Category Archives: Politics

04.04.13
by

Quan warns Oakland of state cash raid

straightcash

When the City of Oakland sold the Henry J. Kaiser Convention Center to the City’s dying redevelopment agency for $29 million last May, most observers saw through the shell game and figured that it would only be a matter of time before the state’s Department of Finance came looking for the money. Now we know that the raid is happening, thanks to Mayor Jean Quan’s warnings to the City Council this week. For more background on what got Oakland to this point, I’ll point you to two past blog posts.

As Oakland scrambled to deal with the ramifications of redevelopment’s demise, the City sought creative ways to move money around to fund basic city services. Methods included using redevelopment money to pay for items that would have normally be covered by the general fund, and transfers like HJKCC. State Controller John Chiang warned cities doing such transfers that if they felt that assets would be at risk for seizure, those assets should be placed in a reserve, which Oakland did to the tune of $30 million. In 2012, the City received a large uptick in tax revenues, bringing its surplus to over $80 million including the reserve. Quan expressed confidence about the surplus.

Even under the worst-case scenario, we have $45 million in reserves. We can cover this.

That worst-case scenario is approaching soon, as the seizures will occur, short-term benefits deals cut with unions to help balance the budget are set to expire, major unfunded pension liabilities loom, and the City works to maintain and add to police staffing. During Tuesday’s City Council meeting, a large union contingent was in attendance to protest any notions of prolonged or additional concessions.

Oakland made a huge mistake in 2011 in assuming that a crippled form of redevelopment would be allowed if bills AB 1x 26 & 27 passed. The nightmare scenario came to fruition when AB 1X 27 was ruled unconstitutional, leaving no avenue for future RDA activities. In addition to the state coming down on the HJKCC deal, the DoF asked Oakland to return $18 million of RDA money in January. All told, Oakland could be dealing with a new $50+ million hole that will go straight to future budgets. Unlike some of the other illegal transfers such as the ballpark land in San Jose, Oakland’s problems are related to cash that was either allocated or spent. The City still has the reserve that can backfill most of the hole, but it will put other parts of the budget at risk and jeopardize other projects, including broad development initiatives such as Coliseum City. Land transfers are a different case in that they don’t have to be liquidated unless the DoF determines that a city has come up so short that a fire sale is needed. In many cases, it’s merely a matter of determining that a piece of land has to be taxed normally instead of being placed in a RDA-style tax increment scenario.

Howard Terminal is owned by the Port while the Coliseum is jointly owned by the City and Alameda County. Neither HT nor Coliseum City are at greater risk in terms of feasibility due to the coming raid. However, it’s possible that the budget crunch will cause additional funding for pre-dev work at HT or CC to be rerouted elsewhere as both fall down the priority list in favor of more pressing matters. That already happened once with Victory Court in 2011, and we all know what happened with that plan.

The full impact of the RDA seizure and clawback won’t be known until the DoF releases its final report on Oakland and the City bakes the impact into its next budget.

04.03.13
by

Good cop, bad cop, legacy (Updated to include Mayor’s letter)

Added 1:00 PM – I’ve taken the liberty of posting the text of Mayor Reed’s letter to Commissioner Selig.

Mr. Bud Selig, Commissioner
Major League Baseball
777 E. Wisconsin Avenue, Ste. 3060
Milwaukee, WI 53202

Dear Commissioner Selig:

When will the A’s be moving to San Jose? That’s the question that is most often asked of me by CEOs of Silicon Valley companies competing to retain and attract global talent, by youngsters excited about competing in little league baseball, and by fans throughout San Jose.

The A’s ownership continues to express its desire to locate the team in San Jose and I strongly endorse that outcome. There should be no doubt of San Jose’s ability to be a great host city for the team and for Major League Baseball. There should also be no doubt that the stadium could have been under construction by now.

We respect your desire to examine fully all aspects of allowing the A’s to move to Northern California’s largest city. In 2011, former MLB President Bob Dupuy, speaking on behalf of your office, asked that our City Council delay approving a public vote to advance a planned stadium project in Downtown San Jose. We abided by that request. Mr. Dupuy also indicated that you would soon make a final decision and, if favorable towards San Jose, the MLB would assist the City with the costs of a future election. Two years have passed since. As you know, we have been contacted many times by the MLB’s Blue Ribbon Panel and we have responded promptly and thoroughly in every instance. Meanwhile, we continue to communicate with leaders in the community and are prepared to advance implementation actions to the City Council following your decision.

Direct communication between us will help resolve any lingering issues about our commitment to having the A’s home plate located in San Jose and could reduce the probability for additional litigation. I’d appreciate an opportunity to discuss this with you and have asked my Chief of Staff, Pete Furman, to contact your office regarding scheduling a meeting with you. I hope you will look favorably upon the request.

