Let’s Take Stock

It’s the early morning of July 8. In less than two weeks, the City of Oakland is scheduled to vote on a term sheet, which despite it being a non-binding document, could play a major role in determining whether the Oakland A’s remain the Oakland A’s. Will it be the term sheet submitted by the A’s? A term sheet written by City staff? Or a compromise version that incorporates key principles from both parties? Or will the parties reassess this mess of a situation, and punt?

Towards the end of today’s study session, Council Member Dan Kalb, who chairs the Community and Economic Development Committee, offered his assessment of how Howard Terminal has progressed since the beginning of the year:

Tonight I’m hearing from the optimists that this all smacks of negotiation in one form or another. Looking at it through Kalb’s (and the other City Council members’) prism, the view is much more chaotic. We are now to believe that the A’s provided their term sheet in January with every intention of getting it approved with minimal changes. Then, having not received much feedback early this year, the A’s publicly released the term sheet in April. City staff, with its divergent goal of getting a term sheet in place that would get enough votes for the Council to approve it – a markedly different goal from the A’s take-it-or-leave-it proposal – scrambled to get that passable term sheet in place. As of now it’s still not finalized. Once it is, if it is passed, it will go back to the A’s for their approval or markup. Or the A’s could find points to compromise and approve it, or dismiss it altogether.

That’s a wide range of outcomes to have at this artificially late stage of the game. There are major deal points that have not been agreed upon yet, chiefly the issues of affordable housing within Howard Terminal and the fate of the “offsite” IFD encompassing much of the area north of Howard Terminal and going west to Mandela Parkway and east all the way to Oak Street. I tweeted out a snap poll to gauge which was most important among the four main issues I identified.

The affordable housing question seems like the most cut-and-dried issue. Simply put, any major development in Oakland requires a percentage of it to be considered affordable housing. The target is 15%, though because Howard Terminal is under the Oakland Army Base redevelopment rules, the target at HT is only 8%. That equates to 240 affordable homes in the final buildout. A lowered goal should be achievable, right? Not for the A’s, who feel they’re already providing enough via tax increment from the development that could fund affordable housing elsewhere. That argument worked well 20 years ago when California’s housing crisis was less stark. Now it’s downright unreasonable to expect that a developer could go this route especially with the historically poor yields of finished affordable housing throughout the Bay Area. 

To illustrate, let’s posit that a newer one-bedroom apartment at HT costs $2,300/month. Under one measure, affordable housing could mean that apartment costs a qualified renter $1,500/month, plus an $800 monthly subsidy paid by an affordable housing fund. That subsidy translates to roughly $10,000 per year, which multiplied by 240 units equals $2.4 million per year. I recognize I’m oversimplifying the problem with this illustration because I’m not tackling levels of affordability, but it should serve the discussion well. No matter how you slice it, that’s a hefty expenditure to be paid by tax increment, a developer, or a renter.

Next up, let’s look at the non-relocation clause. The City wants a term of at least 45 years, which would keep the A’s in Oakland for the next generation or two. The A’s are promising only 20 years, which they say is in keeping with other markets where, as Dave Kaval pointed out, the ballpark is often publicly financed (meaning the City is putting skin in the game). If the City isn’t directly subsidizing the ballpark, the A’s have less reason to take a longer than standard contract. From a practical standpoint, it’s rare to see relocation occur when the first lease term ends, mostly because a team has spent enough time and resources cultivating its home fanbase that it seems wasteful to pursue another so quickly. That generally holds true in baseball, where the last relocation was in 1972 (Washington Senators-Texas Rangers). In other sports it’s far more common, whether you’re talking about the Raiders or hockey in Atlanta. Usually whatever complaints a team has about its venue or market can be addressed by upgrading the facility or building elsewhere in the same market. The A’s sudden scorched earth campaign has sort of laid waste to Oakland, leaving Howard Terminal as the only desirable spot in the East Bay market.

