How to Turn Win-Win-Win into No-Win in a Few Short Hours

Well, that was a disaster.

Friday morning started off with great anticipation, as fans and the media eagerly awaited the City of Oakland’s version of a term sheet. As I wrote last week, the City and the A’s are working at cross purposes in trying to come to terms, as the A’s don’t want to stray too far from what they proposed while the City wants change enough of it for the City Council to pass it.

The term sheet with attachments dropped Friday morning at 9:15 AM. Reporters from all major Bay Area print and broadcast outlets swooped in to study it. Now keep in mind that the City is now dealing with two term sheets, the one proposed by the A’s during the spring and the version put together by City staff. While the A’s and City keep working to come to agreements on major deal points, the only big achievement so far is a consensus on a 25-year non-relocation clause, up from 20 proposed originally by the A’s.

The City’s term sheet entirely omits the offsite IFD (infrastructure financing district), called JLS though it doesn’t include Jack London Square proper. Instead the focus is on a single IFD at the 55-acre Howard Terminal site. From a passage standpoint this is the best move by the City, since the offsite IFD didn’t have broad support and likely wouldn’t withstand a vote of property owners to tax themselves. However, the A’s lobbied for the offsite IFD from the beginning and continue to push for it, turning the issue into a potential showstopper.

Casey Pratt from ABC7 and Brodie Brazil from NBC Sports California both interviewed A’s President Dave Kaval later in the day. Kaval didn’t budge much on the IFD stance, though Pratt caught Kaval not being forthcoming about the state of a potential short-term extension at the Coliseum. I started to feel uneasy at points in both interviews as I got the feeling that Pratt and Brazil were practically negotiating, but for what? The City has its own negotiating team, as do the A’s. Were they representing fans, who until now have been criminally underrepresented? Perhaps, though there are always dangers in turning this already public negotiation even more public. I understand wanting to give fans some nuggets of hope, but this isn’t the way to do it. It’s already a confusing mess, since if the resolution passes on Tuesday it will likely be rejected out of hand by the A’s. If it’s voted down, which the A’s prefer, the City will have to go back to the drawing board while the A’s will have license to look beyond Vegas in terms of relocation. Hell, they’ll have the freedom regardless of what happens on Tuesday. That Kaval already has a Vegas trip planned immediately after the vote indicates that Kaval and Fisher are anticipating either outcome.

What I find puzzling is that at some point in the past 3/6/12/18 months the City should have recognized the offsite IFD was a loser and proactively adjusted the plan accordingly, or at least pushed the applicant (the A’s) in that direction. Now City has a funding gap of $351.9 million and no clear path(s) to bridge it. Kaval mentioned in one of the previous public hearings that the A’s could get the ballpark built with only $22 million in infrastructure built prior to opening day. My guess is that $22 million would go only towards the fencing and other safety measures that would be required for minimal rail safety, though obviously that’s far short of the full grade separation wanted by Union Pacific and Amtrak.

Howard Terminal ballpark with lots of park and open space around it

The A’s chose to propose the ballpark with all of the virtually all of the needed infrastructure, especially the transit hub, located offsite. In doing so, they made the offsite part of the project much more expensive. The transit hub, which will cover a two-block stretch of 2nd Street, is likely to cost $50-100 million to implement. There are also the bridges to build for grade separation. If the A’s included the transit hub as part of the Howard Terminal IFD, they could’ve reduced the offsite cost while providing a reasons for the City to invest in the transit hub: efficiency and better packaging. The team probably didn’t go this route because they didn’t want a transit hub right next to their luxurious condo towers. The funny thing about that is that because they already conceded the western blocks of the site as a buffer against Schnitzer Steel, those blocks are set up well for office uses, parking, and a transit hub if they want it.

Site plan with the southwest corner cut out for the expanded turning basin

Even if the transit hub is relocated, the grade separations remain a priority, even moreso because of the refocused traffic. That $352 million cost doesn’t magically go away. As I leafed through the term sheet it struck me that the offsite infrastructure cost is about the same as the construction cost for PacBell/AT&T/Oracle Park (not adjusted for inflation). It never gets cheaper, and as the A’s keep dillydallying with sites and cities, the price will continue to rise especially if new requirements they didn’t anticipate 10 or 20 years ago are piled on.