Best Wishes,

Chuck Reed
Mayor

c: Lew Wolff

—–

It’s probably not a coincidence that in the span of two hours, Lew Wolff spoke for the first time this regular season about the stadium situation on Chronicle Live!, followed by San Jose Mayor Chuck Reed asking for a meeting with Bud Selig via a one-page letter sent to  the Commissioner’s office.

Reed is positioning the requested meeting as something that could head off future litigation. Over the last year, San Jose has become more vocal about challenging MLB through the courts. So far MLB hasn’t budged. I can’t imagine that this will work either. Regardless of whether San Jose actually has standing in a case against baseball, the sport still has the lion’s share of leverage. If granted the meeting, maybe Reed will come with a phalanx of high-profile lawyers to shake down Selig. More likely is the idea that Reed will continue to pitch San Jose’s positives (of which there are many) and try to allay any fears that the A’s can be self-sustaining in the long run. Remember, they have to be off revenue sharing in a new Bay Area stadium.

As for Wolff, he was peppered with a lot of questions by ChronLive’s Jim Kozimor. Unfortunately, Wolff refused to talk about any progress on the decision-making front for a stadium location, citing the Selig-imposed gag order on both teams. He was able to comment on other matters. On the prospects of the five year lease Wolff requested last year:

The environment of getting a (lease extension) is very positive.

That’s encouraging. All A’s fans hope that the flying rhetoric stops and the team and the JPA can work out an extension that benefits both sides. That’s not going to be easy with the Raiders asking for more revenue control. We’ll see over the coming months if a proper agreement can be worked out for all sides.

Asked if Wolff and the Fisher family would consider selling the team if Wolff doesn’t get his wish to move the franchise to San Jose:

The answer is no… we want to keep this generational.

Following the 14-minute interview, in-studio guest Mark Purdy further elaborated on the “generational” aspect. Purdy indicated that Lew could cede more of the stadium effort in the coming years, as he approaches 80. Next in line is Lew’s son Keith Wolff, who has been working on plans for Cisco Field and the Earthquakes Stadium, where major site work started happening in the last week. Lew says that the Quakes stadium is on track, but process could slow it down. For now he says that the Quakes stadium should be open for the 2014 MLS season, conceding that there could be delays in completing the project. I figure that once that venue is up and running, Keith Wolff will assume his father’s place as the public face of the stadium effort, if not the franchise itself. With the recent trend of teams acting as investment vehicles and development anchors, this is naturally hard-to-believe. Considering how Wolff views his ownership of the franchise and how he attends games frequently with his grandson, it’s not necessarily that far-fetched. Wolff dismissed Kozimor’s suggestion that the team is just fine collecting revenue sharing checks, responding that he wanted to leave the team and the sport in a better place than he found it. As long as there continues to be an impasse vis-à-vis San Jose, that’s inconceivable.

03.27.13
by

Sacramento City Council approves arena term sheet 7-2

Mercifully, the dozens of public speakers at tonight’s Sacramento City Council meeting were done by 9. That left an hour for the City Council to discuss last Saturday’s term sheet on its merits. The evening culminated with an expected 7-2 vote to approve the term sheet, which the City and the ownership bidding group will present to the NBA in New York next Wednesday, April 3.

The two dissenters were Council Members Kevin McCarty (District 6) and Darrell Fong (District 7). McCarty was concerned about the lack of detail about the economic impact of the plan, and wanted to see a real report to that effect. Fong was harsher, asking for the same and also questioning some of the revenue backfill assumptions. Both wanted to see a deal more along the lines of what Seattle was offering, which is a roughly 40% public share. The Sacramento deal rates at 58% public, though if the $70 million in outstanding loans being repaid can be counted as a private contribution, it’s closer to a 50/50 split. Fong also cited San Diego as an example where as part of the deal, Padres owner John Moores was committed to developing much of the surrounding area in the Gaslamp Quarter. The whales have promised to make some further investments downtown and in Natomas if the construction moratorium is lifted. It’s up to the City to hold ownership to that promise.

The vote was almost upstaged by news from Monday that Qualcomm CEO Paul Jacobs is joining the ownership group, making him the fourth “whale”. I figure that Qualcomm will get first dibs on a naming rights deal, which makes some sense if the Chargers eventually move into a newer stadium in San Diego or some other market. New head whale Vivek Ranadive brought Jacobs in. So if you’re tracking it, the white knights coming to save Sacramento come from Silicon Valley, LA, San Diego, and the East Bay (which Mayor Kevin Johnson was quick to point out). When including the local minority shares, practically every part of the state is “represented” within the group.

