01.16.11
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CBA Talk: The NFL is getting ready for war

Every time I tried to start this post earlier in the week, some fantastic new nugget from Maury Brown (site/Twitter) got me to read further. If you really want to get in depth, follow Maury’s thorough, seemingly unending coverage at The Biz of Football and at Forbes. It’s pretty much one-stop shopping if you want to get up to speed.

That said, I’ll preface my overview via an exchange I had with Maury a couple days ago on Twitter.

me: @BizballMaury If you walk into a restaurant filled with NFL players, your meal will be on them guaranteed.

Maury: RT Ha! Really want NFL accountability @marinelay3r: You walk into a restaurant filled w/NFL players, your meal will be on them guaranteed

For some time, he’s been trying to get some hard numbers to determine whether or not the NFL’s claims of economic turmoil have any real merit. So far, the evidence points to the league’s case being B.S. They’re trying to argue that rising player costs, combined with falling revenues, requires a reduction in the guaranteed share the players get. Here’s the league’s case in bullet point form:

  • NFL wants a roughly 18% drop ($1 Billion) in the amount of money given to players.
  • In lieu of a drop, the NFL wants to convert 2 preseason games into regular season games, making the regular season now 18 games long plus 2 preseason games.
  • A rookie cap or slotting system must be introduced to keep rookie contracts in check.

The players union wants things kept the same, a sign that usually means that they (the side that favors the status quo) have the better end of things. And the lack of a rookie cap makes things seem a bit out of whack, even though the evidence is mostly anecdotal. The big issue is really the 18-game schedule. The NFL’s position is that revenue coming from the 16-game schedule is not good enough to sustain the teams, even though 30 of 32 showed profits in each of the last three years.

The players are most concerned with their own health. Most fans know that during the preseason, teams don’t usually have their starters play entire games, even having them play only a series in the first game and a quarter in the second game. The rest of the time is spent figuring out which other players will make the roster. The NFL wants to convert two of those games to meaningful regular season games, which is great from the standpoint that at least we as fans won’t be subjected to five pointless exhibitions in August. But it also increases the chances that players will be injured, even though they’re not getting anything extra from it.

Why is the NFL pushing for this so hard? Because they can afford to. They have a ton of leverage in this situation. League activity ends with this April’s NFL Draft, which itself will be different because teams won’t be able to sign players during the proceedings, and there may be limitations on trades during the draft. After that the nation will be in lockout watch, and precious team-building time in the form of OTA’s, minicamp and training camp will be lost. All the while, the players won’t be paid yet the league and owners will pocket $4 Billion in TV revenue even though there’s no guarantee that any games will be played. With no pressure to get anything done except their own agenda, it’s likely that a lockout will drag on well into the fall, perhaps longer than the 1987 NFL Strike.

The prevailing thought many fans may have is, “These guys can’t gamble on losing fans with an extended work stoppage.” Frankly, I think this is hogwash. Football has hit a perfect nexus of attracting both hardcore and casual fans. HDTV significantly improves the presentation, not as much as it does for hockey but more than baseball or basketball. If you’re a casual fan, you don’t need to show up more than once a week for four hours. If you’re a hardcore fan, you have plenty of things to suck you in during the week: the endless news cycles on ESPN and NFL Network, fantasy football, talk radio. There’s also the Super Bowl if you don’t care more than once a year. Even with each network paying out $1 Billion for the right to broadcast games annually, that’s a small price to pay for a ratings slam-dunk product. If there is a pro sport that is most resistant to backlash from a work stoppage, it’s pro football. In recent weeks NFL commissioner Roger Goodell has repeatedly tried to ensure the public that a deal could be done easily and quickly. NFLPA head De Maurice Smith has been sounding the alarm for a lockout for over a year. The NFL has had almost 25 years of labor peace and unmitigated growth thanks to the most harmonious labor-management relationship in pro sports. Right now, it’s hard to see them getting back to that point.

01.14.11
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Wolff steps up as potential Downtown SJ land buyer

Someone’s eager to wrap things up. And his name is Lew.

