Can anyone guess what this is?
You’ll find out Tuesday afternoon.
Author Archives: Marine Layer
New HOV lanes, BART-to-SJ good news for A’s fans
If you’re one of the 80% of A’s fans who drives to games, you just might get a quicker trip to the Coliseum in the future, thanks to a flurry of new road projects that Caltrans is starting this year.
According to Mr. Roadshow, the Bay Area is getting $5 billion to be spread among 19 projects. While none are in San Francisco, San Mateo, and Marin Counties, the bulk of the work (12 projects) will be in Alameda and Santa Clara Counties. Key among them are the extensions of carpool lanes along the Nimitz:
- I-880 from Hegenberger Road in Oakland to Davis Street in San Leandro ($108 million)
- I-880 from CA-237 in Milpitas to US-101 in San Jose ($31.5 million)
The South Bay project is less expensive than the East Bay project because most of the groundwork was already done for the former as part of a previous 880 widening project a decade ago. Combine these two with ongoing improvements to the Nimitz and improved interchanges at CA-92 and CA-262/Mission Blvd., and it should eventually be much smoother sailing in each direction for carpoolers, who are the usual profile for those who drive to games in Oakland.
If the A’s move south, the carpool lanes, along with at least 4 lanes in each direction the entire way between Oakland and San Jose, will help funnel gameday traffic. However, it’s not a complete, direct solution. Once a driver coming south along 880 hits the 101 interchange, the freeway will revert to not having carpool lanes, which could create congestion there and along surface streets as they try to make it the last two miles. A good way to go might be the Gish/10th Street exit on 880 South just before 101, as it’s a quick detour to downtown and SJSU.
The big ticket item is $2.3 billion for the 10-mile BART extension from Warm Springs (its own separate project) to Berryessa in North San Jose. Again, it’s not a direct trip to Cisco Field, but it’s a lot closer than Fremont and the only way to get to downtown San Jose is to first build to Berryessa.
Not related to Caltrans funding is one more big mass transit project, Caltrain electrification. The long-awaited conversion from diesel to electric trains will create an opportunity for more frequent service, which will drive down the operating cost per trip and help keep Caltrain solvent. To achieve this, Caltrain cut a deal with the state’s troubled high speed rail authority to devote $700 million towards the electrification project. To support the more frequent service and greater number of riders, the San Jose, Millbrae, and San Francisco stations will be expanded. The $1.5 billion project is expected to be completed by 2020. HSR is teetering right now politically, so it’s not clear if that project will ever be built. This money shift appears to be an acknowledgement by the authority that it may need to start in the most heavily impact areas first, before it commits to the full intra-state backbone. The move could backfire in the long run, as it may convince stakeholders and citizens that high speed rail would be best if it terminated in San Jose, not San Francisco.
Moorad stepping down means Padres are for sale
Remember those groups that were rumored to be interested in buying the A’s, even though the A’s aren’t actually for sale? They may have a more realistic target now that Jeff Moorad has stepped down from his Padres CEO post. Although Moorad will stay on as a Vice Chairman, the new role appears to be little more than a placeholder as still-majority owner John Moores figures out what to do next.
The circumstances for Moorad’s departure are shrouded in mystery. It’s possible that, after all this time, enough owners had a grudge against the former agent that there was no way he’d get the gig. If so, that’s a cruel joke to play on the man, considering they and Commissioner Selig set in motion the “layaway” plan in 2009 that allowed Moorad to believe he’d buy the team in the first place. Another reason for getting rid of Moorad may be the allegation that he was looking to use upfront from the new Fox Sports San Diego-Padres broadcast rights deal to pay down debt, Frank McCourt-style.
At Gaslamp Ball, there’s a post with the notion that Moorad wanted to accelerate the sale so that Moores couldn’t get a taste of the new TV money, and when Moores found out how much that was, he suddenly wasn’t in such a hurry to sell the team. The new revenue stream should help Moores net a higher sale price than the $530 million negotiated in 2009. $600 million, anyone?