Sacramento City Treasurer Russ Fehr came out strongly in support of the deal terms, repeatedly saying that backfill revenue estimates were conservative and weren’t based on radical changes such as huge parking rate increases. While some parts of the plan such as the 5% ticket surcharge can be achieved comfortably, there was still a very vague explanation on the parking revenue passthrough that should net $3 million. CM Fong also pointed out that no one had consulted the county on the possessory income tax part of the backfill, only saying that the projected $898,000 comes from an estimate tied to last year’s Railyards proposal. Detailed financial terms will undergo much greater scrutiny when the time comes, and the term sheet is nonbinding (as opposed to Seattle’s binding proposal), so things can and will change just as they did for the 49ers stadium project in Santa Clara.

Opponents to the term sheet were all grouped to speak first and were severely outnumbered by supporters, most of whom wore white “Crown Downtown” T-shirts. They all raised their arms in the air, which – no, was not some Nazi deal – was the group mimicking KJ when he got the phone call that the deal was done.

Arena supporters rise in unison to celebrate the vote and Mayor KJ

Arena supporters rise in unison to celebrate the vote and Mayor KJ

What’s next? The Seattle and Sacramento groups will make presentations a week from today, followed by the NBA’s Board of Governors meetings two weeks later. All along, I’ve said that NBA commissioner David Stern played this to perfection. He may have even played it too well, getting two cities to pony up at least $200 million for arenas in states where only a few years ago, this was considered impossible. Now the other team owners have the tough task of determining which bid is the most sound and beneficial to the league as a whole. That won’t be easy.

The more I look at this, the more I think that the real wildcard in this debate is something that isn’t even being discussed: local TV deals. Seattle’s a larger market, but a NBA team will be the fifth pro franchise in the area which could limit TV money. Seattle’s predominant RSN is ROOT Sports Northwest, run by DirecTV/Liberty Media. Sacramento is technically a mid-market (#20) based on size, but historically has lagged in terms of local TV revenue from Comcast SportsNet California. It wouldn’t surprise me if both bidders had already established talks with their respective RSNs to figure out how much more revenue they can get. If Seattle can get $10-20 million more per year or Sacramento can keep it competitive, that might be the deciding factor. All these histrionics, and it could come down to a factor that isn’t much in their control. Sounds about right.

—–

P.S. Readers who are following my articles about the Kings here or my tweets covering the news may think I’m needlessly slagging the Sacramento plan. I suppose it comes from a relative place of security. The A’s are not in danger of moving out of the Bay Area anytime soon, and if Bud Selig intended to create the kind of bidding war situation now on display in Seattle and Sacramento, he’s failed miserably so far. I’d like to see more cities hold fast to the idea of minimal public contributions and let more teams pay for the majority of new stadia. It seems like with the Kings arena and the 49ers stadium we’re regressing from earlier progress with AT&T Park and Staples Center. I certainly don’t want to see Sacramento lose the Kings, but I also think they should be able to secure the best deal possible, whatever that is. There have been plenty of privately funded arenas built over the last several years (Staples, Nationwide Arena in Columbus), yet time and time again it’s the leagues that have the leverage.

03.24.13
by

Comparing the 2012 and 2013 Sacramento arena deals

It took an extra couple of days, but the City of Sacramento finally released its arena term sheet. The document was supposed to be made available late Thursday, in order to give the public and the City Counsel the customary three business days to review it. The Saturday evening release gives 72 hours of lead time in advance of Tuesday’s City Council meeting, which will have the term sheet on the agenda.

I’ve taken some time to review the document, live tweeting observations as I went. Field of Schemes’ Neil de Mause also made notes on Twitter, going straight into the financial aspects of the plan. In the term sheet is a comparison of the deal to the 2012 deal negotiated by the City, Maloofs, AEG, and NBA, the same deal that the Maloofs backed away from weeks later.

comparison

Comparison of 2012 and 2013 arena plans

A big immediate takeaway is that the price has gone up $56.5 million, which City Manager John Shirey attributes to inflating materials costs. A 14% increase? Probably not. Instead, either the 2012 estimate was not sound and prone to cost creep, or the Ranadive-Mastrov-Burkle (RMB) group pushed for better finishes or features in the arena. It could be a little of both. The amount of the public contribution is the same, though the public percentage of the project is smaller due to an increased private share. AEG is not onboard this time around (yet), so the private share is listed solely as a Kings ownership responsibility.