Tracy Seipel reports that Lew Wolff has emerged as a potential buyer for some property in downtown San Jose that the RDA just put up for sale. This shouldn’t be a surprise, I hinted at this last Friday. Again, this seems like a form of quid pro quo, with Wolff benefiting in the end as AT&T did with their Santana Row land deal. It’s ugly, and it’s not the way things should be done. However, Wolff himself said he was willing to go to great lengths to make this happen. From October:

While he and agency officials both said no details of a possible land purchase by Wolff had been discussed, the team owner pledged: “Whatever issues we run into, we will figure out how to get them done. We will not let anything stand in the way of getting the ballpark done.”

Noted.

In the last week, the deadline to get everything done for a ballpark deal has shrunk from 18 months to 12 to 9 to 6 and now possibly 2-3 months, which is straight crazy. I’m not going to blame the Giants for this, they did what they felt was in their best interest. It’s the continual, inexplicable delay on Bud Selig’s part that has led the A’s to this being what may be their last chance at a ballpark anywhere in the Bay Area or Northern California. As ever, we have no idea what’s going on within The Lodge. With both Wolff and Mayor Chuck Reed regularly in touch with Selig regarding the rapidly changing redevelopment landscape in California, Selig may finally have the proper impetus to… act. Which sadly fits him to a tee.

With the demise of big city redevelopment near, Merc columnist Scott Herhold took the time to assess how San Jose, with the second largest RDA in the state (behind LA), has fared in its redevelopment initiatives. While he considered it a mixed bag, he felt it was better to be large and audacious with the money than for the city to stagnate and eventually crumble. He also linked to a 2006 pictorial presentation (PDF) made by the RDA, which shows how downtown looked in 1975 (the year I was born) and now. They’ve managed to turn a decaying urban center that was more famous for night cruising by local youths down First Street into a place that has stuff to visit, like fantastic library shared with SJSU, a world class arena, several good museums. Yesterday I was strolling through Paseo de San Antonio (between the Fairmont buildings) and I noticed Sharks fans mingling with attendees at the annual Furries convention. Well, maybe they weren’t actually mingling. At least they were in fairly close proximity. Anyway, who’d ever thought that was even possible in 1975?

Below are two pictures of the Plaza de Cesar Chavez area (Park Ave & Market St), first the 1975 photo and then the 2006 photo.

City Hall was once in the park

The ground level part of the curved building is part of what Lew Wolff may purchase, he already owns the upper floors

San Jose may be forever sleepy, but it has still come a long way.

01.14.11
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News for 1/14/11

I ducked into a Starbucks in downtown San Jose on Thursday afternoon to finish the latest CBA Talk entry. While I was proofreading it (it happens every so often), a gentleman at the next table over caught a glance at my screen and asked me what I was blogging about. I explained to him what this site was and how long I’d been at it. He then introduced himself as Bill Bradley – not that Bill Bradley – the Bill Bradley who formerly labored as the sports editor for the Sacramento Bee. He just launched a sports news site, 27×7.com, only 10 days ago and he’s already quite prolific. Bradley was in town working the Sharks game, and while he’s based out of the Sacramento area, he has expansion plans in the works (the “27” stands for 27 markets). After he headed out to HP Pavilion, it got me thinking about the incredible amount of downsizing in the news industry. Whether it’s columnists getting cut and going cut-rate to cable networks, or entire content providers like AOL Fanhouse going practically belly-up, it’s a rough time to be in the sports news game. Good luck to Bill and all of the others out there, hopefully your hustling will be kept to a minimum. On to the news.

  • Added 11:13 AM – The Merc’s Tracy Seipel reports that San Jose is racing against the clock, with a deadline to complete its work (sans vote) coming as early as March.

    The ballpark plan in particular could become more difficult if Brown shuts down redevelopment. Last week, San Jose’s agency announced it was selling five parcels of land and using the proceeds to buy other properties within the ballpark site near the main rail station.

    City officials said they’re pushing ahead with the plan to assure Major League Baseball they can complete the site regardless of state politics. Redevelopment chief Harry Mavrogenes said the sale of the agency’s parcels should be done by June 30.

    State finance officials, however, said Tuesday that if the Legislature were to vote as early as March to disband the agencies, it could issue an order to halt all agency contracts immediately and not wait until the next fiscal year begins July 1.

