I realize that the last post was 1,200+ words long, so at lunch today I tried to come up with a more succinct version. So here it is. Pardon my French.
I realize that the last post was 1,200+ words long, so at lunch today I tried to come up with a more succinct version. So here it is. Pardon my French.
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:
Last week, Oakland Mayor Libby Schaaf declared that the City was close to approving a framework for a potential stadium deal for the Coliseum. The framework would allow for Oakland’s exposure to be limited, while bringing in a big money financier to bridge the lingering (and growing) funding gap.
Today, media were assembled to cover yet another closed session of the Oakland City Council to further discuss the deal. The thought was the Council would come out of the meeting announcing the approval of the framework. What happened?
Okay, there’s always next week. Regardless, Council members sounded confident, especially Noel Gallo. Soundbites sound practically ebullient, despite the fact that the Raiders aren’t a participant in these talks. So what were they ready to pop the corks over? Matier and Ross revealed an outline of the framework (a more tenuous-sounding description is hard to come up with). I’ll summarize:
The inflated price of the project is due to the inclusion of 35 acres of ancillary development (retail/commercial). As usual, costs tend to rise over time thanks to inflation and other factors. What I like is that the whole project’s cost is being considered, an improvement over previous proposals with lots of hidden public costs.
The stadium remains a venue with a projected capacity of 58,000 or so, too small for the Super Bowl, right-sized for Mark Davis in Oakland. Davis remains committed to the Las Vegas stadium project, his sugar daddy being
MGM Sands mogul and LV Review-Journal owner Sheldon Adelson. Whether Vegas is approved or Davis is forced to go back to Oakland with his tail between his legs, he will require a benefactor to effectively subsidize the stadium over the short term. Long-term, Davis will either have to give up a piece of the team or a percentage of stadium revenues. Otherwise, Davis and the Raiders are a charity case. Most of the time the taxpayers are the benefactor as their tax dollars subsidize that gap. The NFL even prefers that kind of arrangement as the municipality acting as an equity partner, even though they see little in the way of event revenue.
If you saw how the Vegas stadium was rammed through various levels of government over the course of two weeks once it was drawn up, you can appreciate how, well, different Oakland operates. Oakland is mostly working the process on its own, the pace and work has been less than impressive and for all but the most faithful Raider fans, not particularly inspirational. Even the celebratory tone taken by the Council feels more like bravado than actual confidence. They “got it done” according to CM Gallo, but what exactly did they get done? While Coliseum City suffered through its own bouts of stuttering and stalling, the City has gone silent this round, scrambling after the last sugar daddy, Egbert Perry, embarrassed Lott by going behind Lott’s back to make a lowball offer on the Coliseum complex. We should see more details in the coming days, though we’re still talking about a framework, so most of the details we might want to scrutinize won’t be worked out. The play is to wait for Vegas to get rejected, present the plan to Davis, and have him work out the private-side details with Fortress and Lott, with all parties believing they have leverage over the others.
That’s about as forward an approach as Schaaf can take given her previous statements about not putting any public money towards construction – which given the paucity of information, we should still believe to some extent. Infrastructure, if that’s where the $200 million is destined, is technically not stadium construction, though it goes right up to the line. Will that satisfy the NFL owners enough to vote in Oakland’s favor? Unless they collectively have an overwhelming desire to keep the team in Oakland, probably not. They didn’t like how the pie was getting split in St. Louis, so why should they like Oakland’s less committal plan? If the idea for Schaaf and the Council is to present a united front and declare that they putting their best foot forward, they can celebrate. To keep the Raiders, the NFL’s gonna make you take more than a step or two.
Updated to include poll:
What is the right price for Oakland/Alameda County Coliseum complex, including venues, land, & debt?
— newballpark (@newballpark) September 21, 2016
BANG’s David DeBolt reports tonight that the investment group led by Ronnie Lott and Egbert Perry offered to buy the Coliseum complex for $167.3 million. The offer comes during the 90-day MOU between the City of Oakland and the investment group. They would get the Coliseum stadium, arena, the surrounding parking lots, and additional adjacent properties bought by Oakland over the past several years.
The $167.3 million offer would also retire debt on the Coliseum. There’s still $113 million of debt left at Mount Davis after 2016, making the remainder for the land worth $43 million. Or is it? The arena’s debt after the Warriors leave is still very much in dispute. That figure could be upwards of $88 million even if the Warriors stay through 2019 as they announced earlier in the summer. Lott-Perry’s first pitch looks like a serious lowball, especially if they have to factor in the arena’s debt.
