Category Archives: Owners

06.26.14
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When the JPA is as effective as Congress

This shouldn’t be this hard.

Both Lew Wolff and JPA characterize the lease extension talks as close. Wolff or Bud Selig may have jumped the gun yesterday. Then again, maybe Wolff made so few changes with his counteroffer that he felt he could consider the deal done. Some staunchly opposed claim that elements of the lease such as the way the parking tax matter is being addressed are showstoppers. Maybe those items really are showstoppers. If they are showstoppers, it should be easy to kill the deal. Conversely, if the sides really are close as they purportedly have been for the last few weeks, it should be fairly easy to close the gap.

These two ways of characterizing the talks shouldn’t both be true. Last week I said that if the JPA, City, and County are truly concerned about the parking taxes (or the opt-outs, or other language), put the whole thing off until after the fall arbitration hearing. That’s effectively the same thing as saying NO to the lease. There are really three options for the JPA here:

  1. Vote Yes and deal with the fallout (coming from the Raiders/NFL)
  2. Vote No and deal with the fallout (coming from the A’s/MLB)
  3. Postpone the vote and hope to delay the fallout indefinitely from either side.

We have no visibility into the talks or the offers and counteroffers, yet I get the feeling that there is very little movement that should properly bridge the gap. There are numerous ways of dealing with the $5 million:

  • Leave the $5 million out of the deal
  • Raise rent to compensate for including the $5 million (from $1.75 million to $2.5 million/year)
  • Have the A’s surrender control of some revenue streams such as concessions or advertising

Now maybe the JPA has provided such options, and Wolff has called those showstoppers, I don’t know. Whatever the case, there seems to be very little creativity that would bring about a solution. Strangely, they’ve been fine with allowing the Raiders to pay very little rent while getting the Harbor Bay headquarters for free (as long as they’re engaged in Coliseum City talks).

Worse, I’ve been hearing a lot of outrage from some about how the A’s are ripping the City and County off for the $5 million. Yet I’m not hearing anything about properly addressing the ongoing $20 million subsidy (debt and operating expenses) that the City and County have to pay for. Are we so numb to that debacle that we can’t consider ways to deal with it? Sure, grandstanding on a one-time $5 million payment is easy if you’re an Oakland or Alameda County pol. Better that than to remind everyone about the even worse deal that they themselves negotiated nearly 20 years ago. If you’re going to really get outraged, get mad about that and ask the pols to make a better deal. Last time I checked, one-time $5 million payments aren’t worth much compared to $20 million annual payments.

I figure the outrage or faux rage is borne more from two separate motivations: the fear of Mark Davis, and the desire to never compromise with Lew Wolff. I imagine that there are some on the JPA who are more realpolitik and don’t want to favor one owner over the other or understand that the best way to go may be with one team instead of two, but there will always be some who can’t give in, can’t make it look like Lew Wolff won. For them, I think the answer is quite simple and can be ratified by a simple No vote. Bud Selig’s comments may have complicated things a bit, but if these stridently principled Nays are that opposed, this should be a no-brainer.

Really, a vote either way would be the best thing for all parties. It would allow both teams to know where they stand and would allow them to plan next steps. If they can’t decide on this on account of $5 million, it makes me wonder how they’re going to make a decision on a project that could cost 500 times as much. If they can’t decide and keep trying to entertain lease discussions they’ll continue to be caught up in the media battle, which they are not winning. It won’t win over the Bud Selig or Roger Goodell. Fans will continue to be frustrated and the whole affair will continue to be a distraction. I doubt that’s what anyone wants.

So please, JPA, if it’s close to a reasonable deal, make the necessary changes and vote YES. If the deal sucks, vote NO. Then we can move on and focus not on short-term fixes, but rather a long-term home. And you’ll look decisive for once, instead of looking like Congress.

06.25.14
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Selig puts out statement about the Coliseum and Howard Terminal (Update: JPA response)

Just in from the official MLB PR Twitter feed:

“I commend the Oakland Athletics and the JPA for their efforts in reaching an extension for a lease at O.co Coliseum. The agreement on this extension is a crucial first step towards keeping Major League Baseball in Oakland.”

“I continue to believe that the Athletics need a new facility and am fully supportive of the club’s view that the best site in Oakland is the Coliseum site. Contrary to what some have suggested, the committee that has studied this issue did not determine that the Howard Terminal site was the best location for a facility in Oakland.”

That makes it official. MLB is throwing its support behind Wolff and his plan, however nascent, for re-doing the Coliseum complex. That plan is not Coliseum City and is not compatible with Coliseum City. Moreover, Selig considers the 10-year extension a “crucial first step” to keep the A’s in the Town. If that isn’t Selig trying to use his leverage, I don’t know what is.

Sure, if talks break down again MLB could intervene again and negotiate another short-term lease, or turn around and green light Howard Terminal. But they probably aren’t inclined, given Oakland’s generally wishy-washy handling of everything at the Coliseum.

Your move, Oakland.