    Even if Mavrogenes beats the state’s deadline — and baseball officials agree that the Oakland A’s should be allowed to move south — voters would have to give permission for the city to use the downtown land for a ballpark. It’s an open question whether they’d be as inclined to bless a park if there were fewer limitations on how proceeds from agency land sales could be used.

    Mayor Chuck Reed said the council will fight Brown’s proposal, which state finance officials say will return at least $1.9 billion annually to schools, cities, counties and special districts around the state beginning in 2013.

    This paints a worst case scenario, but it shows how serious the redevelopment collapse is, and how its implications are far-reaching. Brown talked about turning off the tap for projects that weren’t already under contract. San Jose is definitely not there yet. Already, LA has allocated $883 million of its own RDA funds to projects in anticipation of a raid and shutdown. LA has also agreed to convert the current RDA into a city-run non-profit entity after the agency is officially disbanded (there is an allowance for a successor, though what form it would take is unclear). I suspect that Wolff has communicated the gravity of this situation to Selig. Will it matter to Selig and the owners?

  • There are plenty of reasons to dislike Ignacio De La Fuente, such as his being a career machine politician. His DUI arrest on Christmas Day was not the result of a smart decision. That was followed by a lot of bile, people hoping IDLF would lose his job, people wishing the worst on him – mostly because he dared vote against the Oakland City Council’s $750k expenditure for the Victory Court EIR. Well, now he won’t be charged because of a “lack of evidence.” Officially, IDLF didn’t comment on the matter, but I imagine on the inside he was going, “How ya like me now, haterz!”
  • Speaking of the Oakland City Council, Larry Reid was elected Council President. You may not remember that Reid proudly proclaimed that he’d stake his career on the Coliseum North plan. Thankfully for him, when that plan fizzled out Reid’s career was not irreparably damaged. If there’s a person on the City Council who can be described as the most gung-ho about Oakland’s pro sports franchises, it’s Reid. Having Reid lead the charge won’t make up for a loss in redevelopment funds. Can Reid deliver in other ways? We may find out in due course.
  • Lew Wolff took time to shoot down rumors – made up out of whole cloth by Buster Olney – that he might be interested in buying the Dodgers from the legally challenged McCourts. The most interesting exchange regarding this non-news came from the Boston Globe:

    “Lew was in touch with me as soon as he became aware of the rumor that started to circulate a few days ago to make sure that I knew there was nothing to it,” McCourt wrote in a text.

    McCourt saw Wolff at the owners’ meetings in Phoenix and they discussed it again.

    “I have no idea where this one originated,” said Wolff from his cell phone at the owners’ meetings. “It’s completely untrue. We’re right in the middle of trying to get the go-ahead from Commissioner Selig about moving our franchise to San Jose. That’s all I’m thinking about. The Dodgers have an owner.”

    But we like our conspiracy theories, Lew! /s

  • Union Pacific bought 160 acres of land at the north and south ends of NUMMI. Hope all the NIMBYs there like the prospect of a railyard in their backyard. Because if it’s an intermodal hub like in West Oakland, the potential health issues could create a volcano of outrage the size of which will make the ballpark hubbub look like a neighborhood bridge game. Note: South Fremont is home to large warehouse/light industrial area, which makes it prime for such an operation.
  • The not final A’s promotional schedule is out. It includes bobblehead days for Rickey (4/30), MC Hammer (7/17) and Ray Fosse (8/13). Remember when the A’s also did collectable figurines for a spell? Did anyone like those?
  • I expect to renew my Fielders Choice season ticket plan, though I will be moving to the Value Deck.

The rest of the CBA Talk series will be posted throughout the weekend.

01.13.11
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CBA Talk: The NHL and what might have been

Everyone remembers the 2004-05 NHL lockout, the one that eventually cancelled the entire hockey season, the only time this has occurred in the modern era of professional sports. Now that the NHL has recovered reasonably well from the turmoil and uncertainty that surrounded that work stoppage, observers can look back in hindsight and consider it a cautionary tale. The league now has cost certainty to keep salaries from spiraling out of control and revenue sharing to help the lower income teams. Yet, it never needed to go as far as canceling an entire season. If cooler, future-oriented minds within the league and union had prevailed 10 years prior, the chain of events that led to the 2004-05 lockout may never have happened.