Perhaps this is why we got another update late:
Update: City Hall sources say they aren’t considering this proposal https://t.co/TuKwsvpzct
— David DeBolt (@daviddebolt) September 21, 2016
Chances are that the two parties are not exactly close on the sale price, an issue Perry encountered in Phoenix. In that case Maricopa County is looking to sell Chase Field, not so much because of debt (which has been retired), but because of $187 million of deferred maintenance due for the venue. The maintenance costs and revenue generating potential combined to suppress the ballpark’s appraised value, $40-50 million in 2010. That could rise with a reappraisal, though there are no guarantees. Either way, it’s somewhat absurd to think that a large, modern MLB facility could be worth less than the average project cost of a AAA ballpark, such as the one planned for San Antonio.
The City has no reason to sign anything right away since their own property appraisal hasn’t yet been released. They’ll be guided by that document to counter Lott-Perry. Lott-Perry will be under pressure to minimize this particular cost as much as possible, since every dollar spent on land means another dollar that isn’t spent to bridge the gap on the new Raiders stadium, $300-400 million and rising with every day.
NFL relocation heavy Eric Grubman visited Oakland on Sunday and Monday to see how things were progressing. For now there’s little to report. By the end of the MOU period it will be imperative for Oakland to show something substantive that represents all parties, including the so far non-participatory football franchise. As for the A’s, they are under no pressure to make any deals right away, somewhat to the chagrin of MLB commissioner Rob Manfred. At the very least, the process is moving forward.
In the 2014 A’s Coliseum lease, the process for the A’s to vacate in compliance with a new Raiders stadium project was quite clear. Here’s how the stadium project was defined:
‘Raiders Construction Plan’ means a bona fide plan for construction of a new football stadium for the Oakland Raiders on current Complex property, adjacent to the current Complex property, or otherwise located sufficiently near to the Stadium such that it will materially impact Licensee’s operations, which bona fide plan must include, as pertains to such stadium project, a fully executed development agreement with a third-party developer and the Licensor for development of a new Raiders stadium, supported by a non-refundable deposit from the developer and received by the Licensor of at least Twenty Ten Million Dollars ($10,000,000.00).
And the terms for the A’s to leave:
Licensor may terminate this License upon written notice of intent to terminate to Licensee, such termination to take effect sixty (60) days after the conclusion of the second (2d) Baseball Season that commences after such notice. (By way of example, if Licensor provides Licensee with such termination notice on June 15, 2016, this License will terminate sixty (60) days after the conclusion of the 2018 Baseball Season.)
Basically, the Coliseum Authority has to give the A’s at least two full MLB seasons notice, so that they can plan for their next home. To build a stadium, the Raiders and their chosen developer partner would also have to provide a real plan, not just a couple drawings and some empty promises for studies. The point is to ensure that the Raiders and the developer are committed to the project, instead of wavering while pushing harder for alternatives outside the market (Las Vegas, Los Angeles, etc.).
That’s it. The A’s don’t have any rights or right-of-refusal to develop the Coliseum land, to dispose of the Coliseum debt, or anything else besides playing baseball games at the Coliseum. It is not up to the A’s to determine what land the Raiders can or should use. If the Raiders want to submit a plan to develop the entire complex, part of the complex, or even tear down and rebuild the Coliseum only, nothing is stopping them, especially their co-tenants the A’s. Anyone who say otherwise is lying.
‘Today’s San Francisco Chronicle contains inaccurate information I need to clarify. On May 23, I proactively contacted NFL Commissioner Roger Goodell to update him generally on what we’ve felt have been productive conversations with Raiders’ negotiator Larry MacNeil.’
‘Having learned from what I believe was a past mistake of awarding an exclusive negotiating agreement to a developer not approved by the Raiders, I wanted to assure the Commissioner of my commitment to keeping the Raiders and NFL at the center of our efforts.’
‘I did express to the Commissioner my interest in continuing discussions with the Ronnie Lott/Rodney Peete group and asked how the Commissioner would view my taking more meetings with them.’
‘The Commissioner encouraged me to explore all avenues for partnership that might result in a successful project for Oakland, the Raiders and the NFL, assuming we not give away any rights without clear Raiders’ support. That is my intention in resuming discussions with them.’