The other major issue concerned the two IFDs or infrastructure financing districts. The A’s prefer two, one at the 55-acre Howard Terminal site and the offsite JLS site. City prefers a single IFD which would essentially be Howard Terminal with few surrounding parcels. City thinks the single IFD structure would be easier to get buy-in from Alameda County, which as you might have heard, isn’t exactly jumping for joy at the prospect. For their part, the A’s continue to say that they need both IFDs to ensure there’s enough tax increment revenue to cover all of the infrastructure and other costs. The problem with this is that without the JLS IFD there’s a major funding gap. As @hyphy_republic noted, City has identified Port-related sources that could backfill that need. Those would have to be studied thoroughly for their efficacy. As I started processing this detail, it occurred to me how ironic it is for the City go to the Port for funding while alienating Port stakeholders who are among the harshest critics of the proposal.

Lastly, there’s a question about the amount of community benefits in the package. The concern is that most of the money raised by tax increment usually goes straight to hard infrastructure in a straight line, or perhaps affordable housing. Other community programs may be more likely to be sacrificed in the event of a budget crunch or just plain old-fashioned value engineering.

Remaining milestones assuming it gets that far: Tell me how the City of Oakland is supposed to make a final approval of this project in September as Dave Kaval suggests

Look, I have no idea if the term sheet will pass in less than two weeks. It might, and then in September the County could choose not to take part, wrecking the project. Again, someone could punt on 7/20 and hope MLB doesn’t accelerate relocation talks. All I know is that this project has now come up in three separate major public hearings in the last two months: the Oakland Planning Commission, the Alameda County Board of Supervisors, and now the Oakland City Council. In every venue there was serious tension and rancor between the governing body and the applicant (the A’s). You’re not going to just wipe it away by calling it negotiation. This is much deeper than mere negotiation. The City and the A’s appear to be at cross purposes, and if you throw the County into the mix, all three are. This is what I worried about when Howard Terminal was first proposed and when it came back to life. It’s an already complex set of circumstances made all the more complicated by the current regional economy. Maybe there is a breakthrough on the horizon. Judging from CM Kalb’s reaction, he was expecting a breakthrough sometime ago. It ended up being a mirage.

P.S. – The City has officially opened up discussions on its half of the Coliseum complex. I’ll save that discussion for another day.

P.P.S. – You read that right earlier and I almost forgot to mention it. During the hearding, the A’s filed a suit against Schnitzer Steel alleging a Clean Air Act violation. Now that’s some multitasking.

16 thoughts on “Let’s Take Stock

  1. Are we not counting the Expos move as a relocation?

    • Because of the weird franchise swap that occurred in 2004, it wasn’t a straight relocation. The Expos were purchased by MLB, bounced around the continent, then were sold to Ted Lerner more than a year after they moved to DC.

  2. Why is all this so complicated???????????? No wonder the Oakland A’s are tempted to move to Las Vegas!!!

    • Because the A’s are trying to do something wildly complicated and, really, pretty dumb. And they’re expecting a poor city to kick in $800B. Whereas they could instead do something extremely simple and straightforward (rebuild at their current site).

      • Some people have advocated the refurbishing of the Oakland Alameda County Coliseum!!! One is going to have a major-league challenge talking MLB into refurbishing the aging ballpark off 66th Avenue!!! Lots of luck!!! One is going to need it!!! If somehow by some major miracle it keeps the A’s in Oakland, then so be it!!! Again, lots of luck!!!

      • The A’s and MLB have pretty much given up on Oakland after the recent experience with recalcitrant Oakland politicians. The $800 million (not billion) in additional property tax will still be lost to the city and county since there won’t be any major development in JLS/HT in the next 45 years.

        While the Coliseum has freeway, BART, and AMTRAK access, the A’s and MLB see the site as less than ideal:
        1. Site has history of poor attendance
        2. Many projects in the Coliseum redevelopment zone have failed (Walmart, Pak n’ Sav, Coliseum village)
        3. Topics like side shows, record breaking year in shootings, gentrification, affordable housing, and livable wages.

      • Couple thoughts:

        1. Oops yes of course it’s million not billion. I think I was thinking “a billion dollars” rounding up and brain farted the M vs B

        2. To be clear, I’m NOT talking about refurbishing the toil -er – coliseum. There’s plenty of room on that site to build a new park, since there’s an arena to demo and they won’t need as much parking.