Just like the last plan, the bulk of the public share ($212 million) will come from the sale of parking revenues. The difference in this plan is that the City is not selling the revenue rights to a private parking operator. Instead, the City is going to the trouble of creating a nonprofit, quasi-governmental corporation to control the revenues and distributions. The corporation will contract out with private companies to manage the lots and garages. The reason for this change is simple: it allows the City to refinance debt for existing garages ($50+ million) by continuing to use tax-exempt bonds. Under the previously negotiated arrangement, the City risked losing tax-exempt status on the bonds. The corporation would control parking revenue on all downtown lots except for Downtown Plaza, the arena site. Those revenues would stay with the Kings.

Despite the added complexity in the parking revenue arrangement, projections are fairly similar. The City receives $9 million annually from its downtown lots, which is being pledged towards the arena. The task is to find sources to adequately backfill that $9 million. The City projects $1 million in profit from arena operations, $3 million in new parking revenues, and a possessory interest tax payment of nearly $900,000 every year. Due to the lack of granularity, I’m naturally skeptical of these figures, as they seem like placeholders for a much more thorough accounting later. For now, the incremental $3 million is highly suspect, as the expected increased revenues from arena events are different line item altogether. If revenues fell short, the City could use hotel taxes to complete the backfill. The term sheet is nonbinding, as the deal is subject to CEQA and other approvals. Sacramento’s City Council will have to come back at a later date and approve the whole deal including the financing and the DDA, just as Santa Clara did for the 49ers.

2012’s aborted deal had the Kings locked in for 30 years. 2013’s plan has the team in place for 35 years to start, plus two 5-year options. Capacity and estimates for premium accommodations were carried over from 2012. RMB will handle cost overruns, plus ongoing maintenance and capital costs via a $1/ticket fee. Another carryover is the noncompete clause at Sleep Train Pavilion once the downtown arena opens. In conjunction with that, the City is selling 100 acres of land near STP for future development purposes.

One item lightly addressed was the fate of the $75 million the Kings still owe per the 1997 purchase/leaseback of the STP land in Natomas. The City indicated its willingness to refinance those bonds in order to get the arena deal done, but exactly how that would occur is left completely wide open. Mastrov and Burkle appeared to have erred when submitting their bid by factoring in that debt. The NBA didn’t factor it in and asked the bid to be raised to reflect a value without a discount.

Assuming the City Council approves the deal on Tuesday, this term sheet will be part of the submission to the NBA in 10 days.

Is this a good deal? I’m inclined to say no for taxpayers, yes for the NBA and the Kings. For Sacramento, it’s an enormous price to pay to keep the Kings in town, though it isn’t as bad as fully funding an arena with taxpayer money as is frequently done outside California. RMB generated a good deal of PR by pledging up to 1.5 million square feet of ancillary development at Downtown Plaza. Unlike the arena’s projected completion date of September 2016, no date was given for any ancillary development completion. Clearly that will only be done with regard to market conditions, which in downtown Sacramento have been spotty.

If we’ve learned anything from past attempts to use arenas as part of a grand urban renewal scheme, results are mixed at best and many of the successes come in established cities with properly targeted transition areas (United Center in Chicago, Staples Center in LA, Verizon Center in DC). Most of the time, arenas and ballparks bring visitors from within the region on event days only instead of creating the oft-desired 7-days-a-week metropolises many cities aspire to become. Cleveland, Phoenix, and yes, San Jose are prime examples of this phenomenon. If you live in Sacramento and you support this plan, don’t lose sight of what this is really about: basketball. Over the last month I’ve seen social media campaigns about the arena being bigger than basketball. That’s nice from a campaigning standpoint, but it’s not reflective of what’s really at stake. Even if the Kings leave, someone will buy and operate Sleep Train Pavilion, bringing in concerts to help pay for it. Sleep Train Amphitheater will continue to operate during the summer. Concerts will be held in the area because the region’s large enough to demand them. Basketball, on the other hand, won’t come back if the Kings leave. Is basketball worth the $258 million public cost? It’s funny, the people who desperately want the Kings to stay are sometimes will to pay any price to make it happen. Those opposed to an arena couldn’t care less and think pro sports are close to worthless. It can be hard to establish a middle ground between those extremes.

03.22.13
by

San Jose files motion to disqualify in S4SJ lawsuit

Update 3/23 1:30 AM – Pillbury made its own motion in response. They’re aiming to “augment the administrative record; memo of p’s and a’s” (points and authorities), so they’re providing their defense of their behavior in the case. I’ll try to get a copy of the motion ASAP.

—–

There’s a fairly new term being used in baseball talk on the internet these days: TOOTBLAN. It’s short for Thrown Out On The Bases Like A Nincompoop. It’s very popular on Twitter, and its lineage dates back to some misadventures on the basepaths by Ryan Theriot, who naturally was on the Cubs when the term was coined. When it comes to baserunning, Theriot is the polar opposite of Coco Crisp, whose recent profile by Grantland’s Jonah Keri elevated Coco to ninja-like levels between the bags. Still, Theriot has two World Series rings in the past two years, so who’s the nincompoop now? Well, it’ll forever be Theriot. Sorry dude.