Bob Goodenow was hired as head of the NHLPA in 1992. His tenure spanned three CBAs and included a 10-day players strike (1992), an owners’ lockout in 1994 that took out nearly half of the season, and the 2004 lockout that cost the entire season. During the 2004 lockout, Goodenow was fired.

Gary Bettman became NHL commissioner during the 1992 offseason, coming over from a stint as a deputy to David Stern in the NBA. Bettman was brought in to help the league control costs, namely through the institution of a salary cap. The salary cap became the key issue in negotiations between the league and union, eventually leading to all three work stoppages. NHL owners looked at the its leading competitor in the NBA and saw that basketball had a cap in place for nearly twenty years.

Throughout it all, neither side budged much. The league brought in former SEC chair Arthur Levitt to determine how much the league was losing annually, which amounted to $273 million in 2003. Forbes looked at the numbers and found that the owners were hiding revenue here and there, yet the league was still losing money overall, $123 million for the same period. Either way, the situation was unbalanced and required significant financial restructuring.

To help bring the league back into the black, existing owners accepted new expansion teams in several US West and South markets, including the Bay Area and Atlanta, where the NHL had failed previously (Golden Seals and Flames, respectively). While a market like San Jose has been a success, many of the other non-traditional markets such as South Florida, Nashville, and Phoenix have struggled. Seeing this, some abandoned cities (Winnipeg, Quebec City) and upcoming cities (Hamilton) have expressed interest in landing some of the struggling teams. In the mid 90’s, no one would have thought Winnipeg would be able to have an NHL team again, but now it has a modern, if small arena in place with a capacity of 15,015. Taking a page from MLB, there appears to be a movement to “right-size” arenas for each market. What’s better, 5,000 empty seats and dozens of empty suites in a Southern arena that seats 19,000, or a packed, intimate, 15,000-seat arena north of the 48th parallel?

A Bureau of Labor Statistics article (PDF) published in December 2005 analyzed the circumstances that led up to the lockout and the subsequent CBA. Its opinion generally agreed with virtually every media outlet and even the players in saying that the owners dominated the new agreement. The owners got a salary cap, floor, and revenue sharing. The players were thrown bones here and there, in the forms of earlier free agency triggers throughout the CBA and a greater percentage of revenues if certain targets were reached by the league.

While both sides have lived in relative labor peace over the last several years, both sides are gearing up for at least a little conflict. Rich teams such as the Original Six want to be able to go over the cap since their revenue easily outstrip the cap. Low revenue teams, which make up around two-thirds of the NHL, have no interest in this. Of course, the have-nots would also love to lower the salary floor, which sits at $43 million this season. Both sides could grant concessions to soften both the cap and the floor, but there’s a slippery slope in doing that as it could practically negate the parity effects of having a cap/floor in the place. There’s also a quirk in the revenue sharing agreement in which have-nots which are in markets larger than 2.5 million households cannot qualify for a handout, even if they are in dire straits. This has caused a teams like the Ducks, Islanders, and Devils to make severe cuts over the past several years (the Devils have stabilized after moving into Prudential Center).

The union would love for these revenue sharing matters to become wedge issues among the owners, as they could bolster their case to soften the cap. As mentioned previously, Donald Fehr has been brought in to head the NHLPA, and he’s just as difficult to deal with as Bob Goodenow. Another issue is the players being forced to put 12% of their salaries in an escrow account to guard against revenue shortfalls. That escrow money essentially acts as an extra tax on them, and it will be an important negotiating item come 2012.

In the end, the NHL and the players benefited most from two events that were completely out of their control. The rise of the Canadian dollar to near parity with the US dollar brought the Canadian teams closer to financial equality with their south-of-the-border counterparts. Had this occurred in the mid-90’s instead of five years ago, there might not have been an exodus of teams like the Quebec Nordiques and Winnipeg Jets, and expansion could have happened in Denver and then fewer southern markets.

The other factor is the advent of HDTV, which has been key to increased viewership even though the NHL is no longer on ESPN. No sport has benefited more from an enhanced and far superior viewing experience than hockey. HDTV broadcasting en masse didn’t start happening until 2006.

