Category Archives: Oakland

06.17.11
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Sometimes a tree has to be chopped down

Nearly thirty years ago I went on a field trip with my brother and dad to a nursery in the Santa Cruz mountains. The nursery mostly grew coast redwoods. The afternoon was chilly as the marine layer wafted in over the mountains, giving the trees the moist, dense air that makes them thrive. As we left, my brother and I were both given redwood saplings in half-gallon milk cartons. We decided to plant them in the planter strip near the curb in front of the house. I forgot which brother was responsible for which tree.

Ten years later both trees had grown, though not taller than the other trees on the block. The western tree was taller than the eastern tree and had a thicker trunk. They required no maintenance. My dad laid down iceplant (just like at the old Coliseum!) around the trees and everything coexisted peacefully.

Another ten years passed, and from all appearances the western tree was growing like crazy, whereas the eastern tree was stalling out. The western tree also had much more substantial root growth, which could be identified by the uprooted sidewalk next to the tree. Its brother to the east posed no threat to strollers and skateboarders. Eventually the city noticed the problem with the sidewalk and told us that we had no business planting those trees next to the curb. We were told to put a tree in the yard next time, where it could have more space to grow. One day the city chopped down the western tree, which had grown to 20 feet tall. Later they pulled out the stump and fixed the sidewalk. The eastern tree still stands, growing little by little (I think). My dad calls it the Christmas tree and runs the holiday lights out to the former sapling every December. It remains the only redwood on the block.

San Jose’s redevelopment agency is much like the western tree. It grew as a mighty redwood was supposed to, big and tall and fast. Over time it became too big for its own good, and to keep it from destroying the street it had to be chopped down. SJRA’s mission was informed by a quest to become a big city, which meant putting tons of resources into it. Some of it was well directed (library, convention center, arena, museums) and some of it wasn’t (numerous retail failures). SJRA has a ton of fundamental problems that make it difficult to easily chop down. Yet that’s exactly what it’s done. In preparation for the upcoming fiscal year 109 jobs were slashed, or 91% of staff. Even as they expressed outrage at the passage of the twin “kill” bills, they clearly saw what was coming down the road and prepared for it.

Over the next year it’s expected that many RDA’s will be chopped down like the western tree. Most of those will be agencies that have grown too big or have become unmanageable. The loose definitions of blight and even the term “redevelopment” have allowed the agencies to grow unchecked. Controller John Chiang’s audit covered numerous instances of waste and abuse. Agencies who have mismanaged themselves are likely to get cut down, while the properly managed ones – and they do exist – have a chance to stay alive, like the eastern tree. What we don’t know is the criteria for separating the good ones from the bad ones.

With the first real salvo fired in the redevelopment war on Wednesday, every agency throughout the state is scrambling to protect or save themselves from the coming onslaught.

If you’ve read this far, you now get a treat of ballpark news! The Merc’s Tracy Seipel checked in with both Lew Wolff and San Jose Mayor Chuck Reed to catch their responses to the redevelopment shuffle. Wolff appears undeterred, still saying he can buy land if necessary, though he hasn’t actually done it. Maybe he’s waiting to find out what he might have to buy once the dust settles. Reed provided three scenarios under which the Diridon land can be made whole:

  • Wolff could buy the two parcels, and the city could sell him the rest of the ballpark site.
  • The city could sell agency assets to buy the last two parcels, then sell the entire site to Wolff.
  • The city could buy the last two parcels and lease the site to Wolff, with the city using the lease as security for financing to pay for the land.

These are all scenarios we’ve discussed here on the blog. None of what San Jose has done has been sexy or attention-grabbing. I’ve noted in the past that I could often count all of the people present at a ballpark-related session on two hands. The point is that they get things done. Every time an obstacle has come up, they’ve figured out a way to deal with it. Consider the following:

  • PG&E substation move? Not needed, ballpark configured to fit within purchased land.
  • Fire training station move? Garage requirement eliminated, no longer necessary.
  • Sharks objections? Lifted once entitlements were made for garage/commercial development on north side of HP Pavilion.
  • AT&T land stalemate? Possibly resolved when city provided entitlements to AT&T for land near Santana Row.
  • Worries about parking related EIR impacts? Not if “enough” parking is found on the other side of Guadalupe Parkway. (*shakes head*)

We’re in for an interesting rest of the year. In the morning I’ll check on what ORA and City Hall did with the $100 million.

One more thing: Billy Beane obliterates Lowell Cohn in this interview.

06.16.11
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Redevelopment is only mostly dead

Update 6/16 10:50 AM – Governor Brown has vetoed both of the main budget bills, AB 98 and SB 69. The veto came as Brown has been is discussions with Republicans over tax extensions, which were half of his inaugural budget solution. The GOP has given no quarter on these taxes, which apparently has forced Brown’s hand. The trailer bills, such as the twin redevelopment bills, are still on Brown’s desk being held back by the Democrats for the time being. They are important for funding the “cuts” half of Brown’s budget plan, so don’t expect them to go away.

At one point during the current legislative session, there were at least a dozen bills having to do with redevelopment reform. In the end, the bills that prevailed were largely influenced by Governor Jerry Brown. With AB 26 and 27 passing and almost guaranteed approval by the governor, the only thing left that can save redevelopment as we know it is a lawsuit (or 400). A successful legal challenge by cities and RDA’s would completely upend the just completed budget process, since the budget is dependent on $1.7 billion in money flowing from RDA’s to the state.