For now it appears that Moores is not in a hurry to sell the team. He’s got a nice new revenue stream, better profitability for the team and for himself, and he’s clear of his ugly divorce. He’ll meet with the minority partners, including Bob Piccinini, and tell them what his plans are, whether it’s to encourage them to bring in a new managing partner candidate or to sell their stakes back to him so that he can resell the team whole later. It’s clear that he’s done running a team, so a sale can be expected sooner rather than later.
That provides an opening for the many bidders who’ve lost out out on the Dodgers. The bidding list in LA is down to three, with no bid lower than $1.4 billion. The Dodgers will be a $300+ million annual revenue team once their next TV deal is made, whereas the Padres should be a $200 million revenue team with their new deal. Even at $600 million, the Padres look like a far better deal than the Dodgers, unless a bidder absolutely has to have the Dodgers or the team’s brand cachet. One of the parties supposedly interested in the A’s was an LA financier involved in the Dodger bidding, so it seems natural for him to turn his attention two hours south instead. (If you’re wondering, I don’t know who the second interested party is – yet.)
The Padres aren’t the only team up for sale. A rumor emerged last month that Peter Angelos was looking to offload the Orioles. Angelos is in the catbird seat there, as he has the $360 million guaranteed sale price for the franchise and ownership of MASN, the area’s regional sports network that carries both the O’s and Nats. He can sell either or both. If he sells only the team he should get $500 million. If he sells both he could get up to $1 billion. The team has denied the rumor.
Anything is potentially for sale for the right price, including any baseball team. It’s easy to say you’re interested in a team or to enter bidding. Getting a sale consummated? With the incredible amounts of money at stake, it’s a lot easier said than done.
Rosenthal calls “stAy” crowd flat-earthers
Another week, another media morsel. If it’s not the Giants leaking information out or Larry Baer defending the Giants’ territorial rights claims, it’s a national sports writer pleading Lew Wolff’s case or Lew himself answering questions. To me, it feels more like slow-motion tennis than baseball, and while I like tennis, this has gotten repetitive and tiresome.
This time it’s Fox Sports’ Ken Rosenthal again with a plan to resolve the A’s-Giants impasse. Rosenthal thinks that the Giants should be guaranteed a minimum revenue amount against potential losses incurred from an A’s-to-San Jose move. He cites the O’s-Nats deal as an example. However, while Peter Angelos got a $360 million sale price guarantee and $75 million to start up MASN, I don’t believe that he got an annual revenue guarantee ($130 million) as Rosenthal suggests. There’s a good deal of conflicting information on this. It’s sort of a moot point because the O’s cleared the supposed minimum in the first year of the agreement, 2005, and haven’t looked back. Forbes’ estimated revenue for 2011 was $179 million.
Guaranteeing revenue for the Giants is a different matter. According to Forbes, the Giants haven’t been below the $200 million revenue mark in three years. Last year the Giants were in the top ten at $230 million, whereas the average revenue was $211 million (median: $201 million). I have to think that MLB, in its desperation to get some kind of deal done, has floated a revenue guarantee number to the Giants, to which Baer has balked. I’ve argued frequently for some kind of compensation plan that includes revenue, but a revenue guarantee of $230 million gives me pause, so I imagine it gives Bud Selig and the other owners pause as well. Then again, Wolff is projecting a bump from $150-160 million to $230 million for the A’s, so for baseball the result should be a net positive.
Rosenthal also talked to Tulane law professor Gabe Feldman about the prospects of an offensive antitrust lawsuit against baseball. Feldman characterized such a suit’s chances as very slim, a “real longshot”. Also ready with a quote was San Jose City Councilman and future mayoral hopeful Sam Liccardo, who may see all of this baseball posturing end up as part of his election platform if the saga continues at its current pace.
The sucker punch is saved for the end:
Only a few hardy souls — a latter-day version of the flat-earth society — believe the Athletics still can make it in Oakland. San Jose is the largest city in the Bay Area. A new ballpark in the city not only would transform the Athletics’ business model, but baseball’s as well.