The City of San Jose committed its own TOOTBLAN in the Stand for San Jose lawsuit. During the suit’s discovery period, the City inadvertently released several documents that clearly should have been protected by attorney-client privilege. When City attorneys found out, they asked S4SJ’s attorneys at Pillsbury to return the documents. Instead, Pillsbury held onto the privileged docs and sought to augment their own case with the documents. That forced the City to file a temporary restraining order against Pillsbury, which was granted by a judge in January 2012. Suspecting that Pillsbury lawyers would use the information anyway, last week (3/11) the City filed its own motion to disqualify counsel (read the PDF for the blow-by-blow), saying that Pillsbury’s conduct during discovery should force them off the case. From the motion:

By this motion, respondents and real party in interest seek disqualification of Pillsbury Winthrop Shaw Pittman LLP (“Pillsbury”) from further involvement in this case. Pillsbury attorneys closely examined and attempted to use nine privileged documents inadvertently produced by the City of San Jose. Pillsbury was ethically obligated not to review these documents any more than necessary to determine they were privileged and to immediately notify the City of its possession of the documents. In derogation of these obligations, Pillsbury not only reviewed the privileged documents in their entirety and failed to notify the City that it possessed them, it refused to return the documents after the City discovered the inadvertent production and requested that the documents be returned. Instead, Pillsbury affirmatively sought to incorporate the documents into the administrative record in this case and use the information in them to support petitioners’ claims, threating a motion to augment the record if they were not included. The City was forced to bring a TRO and preliminary injunction proceeding, which resulted in an order requiring Pillsbury to return the privileged documents and all copies. The documents contained highly confidential attorney/client communications and attorney work product bearing directly on the issues in this case. Pillsbury’s possession of this information prejudices the defense of this case, and there is no effective remedy short of disqualification.

I consulted with some folks who have a better grasp of the legal issues here. Apparently the motion to disqualify counsel is not something that is successfully granted often, and any such claims have to pass a fairly stringent test to force such an action. At the same time, the inadvertent release of privileged or confidential information during discovery isn’t all that uncommon, given the reams and boxes of documents that have to be made available for a trial. Still, this is an embarrassing moment for the City and it seems like they want to be rewarded for making a pretty big mistake.

The documents in question include marked up versions of the EIR, analyses and comments from the City Attorney’s office, and to my surprise, a draft of a Disposition and Development Agreement – effectively the lease terms for the ballpark and/or land. Frankly, I want to see this information and the public should have the right to see it. For now, records requests may have to be filed to gain access, and that may not happen until after a trial ends. Regardless, it’ll be interesting to see how Judge Hubner rules on this next month. Just like last fall’s motion to compel, this is a long shot at best, but Pillsbury’s conduct could result in sanctions if not disqualification. If Pillsbury were thrown off the case, S4SJ would be forced to bring in new counsel and prepare a new case, creating considerable delay. Plus the new legal team wouldn’t be the Giants’ own firm. Considering how the Giants may have pressured the Controller’s office to take actions against San Jose in the ballpark land rollback, just about anything’s fair game at this point. The hearing will be at Santa Clara County Superior Court on April 12, 9 AM. I expect to be there for the proceedings.

—–

Note: I spent a couple of fruitless hours at the Superior Court trying to get a copy of the motion, because it hadn’t been properly filed yet. I strolled a few blocks over to City Hall and went to the City Attorney’s office to request a copy. I received it via e-mail within an hour of the request.

03.21.13
by

State rolls back San Jose ballpark land transfer

Update 7:30 PM – Added link to Controller’s report.

Yesterday we got word that the 49ers and Santa Clara prevailed in its lawsuit to reclaim $40 million in redevelopment funds. Today comes the news that the State of California has ruled that land transfers from the City of San Jose to the Diridon Development Authority were ruled illegal.

The Controller’s ruling on the ballpark land seems to hinge entirely on the fact that the City/RDA didn’t enter into a sale agreement with A’s ownership until November 2011, after the June 28, 2011 cutoff when AB 1X 26 took effect.

The RDA made unallowable asset transfers of $29,137,727 to the San Jose Diridon Development Authority (Authority), a joint powers authority made up of the City and the RDA. All of the property transfers occurred during the period of January 1, 2011, through January 31, 2012 and the assets were not contractually committed to a third party prior to June 28, 2011.