‘I continue to believe the Raiders can develop a new stadium in Oakland that is responsible to the team, its fans, the NFL and the taxpayers of Oakland. Oakland has worked hard to contribute the entitlements, development opportunities and infrastructure funding to our shared vision of a stadium-centered development at the Oakland Coliseum. I’m committed to continuing to work hard to realize this vision.’
Smart move by Schaaf not only to get ahead of the story, but to also control the messaging. This statement doesn’t waver from any previous public statements made by Schaaf since the demise of Coliseum City. Certainly there are other talks happening in private. The City and County still haven’t finished the the buyout plan for the Mt. Davis debt. She knocked down the characterizations in the M&R piece, instead positioning the talks as part of an ongoing process instead of a chess match.
A Raiders stadium is not going to proceed on a ridiculously fast track as we’ve seen in Cobb County for the Braves or in Vegas for the UNLV-Raiders stadium. There are too many details, too much complexity. That’s why the whole Raiders are stuck because of the A’s lease reeks of an exercise in blame assignment. It’s going to take a while. The process of untangling all of the agreements and leases while minimizing impact on current tenants will be messy. Besides, Davis doesn’t have the coin to accelerate a project the way the Yorks did in Santa Clara. Maybe, just maybe, that’s a good thing. We have seen what happens when a project is improperly rushed.
After a five year run, internet retailer Overstock.com and the JPA are calling it quits on their naming rights deal at the Coliseum. The deal apparently was not terribly lucrative for either side. The JPA realized $2 million a year, making at best a slight dent in ongoing debt and operations costs. For Overstock, which more or less stopped using O.co in the US, the name was more a source of confusion and mild derision than revenue growth. Here’s how confusing the name situation was and still is:
Why is Overstock.com known as O.co internationally?
Over the last few years, Overstock.com has expanded to countries all over the world. However, we discovered that “overstock” doesn’t always translate well. To minimize the confusion created by translating the word “overstock” into other languages, we decided to use O.co for our international sites.
So many welps. At least Overstock has found some success partnering with the A’s, so their partnership will continue. As for the stadium, I and most everyone I knew called it the Coliseum. Just as we didn’t call it the Network Associates Coliseum or McAfee Coliseum (or even UMAX Coliseum), we didn’t use O.co and probably won’t use any future name either. I can’t blame the JPA for trying to get some revenue out of this, but they can’t blame the fans for holding on to the edifice’s rightful, classical name. Even the downright bureaucratic sounding “Oakland-Alameda County Coliseum” has its own air, or at least Chris Berman thinks so.
Frankly, when you go through so many names, it’s probably time for a new ballpark.
The Raiders agreed in principle to a one-year lease at the Coliseum, with the potential for extensions in 2017 and 2018. Specific terms were not revealed at today’s press conference, but the main reveals are that the Raiders will pay more in rent than they had in the most recent lease, and that Larry MacNeil, former 49ers CFO, was hired to work with the City/County/JPA on a new stadium deal. Davis touted MacNeil’s experience in developing Levi’s Stadium.
Towards the end of the press conference, Davis challenged A’s ownership to “commit to Oakland”:
Right now there’s 120 acres. There’s parking, there’s an arena. We like the gameday experience of tailgating on that parking lot. We don’t want to give that up. Now, there’s two teams that play in that Coliseum. One’s the Oakland A’s, one’s the Oakland Raiders. People have not listened when I said I do not mind if there are two stadiums on that site. The A’s stadium would take about 12 acres, the Raiders’ stadium would take about 15-17 acres. That’s fine with me, but I do not want to give up the parking.
If, in fact, the A’s do want to stay in the Coliseum site, they need to commit A.S.A.P. so that we can go ahead and design and take down the Coliseum, provide all the infrastructure necessary to build two new stadiums in Oakland, and two teams will then come back in and play in two new stadiums. What I do not want to do is build a football stadium in the corner of the parking lot while the Coliseum is still standing, and then once we have a brand new stadium we begin to tear down – or build a new baseball stadium – and then tear down the Coliseum, disrupting the ingress, egress, and parking, tailgating experience for Raider fans on gameday. What it’s going to take is for the A’s to make a commitment to Oakland and tell the people what they want to do.”
You mean something like this, Mark?