There will be some Oakland defenders who say things like, “If you tell a lie long enough people believe it”. No, that’s not it. Sometimes a spade is a spade. If it wasn’t the case, Oakland wouldn’t be pinning its urban revival hopes on a pie-in-the-sky plan like Coliseum City. If it wasn’t truthful, Signature wouldn’t be trying to offload O29 on any Tom, Dick, or Harry who might be interested in land. It’s telling that one of the chief pro-Oakland arguments is that baseball doesn’t have the wherewithal to change T-rights on Wolff’s behalf. That’s all well and good, but how is that confidence-inspiring for Oakland?
Baer reaffirms T-rights claim
On a panel at the 2012 IMG World Congress of Sports, Giants CEO/President Larry Baer continued to flog the idea that the Giants own Santa Clara County. Via Sports Business Journal:
During a panel discussion, he cited a “territorial grant” that allows the Giants to market to Santa Clara County. Baer said the Giants franchise depends on revenue derived from there, with 35 to 45 percent of its market coming from San Mateo and Santa Clara counties.
I thought the number was 50%? Now it’s 35-45%. Two weeks ago it was 43% from Santa Clara County alone. No wonder we can’t keep these numbers straight. Baer can’t either.
Baer went on to cite how the Giants got it done with good ole’ sweat and gumption. He conveniently forgets one tiny little detail: When it comes to having billionaires ready to coalesce and save the franchise, Oakland is no San Francisco. The two groups that reportedly want to buy the A’s? Not from Oakland. Bob Piccinini? Not from Oakland. If the team is going to be saved in Oakland, someone will have to step up from Oakland. It’s one thing to talk about civic pride, another to have the means to act on it.
Forbes has Giants twice as valuable as A’s
Forbes came out with their annual overview of The Business of Baseball, and if you’ve followed this site or other sports economics sites much you won’t be surprised by the results. The A’s, stuck in limbo, have the lowest valuation of any of the 30 MLB franchises at $321 million. The figure hasn’t quite caught up with Forbes’ pre-downturn, 2008 valuation of $323 million (which may have factored in a future in Fremont). Despite this, the number is up 5% over last year. Some other numbers and extrapolations:
- The Yankees are worth the most at $1.85 billion, followed by the Dodgers at $1.4 billion (based on current franchise bids).
- The Angels ($656 million) and Giants ($643 million) follow the Dodgers as most valuable on the West Coast.
- Aggregate value of all franchises is $18.1 billion. The A’s account for only 1.77% of this total currently.
- A’s revenue is estimated at $160 million, roughly in line with last year’s amount. This includes revenue sharing, if you’re asking. (I assume that Lew Wolff may quibble with the figure a bit.)
- Player expenses for the A’s are listed at $81 million, slightly more than the 50% “salary cap” that we frequently discuss here.
- The blurb on the A’s page questions what team president Michael Crowley does. Besides saying no, I wonder that myself sometimes.
A closer look at how the valuations for the Giants and A’s breaks down yields some additional insight.
Stadium and brand make up most of the difference
The big takeaway is that for the first time, the Giants are considered twice as valuable as the A’s. It’s reflective of the constraints the A’s are under, as well as the team’s lack of promotion within the market(s). To their credit, the A’s have a much more permanent media presence than they had in the last 20 years. It’s still a long climb out of the cellar. The team’s stadium value would probably be double in a sold out new ballpark, and the brand value could see a similar increase. Sport would see a drop due to less reliance on revenue sharing. Market’s a tougher question. Clearly, that number could double if the A’s were allowed to build in San Jose, but it should also go up appreciably if they built something new in Oakland. Some back-of-the-napkin math has me estimating the team’s value in a new ballpark in Oakland at $400 million, San Jose at $450 million.