Other cities will be talked about as the A’s and MLB grow more frustrated with Oakland. These days that’s par for the course. Just remember that there are a couple factors that will have sway that no candidate city can control. One is inflation, or the rising cost of construction. That’s partly explained by building more complex buildings than what used to be standard (see my visit to Globe Life Field as the most recent example). Places that need retractable roofs and comprehensive HVAC systems can add a cool $300-400 million off the top. That’s an equalizer for Oakland. The other factor is written into the MLB’s constitution.

As a team in one of the largest markets, the A’s agreed to be taken off revenue sharing indefinitely. When that occurred I complained that Oakland, while in the powerhouse Bay Area, is functionally more of a mid-market team like San Diego or team in the Midwest due to its inherent disadvantages in media and location. Regardless, the A’s have to play by big boy rules, so they get no quarter, no revenue sharing. That means that any move to a new market (Portland, Las Vegas, Vancouver) must be contemplated not only as a new market, but also a market that will require the A’s to go on revenue sharing due to yes, inherent disadvantages in media and location or market size. If MLB’s philosophy is to get franchises off revenue sharing as a necessity (call it small market welfare), moving the A’s to a much smaller market contradicts that notion. Ironically, crippling the A’s revenue picture a few years ago may be the one thing that saves the A’s for Oakland in the end. If only they can get a ballpark built.

P.S. – The Oakland Coliseum is about 16 acres in size. It’s huge. The Howard Terminal looks very close, maybe 14 acres. The packaging could be a lot better for 30,000 seats.

18 thoughts on “How to Turn Win-Win-Win into No-Win in a Few Short Hours

  1. Disaster indeed. Obviously not the topic at hand (but mentioned): it always puzzled me why MLB would take the A’s off of revenue sharing while confining them to Oakland. If they had allowed them to relocate to $CCo/$J or made the entire Bay Area shared, then that would’ve made complete sense. Under the current arrangement, no sense whatsoever!! Again, MLB seems OK with screwing one of their franchises when remedies exist to make them money makers/revenue contributors.?

    • antonio2020,

      MLB will never give revenue sharing to a region (media market) with two teams. Yankees/Mets, White Sox/Cubs, Angels/ Dodgers, and A’s/Giants. The theory being that over the long run when the A’s move to Vegas, the Northern California A’s fans will switch from NBC Sports California to NBC Sports Bay Area and start watching the Giants.

      MLB gives revenue sharing to teams in “small” media markets so that the market isn’t lost to MLB. If the Royals moved to Brooklyn, NY, the Royals may make more money but MLB as a whole would lose revenue. The Yankees and the Mets would lose revenue and many in the Midwest would no longer subscribe to a regional sports network. If the A’s move to Las Vegas, whatever money was lost at NBC Sports California will be more than made up by increased subscriptions to the southern Nevada regional sports network in Nevada.

      I am guessing that the A’s and MLB saw Howard Terminal, unlike the Coliseum, as a site that could support a team without revenue sharing. Whether Howard Terminal would have been that lucrative…topic for another blog.

      • Giants fan??!?!? LOL… no. If it weren’t for their greed and the A’s cheapness (aka greed) we’d already be enjoying A’s games in San Jose.

        I’ve already given up on the A’s. The owners are cheap greedy bullies who don’t give a R’s A about their fans.

        IF I continued to follow MLB after all of this I will likely become a Dodger’s fan just to spite the Giants.

      • I’m with your dp! A’s should’ve been playing in $J long ago. As for myself, I’m more of a soccer/futbol/rugby union guy now a days. But if I had to choose a MLB team I’m going with the Padres, not only to spite giants but because I might be living down there in a few years (Chula Vista).

  2. ML,

    I know that property tax is divided between the state, the county, and the city.

    1. Would the HT and JLS IFDs be limited to the city portion of the property tax?
    2. Are the IFDs proposed by the A’s 45 years in length?
    3. If the HT and JLS IFDs were to include the county and state portions of the property tax could the length of the IFDs be reduced?

    To be honest, things look glum. I would imagine that after July 20 the issues will be where are the A’s moving and how will they make it happen. (The difference between Oakland and Las Vegas, is that Las Vegas would have voted yes on the original proposal over a year ago and July 20 would have been the ground breaking ceremony.)

  3. Why is all this so complicated??????????

  4. This project might not be so complicated if it was just about building a new baseball park.

    One reason it is so complicated is because the A’s owner John Fisher is proposing to build a new neighborhood in a cash-strapped city on a Superfund site with other people’s money.