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Update 3:30 PM – The JPA just released this statement:

OAKLAND, CA – The Oakland Alameda Coliseum Authority has issued a statement following Major League Baseball Commissioner Bud Selig’s public comments on the license agreement between the Oakland Athletics and the Authority:

“We very much appreciate Commissioner Selig’s support for Oakland to be the home of the A’s. We also agree, and we believe the A’s do as well, that long-term the Coliseum is the best site for them in the East Bay

We are still fine-tuning the details of the license agreement between the Authority and the A’s. It is our hope that the details will be finalized shortly and will then be voted upon the by the JPA on Friday. Once approved, the agreement will then be voted upon by the Alameda County Board of Supervisors and the Oakland City Council in the weeks ahead.”

Update 4:50 PM – Oakland Mayor Jean Quan denies that the A’s and the JPA have come to a lease agreement:

sovern

Larry Reid also appears to be surprised (link includes quotes from me). They certainly didn’t see this coming. These joint powers arrangements aren’t complicated at all, as you can see.

06.25.14
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Oakland: We’re SF-adjacent!

An op-ed by Oakland Waterfront Ballpark leaders Don Knauss and T. Gary Rogers hit the Tribune tonight, making its case for a ballpark at Howard Terminal. In the op-ed Knauss and Rogers extol the virtues of downtown ballparks, while also talking up Oakland as a beneficiary of spillover effects from the startup boom in San Francisco.

That’s in keeping with the Oakland-as-Brooklyn narrative many are trying to pitch when wooing companies and potential residents to Oakland. From the housing standpoint, it’s definitely working. High rents in SF and comparable or better cultural and lifestyle resources in Oakland make a compelling choice for some residents and companies. But let’s not make this more than it is. Right now, Oakland is a stylish, cheaper bedroom community for SF that Marin’s too stuffy to produce and Daly City is too plain to provide. Is Oakland’s best sales pitch We’re San Francisco-adjacent? If Oakland wants to be taken seriously as a major city of prominence, its pitch shouldn’t be that it’s close to SF. The pitch should be that Oakland is the new home for investment. SF brought in $5 billion of venture capital last year. San Jose brought in $3.5 billion. Oakland? $242 million. Plus Silicon Valley is the home of VC’s and the big companies like Apple, Google and Facebook – companies that regularly acquire or acqui-hire those same startups that Oakland covets. Oakland should be more than simply riding on the coattails of the very city it hates like a bitter enemy. As a coach who recently coached a team based in Oakland would say, C’mon Oakland, you’re better than that.

The other part of the Knauss-Rogers argument seems to be aimed directly at this blog:

Some have said that, as a former industrial site and one close to railroad tracks, Howard Terminal poses unsolvable challenges for development as a ballpark. The reality is that Howard Terminal carries no greater challenge to being successfully developed than other former industrial sites along the San Francisco Bay, including Mission Bay and the famous ballpark across the Bay.

Not unsolvable, guys. I describe these challenges as cost-prohibitive. Nearly any problem can be solved if you throw limitless amounts of money at it. Limitless amounts of money are not available from the City of Oakland’s coffers, and ultimately any group that may want to build at Howard Terminal will face a situation where the cost to develop is too high to make their money back, nevermind making a profit. Those costs, and the lengthy development timeline associated with them, are what Lew Wolff is talking about regarding Howard Terminal. The cost and time of dealing with CEQA, the BCDC, SLC, FRA, CAPUC, Caltrans and local agencies threaten to make Howard Terminal too costly too pull off.

If OWB wants to prove Wolff, me, and numerous other doubters wrong, they sure have a funny way of showing it. The exclusive negotiating agreement signed in the spring, which was supposed to start the pre-development process, only called for a $100,000 deposit by OWB, only half of which will go towards any studies. Frankly, that money isn’t enough to do anything substantial. Howard Terminal will require $2-3 million worth of studies to determine its true feasibility.

Oakland and many of the Howard Terminal proponents had a chance to prove out a waterfront ballpark site five years ago. It was called Victory Court. It offered many of the same economic advantages as Howard Terminal, but lacked the SF-adjacent angle because the nation was mired in a recession. Supposedly over $1 million was spent on studies for Victory Court, some of which could be used for Howard Terminal. We never saw any of those studies. As redevelopment died and the recession showed few signs of abating, Victory Court died. Unlike the big to-do when the initiative was launched, there was never a report issued about the site’s demise. We found out later that acquiring the site at up to $240 million would’ve been cost-prohibitive. Thankfully, Howard Terminal is already owned by the Port of Oakland. However there are plenty of issues that could make Howard Terminal too expensive to develop.  If OWB is so confident in the site, pony up the money to get it properly studied. If OWB really believes in the site, they should’ve paid at least a good portion of that $2-3 million ($500,000 would probably suffice for starters) to get the ball truly rolling. As it stands, the ENA and $50k look like someone did something, but when the time comes to show results, the only thing to say will be that Oakland spent the first year trying to figure out if the ballpark was worth pursuing. We’re past the point of feigning interest, folks. Commit the real money, get those studies going in earnest, and prove Wolff (and me) wrong once and for all. Over the past few weeks there have been a few op-eds from interested parties. Let’s aim for fewer op-eds and more reports. It’s not that hard, Oakland. And if you’re waiting for Wolff to write a big check for those studies, I have to wonder how committed OWB and its supporters really are to the idea.