Dominoes are falling
One by one, the various ownership crises facing baseball and Commissioner Bud Selig are being resolved. Yesterday, the Mets settled with a trustee in the ongoing Madoff suit for at most $162 million, probably less when the final bill comes due. Compared to the threat of a $1 billion judgement against the team, it’s a bargain. They’ll get even more of a reprieve by not having to make any payments for four years.
The Mets managed to pay off $65 million in short-term debt, thanks to a $240 million selloff of minority shares in the team (8 x $30 million). While Sandy Alderson will have to run the team on the lean side for at least this season, prospects for a rebound are decent.
On the other coast, MLB and Frank McCourt have narrowed down the lister of bidders for the Dodgers to four groups. MLB’s favorite appears to be the group headed by Magic Johnson and former Nats president Stan Kasten, largely because the bid is local. McCourt’s favorite may be the bid by New York hedge fund magnate Steven Cohen. The Cohen bid boost may have gotten a boost thanks to Patrick Soon-Shiong, an LA billionaire whose sudden presence as a minority partner gives Cohen some local bonafides. Unlike the Johnson-Kasten syndicate bid, Cohen was going solo (until Soon-Shiong) and is ready to post an incredible $900 million cash as part of his $1.4 billion (not highest) bid. Ironically, Soon-Shiong picked up Magic’s minority share of the Lakers last year. Magic vacated that share and his executive position within the organization to get his ducks lined up for the Dodgers bid.
The other two bids are by Rams owner Stan Kroenke and a joint bid by possibly outgoing Grizzlies owner Michael Heisley and LA financier Tony Ressler, who initially headed separate bids. By the terms of McCourt’s divorce settlement, he must pick a winning bidder and close the sale by April 30 so that he can make a massive $131 million payment to his ex-wife, Jamie McCourt.
All of this movement should put the A’s situation truly on the front burner, press release wars and gossip aside. That doesn’t mean that Selig will be able to come to a mutually beneficial agreement for the A’s and Giants – for some time my argument has been that this is the obstacle, not gathering votes or self-serving agendas. With the next owners meetings coming in mid-May, perhaps this is the chance to truly address the issue once and for all. Selig deserves as much blame for allowing the Mets and Dodgers to fester as he gets credit for saving them from the financial disaster, but from both quantitative and qualitative measure both teams are worth more (and deserve more attention) than the A’s and Giants’ squabble. Let’s hope, then, that he’ll be able to muster enough resources to resolve the A’s problems once and for all, instead of playing the perennial game of kick-the-can with the green and gold. Seven years is long enough.
Ellison in talks to buy Memphis Grizzlies
Oracle CEO and billionaire Larry Ellison has been getting some sun down in Indian Wells, where one of his sports properties, the BNP Paribas Open tennis tournament, has been going on for the last two weeks. That hasn’t stopped him from accelerating his quest for an NBA franchise. The basketball fan almost bought the New Orleans Hornets with the possible intent to move the franchise to San Jose. After those overtures were denied by the league, he’s back to buy another Southern team, the Memphis Grizzlies. CSN Bay Area’s Matt Steinmetz reports that Ellison has a “handshake agreement” with current Grizzlies owner Michael Heisley to acquire the franchise.
The Grizzlies are locked into a lease at FedEx Forum through at least 2017, so there’s no chance of Ellison being able to relocate the franchise immediately (if he wanted to). The Merc notes that Heisley’s asking price is $350 million, a $40+ million premium over the franchise’s most recent Forbes valuation. That figure is also in line with the amount the NBA is looking to get for the Hornets, who are expected to be sold to a consortium headed by LA businessman Raj Bhathal sometime in the next few weeks.
Both Heisley and Ellison were expected to be bidders on the Dodgers. Only Heisley submitted a bid. Frequently criticized for being cheap in his tenure as Grizzlies owner, Heisley managed to end up on the short list of Dodger bidders, making it past the first two rounds after he teamed up with Tony Ressler.
