN article a little different than you are. I took Grubman’s statement as meaning if Oakland could put what the NFL considers a viable proposal on the table, they’d keep the team regardless of what Vegas does. I also took his comments as meaning, he’s pessimistic that a viable proposal will come out of the Lott-Oakland negotiations, but not ruling out the possibility altogether.
No doubt having a third party investor does make getting a deal harder, as it’s another party that needs to get a share of the pie. But Vegas faces the same problem.
That’s why I included the whole quote. Oakland has not as yet provided a proposal for the NFL to consider, never mind Vegas for the moment. Oakland is competing against itself in the NFL’s eyes. It is failing, and has failed every time it’s had a chance to prove itself.
So Sid’s assessment doesn’t reflect what the NFL is thinking. At all.
Several owners and league officials dismissed the latest plan to keep the Raiders in Oakland, an effort spearheaded by Hall of Fame safety Ronnie Lott. Though the Oakland City Council and Alameda County Board of Supervisors approved a term sheet with the developers, the league sees that as a non-starter.
“We have not made great progress in Oakland and San Diego,” NFL Commissioner Roger Goodell said. “There is not a stadium proposal on the table that we think addresses the long-term issues of the clubs and the communities. So we need to continue to work at it.”
@Bartelby: As usual, you are 100% wrong. The Fortress Group proposal has the Raiders backing some of the bonds with their revenue (one could see why the NFL doesn’t want that) The Vegas plan is much simpler and doesn’t require Raider’s revenue backing bonds to finance the stadium. The Raiders will finance $500 mil,. The Sheldon Adelson group $650 mil., and the Las Vegas hotel taxes $750 mil. – the Vegas financing appears to be much more solid.
Even if Adelson backs out
(don’t see that happening, Davis/Adelson have reportedly agreed on a stadium revenue split that *does not* require a piece of the team … unlike the “we’ll negotiate that after Davis signs on” from Fortress)
there are other investors waiting outside the door:
Majestic Realty (left the group because Adelson wanted to do it alone), Steve Wynn, MGM, the Fertita Brothers, Goldman Sachs …
There is funding in Vegas that requires very little of the Raiders other than showing up and handing over the standard (NFL G4 loan + PSL/Luxury/Club seating revenue) contribution.
The NFL wants the land and development decisions in the hands of the Raiders, and not Fortress or any other investors.
With the votes to approve the Lott/Fortress plan, Oakland/Alameda County just started a 60-day ENA with Fortress that precludes them from dealing directly with the team or the NFL.
That 60-day period would expire within days of the Superbowl. One day after that, should the Raiders make it that far, would be when the Raiders formally submit their application to move. (If they don’t, they can apply as soon as their season is over).
The city and county would literally have less than a business week to negotiate with Davis/NFL, put together a plan, and submit it against the Vegas plan.
…and that’s the *best* case for the city to retain the Raiders.
I don’t think they were counting on have a deal to compete with Vegas, they were counting on the league delaying a vote and having another year to negotiate with the Raiders. It’s that whole checkers v chess thing, though not sure who is playing which.
“@Bartelby: As usual, you are 100% wrong.”
If I’m wrong. your post sure doesn’t prove it.
“The Fortress Group proposal has the Raiders backing some of the bonds with their revenue (one could see why the NFL doesn’t want that) The Vegas plan is much simpler and doesn’t require Raider’s revenue backing bonds to finance the stadium.”
Reading comprehension fail. $100 million of the bonds are to be backed by so-called “but-for” taxes on the stadium and $100 million by “but-for” taxes on the ancillary development. Tax money is hardly Raider revenue.
It is true that the $150 million in land value is to be repaid by some portion of project revenue to be negotiated between the parties. But that’s no different than the negotiations going on right now between the Raiders and Adelson about how he gets his $650 million back.
“The Raiders will finance $500 mil,. The Sheldon Adelson group $650 mil., and the Las Vegas hotel taxes $750 mil. – the Vegas financing appears to be much more solid.”
The Oakland proposal and Vegas proposal have two things in common: (1) neither is a definitive proposal yet, as no firm agreements exist between the Raiders, Adelson, the Lott Group or any of the government entities; and (2) both involve a substantial investment from a third-party who’s going to need to make that money back. From this standpoint, the Oakland proposal would seem to have an advantage in that the third-party investment is less ($400 million to Lott Group and $150 million to City of Oakland vs. $650 million to Adelson plus potentially $300 – 500 million in relocation fee), meaning a smaller revenue share will be needed to pay it back.