The way this works is that as of October 1, all redevelopment agencies (city or county) would be dissolved. Any projects under contract before January 1, 2011 would continue to have tax increment (now simply named property taxes) as an ongoing funding source. Anything agreed to after January 1 is subject to review in order to determine whether any bond issues violate the spirit of the law.

In addition, redevelopment agencies could be reconstituted if they can perform their activities while taking care of their ongoing debt and these new payments. If they can’t, a successor agency will be appointed whose mission is to collect the these “excess” property taxes and send it to school districts and the like. Cities can apply to reconstitute or create new RDA’s via the mechanism described in AB 27, but they are bound to the aforementioned property tax revenue distributions.

The Merc’s Tracy Seipel reports that the City of San Jose’s share for the next fiscal year is $62 million, and $15 million per year after that. That’s going to be extremely difficult for San Jose to pull off because tax increment revenues have been so poor for the last several years that there’s been little excess to use for new projects. SJRA’s practice of landbanking has also tied up funds in real estate purchases, which have allowed SJRA to act semi-speculatively when it comes to encouraging new projects. Many cities practice this, few to the extent San Jose does. Now it appears that much of the landbanked property will have to be sold to cover these new payments, not to mention any shortfalls that might occur if the property tax receipts tank.

Remember that in December, Lew Wolff renegotiated the price of the Airport West property down to $89 million, a reflection of the depressed real estate market. Wolff doesn’t have to pay until 2015. I suspect that he may have no choice but to accelerate the purchase, if only to prevent the state from forcing the city to sell another piece of land Wolff covets, such as Diridon. It may be that the creation of SJDDA insulates the city somewhat, but my understanding of the bill language is that efforts to circumvent these new powers and responsibilities could turn into an ugly tug-of-war over dollars and dirt. San Jose’s moves aren’t nearly as egregious as what’s been squirreled away in LA, but if I were Wolff or a board member of SJDDA I wouldn’t rest easy until I knew how legal the new joint powers authority was via a court ruling. There seems to be a simple solution for Wolff if he wants his ballpark in San Jose: PAY UP. (BTW, you know what else probably costs around $89 million? The Fairmont SF.)

Oakland’s situation is different in that it has much more bonding capacity and property tax revenues in several districts are good. However, it will be difficult for ORA or a successor agency to round up the money needed for Victory Court. As I noted yesterday, ORA is buying the Henry J. Kaiser Convention Center for $29 million just so that the city can balance its budget. Other properties, including the Fire Training Center, were bought under similar circumstances. Those kinds of quickfixes won’t be available for much longer, especially if the lion’s share of excess property taxes ORA collects will have to go to Peralta CCD and Oakland School District (my guess: $15-25 million for the first year, $5 million annually thereafter).

The last obstacle in Brown’s quest to kill redevelopment is a legal one, which has been been telegraphed by cities and their lobbying groups for months. Their biggest problem is that so far, pro-redevelopment’s solutions have been predicated on RDA’s voluntarily sending money to the state and education as they get it. It’s kinda difficult to base a budget on voluntary payments, don’t you think? And as long as they keep up with the rhetoric about this legislation and Brown’s efforts being “unconstitutional” they’re setting themselves up for a big loss. They may prevail on technical legal terms, but even if they do it doesn’t bode well for the state, cities or counties. The budget was passed strictly on party lines, with very little give on display and numerous battles to come before Brown has to make a decision. We’re getting to the point where it’s time to start thinking about working in a post-redevelopment era. Municipalities that can’t make such a transition are in danger of being left behind.

06.15.11
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Quan takes it down to the wire

In light of how San Jose Mayor Chuck Reed used hardball tactics to get across-the-board concessions from public employee unions, it’s a good time to check in on how his counterpart in Oakland, Jean Quan, is doing.

In late April Quan presented three different budgets to the City Council, which included different mixes of cuts, union concessions, and new revenues from a parcel tax Quan supports.

The budget deficit is $58 million, or 2 x $29 million. Why am I using that notation? You’ll see shortly.

First the parcel tax. Quan has heavily advocated for a $80 parcel tax which would raise up to $11 million for the upcoming fiscal year. Nevermind that parcel taxes aren’t frequently used to take care of general fund shortfalls, she’s pushing ahead anyway. Fundamentally it’s difficult to base a budget, which has to be approved in June, on a tax whose fate is unknown until a few months down the road via a special election. Council is expected to vote on the tax on the 21st. If approved the special election would follow.

On the cuts side of the budget, Quan is looking for nearly $29 million (ding!) from the unions. Ever the consensus builder, she chose to start talks with labor in May, which put a huge crunch on Mayor and Council to wrap up the budget. There are allegations that the different unions are not being treated as equal partners, and are being given more or less favorable deals based on who they are. The final budget can’t be voted on unless the true amount of concessions from the unions is known. They’re six days away from the deadline.