The $350 million sales price appears to be the key for Ellison, as he bid lower than Joe Lacob and Peter Guber when the Warriors were put up for sale. That’s the same amount he bid on the Hornets in late 2010. Still, the franchise is in Memphis and is not going to move for a while if at all. With his interest tied up in the ongoing America’s Cup defense and running a NASDAQ-100/S&P 500 company, you have to wonder if Ellison would end up being something of an absentee owner. An hour jet ride to Palm Desert once a year is a lot more manageable than frequent four-hour trips to Memphis. Despite that “hardship” it’s clear that Ellison wants in on owning an NBA franchise, which is more than I can say for his supposed interest in baseball.
Ownership Swap
Note: This is another “what if” scenario for this week. The conjecture within is not based on any recent news or reports.
Several teams throughout MLB are in some form of transition, whether it’s a venue (Marlins) or a sale (Padres, Dodgers, Astros). Some of these teams are taking far longer than they initially expected to get their transitions completed, creating a bit of heartache for their constituent ownership groups and business partners.
In January I wrote about the problems facing Jeff Moorad in his quest to gain control of the Padres. As reported last week, Moorad withdrew his application to become the “control person” in order for the team’s new TV deal with Fox Sports San Diego to go through. Moorad’s deal to buy the team from John Moores was set to take as much as five years on a sort of layaway plan, though Moorad has already assumed operation of the team. He also has clearly been looking to accelerate the process, yet hasn’t made any headway within The Lodge for several months. The control person issue hasn’t even gone to a vote, unlike the uncontentious decision made in when Larry Baer was approved by MLB four months ago. Maury Brown thinks that in addition to financial concerns, there may be others among the other owners who have it in for Moorad, including Jerry Reinsdorf and Moorad’s former partner, Ken Kendrick of the Diamondbacks.
With the troubles that Moorad’s facing in San Diego and Lew Wolff is dealing with in Oakland, could the time be coming for the two to switch places? Moorad’s group, which famously includes Save Mart CEO and one-time A’s bidder Bob Piccinini, would be able to get in the club with a lower price ($100+ million less) in Oakland than in San Diego. The group, which is reportedly full of Modesto-area interests, would be able to see a locally-based team. There still the fundamental issue of what to do in terms of a venue, but I’ll get to that later.
For Wolff and John Fisher, it would be an acknowledgement of defeat in terms of trying to build a venue. However, Wolff and his family would at least be able to continue to be owners of a franchise, and a Wolff-Fisher ownership group would have more capital on hand to pass muster with the Elders at The Lodge. Wolff himself is based in LA, so a move to the San Diego franchise would also be relatively local. Future revenue streams are far more stable and predictable for the Padres than they are for the A’s at this point, so aside from the fact that there’s no dream legacy-piece stadium to build (except maybe for AAA), it’s a good investment.
There’s a $100 million difference between the A’s and Padres valuations (latter is higher), which would have to be accounted for. Politically, a franchise swap could be the catalyst Oakland needs to get its Coliseum City/Victory Court/980 Park/Flavor-of-the-week stadium plan moving. It would allow Piccinini the opportunity to prove that he could keep the team in Oakland. It’s possible that Andy Dolich, who Piccinini teamed with last time and recently lost out in the Dodgers bidding process, could come on with a minority share. And if Oakland can’t get its act together or if the cost to stay in Oakland were too great, the group would be well-positioned to move the team to Sacramento, which is closer and a more hassle-free drive from Modesto (and further away from the Giants, who would rent the Mayflower trucks for the move).
Obviously, swapping ownership groups is not nearly as simple as I’ve described. It’s only been done once in modern baseball history when John Henry took over the Red Sox while Jeff Loria sold the Expos and bought the Marlins. The important thing is that unlike the T-rights dispute, there is a real precedent for this. Whether you think this is realistic or farfetched is probably dependent on your view of current ownership and your opinion of Oakland or San Jose.
I look forward to the comments on this one. Fire away.