06.18.14
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Purdy cites Sharks’ TV deal as reason team could leave San Jose

It wasn’t that long ago that the Sharks were such a laggard in terms of TV ratings and revenue, they sold their own ads. With no competition to Fox Sports and its successor, Comcast Sportsnet, the Sharks always ended up the runt of the litter compared to the MLB and NFL teams, plus the Warriors. When CSN California was started in 2009, the Sharks gladly leaped to the fledgling network in hopes of better exposure and fewer time conflicts. While they got both of those goals realized, the actual contract terms severely favored Comcast, netting the Sharks only $7 million a year.

Mark Purdy mentions Sharks ownership’s exasperation with the deal, which was negotiated in 2010, years before Hasso Plattner assumed the throne at the Tank. The NHL hasn’t been affected as much by the TV rights bubble as the other three major sports, but there’s enough of a discrepancy that it’s problematic for the Sharks, who have the 4th highest payroll in the league. SoCal rivals, the Kings and Ducks, bring in $20+ million annually. Even the Florida Panthers rake in around $11 million per year. Toronto has the most lucrative deal at $41 million per year, which expires after next season. That said, Toronto’s deal is approximately the same as the middle-of-the-pack deal the A’s signed, ironically also with Comcast Sportsnet.

And it’s not like the A’s are a ratings powerhouse. Both the A’s and Sharks are in the 1.x ratings range on CSNCA. You’d think that would translate to similarly sized deals. Evidently not. Purdy speculates that former Sharks exec Greg Jamison lost his job after making the deal. Jamison had a long tenure dating back to George Gund’s time as the owner, so maybe Jamison was too fixated on how the deal compared in proportion to previous deals. Perhaps he didn’t see the bubble coming.

Current team CEO John Tortora is a former media lawyer, so renegotiating the contract should be right up his alley. Unfortunately, the team is locked in for another 14 years, and while Comcast may be accommodating to some degree, they’re not gonna give away the farm. I like the idea of NHL commissioner Gary Bettman getting involved and holding next winter’s Stadium Series game as a carrot, though I’m not convinced it’ll make that much of a difference. When Comcast files its annual financial statement, CSNBA and CSNCA are lumped with all of the other regional sports networks and non-sports properties like USA and Bravo. But it’s obvious that each network is its own unit and must perform up to par. Take CSN Houston, whose carriage situation outside its sister cable provider has been disastrous. CSN Houston is currently undergoing bankruptcy proceedings, and the two teams who have partnered to start the network, the Rockets and Astros, are feeling the pinch because of that mess. For Comcast, CSN Houston may be the canary in the coal mine that signals the end to the bubble.

Trapped for now with a poor TV contract, the Sharks could look elsewhere locally for revenue. Santa Clara has harbored ambitions of a huge Coliseum City-like entertainment complex, with Levi’s Stadium and Great America acting as anchors. An arena – presumably on the current Golf & Tennis Club – would complement the existing options, with a Santana Row-like development bridging the area between the arena and the stadium. Since the City is tapped out because of obligations for the stadium and redevelopment dead, the Sharks would be on their own the same way the Warriors can’t expect help from San Francisco for their Mission Bay arena. Even with free or cheap land, the arena’s price tag would be $600-700 million. Most franchises can attempt such a move if they have ballast in other areas like TV. The Sharks do not, so it’s hard to see how they’d take on such a huge debt obligation.

Attendance has been great for all 20 years the Sharks have been at the Tank, so the only motivation to reach for more is the premium seating segment. SAP Center has plenty of suites and club seats. The suites could be better situated, and the newer segments in between suites and club seats haven’t been addressed, whether you’re referring to 4-6 person loge boxes or outlandish accommodations like the “bridges” under the ceiling at MSG. Even standing room only seats have been turned into something of a premium experience in some arenas.

The cheapest solution would be to make improvements to SAP Center to match what’s being offered. There are only two concourses, main and club. The upper suite level above the seating bowl is too narrow to serve anything besides the suites and penthouse area. The ceiling is among the lowest in the NHL, which limits expansion to an extent but also contributes to making the arena very loud (compared to Staples Center and Honda Center it’s no contest).

tank-seatingchart

Recent Sharks seating chart

Knowing the Tank’s limitations, I have a short list of improvements that could be made to keep the place competitive:

  • Install 40 loge boxes – As you can see from the chart above, the club seats begin where the club level vomitories (tunnels) provide access to the seats (near the 100-level numbers). The seats immediately next to the vomitories are non-club seats. If the Sharks want to add loge boxes, they can do so in those 4 rows. Doing so would displace a bunch of season ticket holders. Hopefully they can be relocated to comparable area.
  • Replace the wire/metal railings at the front of the upper deck – Currently the Sharks sell Ledge seats at a premium, as most teams do. If they remove the wires and replace them with glass, the views from the 2nd and 3rd rows won’t be as compromised, allowing the Sharks to sell those seats for more.
  • Redo the lower half seating bowl with dual-rise seating at the ends – Doing so will make the arena configuration more flexible and efficient. See this post for more.
  • Install rafters seats – Like the MSG bridges, these seats would be in the ceiling and would practically overlook the rink. The elaborate truss framework in the ceiling is designed to make various parts up there easily serviceable and accessible. Look up during a game and you’ll often see people scurrying along the catwalks. If the Sharks can figure out a way to properly provide fan access, there’s an obvious opportunity. The only question is whether the trusswork causes obstructed views.
SAP Center ceiling

SAP Center ceiling

All of this costs money. SJAA, the authority that manages the arena over the top of the Sharks, has a capital improvements budget that it negotiates with the City and the Sharks. Over time they’ve funded replacement scoreboards, the addition of new suites, and other changes. It’s through SJAA that future improvements will be funded, though the Sharks will have to pony up a lot of their own money to get it done. For the rights to operate the Tank and get a cut of concessions, parking and other revenues for all events at the arena (not just hockey), the Sharks pay San Jose $7-8 million a year – mostly for debt service. The Sharks have claimed paper losses for several years now, partly owing to that rent payment, the TV shortfall, and the team’s high payroll. Perhaps the Sharks will offer to make the improvements in exchange for lease concessions. Also, there’s still the deal struck in 2010 to build a garage north of the arena in case the A’s come to San Jose. The lease is up in a few short years, so both sides better get prepared.

Finally, there’s a much simpler market-related question to ask: Can the Bay Area support 4 arenas? With the W’s building their own in SF, Oracle Arena and SAP Center probably still standing for some time to come, how does a 4th arena (2nd in the South Bay) make any sense? Touring acts will play the 4 off each other, killing the arenas’ profitability in the process. LA and NY support 3 up-to-date major arenas, mostly because all the arenas have sports franchise tenants (the Forum is an outlier). In the Bay Area’s case, only 2 arenas would have sports franchises. Each arena would be specced out for their respective team, multipurpose being synonymous with compromise. From a demand standpoint it makes little sense. Plattner, Tortora, and their staff probably realize this and know how to move forward with the venue. But consider for a moment that the Bay Area could have 4 very nice arenas yet only 1 modern NFL stadium and 1 modern ballpark. Frankly, that looks more than a little skewed.

06.17.14
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A’s lease extension vote postponed, aftermath

The Trib reported tonight that after a lengthy discussion by the Oakland City Council about the merits of the proposed 10-year lease extension for the A’s, the JPA vote on the lease will be postponed. Opponents, largely Raiders fans, were ready to break out talking points for Friday’s scheduled JPA meeting. No need for that, though we’ll have to wait for the inevitable lease leaks about the lease the next time it comes up.

I thought the lease would be approved based on CM Rebecca Kaplan’s work on the deal. Problem is that we’re in June, and Oakland’s just starting to have very important budget discussions. While property tax revenue is on the rise, there are still potential shortfalls that need to be addressed. One way to address them – at least this year – is to hold firm on the parking tax fight they’re having with the A’s. Or as I said on Saturday:

Lease tweets

Lease tweets

If the City doesn’t want the parking tax to be a wedge issue, then simply let the matter go to arbitration as planned for the fall. When that’s done, start up the lease discussions anew. Yet, why do I get the feeling that we’ll hear about this again before election day?

Yep, just as I expected.

There’s also another way to manage these lease discussions – do everything privately. Stop broadcasting out to the media that a deal is close, and then when the actual negotiating begins, walk away from the table. The level of pettiness and petulance on display is unseemly. If the two sides really want to get it done, stop with the interviews and soundbites and hammer it out, with input from all stakeholders. If not, MLB will be happy to dictate the terms for you as they did last November.

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Speaking of pettiness, what’s this?

Did Wolff instruct the scoreboard operators to change the display from “OAK” to “A’s”? There’s no reason to do this unless Lew’s trying to send a message to Oakland pols. Or unless he felt he needed to test the apostrophe thoroughly. Of course, over the weekend Lew had some fun with his image as the A’s hated owner, so maybe this is an extension of that. If so, he trolled some very excitable A’s fans very hard.

On Twitter I had been referencing a study from Emory University about the types of fanbases each MLB franchise has. The study tried to separate various factors, such as a “bandwagon” effect (fan sensitivity to on-field performance) and social media equity (how frequent and how volatile is team’s Twitter following) and others. While the bandwagon discussion was quite the flamefest, there was a good deal more agreement about the assessment of the A’s social media characteristics. Teams were grouped into one of four silos, and while there could be some debate about a few teams, the A’s place was rather well earned.

Groupings of team by type of fanbase

Groupings of team by type of fanbase

“Depression & Some Mania”, eh? Wouldn’t have it any other way.

06.11.14
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Oakland’s reckoning: Raiders or A’s?