The last part of the tale is a sad but increasingly common deal. Should the parcel tax not pass, City will need to take care of another $29 million to balance the budget. It turns out Oakland’s had something up its sleeve for while, courtesy of Oakland Redevelopment Agency. Last week ORA offered to buy the Henry J. Kaiser Convention Center (SFGate) from City. The price: $29 million (ding!). An appraisal done last year pegged the value of the auditorium and land at – you guessed it – $29 million. Whether a building that hasn’t been used in several years is worth $29 million is up for debate. The fact is that $29 million is being transferred from ORA to the City to address a budget problem. Coincidentally, that money is coming out of the coffers of two ORA districts, Central and Central City East. Both of those districts meet at the Victory Court site, and it is assumed that additional fundraising from those two districts would be required to buy land and improve infrastructure at Victory Court.

That’s not to say that this is currently problematic for Victory Court’s prospects. Since the EIR has only begun and no decision by MLB has been made, neither the City nor ORA were in the position to buy additional Victory Court land. San Jose used a similar “rob-Peter-to-pay-Paul” tactic when it sold its old City Hall to Santa Clara County as part of a settlement. Money’s extremely scarce for all municipalities, so if they have assets they might have to liquidate them.

However, taking money from ORA to pay the bills leaves ORA with an asset that isn’t useful in the near term. It’s too expensive to run and renovate. Peralta Community College District isn’t interested in buying HJKCC. While the setting is absolutely beautiful, it has limited redevelopment prospects. The actual lot has shrunk in recent years thanks to the 12th Street Project. Any new commercial development would require a good deal of new parking, which is lacking in the area.

Yet there are a couple of juicy pieces that come out of all this activity. One, ORA suddenly owns a large piece of land outright, on which a ballpark could be built (HJKCC), right? Well, not quite. The shrinking of the lot makes its size around four acres, much too small for a ballpark. The distance from the sidewalk on 10th Street to the new 12th Street curve is less than 400 feet, making it difficult to plant a regular baseball field, let alone a gigantic grandstand behind the diamond.

Finally, there is a real opportunity cost with this money move. An advisory council for the Central City East district expressed disapproval of the sale via a 13-1 vote against. That doesn’t matter since the ORA board is essentially the City Council in a different guise. A rubber stamp is a mere formality. The sale also gives Oakland a very good excuse for not pursuing Victory Court with more alacrity – the money is sworn to other obligations. That’s a key difference between what Oakland is doing and what San Jose is doing: San Jose is selling redevelopment land to private buyers to help make the ballpark deal complete, whereas Oakland is selling City land to ORA to make the budget.

The upshot for Oakland is that it’s even more important than ever that redevelopment (the institution) survives the state’s budget negotiations. If redevelopment takes a big hit in either legislation or from Governor Brown, Victory Court is basically dead. How can I be sure of this? This is how:

If the State of California eliminates redevelopment as been proposed in the Governor’s Budget, unencumbered bond funds would be used to defease corresponding bond debt, and unencumbered operating funds would be used to pay Agency’s obligations. The net funds available, after expenses related to eligible Agency activities, will go to the taxing entities, including approximately 27% to the City of Oakland. Without Redevelopment funds, the City will have significantly less capital funds for City infrastructure – streetscapes, parks, public facilities, etc. – but will have an increase in property tax revenue. This increased revenue will not offset the current staffing funded through redevelopment, let alone provide additional funds for capital projects.

That came from Interim City Administrator P. Lamont Ewell’s April report supporting a separate $4 million City-to-ORA land sale. It’s possible that the compromise plan being worked out in the Legislature will save Oakland’s bacon in this regard – but there’s no guarantee that will happen.

06.13.11
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Time to band together

Athletics Nation’s resident raconteur, emperor nobody, posted a beautiful plea to A’s fans and Bud Selig in the wee hours this morning. A Facebook page was also created named “Hey Bud, PleA’se stop the TeA’se” whose purpose is to spread the message. The message? It’s time for Selig to make a decision and lead. Whether the future is in Oakland or San Jose matters less than the idea that there is a future for the A’s and A’s fans.

In the emperor’s inimitable way, he asks us to be indomitable:

Yes, the Giants are holding it all up, I get that.  Yes, Oakland’s “Victory Court” Environmental Impact Report (EIR) is proceeding at a speed somewhere between that of a glacier and Bengie Molina running out a triple, I get that too.  Yes, in Bud’s mind his hands are tied, so he has gone into a sort of administrative fetal position on this matter, all curled up with his thumb is his mouth — or some other convenient orifice of choice.  Be all that as it may, there’s no cavalry coming to shake him back to sentience and make him bring leadership to a difficult and distasteful set of circumstances.  I hate to say it to you, but the A’s fanbase — the group of people who form the natural constituency of concern here — has been whittled down pretty significantly.  So if you’re looking through your binoculars to see if the cavalry is approaching to save the day — or at least to start some shit so the real players in the drama can feel the heat and act accordingly — I’d suggest you lay the spyglass down and refer to your nearest mirror.  Because that’s where the cavalry is gonna come from, if it’s to make the scene at all in time to keep this franchise from circling the Eternal Drain of Irrelevance and Depredation.

More details about the movement will be unveiled on Chris Townsend’s show at 3 PM. It’s time for real accountability. It’s time for a decision. I’m onboard with this movement and have liked the page. How about you?