The graf above comes from the 12-page report released today, a draft of which was sent to the City on November 15, 2012 to allow for a response. The City argued that “there is no statutory or legal support” for the 6/28/11 cutoff to no avail. The Controller disregarded this argument and directed the land be turned over to County-appointed Successor Agency, whose oversight board will make the final determination of what to do with the land. City has cutely shortened “Successor Agency” to SARA and for good reason. What does SARA stand for?

Successor Agency to the Redevelopment Agency of the City of San Jose

If the Diridon Development Authority is the “son” of revelopment, SARA is the daughter. What does SARA make of this mess?

Ordering the City to return the assets to the Successor Agency only to have the Oversight Board direct that they be returned to the City is simply form over substance and wastes valuable time, energy and resources to arrive at the same result.

Regardless of what happened with the Controller’s decision (which was expected) the City still feels that the land will end up with the A’s. If they had inked the sale agreement in March 2011 instead of November, the transfers would’ve been in the clear. Now they could sue the State the same way the 49ers did, but since that would be even more costly and the City and County are already working on a proper land disposition agreement, that seems like a terrible idea.

What will happen next? My guess is that the land won’t actually be sold. Instead, the parties will work on a lease agreement that would allow the A’s to build on the public portion of the ballpark site while the A’s buy the rest over time. The alternative is to sell the land for “market value”, with a yield large enough to be approved by the Controller. The purpose of this is two-fold: get a sale so that funds can be sent to the state, and ensure that the land is assessed at a value high enough to get adequate proceeds to the state, county, and schools. Mayor Chuck Reed, who is on the SARA oversight board, released a statement in response to the ruling just a few minutes ago.

I am disappointed in the findings made by the State Controller regarding certain properties transferred from the San Jose Redevelopment Agency to the City of San Jose, San Jose Diridon Development Authority, and City Housing Agency.

The properties transferred to the City include assets that serve a civic or government function, and likely will fall under the government use provisions of the new redevelopment dissolution law and my expectation is that the Oversight Board will make the same findings.

With respect to the Diridon Development Authority properties, the State Controller failed to recognize an Option Agreement validly entered into between the JPA and the Athletics Investment Group. Any transfer of these properties to the Successor Agency would be subject to the contractual rights of the Athletics Investment Group as required under state law.

The City Council and County Supervisors have both made their desire to have a ballpark built on the site known through formal resolutions in the past. My expectation is that we will continue to work together to bring the Athletics to San Jose regardless of the ultimate ownership of the JPA properties.

Coincidentally, an oversight board meeting is scheduled for tomorrow morning at City Hall. While this news came too late to make the meeting agenda, I would expect the matter to be discussed. I’ll attend and report back.

03.20.13
by

Judge rules State’s seizure of 49ers stadium funds improper, freezes funds anyway

A strange and very tentative ruling came down from the Sacramento County Superior Court regarding the $40 million in redevelopment funds earmarked for the 49ers stadium. Judge Allen Sumner ruled that the contract signed by the City, former Redevelopment Agency, and 49ers is legal for a simple reason: the 49ers are a third party. The State’s argument and the law passed in 2011 was such that agreements between a municipality and its redevelopment agency were not so-called enforceable obligations, where tax increment revenue was pledged to pay for a project or debt. Since the 49ers are a party to the agreement, the contract is, in fact, an enforceable obligation. Moreover, the judge wrote that the 49ers aren’t a mere third party beneficiary, they are also a direct party to the agreement since they loaned the money upfront in the first place as RDA funds were on shaky ground during that period.

Despite the judge’s ruling, $15 million in currently frozen funds will not be freed up for the 49ers or schools per last fall’s deal. Instead, Judge Sumner chose to let Santa Clara’s Successor Agency (son of RDA) figure out the repayment schedules (ROPS) for the 49ers and the schools. Until that is determined, the money will remain frozen. This is clearly a victory for the 49ers and for other private parties who have made deals with cities in the run-up to the death of redevelopment. In making this ruling, the judge was clear in that the court had no business redefining what an “enforceable obligation” was.

Reading this ruling’s impact beyond the scope of the 49ers stadium, it won’t necessarily help San Jose or the A’s since they completed their land deal for part of the Diridon site in October 2011, well after the law took effect. Then again, Santa Clara and the 49ers didn’t have their DDA finalized until December 2011. I guess we’ll have to wait for a court to rule on the A’s land deal, whenever that happens.

03.19.13
by

Santa Clara sells the farm to win Super Bowl

As the cities of Santa Clara (+ San Francisco) and Miami get closer to the NFL’s May awarding of Super Bowl L to an official host city and stadium, one city is struggling to get its ducks in a row whereas the other is taking care of its final bid details. Miami’s bid is flailing as funding for a major upgrade to Dolphins Stadium remains in limbo. Meanwhile, Santa Clara’s City Council is prepared to approve a series of concessions to the NFL that should sew up the game for the South Bay, while creating a risk that Santa Clara will run in the red in the process.

