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.
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.