A way to Sacramento
A year ago, Giants CEO Larry Baer hinted that it would be good for the A’s to look somewhere outside the Bay Area for a new ballpark, if a deal for an East Bay park couldn’t be worked out. I wrote three years ago that an expansion to Raley Field would cost at least $250 million. It would be hard for the A’s to make a large contribution towards the expansion project because Sacramento’s government town status makes the corporate revenue pickings slim. If the A’s are going to pay for it, and MLB isn’t going to pay for it, who will?
The Giants, of course.
Now, I’m not actually suggesting that the Giants will pay for the stadium directly. They’re coming to the end of their own mortgage, so why would they saddle themselves with someone else’s? They wouldn’t. Yet if the A’s were forced to vacate the Bay Area, the Giants would likely pay the A’s to surrender the territorial rights to the East Bay. Such money which could be used to build or expand a stadium elsewhere. The Giants would end up indirectly funding the A’s stadium as a result.
We’d start with the MLB standard compensation package: $75 million, half coming from the commissioner and half coming from the paying team. That’s too small of compensation for the 2.5 million-strong East Bay, especially when you consider that the Giants’ franchise valuation could get a 2-3x boost from the A’s leaving. $150 million is probably a fairer package with the same 50/50 terms.
By the time the A’s were able to consider such a move in 2016-17, the $250 million cost could easily balloon to $300 million. That puts the Giants/MLB contribution at half. The A’s might be able to contribute $75 million on their own (via a new lease and revenue share), meaning the rest would have to come from a public source. This is absolutely important so that the A’s don’t get relegated to being another small market team. If the A’s move to Sacramento and have to pay a fat mortgage, that’s not an improvement upon staying in Oakland. The A’s best chance to thrive in Sacramento is if their stadium costs are as minimal as possible.
For Sacramento’s part, the plan only makes sense if the Kings are gone. The A’s still need corporate support to sell out premium offerings, and it’s expected that the Railyards Arena will suck up all of those customers. Involvement of AEG will only enhance that. The controversial parking revenue play won’t work because the plan is to expand Raley Field in West Sacramento, which is out of the Capitol City’s jurisdiction. A joint powers agreement between Yolo and Sacramento Counties sounds like a possibility.
At the actual stadium, the hard work includes taking down the press box and suites, ripping up the concourse to put in new columns, and putting in new facilities under the concourse such as modern, MLB-standard team clubhouses and a kitchen/commissary. Then the A’s could focus on putting in a club level, new suites, an MLB-standard press box, and a third deck to bring in those extra needed seats. The scope of work reminds me of this:
Mount Davis added 10,000 seats in a three-deck grandstand, an expansive indoor club, and 96 suites. The scope of work is similar to what would be required at Raley Field (sans tarps).
Would $300 million be enough in the end? It’s hard to say. It would be easy to argue that MLB wouldn’t want to skimp on amenities, or else Raley Field could be viewed as a cheap, temporary solution. Terms published for Nationals Park showed that MLB wasn’t interested in cost effectiveness – except in terms of external finishings. Marlins Ballpark is a testament to excess with its bizarre center field sculpture and aquarium behind the plate. The “wedge” in the Railyards dedicated for the arena isn’t large enough for a ballpark, so if MLB weren’t satisfied with Raley and wanted to look in Downtown Sacramento, it would have to use another plot within the project area for a completely new stadium, and a $500+ million price tag to go with it. Unless MLB was really desperate (which they usually aren’t), it seems iffy for baseball go along with the expansion plan when Sacramento was willing to foot a large part of the bill for a brand new arena.
There’s also at least one inside baseball consideration. MLB is fully aware of what Sacramento’s market limitations are. If the Railyards arena deal falls through, it won’t look good to MLB that the City couldn’t put together either a cohesive local or regional plan to retain a team. Sacramento wouldn’t show up on the top of anyone’s “viability” list, even though the resources to support a baseball team alone are there. Yet if the arena deal were successful, the market is too limited to exploit for a second major sports franchise, especially one whose economic requirements are much greater than those for a basketball or hockey team. It’s definitely a strange paradox.
newballpark.org 