    It’s a land use issue. Baseball is the sideshow.

  5. As time goes on I become less encouraged. I recently (4 years ago) moved back to California and was looking forward to watching the Raiders again. Then they moved. Not only did I give up on the Raiders, but football in general. What will I do if the A’s leave?

    • I’m not sure there’s much you can do. Perhaps going on being an A’s, Raiders, & Warriors fan in spite of the fact that they pulled up stakes and moved away!!! I’ll feel bad if the A’s move away! How ’bout people, will ya still be East Bay fans even though the sports teams moved away??? I will.

      • Probably be an A’s fan forever. I hope when I visit the new Las Vegas ballpark in my Oakland A’s gear, I will receive the same level of respect that is given to NY Giant’s gear at Oracle Park and Brooklyn Dodger’s gear at Chavez Ravine.

      • I gave up on the Giant’s when they traded away Juan Marichal Fortunately we got a new team to root for about then. I spent 20 years near Houston and never stopped following them.

  6. my take: Fisher is wanting to move to LV, Portland or some other places. For whatever reasons, the paying public don’t seem to want to support the A’s. Fisher thinks he might be able to get butts in seats somewhere else.

  7. I am in the distinct minority here, and I acknowledge the very real possibility that I am dead wrong, but the last few days make me believe the HT project is more likely to happen than to not happen. We have a reasonably specific development plan and we now have concrete offer and counter-offer on that plan by the team and the City and an identifiable funding gap of ~$350M that I believe is surmountable given the overall value of the project to the team and City and the nature of the improvements (shared infrastructure) that the missing $350M would buy if funded. We also now know that at least a slim majority of the key political people within the City want to get this done. That was the critical wildcard that concerned me a week ago. The intensity of the focus on these term sheets by the City and the team suggests to me that there is will on both sides, at least right now. Negotiating 101 teaches us that the A’s have nothing to gain by publicly budging an inch at this moment in time, and I expect several weeks of tough talk. If I had to bet $1,000 of my own money today on the ultimate outcome, I’d bet that a compromise will be reached on the $350M by the end of summer, perhaps by trimming some aspects of the project to reduce size of the gap, and then increased contributions in some form by both the team (most of it) and the City (some of it). I believe the odds of success would increase if the two sides could avoid negotiating in public, but that’s not how Oakland works, so we will all get to be spectators to the type of project finance negotiation that typically happens in closed conference rooms and lawyer emails.

    • Ricky24,

      I wish I could share your optimism. Unfortunately, I think we have reached the point where no one can afford to budge. $850M is the rock bottom cost for infrastructure necessary for a project of this scope. (Many would argue that more than $850M of infrastructure is needed.

      1. MLB/A’s cannot afford to budge. If future teams are expected to pay $2B for a franchise, all stadium construction costs, and most to all related infrastructure costs…MLB will remain a league of 30 teams forever.
      2. Oakland politicians cannot afford to budge: The majority of their constituents could care less if the A’s move to Las Vegas. (Most of the constituents believe capitalism evil, profit corrupt, and themselves deserving of housing, health care, food, clothing, and other miscellaneous items free of charge. All the aforementioned items should be financed by the corrupt profits of evil capitalists.

      The only way Howard Terminal moves forward and the A’s have the possibility of remaining in Oakland is if the Oakland City Council votes yes on the original request for proposal set for by the A’s with only minor modifications such as:

      1. 25 – 30 year non-relocation agreement.
      2. Reduction of years in which the incremental taxing districts exists (currently 45 years), if revenue collected is greater than estimated or if additional contributions are obtained form the county, state, or federal governments.

      Keep being optimistic. The world needs more optimists.

  8. Bottom line: I hope somehow someway, the A’s get their Howard Terminal ballpark. If HT blows up in the A’s face, I hope there are various other crooks and nannies in Oakland. Oakland is full of crooks and nannies! The Oakland City Council will vouch for that!!!

  9. You sound like Elvis Presley!!!

  10. Dear Oakland City Council: Please vote YES on the HT ballpark!!! After all, do we really want the A’s to move to Las Vegas??? The A’s tried to go to San Jose but the Giants wouldn’t let them. I surely hope and pray that the A’s can remain in Oaktown!!! Thank You!!! Matt

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