06.10.11
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Gammons and Rosenthal weigh in on Beane, Oakland

Peter Gammons held court on KNBR’s morning show (MP3), talking about Billy Beane, the two managers named Bob, and the team’s economic predicament. Gammons has never been one to be particularly critical of Beane, so as expected he blamed Beane’s lack of success over the last five years on the A’s status as a low revenue, have-not franchise. When Brian Murphy challenged this by giving the Giants’ (and anti-Wolff/Fisher) narrative that the ownership should spend more because it is the 4th richest in baseball, Gammons replied:

Because nobody goes to the ballpark, there are no TV and radio rights. They’re not gonna lose their shirts. The Oakland A’s either have to move or be (contracted)… They can’t exist in a dump. There’s no chance of succeeding there. When Peter Magowan built PacBell he changed the market forever. Now, it was always a great baseball market. The Giants were always a really good franchise, but when they had those cold nights at Candlestick it wasn’t always a lot of fun. But they changed everything. I still think the Giants are one of the top five teams in the business.

San Francisco is a huge market. Oakland is not. The ballpark is in shambles and it’s in a bad neighborhood. People aren’t gonna go there. There’s no reason for wealthy people to give enough money so that they finish .500 and still lose money.

On this site we’ve occasionally discussed how AT&T Park has adversely affected the A’s. What surprises me is how Gammons so succinctly nailed that point when much of the local media have generally turned a blind eye to it. It’s not about hardcore fans. It’s casual fans. Regardless of how many seats are tarped over and what discounts are available, casual fans don’t come out to A’s games – at least not en masse. And when the A’s suck, there’s little hope for casual fans to show up. They know there’s a scene at China Basin and a buzz around the Giants.

Ken Rosenthal wrote a different take on Beane, wondering how long Beane will want to put up with his annual Sisyphean task. Unlike Gammons, Rosenthal doesn’t hold Beane above reproach. But he does point out the problem all low revenue teams have that we’ve gone over repeatedly:

All GMs swing and miss; it’s the nature of the beast (and not all of those deals appeared to be misses initially). The problem in Oakland — and Tampa Bay and other low-revenue markets, for that matter — is that big misses are almost catastrophic. Low-revenue clubs, unlike their big-money brethren, can’t spend their way out of mistakes.

It makes me wonder if the best way for the A’s to compete is to tank a few seasons to get high draft picks, as the Rays did unintentionally. Frankly, it’s depressing to think about. Rosenthal doesn’t offer any solutions, doesn’t mention San Jose once. I know this much. If the A’s don’t go on a big run towards the end of the season it’s gonna take the shine off Moneyball the movie. At least for me.

Updated 12:12 PM – Gammons also calls Wrigley Field “a dump” and similarly puts Tom Ricketts in a tough spot since he’ll have to go out of pocket to fund Fenway-style renovations to Wrigley.

06.07.11
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The Cost of Indecision

It’s been a while since I have posted here. Not that ML needs any help, but I felt like it was time I stepped up and earned the fact that my name gets to appear with his on the side bar.

This desire to contribute didn’t come out of the blue. It actually took root in a recent meeting that I arranged, at my workplace and over lunch, with ML and one Doug Boxer. Many of you know that Doug is the driving force behind Let’s Go Oakland, a group of people who are passionate and committed to keeping the A’s in Oaktown.

While we didn’t really talk about anything that anyone that reads this site with regularity doesn’t already know, I was impressed with Boxer and his straight forward style in discussing both the advantages of Oakland as well as the challenges it faces. I wish many of the Pro Oakland folks that I know were equally as honest about the challenges that face the Town in their pursuit of having a stadium built. Challenges, that while real, are not impossible to overcome if accepted and addressed. Especially when you have smart people working on a realistic solution. In short, if there is a solution in Oakland, Boxer will be part of sorting it out… Even if he doesn’t have all the answers about funding the joint right now, something I think he would freely acknowledge.

After having this more than an hour discussion, I can say a few things with absolute certitude. The City of Oakland has had an opportunity to put forward it’s best ideas. The ideas they have chosen as the best have been listened to. The people of Oakland are fortunate to have a guy like Doug Boxer in their corner. If he can’t help find a way to make it work in Oakland, I am confident saying that no one can, or will.

One of the topics of discussion, something I hoped to glean but didn’t, was what the heck this two year delay has been all about. ML, Doug and I all had our own thoughts, though none of us really know for certain. The reality is that it doesn’t matter, Bud Selig’s lack of foresight has already been extremely costly to our favorite franchise and should offend the sensibilities of all of us A’s fans in the Bay Area. After all, we live in a region with a long history of successful companies that grow from flashes of imagination to household names in the time it has taken for Bud’s panel to do absolutely nothing but “study” an already pretty clear situation.

From Pandora to Facebook, companies in the Bay Area prove all the time that chasing a perfect solution to any problem is a waste of time and detrimental to getting something done. So is sitting on one’s own hands and waiting for a solution to appear. It seems that one of these two scenarios is playing out before our very eyes. Either Bud is waiting for Oakland, or San Jose, to give up so he doesn’t have to force the issue, or he is expecting years of research to come up with a magic bullet to slay the Beast of Where an A’s Stadium Should Reside. Both are foolish.

A brief interlude… As you can probably already tell, I am kind of cranky. That isn’t really anything new for us A’s fans. Really, it’s like we are all building blocks in the 9th Wonder of the World: The Frustrated Pyramid of Oakland. Think about it for a minute, we are the bottom few rows of humongous sandy blocks. We make up the first few layers of frustration as we sit helplessly watching the players flail away. Those same players make up the next few rows of the great pyramid. As they struggle to figure out how a promising season devolved in one week’s time. Decimated pitching staff? check! Underperforming veterans? Check! But most importantly, clearly incapable of carrying out the most important parts of his duties manager? Double check!