It seems hard to imagine that hockey, with all of its labor strife over that past 20 years, could so easily shoot themselves in foot once again. You’d think they’d have run out of feet at this point. As badly as the NHLPA lost in the last round, prior to Fehr they had been rudderless, so it was imperative they had someone leading them with a coherent strategy and direction. The issue that remains is whether or not that direction is off a cliff.

01.12.11
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Giants hegemony extends to North Bay

Last August, Jeffrey (heh heh) wrote about the ongoing vertical alignment among major league franchises, with the parent clubs buying and in some cases relocating their affiliates to closer locations. The Giants bought a controlling stake in the San Jose Giants in an effort to tighten their hold over the South Bay. That has caused complications for Windsor entrepreneur Chris Lee, who wants to build a new ballpark to house the Giants’ Class-A affiliate in the Sonoma County town.

“The Giants hold all the cards, and the Giants have declined to play,” he said Monday. Lee explained that the organization has territorial rights over which team affiliated with Major League Baseball can come to Sonoma County.

“If you want to add an affiliated team, you can’t do it without the permission of the Giants,” he said. “The Giants have declined to participate in that conversation.”

But on Tuesday, a Giants executive said the organization had not yet formally replied to the letter Lee sent after the World Series.

“I’m not aware of any formal rejection from the Giants,” Bobby Evans, vice-president of baseball operations said.

Evans said he didn’t want to give the impression the Giants were “leaning one way or another” on the issue of minor league baseball in Sonoma County, but he promised Lee there will be a written reply to his letter.

In the Giants’ ongoing efforts to marginalize everyone not related to their organization, this is yet another great success! Perhaps Lee would have more standing if he were a different Chris Lee:

… or this Chris Lee.

Wait, they’re the same guy? Well, you know what to do, Chris Lee in Windsor. Get on the horn and fly the man in from the U.K.

Or, here’s a crazy idea. How about the Giants play ball, get their situation with the A’s settled, and get everything else moving. Before all redevelopment funds run dry, and it becomes exponentially more difficult to get anything built. Just a thought.

01.12.11
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Sad Sac Kings

I was barely an adult the first time I ventured into ARCO Arena. I had hooked up with a photographer who got me a press credential, and from afar I had admired the facility. At the time, ARCO was only 7 years old. The exterior had a nondescript Wal-Mart look and there was nothing in the immediate vicinity. The interior was remarkably white, whether you were looking at walls or people.

The visitors’ locker room was no larger than a typical elementary school classroom. Press accommodations were decent, and the spread was better than the one at the Coliseum Arena. My seat was in the designated auxiliary press row, a separate “balcony” above the lower level seats and suites. It was an exhibition game between the Kings and Warriors, so I didn’t expect many of the other people with assigned seats to show. I was somewhat disappointed by that, since former Warriors coach Al Attles was supposed to be sitting in the seat next to mine.

Enough reminiscing. If you have fond memories of ARCO, as I do, you might want to treasure them because the future is not bright in Natomas. Vultures are circling around the Kings and the Maloofs. And the arena, whose naming rights deal with ARCO expires soon, will be renamed Power Balance Pavilion, after an Australian company which makes energy balance bracelets that have not been proven to provide energy, power, balance, or pavilions. The deal may be worth as much as $1 million per year, a sum that seems a bit puzzling considering the company’s measly $35 million in annual revenue. Then again, the team and the Maloofs may not be around long enough to see if Power Balance actually makes more than one payment, or becomes the next Pro Player.

An Orange County Register article tries to calculate the cost of relocating the Kings to Anaheim, where coincidentally, they’d be the second team named Kings in SoCal and have the same color scheme to boot.

But is Anaheim a realistic destination? There are several obstacles that could complicate or preclude such a move.

It has been widely reported the Maloofs have $69 million left on a loan with the city of Sacramento and reportedly have taken out $125 million in loans from the NBA in recent years.

There’s also a standard $30 million relocation fee that must be paid to the NBA if a franchise moves. And there will be territorial rights fees owed to the Lakers and Clippers (estimated between $30 million and $50 million to each team) for invading the Southern California market they share.