        3. Well all the Oakland pathologies you list are true enough, but it’s all the same for the Coliseum site and HT, so that’s a discussion of whether to stay in Oakland at all, not where.

  3. Here’s my WILD (crazy) take on the A’s wanting only a 20-year non-relocation clause: IF (and a huge IF at that!) everything fell into place at HT, the A’s could “value engineer” the hell out of a new HT ballpark (much like they did in SJ with their cheapskate, unfinished “erector set” Pay Pal Park), all while making gobs of money on the real estate aspect of the project. Then, in the 2040’s, the A’s could be “free” to explore much greener pastures of the ENTIRE Bay Area (the Giants territorial rights by then should be happily in the grave along with Baer and Manfred), including once again $an Jo$e; fan base already in place ready to take BART to ballgames in $J! The HT ballpark site could then be utilized to make MORE money for the A’s by selling off the parcel(s) for more real estate development. 20-year non-relocation clause almost like an insurance policy if things weren’t working out in The O, and with HT being extremely problematic to get in/out of, that would be a likely possibility.

    • The San Francisco Giants only had a 25 year nonrelation agreement in place when they opened their new park…So, it is probable in line with such agreements, perhaps the A’s give 5 or 10 more years on that but that’s probable all that is about.

  4. Reading this tells me a few things:

    -Oakland is not willing to put any skin in the game and wants all the benefits as usual.
    -A’s have put something on the table way too complex for Oakland to understand or grasp in it’s entirety.
    -For all these steps to be completed above would take a miracle. Oakland has proven time and time again they will not put a dime into something that in reality would revitalize a run down area of their city….
    -Kaval’s point on 20 versus 45 years is excellent, if the city/county will not put a dime in, why should they not make concessions?

    Conclusion: This is how bad business is done, you have Kaval who is brilliant but on the other hand you have Oakland, who is any thing but brilliant. Plus there are way too many moving parts……no way this gets this done.

    Viva Las Vegas!

  5. Let’s see…
    1. City of Oakland rejects Uptown Site (walking distance to two BART stations)
    2. City of Oakland rejects Laney College (walking distance to BART)
    3. City of Oakland rejects Howard Terminal

    As they say in baseball…three strikes and you’re out.

    • 1. That was regrettable, I think that would’ve been great. I think Mayor Moonbeam did a great job, but that is one thing I really think he dropped the ball on.

      2. Oakland didn’t reject Laney College, Laney College rejected Laney College. Complain about that as you will, it wasn’t a City of Oakland thing.

      3. We’ll see!

  6. WAY off topic ML, but regarding news on your Twitter thread: I’m LOVING the Las Vegas Festival Grounds site on LV Blvd/Sahara for an A’s ballpark! Pretty much centered between The (main) Strip and Downtown LV and the LV monorail is only a block away. Brilliant!

    • Las Vegas A’s??? Unfortunately, it sure looks that way if the Oakland City Council votes no on HT!!!

      • Even if they vote yes, still doesn’t mean the HT project is 100% a go. I’d expect Vegas to be alive and well, regardless of what happens on July 20th.

  7. I think the big issue is the final cost to the public. We have the $855M for infrastructure and $400M community fund all paid for by future taxes. But, what if more infrastructure is needed like grade separating trains? What if additional community benefits are needed? In the Google San Jose Campus deal, the infrastructure + community fund was around $650M and there were an additional $550M needed to really appease the opposition. I think the real danger to this deal comes from these additional costs that most surely will be there. In the Google case, they are paying the $1.2B as the cost of buying the entitlements. Google is paying $1.2B + future taxes. For HT, future taxes have to cover everything. Sure, you can argue that the ballpark is generating these future tax revenues, if you assume that JLS will never expand on its own. Even so, there’s also a real chance that the total cost exceeds the future tax revenues. Right not the cost to the public is $1.255B but, you could easily see it ballooning to over $2B. What if this happens and the future tax revenue is less than projected? In the end, Oakland has to assess the fiscal risk (not just assume the most optimistic case will happen) and decide whether they can stomach that risk.

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