I’d throw Bob Geren in as the next level of frustration, but I am not sure how long he is going to be around. Color me skeptical, but when was the last time an owner went on record in support of his Manager only to change his mind not so long after? Maybe, if Bob Geren gets crushed between the pressure of Billy Beane’s frustration at not being able to get a premier bat to come to Oakland and all the grumpy players (players who are grumpy because Bob Geren, himself, can’t communicate or manage a bullpen) it will provide some stress relief for all of us?

And on top of Beane’s frustration we have Uncle Lew. Now, some of you who read here regularly are going to have real trouble trying to sympathize with Lew Wolff, but just imagine the conspiracy angle is true. Imagine Bud invited Lew to buy the A’s so that he could move the team out of Oakland. Imagine Lew playing his part perfectly… Nope no land in Oakland. Nope, $30M later, Fremont won’t work. Hey Bud, time to pull the trigger on that San Jose thing you asked me to get done… Oh, wait.

Now pretend the conspiracy isn’t real (or accept that it isn’t, depending on your view)… Imagine spending a few years reaching out to different people in Oakland, as Lew did. Imagine amassing the magic “binder” of letter’s rejecting the use of places like Howard Terminal, researching how a river of crap flowing beneath the old HomeBase site impacts potential development, and so on and so forth. Imagine having a solution and walking into Bud’s office and being told… “Hold on a minute while we redo everything you have done and let the local press savage you for the next 2 years and take no action to help you move forward either way… Oh, and please keep holding the line for now. Afterall, we are ‘working’ on it.”

Man alive that is a whole lot of frustration from top to bottom! But how about our two fair cities of consideration? Where do they fit in this Great Pyramid of Teeth Grindage? Has Bud’s indecision cost them anything?

First, an election will need to happen in San Jose should that locale be chosen. He had voter support to make it happen. Who knows what he has now? This is the cost of indecision.

Second, he had some momentum in Oakland… A grass roots group of supporters that are willing to make the case for a new stadium doesn’t exactly fall out of trees. How long does a Facebook group and clicking a link to send a form letter keep people’s attention? This is the cost of indecision.

These are just two, of many examples, of the cost of indecision. Bud didn’t capitalize on either. Instead he says “this is a complex situation” and insults our intelligence. That isn’t how you build the most successful internet radio platform. This isn’t how you build a social network with hundreds of millions of users. This isn’t how you should run Major League Baseball.

At Facebook, there are signs posted all around the place that say “Done is Better Than Perfect.” I think Bud needs to visit and catch a glimpse of how business is done these days. At Pandora, I am sure that copyright law policy and advertising sales campaigns and boosting subscription service account holders are all issues worked in unison. No, the “Dodgers and Mets have really screwed up… everything else is on hold” sort of dalliances don’t usually hold muster at companies that own the future.

Having a consensus builder at the helm isn’t exactly like having a visionary running the show. Having a man who can’t make a decision without the approval of those he “leads” is cutting into our fan base. And by our, I mean we. Me and you and all of us who should be preparing for a new yard instead of bickering about where that home should be.

Some other things that are currently cutting into the A’s fandom? Monte Poole’s monthly “Lew Wolff and John Fisher are characters from an Austin Powers film” column. By now, Poole should have been able to write off the A’s as the 30 mile moving carpet baggers or embraced Wolff for getting something done in the East Bay. Instead I have to argue with my friends, who support the same team I do, once a month about how Lew Wolff isn’t Emperor Palpatine and that, no, me pointing that out doesn’t make me an apologist. I will be really happy when I don’t have to read those columns anymore.

By now, our focus could be on how we band together to get Bob Geren the heck out of Dodge. Instead we argue, here and other places, about what Oakland could have done 15 years ago. As if that matters.

By now, some of us could have moved on to not being A’s fans if we so chose. Instead we drone on and on about what Lew Wolff’s intentions were when he bought the team. As if that has any bearing on MLB’s committee.

By now, some of us could be driving down to check out progress on the new yard every other week. Instead we fight about funding models for an imaginary stadium.

By now, we could all be looking at 3D illustrations and picking a seat for our season ticket package. Instead we are nitpicking “projections” of how many thousands of people would be sitting in the tarped off section of the O.co Coliseum.

By now, we could all be celebrating the signing of some free agent with a power bat. Instead we take sides in a debate over whether Scott Boras was telling the truth about why Adrian Beltre didn’t sign in Oakland.

By now, we could be talking about things that are relevant to the future of our favorite baseball franchise. Instead we are in a perpetual discussion over things that are irrelevant.

This is the cost of indecision. Something tells me a bad decision couldn’t be any worse.

05.27.11
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News for 5/27/11

Sacramento has the feasibility study for its new arena at the its website, along with additional renderings. Besides the lack of financing plan that would have to be determined by the end of the “100 Day Plan,” I noticed one other thing. As part of the effort to cut costs, there is no separate club level. Instead, the club seats are largely confined to one side of the arena and courtside sidelines, with the club lounge taking up part of the main concourse.

Angle view of ICON Taylor arena interior. Club seats are colored blue-violet. Arena is designed to host a hockey team as well as the Kings.