More info about the pending lease extension came out via Lowell Cohn over the weekend and from Mark Purdy today. If you’ve been following the story since November, you’ll know that there aren’t many new items here. Yes, the A’s will pay slightly more in rent than they are now or were in the last lease. Yes, they want to put in new scoreboards. And yes, the lease term will be 10 years, with an escape clause if the Raiders build a new stadium that forces the A’s to be displaced. There is one new wrinkle, in that the “eviction” process for the A’s will include a 2 year advance notice by the JPA. That should allow the A’s enough time to properly scope out temporary venues, whether they are existing ballparks in the region or something else like a temporary new stadium. It should also put MLB at ease since they won’t have to go into scramble mode trying to make accommodations for the A’s or visiting clubs.

Cohn’s long blog post is probably the most evenhanded take he’s ever had on Lew Wolff. That alone is notable. More importantly, the post gets comments from both Wolff and Raiders owner Mark Davis on their desires for the Coliseum. Davis confirmed that he would prefer the Raiders to have Coliseum City to themselves. In Purdy’s piece, Wolff confirmed that he has no interest in Coliseum City as currently (or formerly) conceived, citing the complexity of acquiring land for the whole project, three-quarters of which (600 acres) is privately held. Wolff has experience with this, having explored and failed with that option, the Coliseum North/66th-High plan.

Wolff is a developer, and unlike the Coliseum City-Raiders concept, doesn’t need to bridge a $500-600 million funding gap. There could still be a gap, but that could be filled in by the usual private commitments (premium seat lock-in, charter seats, season ticket subscriptions). In turn, Wolff could develop the Coliseum in a more phased manner, with fewer pie-in-the-sky projections. Like Davis, Wolff wants control of a single venue and all of the revenue streams that come with it.

“But under no condition will we become a tenant of anyone in a new facility,” Wolff said. “We have to control our own destiny . . . We would be interested in the land that’s under city control. Once we’ve extended our lease, we can examine that.”

Moreover, Wolff continued to dismiss Howard Terminal, even go so far as to make the elimination of that site as a condition of negotiating on a new Coliseum ballpark, should that opportunity arise.

Naturally, there will be grousing by many in the stAy crowd about Wolff’s supposed fear of Howard Terminal. That’s ridiculous. It really comes down to two things: focus and resources. Right now Oakland is focusing most of its pro sports effort on Coliseum City through the JPA. It has spent money on an EIR, a draft of which is due in weeks. Howard Terminal, on the other hand, has no EIR even started yet. OWB, the group supporting the site, is providing $50-100k on limited work. The rest of the EIR will take at least 18 months from the start and would probably cost $2-3 million to complete. Wolff, having seen prior reports on Howard Terminal, sees this as a waste of money, time, and effort. Why spend $2-3 million to prove a negative? If OWB wants to spend that money, let them. They have the most to gain from an HT park. Something tells me that they won’t.

Then I started to think about the stadium boom of the last 25 years. I tried to figure out if there were any cities or municipalities that worked on two completely new stadium projects within the same city or market simultaneously. There aren’t many examples.

  • New York City – Citi Field & Yankee Stadium built at the same time, opened in 2009 thanks to Rudy Giuliani muscling it through.
  • Philadelphia – With Veterans Stadium and The Spectrum getting old, three venues replaced those two: Wells Fargo Center (1996), the Linc (2003), and CBP (2004).
  • Cleveland – The Jake (Progressive Field) and Gund Arena (The Q) both opened in 1994 thanks to the implementation of a city-wide sin tax.
  • Glendale, AZ – Jobing.com Arena and University of Phoenix overlapped by mere months, and have nearly bankrupted Glendale in the process.
  • Pittsburgh – Heinz Field and PNC Park opened flanking the now-departed Three Rivers Stadium.
  • Houston – Toyota Center and Reliant Stadium (NRG) also overlapped by a year and are in different parts of the city.
  • Seattle – Safeco Field and CenturyLink Field were timed to replace the Kingdome in short order.

Five of those cities had two venues built next to each other. The dual ballparks in NYC, an outlier due to circumstances, happened thanks to shady politics and shadier financing arrangements. The rest were your typical boom-era projects with huge amount of public funding. Most other venues are single-issue, pushed by the teams, and have their own unique financing structure. Oakland and Alameda County aren’t in the position those other cities are, not if various elected officials want to keep their jobs. The Raiders stadium will cost around $1 billion, while the A’s ballpark could cost $500-700 million depending on site. Oakland’s not going to be able to foot even 25% of each venue, so why would Davis and Wolff entertain the JPA’s grand schedule if they’re the ones footing the bill. The last thing Wolff and Davis want is Oakland to have divided focus on two projects that could ultimately compete against each other for scarce resources, whether money or personnel. They’re looking out for their franchises first and foremost. If Oakland gets a civic boost, great, but that’s not paramount for the owners.

And that’s why Oakland will inevitably have to choose between these two teams. Just building a single stadium, getting it approved, getting it vetted by civic groups and voters, will be its own set of difficult tasks. That demands full, undivided attention. If Oakland can’t provide that, it’s worth asking how truly serious Oakland is about all of this. That’s what Wolff and Davis are asking.