To help pay off the 49ers stadium, the Stadium Authority has several revenue streams tied to taxes and fees employed for every Niner home game and other events. The NFL requested that such fees be waived for the Super Bowl, and apparently the City is more than happy to comply. Fees being waived include the following:

  • 10% NFL Ticket Surcharge – At a conservative set price of $500 per SB L ticket, the $50 surcharge would yield $3.75 million with an expanded capacity of 75,000.
  • $0.35 Ticket fee – Meant to fund some senior and youth programs. A cap of $250,000 per year is imposed on this revenue source. If the 49ers play at least one home game, it’s likely that the 49ers would hit the cap, rendering additional collection of this fee moot.
  • Hotel tax – A Mello Roos district was created to provide some stadium funding, backed by a hike in the transit occupancy tax from 9.5% to 11.5% in the stadium’s immediate area. The NFL asked for its share (350 rooms for an unspecified number of days) to be waived. Assuming that the NFL needs 350 rooms for the full two weeks, the City would forego some $70,000+ in hotel taxes. The City notes that it expects to make up this loss via taxes collected on additional room bookings.
  • Off Site Parking fee – The City has imposed a $4.54 fee per space for event parking. That too will be waived. This appears to be for all Super Bowl activities, not just the game itself. The City notes that the fee is meant to offset the cost of traffic management.

The non profit San Francisco Super Bowl Committee is supposed to reimburse the City for the cost of services rendered by the City (and other jurisdictions). The committee is not going to backfill the City’s lost revenues. Strangely, no estimates of this impact were disclosed, even as the City touts $300 million in additional economic activity for the region. Much of that major economic impact will be felt in San Francisco, where the majority of non-game events will be held. The key will be the layout of the Super Bowl hub surrounding the stadium. If attractions such as the NFL Experience are staged at Moscone Center instead of the Santa Clara Convention Center, real economic impact for Santa Clara will be limited outside of Super Bowl Sunday.

A year ago I wrote about what it would take to host a Super Bowl in the Bay Area, and despite Santa Clara “taking one for the team”, there is a burgeoning sense of excitement about the possibility of hosting the big game. It’s just too bad that the City Council, knowing it had at least a little leverage with the knowledge that Miami is struggling so much, hasn’t considered driving a harder bargain with the NFL. Maybe next time – if there is a next time.

03.11.13
by

Albatross

When the season starts and you notice the A’s-themed tarps that will stay up the entire year except when replaced by Raiders-themed tarps, remember this:

Payment schedule of Coliseum bonds

Payment schedule of Coliseum bonds

Last year the Coliseum JPA sought to refinance the stadium debt in order to switch the debt from variable to fixed rate. New bonds were issued in September.

It can’t be emphasized enough that whatever is planned in the future for the Coliseum, this debt has to be factored in. The City and County will want to repackage the debt in a way that takes the burden away from their respective general funds. Naturally, the A’s and Raiders probably want no part of this, considering how expensive it already is to privately build anything. Even if nothing gets built until 2018, $100 million in debt will remain, making that a sort of tax on any new stadium(s). The JPA is asking the A’s to pay more in rent, reportedly up to $3 million a year. Even then a substantial subsidy will be required. Ultimately, no deal on Coliseum City – no matter the size or scale – will go anywhere unless the outstanding debt at the Coliseum is addressed to all parties’ satisfaction. That’s a challenge as towering as Mt. Davis itself.

—–

Added 11:30 AM – Matier and Ross have an item covering the JPA’s ongoing lease negotiations with the A’s and Raiders. 

The tug-of-war for the five-year extension is over the $3 million in parking taxes that Oakland says the team owes, and over the A’s claim to about a third of the beer sales at the Coliseum – be they at an A’s game, a Raiders game, a U2 concert or any other event.

The tightrope is with the Raiders, who don’t like giving the A’s the beer money and don’t appreciate the A’s request for ballpark “improvements” that may come at the Raiders’ expense.

The parking tax referred to in the piece dates back to 2009, when Oakland unilaterally decided to enforce a long-dormant 18.75% tax per car at the Coliseum. The A’s hiked up parking fees from $15 to $17, and the price stayed there ever since. However, the A’s sat on the additional revenue while other details shook out, such as a revenue split between Oakland and Alameda County that was only settled last year. Assuming that a 2014-18 (or longer) lease extension can be worked out, the parking tax would be yet another detail to negotiate. The beer revenue split goes back to when the A’s sued the Coliseum Authority and received lease concessions, including a split on pouring rights for all events and some advertising revenues. As for the baseball-specific improvements that the Raiders may be resisting, I’m not clear on those. I’ll try to dig that up. All I know at the moment is that Lew Wolff has wanted an escape clause if the Coliseum undergoes changes for the Raiders. 