While the Maloofs continue to maintain that the Kings are not for sale, as many as three groups have surfaced that could buy the franchise if it were available. Ron Burkle continues to be the popular choice, with the “mystery Nevada businessman” being second. Now a group fronted by former King Chris Webber has surfaced, and its chief moneyman is a Filipino businessman named Manny V. Pangilinan, or as he’s known in Manila, “MVP.” With frequent talk of Chinese interests getting a controlling piece of a NBA franchise, it would be somewhat poetic to have a Filipino be the first Asian to do so. FWIW, there are three national sports in The Philippines: basketball, boxing, and cockfighting. It’s not going to make me anymore a Kings fan than Erik Spoelstra (who is half-Filipino) being the head coach of the Miami Heat makes me a Heat fan, but it’s something to be proud of.

Another week, another arena proposal. This time it’s in Baltimore, a city whose 50-year old arena hasn’t fielded a major franchise in nearly 40 years. 92-year-old construction magnate Willard Hackerman is willing to pay for the arena as part of an elaborate redevelopment plan along the Inner Harbor. Like Sprint Center in Kansas City, the arena would be built on spec, without a major pro tenant. Baltimore has been without an indoor sports franchise for so long that it’s hard to know if one would be successful there. It appears that Hackerman is willing to give it shot. Hackerman’s company, Whiting-Turner, built M&T Bank Stadium, home of the Baltimore Ravens.

ESPN’s Jim Caple came out with his “official” MLB owner’s rankings. Lew Wolff placed 17th, higher than I would’ve expected. Must be the national media bias.

Here on the blog, 980 Park concept originator Bryan Grunwald received word from the City of Oakland that his concept will in fact be part of the Victory Court EIR, hopefully as a full alternative. Unfortunately, Grunwald also was informed that there is no schedule for the release of the EIR. With MLB moving glacially and putting the A’s on the backburner, I suppose it affords the City time to be thorough. Weren’t they supposed to have the whole thing done (and certified) in around a year?

On the redevelopment tip, there are now three bills working more-or-less in conjunction to provide a less wasteful alternative to the current scheme, which is enshrined in the California Constitution. A fourth bill works against redevelopment, as wished by Governor Jerry Brown. Here’s the list:

  • SB 286 would restrict how projects are funded. Currently redevelopment dollars are a free-for-all as long as they can be applied to a “blighted” area. If this bill passes money for stadiums and arenas would require a public vote in the affected municipalities.
  • SB 450 seeks to rein in waste by capping administrative costs, while pushing the requirement that 20% of funds be spent on affordable housing, to the forefront.
  • SB 214 would allow the creation of new infrastructure districts whose purpose would be to finance infrastructure projects (roads, highways, sewers, etc.).
  • AB 101 is the aforementioned anti-redevelopment bill. Should any municipality’s RDA have any surpluses after obligations are met, those surpluses would vest with the municipality instead of being sandboxed for redevelopment purposes.

The University of Michigan wants to expand The Big House to 120,000 seats. Might want to fix the football program first.

If you wear a “Yankees Suck” T-shirt at the O.co Liseum next week, will you get thrown out as this lawyer did at the Trop last week?

Added 2:15 PM – The Minnesota legislative session ended with no action on stadiums for the Minnesota Vikings and St. Paul Saints. A deal would have to be done in a special session.

05.24.11
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Want a franchise? Empty your wallet

Just as the stock and housing markets have experienced bubbles, MLB appears to be in a bubble of its own when it comes to buying and selling franchises. Last week, Drayton McLane and Jim Crane came to a surprisingly high price of $680 million for the Astros. That follows up the auction-boosted $593 million paid by Nolan Ryan’s group for the Texas Rangers. In both cases the final sale prices were a combined $348 million more than Forbes’ valuations at the times of those sales. Prior to the two Texas teams, the Padres and Cubs pulled $100+ million premiums over Forbes.

* - Debt may not include all debt for related companies. ** - Astros sale is not yet final.

It’s not only MLB. Last year the Warriors were sold for a NBA record sale price of $450 million. Again, this was around $100 million more than expected for the team. Compare these recent sales to those of a few years ago in the table above. In those cases the disparities weren’t nearly as vast and could be easily explained. Nowadays it’s hard to say. The Astros reportedly fetched a higher price due to projected higher revenues from a new regional sports network. Yet the Rangers’ premium price didn’t even include all of the parking lots surrounding the stadium, and it’s possible that a future sale of the Dodgers will have similar limitations. I have a few hunches as to why this bubble is occurring:

  • Money has been sitting on the sidelines of the broader market for so long that interested buyers are willing to pay premiums for sports properties.
  • Local TV revenue is starting go through the roof for more than the big market teams, which is encouraging investors to buy into teams with long, locked-in TV contracts.
  • MLB’s CBA in particular looks attractive to investors because cost controls are inherent for each team and there’s little worry about labor strife.
  • Someone (who?) may be priming the pump on franchises.

That last bit is complete speculation with no basis in fact, but how else can you explain it?

The next franchise likely to be sold will be the Braves (again), who were sold in 2007 as part of tax-free, debt-free equity swap between Ted Turner and John Malone’s Liberty Media. Those tax breaks expire next year, which means the clock is ticking for the Braves. I’m curious to see what price they fetch – and whether having zero debt load makes any difference.