06.06.14
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Blackwell could become Coliseum City consultant, JPA to vote on lease extension 6/20

Fred Blackwell may end up having his cake and eating it too. Weeks after shocking the City of Oakland with his announcement that he would take the CEO position at the San Francisco Foundation, the Trib reports that Blackwell may end up taking a consulting position to oversee the Coliseum City project. It’s not clear if Blackwell negotiated his availability with SFF or if the JPA will even approve the side gig. Regardless, Blackwell would be valuable to have with the project, even if he isn’t necessarily a decision maker. Then again, considering he’s pulling down $344k per year with SFF and was paid pretty well as Oakland City Administrator, perhaps he should take the gig on a volunteer basis. What better way to show your commitment, eh Fred?

In the same article, JPA board member and Oakland City Councilman Larry Reid continued his Debbie Downer attitude about Coliseum City, especially the developer/investor group BayIG.

As far as the project is concerned, Reid said progress is hard to find. The city still hasn’t been able to sign an exclusive negotiating agreement with their new development team because of a payment dispute with a former development partner.

It’ll take $100k to jettison Forest City. This should not be that difficult. The lack of progress comes in the form of the lack of commitment (the notorious “letter of interest” from the Raiders) and some deliverables, which have slipped on occasion. Still, they’ll continue to plow ahead. What choice do they have?

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Then there’s this:

The first question that most will ask after this is, Is there an escape clause? Chances are that there is, beyond the fifth year. That’s what Lew Wolff wants. Mayor Quan and others on the City Council have preferred no out clause, and could vote down the extension after the JPA approves, but can you imagine how bad that would look? Especially with the mayoral race now in gear? Better to compromise and kick the can down the road than to cause yet another scene. And if there is no escape clause, I imagine that MLB wouldn’t approve it (they have to review and approve all team stadium leases). Given the state of the Coliseum, the league would want to retain flexibility for the A’s. That wouldn’t come with a 10-year, no-escape lease.

Lew Wolff has been steadfast in his stance that no future stadium talks can occur with a lease first. That’s the opposite of what Mark Davis is seeking, a stadium deal before the next lease for the Raiders. Davis said in April that a 10-year lease would make it tough for the Raiders to build at the Coliseum. Things might be a little easier if there’s an out clause, since the A’s could simply vacate when it comes time to start construction on a Coliseum replacement, whether it’s on the current Coliseum footprint or elsewhere in the complex. The current plan calls for the Coliseum to remain in use while two stadia go up alongside it. Beyond the obvious questions about parking availability, there’s still a major concern about making the financials work out. There are whispers that BayIG may not foot the bill, not so much because they can’t afford it but because the funding gap is so huge that it cuts heavily into their profit projections. And that may be the case with just one stadium, never mind the replacement ballpark. I expect the one year deadline to get pushed out by six months because of all the details and complexity. Will Davis hang in there? He already considers this stage the 11th hour.

06.04.14
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Forever small market

Update 8:10 PM – Oakland CM Rebecca Kaplan will announce on Thursday that she’s entering the mayoral race. Recent polls had her as a frontrunner even though she hadn’t declared.

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In an interview on Bloomberg Market Makers earlier this morning, Wolff talks up the 10-year lease extension that has gained momentum this week. When asked by show co-host Eric Schatzker when the extension might be done Wolff replied,

“Next couple of weeks, I hope… there are some approvals necessary, but the people we’re dealing with now are very intelligent and working with us.”

That seems to be a further nod to Oakland City Councilperson and JPA board member Rebecca Kaplan, who is now involved in negotiating the lease. Kaplan, who still hasn’t decided if she’ll run for the Oakland mayoral gig (thanks ranked choice voting for allowing this to play out), could very easily use the A’s extension as part of her platform, pivoting directly into the race immediately afterwards.

It’ll happen when it happens. Unless it doesn’t.

If you want to get a good idea of how the rest of the country views Oakland and the A’s, look no further than Schatzker’s numerous comments about the small market nature of the A’s. Moneyball may have indelibly painted the A’s as a small market team that plays in a crappy stadium, but there’s also a major disconnect. Market Makers is broadcast from New York, so it’s no surprise that the Schatzker and co-host Stephanie Ruhle know little about the Bay Area (Schatzker’s “southern Bay Area” remark is especially telling). Bloomberg has its own West Coast offices and a TV show broadcast out of SF. Oakland is mere miles from SF and a little further from the South Bay, separated only by a body of water, not a border, and yet Oakland is unable to shake the small market label. It’s not even clear that a new stadium in Oakland will get rid of small market.