CCCTL Where are you seeing that Adelson and Davis have agreed on a revenue split? As of an hour ago, the Las Vegas Review-Journal was reporting that they “are working very hard to finalize a complicated deal.” http://www.reviewjournal.com/business/stadium/raiders-adelson-family-begin-fine-tuning-stadium-development-details
@bartelby: The Fortress Group plan has the Raiders backing the city of Oakland infrastructure costs with team revenue (the NFL wants no part of that plan) Also Davis doesn’t need the Fortress Group to finance a local stadium, the Raiders evidently can finance $600 mil. ( a substantial figure) My guess is that the Niners are basically the San Jose Niners anyhow and don’t need the Raiders. Also SF officials may be turned of because of the clashes between Raider/Niner fans at Candlestick Park – SF has experienced far more fan violence incidents than Oakland has)
@duffer “The Fortress Group plan has the Raiders backing the city of Oakland infrastructure costs with team revenue”
You show me where the Term Sheet says anything of the sort. What it specifically says is this:
“The New Stadium will cost approximately $1.3 billion (including site improvements/infrastructure). The parties anticipate that the New Stadium and other Project components will likely be financed as
• The City will invest $200 million to construct infrastructure, site preparation and other related expenses that are part of the scope of the Project but are not hard construction costs for the New Stadium (the “City Investment”), as follows:
• A $100 million privately-placed bond secured by the direct City taxes generated by the New Stadium. The Lott Group will lead a private placement of the bond.
• A $100 million EIFD bond or other financing secured by City “but for” taxes, i.e., City tax revenue generated as a result of development of the Project. The City will endeavor to bond against this tax revenue as early as possible, but the City will not bond in any manner that puts the City’s General Purpose Fund at risk. Therefore, the parties anticipate the probable need for the Lott Group or other private party to provide or secure bridge financing, on terms to be negotiated, for all or a portion of this amount until an EIFD bond is able to be issued.
• Neither the Lott Group, the Raiders, nor the Project will be responsible for the current Coliseum bond debt, but the parties acknowledge that the existing Coliseum bond debt must be addressed prior to conveyance of the Coliseum Site.”
just a guess: the nfl does not like or want Fortress.
No, they don’t.
They simply prefer public money to having a third-party involved who needs to make money on the deal and therefore reduces the profit potential. To whatever extent they don’t like Fortress, my guess is they like Adelson even less. In each case the third-party is a necessary evil if they want to get a stadium deal done.
Can someone explain why the Rays would dissent in ratifying the new CBA, and the A’s would not? The new CBA was passed with a 29-1 vote last night. Stu Sternberg was the lone dissenter, citing that the new CBA doesn’t do enough to curb the widening economic gap between the haves and have-nots in MLB. Very true, Stu!
And yet the A’s get screwed harder in this new CBA than any single team, right? They’ve been denied the ability to relocate within their market. And yet they also are now being phased completely out of revenue sharing over the next four years. Why on earth were the A’s ok with this?
I am curious why people here in this blog thinks the NFL powers-that-be dislike Sheldon Adelson. He’s willing to commit $650M to a new stadium, in a new market, and his influence is a huge factor in why Nevada pols pushed through $750M in taxes to help fund a Vegas stadium. I think the NFL views Adelson as their golden goose…an old one who won’t be there forever.
Because putting a team in Vegas is one thing, but getting in bed with Adelson gives gambling interests influence over an NFL team in a big, big, way, whether or not he takes an ownership stake. It’s entirely possible NFL owners may talk themselves into the concept of a team in Vegas but not be able to get past giving the gambling industry that much sway.
It’s still puzzling why SF or San Jose isn’t interested in the Raiders.. If Davis is willing to invest $600 mil. – those municipalities (unlike Oakland, one would believe), could afford financing $300 mil. towards a $900 mil. 55K capacity stadium. The only upside to a Las Vegas move is potential huge corporate (gambling and hotel) sponsorship through luxury box rental and ticket sales. One would believe the bay area offers a larger, more loyal fanbase than Las Vegas would. Also, the Yorks have basically been dorks running the Niners (with the exception of the Harbaugh era) the Niners have been a suckfest and appear to be going nowhere fast because of the Yorks’ leadership. The Niners likely won’t be giving the Raiders much competition for fan support in the foreseeable future – that’s another advantage to staying locally.
“The only upside to a Las Vegas move is potential huge corporate (gambling and hotel) sponsorship through luxury box rental and ticket sales.”
No casino or hotel has made any such commitment yet. Logic and a rudimentary understanding of Vegas-economics tells us this is a very risky bet. In any event, the Bay Area is more than capable of selling out a stadium’s worth of luxury boxes and club seats.
Another report that Adelson and Davis have not yet reached a deal. http://profootballtalk.nbcsports.com/2016/12/12/mark-davis-sheldon-adelson-having-a-hard-time-striking-a-deal/
Las Vegas problematic as an NFL market; NFL favors Oakland over Las Vegas
Also, Davis is in the drivers’ seat. Oakland officials appear ok with continuing short term leases with the team. They’re drawing respectable crowds – likely more that they would in Las Vegas. Davis can bide time and wait for new stadium terms to his liking. It also appears that Adelson is interested in pursuing acquiring a share of the Raiders. (that’s how Kroenke took over the Rams, buying 30% of the Rams stock originally ,, purchasing more Rams stock and getting 40% of that team’s ownership. Finally the Rams owners needed to pay a inheritance tax because they inherited the Rams and sold Kroenke enough stock to own the team – Davis would likely seek to avoid a scenario such as that and hopefully stay in Oakland.