As long as franchises continue to be sold for premium prices, the market creates yet another obstacle for Oakland. Let’s say the Wolff gives up on the Bay Area and announces he wants to sell with Fisher. Bidding could easily grow to over $400 million with no guarantee of a hometown discount. The best hope for the pro-Oakland crowd would be if Fisher could be convinced to stay on as silent majority partner and another managing partner were brought in, much the same way Bill Neukom was brought into the Giants. But if you’re Fisher, how do you sign on without guarantees you’re getting real returns? By real returns, I mean a ballpark that more than pays for itself. If I knew the answer, perhaps I wouldn’t be so skeptical about Oakland’s chances.

05.23.11
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A’s change Twitter name from @OaklandAs to @Athletics

I’m not sure if I ever explained this before, so forgive me if I’m being repetitive. When I set about moving this blog from Blogger to a self-hosted WordPress installation, I looked far and wide for a unique, succinct domain name. The obvious choice, newballpark.com, was already registered to MLB. The reason? It was purchased well over a decade ago by the Red Sox, who at the time were run by John Harrington. Harrington was in the throes of a campaign to replace Fenway Park with a newer, more modern version of the yard next door. After the Montreal Expos were contracted and reborn as the Washington Nationals, Harrington and the Yawkey Trust were out and John Henry, who had until then owned the Florida Marlins, took over the Sox. Henry chose to renovate instead of replace Fenway, and the rest is history. Ironically, the domain newballpark.com remains with the Sox despite the 180-degree turn. I could have chosen newballpark.net (which is available to my knowledge) or newballpark.org. Since I wanted to run the blog as a clearly non-commercial entity, I chose the latter. And here we are. So it’s with some amusement that I found out that the A’s changed their official Twitter feed from @OaklandAs to @Athletics. Immediately there was some worry that this was yet another slight of Oakland, and that the change was an indicator that they were out the door. Athletics After Dark‘s Dale Tafoya got the word from straight from the A’s. twitter-tafoya-rose

It makes sense. The A’s were always going to be in this awkward situation regarding naming, especially on social media. Should they use OaklandAs, OaklandAthletics, Athletics, or OaklandAs? Isn’t “Athletics” synonymous with what Americans call “track and field?” Not having the apostrophe available on Twitter might lead to misinterpretation. In the end, when A’s fans posted on Twitter, they customarily used the hashtag #Athletics, so naturally the team might want to pursue the name. The baseball Giants weren’t first to claim either the domain name or Twitter account named “Giants” with both going to the New York Football Giants instead. The domain name athletics.com belongs to Selliquest, a purveyor of web-based sales and marketing tools for the pharmaceutical industry. The product in question is called Net Athletics, though the second word is emphasized. Selliquest owns both athletics.com and netathletics.com. Would they be willing to part with athletics.com for the right price? If it goes according to form, the company will probably ask too much for the domain if the A’s come calling. One more thing: #FIREGERENNOW

05.22.11
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The Neukom Doctrine

In the mid-90’s, Microsoft was at the top of the world. With unmitigated dominance over the computer operating system market, smaller competitors were crying foul as Microsoft used its stature to enter new markets and take them over. Often MSFT did this by bundling features into Windows for free, such as its Internet Explorer browser. This strategy was called “embrace and extend” though it really meant “embrace, extend and extinguish” to competitors, as Microsoft frequently added features that would lock out competitors.

Giants managing partner Bill Neukom is no stranger to this strategy, as he defended Microsoft’s practice of it during his tenure as general counsel until he left the company in 2002. Initially he and Microsoft lost the landmark antitrust case against the Department of Justice in 1999, only to have the decision overturned by an appellate court. The company and the government eventually settled out of court, which allowed the company to stay intact (DoJ was seeking to break it up). Historically, the decision for Microsoft is viewed as a somewhat pyrrhic victory, as it has struggled to innovate in the face of Google, Apple, and smaller upstarts over the past decade, resulting in flat stock performance during that period.

By building AT&T Park, Peter Magowan initiated his own form of “embrace and extend” with the fanbase by choosing a more attractable, accessible location for the Giants than the windy, transit-poor Candlestick Park. Suddenly it became much easier to bring in fans from throughout the city proper, plus well-heeled fans in Marin County (via ferry) and the Peninsula (via train). The Giants got the added bonus of tons of fans coming from the East Bay via ferry and BART. Many of those fans were ex-SF residents who moved out to warmer, cheaper suburbs like Concord and Pleasanton. In doing so, they struck at a huge part of the A’s East Bay fanbase, and while many of the hardcore A’s fans would stay allied with Oakland, the A’s lost one very important demographic: Giants fans who could frequently go to A’s games as a more accessible substitute.

Since then-A’s-owner Steve Schott couldn’t object based on the fact that the Giants were building within city limits, all he could do was to deal with it and look to improve the A’s stadium situation, which he tried with Lew Wolff at the HomeBase site and in Santa Clara. The former was declined by Coliseum officials, the latter by Santa Clara officials when rumors of Schott wanting to sell arose. Schott also infamously didn’t show for a presentation on Oakland’s Uptown site, which is the very least he should’ve done – even though Jerry Brown was never going to let an Uptown ballpark happen on his watch.

Neukom further extended Magowan’s strategy by acquiring the San Jose Giants. He also had the World Series trophy paraded all over the East Bay – though not Oakland, obviously. Now, he’s preparing to make an interesting choice regarding the Giants’ future.