Wolff, who had perhaps his best television interview in recent memory, played along with the narrative and called the A’s David to the various Goliaths, though as usual he didn’t complain about said Goliaths. The rising tide is lifting the A’s boat, as the franchise should see $200 million in revenue this year thanks to the new national TV deals. Yet competitively they remain way behind most of the rest of baseball, where 16 teams started the year with payrolls above $100 million. The A’s are stuck with the other small market – or rather, low revenue – teams. A new ballpark running at capacity should properly elevate the A’s relative to their peers. The CBA points out that the A’s are in the #7 market, and given their position they should be taken off revenue sharing once a new ballpark starts operation. But as long as the A’s remain in limbo with regards to a new venue, so will their financial position. They live in a large market, yet they can’t function like one because they don’t make enough money to live that way. Sounds apropos considering how tough it is for individuals to live in much of the Bay Area these days.

06.01.14
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Clippers sale: Bubble burst or new reality?

The pro sports valuation bubble officially hit a bursting point last week, when outgoing Clippers co-owner Shelly Sterling accepted a $2 billion bid for the team. The winning bid came from former Microsoft CEO Steve Ballmer.

Confusion reigned as the bids came in fast and furious early in the week, while at the same time Donald Sterling filed a lawsuit against the NBA for $1 billion. Eventually, language was included in the bid that would have lawsuits and punitive measures dropped, including the league’s lifetime ban against Donald Sterling. NBA commissioner Adam Silver and the notoriously litigious Sterlings managed to get done in one week what normally would take three months, and with the Sterlings was expected to get dragged out for perhaps years.

Ballmer, a longtime basketball junkie, had been involved in Chris Hansen’s bid to move the Sacramento Kings to Seattle. With lion’s-share financier Ballmer out of the picture, the prospects for a team in the Emerald City look rather slim for the foreseeable future. Ballmer has said that he won’t move the Clippers to Seattle, mostly because his $2 billion investment would be immediately be devalued upon relocating the franchise.

Even in the 2nd largest media market in the US, the $2 billion price has to be questioned. Sure, the Clippers are due a local boost when their TV deal comes up for renewal in a few years, and a national boost when the league’s TV deals get negotiated at the end of the decade. Those boosts still won’t properly support a $2 billion valuation. Forbes’ January valuation of the team was $575 million, based on $128 million in annual revenue, or 4.5X revenue. That’s already pushing things a bit, since it’s customary to value a team at 3X revenue. To justify $2 billion, the Clippers would have to realize at least $500 million annually, or a 4X jump from their current circumstances.

There’s no chance that such revenue will come from the new TV deals. The Clippers could get an additional $30 million a year from national TV, and another $100-150 million from Fox Sports West. Even so, that boosts their annual revenue to around $300 million, which would support a valuation of $1 billion. Of course, there’s no accounting for the competitive bidding activity that has surrounded recent franchise sales, so $1 billion would have to be considered a baseline, which was the case. Forbes’ Kurt Badenhausen laid out the case for why the team could fetch such a high multiple, but it still doesn’t quite add up.

The Dodgers sold for $2.1 billion, which came about because they too had a local TV deal up for bid. That bidding culminated in the birth of Sportsnet LA, the Dodgers-only regional sports network that will provide the team nearly $250 million per year. As one of the marquee franchises in the Southland along with the Lakers, a $2 billion sale price was considered enormous but not outlandish, especially when the value of Dodger Stadium and the 100 acres surrounding it are taken into account. The Clippers don’t have their own arena, or their own land outside of a recently built practice facility. They are mere tenants at Staples Center, and for the most part get the runt’s pick of dates and times at the arena. While the franchise has experienced a good run of success since they drafted Blake Griffin and traded for Chris Paul, Paul’s going to turn 30 next year and on-court success tends to be cyclical.

Ballmer will take over a team that has had few playoff appearances, let alone division, conference, or championship banners. He’ll look for ways to get the team to the summit, perhaps with an analytics-focused general manager. The Clippers are locked into their lease at Staples for another decade, so no new arena deal is in the offing – not that a new arena plan is emergent. Many in the media are calling for the Clippers name to be changed, its legacy tied to Donald Sterling’s long tenure as the worst owner in sports.

Then again, Ballmer may simply view the Clippers as a way to park $2 billion. Surely there are better growth strategies available, but when you have $20 billion and you have to diversify anyway, why not take on a franchise where you can reasonably expect the franchise growth to outpace inflation, where you’re virtually guaranteed to not lose money? Plus he’ll have a nice toy to play with. Ballmer attended many Sonics games as a season ticket holder when the franchise was in Seattle, and his old Microsoft colleague Paul Allen has long owned the Portland Trailblazers. If you’ve got the cash, it sure beats putting money into something boring like municipal and corporate bonds.

Should a 6X multiple become a new standard for franchise valuations or sale prices, it would grow the valuation bubble to enormous sums. The Warriors would be worth $1 billion, double the then-record 2010 purchase price of $450 million. The trend could quickly take hold throughout the rest of the NBA and spread the other major sports, where the Raiders and 49ers could hit $1.3 and 1.5 billion respectively, and the A’s could reach $1 billion. The market dynamics could be balanced out if a number of owners decided to cash out at the same time, so the leagues will be hard pressed to draw out any new franchise transfers in order to prevent a buyer’s market from breaking out, crazy as that sounds. The simple truth of the matter is that pro sports teams are exclusive and extremely lucrative, whether playing the long game or running the team annually. Budgets are fairly easy to work out and costs are incredibly well-controlled thanks to collective bargaining agreements and pools of centrally-derived revenue. Even paper losses can easily translate into profits at the end due to owner-friendly depreciation rules. You favorite team has turned into a part of some rich guy’s portfolio. The hedge fund guys started figuring that out during the recession, and it has only grown since. That’s the world we live in.