So that’s a $69 million loan/lien plus the $30 million relocation fee and $40 million in territorial rights fees. Total: $139 million, which is close to the $150 million payoff to the Warriors for the Hornets to come to San Jose. Then there’s the $125 million in loans from the NBA, which may or may not have to be dealt with. Jinkies. Nice to see it broken down, though the existence of the Kings’ loan as a component makes it appear that $150 million is a rather inflated price tag for Lacob-Guber to go away (NBA debt notwithstanding). There’s probably some assumed debt for the Hornets that would have to be addressed at some point, which could make the final price tag similar. Or does the equation change when a new owner is involved? Looks like the rich soaking the rich.

01.11.11
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Olney has a silly idea

In Buster Olney’s blog (Insider accout required), he floats an idea that, unfortunately, Craig Calcaterra thinks has legs.

It’s been awhile since Bud Selig formed the committee to study the Oakland ownership situation, with no resolution in sight for his longtime friend and former fraternity buddy Lew Wolff, the Athletics current owner. What Wolff and the Athletics want is a ballpark in San Jose, and Selig might feel as though he can’t give that to him.

But if McCourt eventually has to sell the Dodgers, providing Wolff — who lives in L.A. — an opportunity to buy the Dodgers would be a heck of a compromise move for Selig, who is, above all else, a deal-maker. In a similar way, he ushered John Henry and Tom Werner — previously connected with the Marlins and Padres, respectively — into control of the Boston Red Sox.

And Wolff, of course, could bring along GM Billy Beane, who could leave the Athletics in the hands of the next owner and heir apparent David Forst.

It’s all speculation. But it all could make a lot of sense, depending on which way the dominos fall with the Dodgers.

First of all, Wolff doesn’t have the scratch to buy the Dodgers. Most owners don’t, and with the valuations of teams as high as they are, they’d be foolish to buy teams on their own. Wolff certainly could partner with people in LA, but really, does anyone think the Dodgers will have a problem attracting extremely wealthy buyers when the time comes?

Besides, Wolff’s share of the A’s has diluted over time. The vast majority of ownership of the A’s are highly entrenched Bay Area people, whether it’s John Fisher in SF, Wolff’s friends and family in the South Bay, or Guy Saperstein in Piedmont. When a team sale happens, the turnover of an owner or ownership group is usually complete. We don’t hear much about a major partner cashing out of an ownership group all that frequently, and when we do it’s often because the partnership was somehow broken.

While Wolff lives in LA, he has children and grandchildren here. There have been plenty of video shots of him sitting in the Coliseum with a young child decked out in full A’s regalia over the years. For him it’s not just about real estate, or getting the stadium done, even though that is his charge. There’s a real emotional attachment there, and it’s gotten to the point that the team is family. If anything, the man is too invested in multiple ways to just let this go. Have you noticed how much more defiant he has gotten the last few months? Despite the challenges and mistakes, he’s a man who generally sees things through, and that’s what he intends to do.

01.10.11
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Brown’s Redevelopment Changes in Budget Proposal Text

If you have the time and the inkling, Governor Brown’s budget summary proposal is worth perusing (PDF here). I’ve taken the relevant portions related to redevelopment and pasted them here.

From the section titled Realignment, which describes how state and local services would be realigned to shift more of the burden/responsibility to the local level (p. 28):

Local Economic Development Change

As part of the determination of which level of government is best equipped to provide what service, it became clear that the state’s investment in local economic development and redevelopment agencies is less critical than other activities. (Please refer to the Tax Relief and Local Government Chapter for more information.)

The proposal outlines a new option for funding economic development at the local level by calling for a constitutional amendment to provide for 55‑percent voter approval for limited tax increases and bonding against local revenues for development projects similar to those currently funded through redevelopment and for infrastructure.

The Budget proposes legislation to phase out existing redevelopment agencies beginning in 2011‑12. Existing agencies will be required to cease creation of new obligations and successor agencies will be required to retire RDA debts in accordance with existing payment schedules. No existing obligations will be impaired.

In the 2011‑12 fiscal year, the freed‑up funds will be used for General Fund budget relief. In subsequent years, these funds will be allocated according to the existing property tax allocation, except for enterprise special districts, and will be available for cities, counties, and special districts to use for their high‑priority core functions. By 2012‑13, the Department of Finance estimates these local entities will receive close to $900 million in new resources to use for their priorities (with a similar amount going to education).