The A’s response did not waver from their ongoing evaluation process:
— Susan Slusser (@susanslusser) February 12, 2016
Let’s, for a moment, follow Davis’s argument all the way through to its hypothetical end. He is right that he’s been consistent about this. For nearly two years he has wanted the Coliseum torn down immediately, to be replaced by either a football stadium on the original footprint, or two venues next to each other. As you can see from my drawing above, it can be done while taking up only slightly more land than the original Coliseum did. There would even be some advantages in that a grand plaza could be built between the two stadia, leading to the arena.
But is it realistic? Let’s consider how this would progress. Assuming that Lew Wolff and John Fisher could be convinced to go along with this plan, the Coliseum would be torn down and the site graded shortly after the end of the Raiders’ 2017 season – let’s call it a year from now, February 2017. From that point new infrastructure would have to be put in place, followed by actual construction. If they started by the summer, the A’s couldn’t move into their new home until the 2020 season because of a very compressed schedule for an early 2019 opening. The Raiders could potentially open in 2019, but consider that 2019 is the projected opening for the Rams’ stadium in Inglewood – and that site is ready to go, demo already completed. For all intents and purposes, both the Raiders and A’s would be out of Oakland for three years – the A’s probably to AT&T Park, the Raiders to Levi’s or somewhere else. Throughout all of this, Davis would have final say on any development on the 120-acre Coliseum site.
Is there anything in Davis’s history or actions that makes anyone believe Davis is the person to make this happen? He has no experience in development or in the kinds of complex legal and business arrangement requires. His sudden ability to rattle off catchphrases like “opportunity cost” like he just rolled out of a basic microeconomics class isn’t impressing anyone. MacNeil is a good hire, but his presence alone isn’t going to convince investors to subsidize a stadium. And Davis’s desire to stick with ingress/egress/parking as his most important issues in Oakland is downright bizarre. Preserving parking has some nobility to it and is a good way to pander to Raiders fans, especially when compared to the mess that is Levi’s Stadium parking. That argument can’t possibly impress the other 31 owners, who have demonstrated repeatedly that they want deals that improve revenue for teams and for the league as a whole. Parking is worth maybe $4 million a year in revenue. Davis has somehow neglected to talk about revenue as a rationale as every other owner seeking a new stadium has done. Raiders ticket prices will be frozen again for 2016, keeping prices and local revenues essentially flat for the several years since he took the reins. And Mt. Davis will remained tarped to boot. If the Raiders’ revenue position is going to improve, the Raiders will have to charge much higher prices at the new stadium, and in the intervening years they’ll have to test out those higher prices on fans at the Coliseum, the same way the Warriors are doing now in preparation for their new arena. Without a major revenue boost, there isn’t even a business case for building a new stadium, even a small one. The $500 million (+$100 million gift) Davis frequently talks about comes from stadium revenues. If he can’t hit the targets in those loan programs he’ll have hell to pay from the other teams’ owners and his own investment group, in large part because he’ll end up bleeding his golden goose (the NFL’s TV contracts) to pay everything off. And we still don’t know how the $300 million funding gap would be filled.
Historically, none of the old multipurpose stadia have been redeveloped in the manner Davis is suggesting. There generally was a sequence with one tenant staying in the old building while another was built next door, then the old one was demolished and replaced. That was a successful model in Pittsburgh, Cincinnati, and Philadelphia. While the Bay Area has the luxury of high quality venues that could host the two Oakland teams in a pinch, you’re also allowing them to take both feet out the door for three years. Either team (or both) could back out of any stadium deal at any time (really, please try to force a team to build a stadium when the city is providing no money for it). The only leverage Oakland has is that the Coliseum still exists and remains functional, allowing MLB and the NFL to maintain its inertia regarding both teams. Without the Coliseum, Oakland is practically a non-entity for pro sports. I’m not sure if the politicians gathered around Davis at the presser believe in Davis’s vision. The presser certainly wasn’t the venue to argue against Davis. The theme of the event was unity, even though all they were talking about was a short lease extension. Well, unless we start to see hard numbers and actual advantages for the A’s and Raiders besides preserving parking, we’re a long way from actual unity.
P.S. – Davis is trying to play some sort of PR game by claiming that the Raiders are “hamstrung” by the A’s lease. That’s only true if the only way to build a stadium is to do it Davis’s way. Otherwise the A’s lease can be terminated with two years’ notice. That’s it. It’s not unreasonable for the A’s to ask for some time to get their affairs in order. Unless you’re Tommy Boy, I guess.