Finally, M&R end on a vague note – MLB might look favorably on Oakland if a short-term deal can be worked with Wolff/Fisher or “a new set of local owners”. Perhaps, but let’s be clear on a couple of things. First, even if Wolff were to declare today that the he and John Fisher were putting the team up for sale, the actual process to vet prospective bidders (such as a Don Knauss & Co. bid) and then complete the sale would take the better part of a year or more to complete, which is of no help to the A’s immediately as they try to work out a short-term extension. Second, MLB won’t approve a sale to an East Bay-focused group unless there is an ironclad ballpark deal in place. Otherwise there’s no point because the A’s would remain revenue sharing recipients indefinitely, even though it’s written into the CBA that they’re supposed to be off revenue sharing in the next several years. Third, MLB has offered to insert itself into the lease discussions, only to be told no by Wolff. Wolff’s making a leverage play here. He did well in getting a ton of flexibility in the last two lease negotiations. This time, talks are sure to be more rancorous. If MLB wants to float a feel good item to help soften up the JPA, I’m sure Wolff won’t mind. Finally, there’s the issue that appearing to help the A’s and MLB may send the wrong message to the Raiders, who are the only team directly working with the JPA and Oakland at the moment. It’s a very fragile, fluid situation. No one said it’d be easy.

03.08.13
by

Stern goes Mutombo on Mastrov bid, rules out expansion in Bay Area

NBA commissioner David Stern made a trip out to Oakland to talk up the Warriors as a “model franchise” and the team’s trip next fall to China, where they’ll play preseason games against the Lakers. Stern’s event had another large contingent of media from Sacramento, who wanted to hear Stern’s take on last week’s bid to save the Kings by Mark Mastrov and company. NBA Commissioner David Stern says Sacramento bid is “not quite there” financially compared to Seattle. He’s hopeful it will be eventually. To ensure that Sacramento lines up its (final?) bid properly, the NBA will hold a meeting on April 3 so that everyone has their ducks in a row in advance of the Board of Governors meetings on April 12-13.

That, folks, marks the end of the short period of Stern as bystanding non-arbiter. In case anyone thought that this was about anything other than getting the biggest, best bid possible for the sale of the Kings, it isn’t. The owners want to see their franchise values grow. If the McCourt disaster did it for baseball franchises, the Maloof debacle could certainly do it for hoops. Earlier this week a rumor was floated that the Hansen-Ballmer group might have to pay a $75 million relocation fee, instead of an amount closer to the $30 million Clay Bennett paid to move the Sonics to Oklahoma City. The owners want their piece, and David Stern’s last major effort as the commissioner will be to facilitate that. The man has played the whole thing perfectly. Now, the NBA and the bidders have kept the details close to their respective vests, so we can’t say for certain how low the bid was or how much it needs to be raised. I know this much: Mastrov put in a $420 million bid for the Warriors nearly three years ago. Stern and the owners know that Mastrov can raise capital, whether they’re bidding for 100% or 65% of the Kings. Fortunately for the Sacramento bid, there’s a few weeks left to raise the bid. Now it’s a lot like competing bids for a house in a seller’s market. The best offer with the most cash wins. You know what they say on the court: Come strong or don’t come at all.

Stern was also asked about the chances of a second Bay Area team coming via expansion if the Kings left, and he swatted that notion away. Stern left it to the Board of Governors (owners) and his successor to wrestle with that concept.

“I don’t think that we’re in for expansion of the league, any time soon. That’s just the way it is. … There are no territorial rights barriers. The only barrier is a vote by the NBA’s Board of Governors, but they’re being convened to consider the application to sell the Kings and to move the Kings.”

There’s no incentive to entertain talk of expansion as long as this bidding war – and it is indeed a bidding war – is on. Maybe after April the NBA and the losing city/bidder can talk about a framework to get an expansion or future relocated team. Chances are that even then, that losing city/bidder will be left to lick their wounds, and if it’s Sacramento/Mastrov, after having being on the losing end twice (last year for Sac when the Maloofs reneged, Mastrov in 2010 with the W’s), everyone may want to take some time to determine how much effort they want to put into this yet again. There’s just as much emotion that goes into these efforts as there is money.

I’ve thought that the horse race mentality that some of the Seattle and Sacramento partisans recently have taken on was silly, but this news  certainly makes the proceedings feel like a horse race. One of these cities will have a lot of broken hearts in early April.