05.18.14
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River Cats may change affiliation from A’s to Giants (Updated with River Cats statement)

Update 5/19 11:15 AM – The owners of the Fresno Grizzlies aren’t showing concern about the future of their affiliation with the Giants. They feel that the long history of Fresno being a Giants’ town, going back to the Cal League in the 40’s, will win out in the end. In addition, the Angels have renewed their PDC with the Salt Lake Bees through 2016.

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Update 2:00 PM – The River Cats released a statement about their affiliation with the A’s.

“Though our player development contract with Oakland does expire after this year, we place the utmost value on our affiliation with the Athletics. This year, as in years past, we will perform an internal evaluation after the season has concluded. Our first priority has always been, and will continue to be, providing our fans with the best experience possible at Raley Field. This year is no different.”

That internal evaluation will probably include exchanging the more successful A’s-supplied rosters with the generally mediocre Giants-supplied Grizzlies rosters. While there would be a honeymoon effect, chances are it would be offset by fan response to bad play in the long term. Is it worth it? That’s for the Savage family to decide.

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Art Savage and Lew Wolff were friends going back many years, when Savage was the CEO of the fledgling San Jose Sharks. Seeing an opportunity to the north, Savage decided to gamble on moving a AAA baseball club from Vancouver to Sacramento, where there hadn’t been any kind of pro baseball in decades.  There was much shock and sadness when Savage died in 2009, at 58. Since then, his wife Susan and his sons have taken the reins of the River Cats, which are effectively the family business.

Despite the River Cats’ constantly excellent attendance performance (1st or 2nd in the PCL annually), the River Cats may choose to drop the A’s affiliation and shack up with the Giants after the end of the 2014 season, according to the Chronicle’s Susan Slusser. The River Cats-A’s Player Development Contract, which has been renewed with little rancor since the move from Vancouver, expires at the end of 2014. There is nothing stopping the River Cats from shopping around to hook up with a team that could provide maximum attendance and marketing opportunities, which in the NorCal market would clearly leave the Giants as the favorite, previous affiliations notwithstanding. 11 of the 16 Pacific Coast League clubs have their PDC’s ending this year, which will make the offseason a serious game of franchise musical chairs. A similar situation occurred in 2005 with few changes.

The simple fact of the matter is that attendance has dropped off from the 10k average crowds the Kitties experienced throughout much of their first decade at Raley Field, now at 8-9k per game. A trend of 10-15% drop off should be alarming for any club operator. If the move happens, it’ll be because Susan Savage felt that the best way to improve the bottom line was to work with the Giants. The orange and black fan base is extremely strong in Sacramento. Whether the team chose to keep the River Cats branding or switched to the Sacramento Giants, there would be more chances to leverage the Giants’ history and their greater ability (than the A’s) to keep stars. As Slusser noted, there’s also a chance for a more lucrative TV deal.

The Giants have every reason to pursue Sacramento if the Savage family is open to a new deal. Bringing Sacramento into the fold would further solidify the Giants’ hegemony in NorCal. It would provide a major obstacle to the A’s possibly moving to Sacramento, as the Giants could ask for unreasonable amounts of compensation if the A’s attempted such a move. The Giants would also have a better performing affiliate in a better market with a larger airport, a healthier financial outlook, and shorter driving distance for Giants farmhands.

Parent clubs pay for all player salaries and baseball operations, including coaches, for each of their affiliates. The minor league team’s responsibility is to cover marketing and ticket sales. Certainly the River Cats have been doing well, especially when compared to many of their PCL brethren. But there’s always the potential for more, so it would make sense for Susan Savage to at least take a cursory look. Sacramento is the belle of the PCL ball this offseason.

If the Giants got the River Cats and Sacramento market, that doesn’t mean that the A’s AAA affiliate could go to San Jose. While there’s no PDC for the San Jose Giants due to the team being owned by the SF Giants, there is a lease through 2018. Fresno would be the most natural alternative, although there’s a chance the Angels could also be interested as their PDC with Salt Lake City also ends this year.

One thing that could complicate matters would be if the Giants wanted to buy the River Cats from the Savage family. They already own the San Jose Giants, and they have the cash to buy any of their minor league affiliates outright if they chose to. If the Giants wanted to go that route and the Savages resisted, that would push them back into the A’s arms, since the A’s haven’t operated that way and probably won’t in the future. If the Savages wanted to cash out, there’d be no better time than this offseason. How chilling would that look? Giants surrounding the A’s on three sides: San Francisco, San Jose, and Sacramento. The A’s would have Oakland, Stockton, and Fresno. Talk about haves and have-nots.