From the Tax Relief and Local Government section (p. 171-172):

The Budget proposes a new approach to fund economic development activities at the local level and phases out the current funding mechanism for redevelopment agencies. This proposal will return billions in property tax revenues to schools, cities, and counties. These funds will help sustain core functions including law enforcement, fire protection, and education. Below is a summary of the proposal:
  • Change redevelopment funding: Provide improved options to fund local economic development with voter approval. The Budget proposes a new financing mechanism for economic development. Specifically, the Budget proposes that the Constitution be amended to provide for 55‑percent voter approval for limited tax increases and bonding against local revenues for development projects such as are currently done by RDAs. Voters in each affected jurisdiction must approve use of their tax revenues for these purposes.
  • Shift existing redevelopment taxes to core local services. The Budget prohibits existing agencies from creating new contracts or obligations effective upon enactment of urgency legislation. By July 1, existing agencies would be disestablished and successor local agencies would be required to use the property tax that RDAs would otherwise have received to retire RDA debts and contractual obligations in accordance with existing payment schedules. This is estimated to cost $2.2 billion in 2011‑12. Finance estimates $3 billion will remain after these debt service and contractual payments. From this remaining amount, one‑time payments estimated at $1.1 billion will be provided equal to the pass‑through payments that otherwise would be received. Of the remaining $1.9 billion the Governor’s Budget directs $1.7 billion on a one‑time basis to offset state General Fund costs for Medi‑Cal ($840 million) and trial courts ($860 million). The final $210 million will be distributed on a one‑time basis to cities, counties, and special districts proportionate to their current share of the countywide property tax.
  • Provide revenues for core local services. Beginning in 2012‑13, the amounts remaining after payment of pre‑existing RDA debts and contractual obligations will be distributed to cities, counties, non‑enterprise special districts, and K‑14 schools in amounts proportionate to their share of the base countywide property tax. The only exception is that roughly $50 million that would otherwise be distributed to enterprise special districts (mainly water and waste disposal districts) will instead be provided to counties. Enterprise special districts are mainly fee‑supported. In 2012‑13, this is expected to result in an increase in annual local revenues (over the amounts they would have received in pass‑throughs) of approximately $1.0 billion for schools, $290 million for counties, $490 million for cities, and $100 million for non‑enterprise special districts. Funds received by K‑14 schools would not count toward the Proposition 98 guarantee. These monies would augment existing funding, and could be used at the discretion of school and community college districts. The sums received by schools would be distributed to both school districts and community college districts throughout the county, primarily based on numbers of students.
  • Use housing balances for housing. Amounts in the RDA’s balances reserved for low‑moderate income housing would be shifted to local housing authorities for low and moderate income housing.
  • Funding for core local services increases as debts are paid off. After 2011‑12, the money available after payment of RDA debt would be distributed to schools, counties, cities, and non‑enterprise special districts for general uses. These distributions will generally reflect the distribution of property tax in each county under existing law. This will help counties to absorb costs and provide enhanced services associated with realigned programs, if they choose to use the money in that way. Successor entities would continue the process of retiring RDA debt, which is expected to take at least 20 years. As the RDA debt is retired, the monies formerly used for debt service payments will flow to local governments.

The key here is the timing. The Governor expects this to be wrapped up by July, when the next budget has to be approved, not 18 months from now. Surely, the RDAs aren’t going to take this lying down. They’ll sue, knowing that they have Prop 22 to provide some protection. They may be able to delay things 6, 9, 12 months. The harsh reality is that California can’t run deficits as per the state Constitution, and if the left will more fervently fight additional cuts to services and the right does the same regarding tax hikes, guess who gets caught in the middle? Redevelopment. That only leaves two things for the RDAs: Figure out how to spend those nest eggs now (San Jose has $200 million in land assets after the downtown sale), and freshen up those resumes.

Quick aside: If nothing’s sacred in government or the budget anymore, it might be a good time for a constitutional convention just to clean things up. It’s only been 60+ years since that last happened.