Since the beginning of his tenure as managing partner, Neukom has been steadfast about the Giants’ territorial rights to Santa Clara County. The argument goes that the value of those rights was baked into the financing of AT&T Park, which means they’re also baked into the franchise’s value. As such, they’re sacrosanct and not up for negotiation. Naturally, being steadfast is not the only option that he has since Bud Selig may choose to nudge him in one direction or another. With that in mind, it appears that Neukom and the rest of his ownership group have three distinct options moving forward.

  • Don’t budge, let the A’s leave the Bay Area. The Giants have said publicly that they “hope” that the A’s are able to work out a ballpark deal in the East Bay, since it would respect the existing six-counties-to-two distribution of territories in the Bay Area. Secretly, they have to be hoping the A’s fail completely in the Bay Area and are forced to look elsewhere. The only really advanced threat of building in either Alameda or Contra Costa Counties was when Pacific Commons was in the planning stages. It concerned Magowan and Giants President Larry Baer enough that they scouted the location to see how close it was to Santa Clara County. With Fremont a bust and many outside Oakland skeptical that a privately financed ballpark deal can be done in Oakland, the Giants have to be licking their chops at the thought of a Bay Area completely to themselves. While there don’t appear to be any good relocation markets for the A’s at the moment, there’s no certainty that will remain so five or ten years down the road. Should the A’s leave the Bay Area, they would be compensated by the Giants for ceding the East Bay. The interesting thing about such a transaction is that like the Giants ceding Santa Clara County, it would place a price tag on a territory. If the argument among the big market teams is that they don’t want to see such a precedent, then they don’t want either outcome to happen. Strange, huh? It would get even more complex if the A’s were to move to Sacramento as Baer has suggested, because the A’s could lobby MLB hard to split up Northern California to gain exclusivity over much of the region up to the Oregon border and Northern Nevada, the same way Warriors and Kings TV territories are split. The split would be damaging to the the value of the Giants’ TV rights since they’d give up millions of households every game. The result is ultimate dominance over the Bay Area for the Giants, but a huge loss throughout their broader territory. From a bottom line revenues standpoint, it’s hard to say how much this helps the Giants. If the A’s move out of state, the Giants pay nine figures upfront. If the A’s move to Sacramento, the Giants lose money on an annual basis. There have been rumors about the the Giants being willing to pay off the A’s to leave, so it’s not like both teams haven’t thought about it.
  • Don’t budge, keep status quo. This option assumes many events occurring in sequence. First, Lew Wolff (or whoever the owner is if Wolff sells) would have to stay in the Coliseum several more years past the existing end of the lease while working out the details of a ballpark in Oakland. It also assumes that MLB absolutely believes that a privately financed ballpark deal can be and is being done in Oakland. The Giants would be fine with this as it maintains regional hegemony. It might not work quite as well for MLB. If the A’s have trouble filling the ballpark due to poor performance, high priced tickets, or both, the A’s will have an extremely bad debt position for MLB to deal with. As long as the A’s struggle (whether in old or new digs), the Giants will continue to essentially pay part of their revenue sharing payment directly across the Bay to the A’s, which could be $20 million or more in coming years. Remember that the Bay Area is the only market where one team effectively subsidizes the other. That’s another situation that has to give MLB and Giants ownership pause.
  • Allow the A’s to move to San Jose. Again, Neukom has been steadfast about not allowing this. How bad would the Giants be damaged? Once you remove TV money and other Bay Area local revenue, I figure that Santa Clara County alone is worth at least $25 million per year in revenue to the Giants (back of napkin guess). That’s a lot. That pays off AT&T Park all by itself and then some. Neukom’s argument is that they’d lose that revenue. Wolff and South Bay proponents counter that hardcore Giants fans will remain that way and the Giants’ losses won’t be so deep. In particular, Wolff has argued that the league should look at compensation for T-rights on an annual basis, where a threshold is set and the A’s pay for the gap that doesn’t meet that threshold. Whatever the compensation model, I don’t think the Giants would lose $25 million annually. They’d probably lose 50% of that number since many of the fans are casual and both fans and sponsors can be replaced by East Bay fans. Years ago Magowan floated a number like $100 million for Santa Clara County, while Roger Noll estimates that the actual value is around to $20-30 million. If you’re Neukom and his partners, how do you attack this? A one-time payoff, even $100 million, dissipates within 7-10 years and doesn’t do much for franchise value (currently $563 million). Noll’s number is a mere pittance to them. Even if the A’s come off revenue sharing, it doesn’t mean the Giants won’t stop paying in – they most assuredly will continue to pay, though a few million less every year. The best thing for them may be to simply shut up. But that sets up the possibility that Selig will name the price for them.

No matter what Neukom decides, it looks like he’ll have to pay. He either keeps paying to keep the A’s in their stadium rut, he pays them to leave, or he gets less revenue if he cedes the South Bay. With the aura of the World Series and record revenues pouring in, such a possibility seems extremely remote. When the time comes to figure out how all of this should work out, that glow will be the furthest thing from his mind. By no means am I sympathetic to either Neukom or Selig for dragging this out for more than two years, but this is a thumbnail sketch of the dilemma and it took 1,600 words. What price hegemony? It’s definitely not cheap. Or easy.