01.10.11
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Brown to Redevelopment: Your days are numbered

Governor Brown just finished his press conference, where he explained his budget plans. Brown is pushing for $12.5 Billion in spending cuts, and he is asking the legislature (and the voters) to extend temporary income, sales, and car taxes that are set to expire this year. As for the redevelopment golden goose, Brown said that existing (already bonded) projects are safe. New projects, on the other hand, are in trouble. Brown wants to “phase out” redevelopment agencies and start taking back $1.7 Billion in tax increment annually. What it comes down to is this: If you don’t have your project started and well underway in the next 12-18 months, you are screwed. There continues to be some debate as to how the governor could eliminate RDA’s, with the agencies enshrined in Article 16 in the Constitution and recently passed Prop 22 acting as protection. The governor seems to be saying, “If we get rid of RDA’s, there are no more protections.” Yow. Okay, who would this impact? Let’s put together a list:

  • San Jose Diridon Ballpark – While the City is speeding up land acquisition, what about Autumn Parkway and other mitigations? Will the funds be in place for the rest of the project, or will it get kicked down the road?
  • Oakland Victory Court Ballpark – Oakland already had to deal with a tight schedule based on a 2015 Opening Day. Now, Oakland will have to get its bonds raised and land in place right around the time an EIR is certified, or even before certification. Expect for Oakland to push MLB harder to decide in its favor, even without anything significant in place.
  • 49ers Stadium in Santa Clara – The quasi-public stadium authority would have to get its loans and/or bonds in place in the next 18 months as well.
  • New Raiders Stadium at the Coliseum – A new stadium is practically a nonstarter given the funding questions. Expect the Raiders to look south sooner rather than later.
  • Downtown Los Angeles NFL Stadium – The now $1.5 Billion stadium (+$500 million in the last two weeks) would require $350 million in bonds, which won’t be available if RDA’s go away.
  • City of Industry NFL Stadium – Ed Roski’s plan involves his own land, but much of the stadium cost would be funded by tax increment on the land improvements, thanks to much of the city being one large redevelopment zone. Uncertainty regarding RDAs makes the prospects for building infrastructure for the stadium and ancillary development, murky at best.
  • Sacramento Kings Arena – As Kevin Johnson’s arena task force continues to talk things out, time is running out, especially for an arena at the long dormant Railyards.
  • San Francisco Arena – Land south of AT&T Park could serve as the site for a new arena. Controlled by the Port and with development rights given to the Giants, it’s likely that any dev plan there will require at least the same kind of public outlay that made the ballpark deal work. Proponents would have to find another source for that funding.
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Slide captured from the governor’s briefing

The message is abundantly clear: If you want to get something built, get a move on. (BTW, take a look at the counter on the right today. Eerie.)

01.10.11
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News for the week of 1/10/11

I had a pass for CES but couldn’t go at the last moment. While I’m lamenting that, here are some truly newsworthy items.

  • The Maloofs are not only having trouble keeping the Kings afloat, they’re having trouble keeping the Palms afloat, at least according to Bloomberg. Two private equity firms are looking to buy controlling stake in the celebrilicious casino, with the possibility that the Maloofs would continue to operate the Palms, albeit with a reduced stake. No wonder there’s no talk of the Maloofs putting up money for a Sacramento arena. The family sold a $100 million beer distribution business in New Mexico last year to bring in some cash. It’s interesting that although the Kings have been discussed as either a prime sale candidate or worse a contraction target, there are few indicators that the Maloofs are interested in cashing out the franchise. They must really love their basketball team.
  • If fans are truly interested in stripping away baseball’s antitrust exemption, they might want to take a page from a new Washington lobbying group called Playoff PAC. The group, started in 2009, has stated its goal to eliminate the controversial BCS system and replace it with a true college football playoff tournament. Playoff PAC’s weapon of choice is to try to push anyone who will listen into investigating possible tax violations by the organizations which control three of the four member bowls of the BCS. While Playoff PAC does not have a ton of cash, but its limited efforts may actually be bearing fruit.
  • The downtown LA football stadium plan is finding takers. Farmers Insurance may become the naming rights sponsor, to the tune of 30 years, $20 million a year.
  • A draft race course route for the 2013 America’s Cup is up, and it’s quite cool.
  • Governor Brown will release his budget plans later this morning, and I will be paying close attention (as should you).

Will we hear something about KTRB this week? I sure hope so.