I realize that the last post was 1,200+ words long, so at lunch today I tried to come up with a more succinct version. So here it is. Pardon my French.
I realize that the last post was 1,200+ words long, so at lunch today I tried to come up with a more succinct version. So here it is. Pardon my French.
A long day and night of talking and grandstanding is over. Alameda County’s Board of Supervisors approved the Ronnie Lott-Fortress Investment Group stadium deal framework around lunchtime. It’s a term sheet, so it has some basic details worked out, but not some extremely important ones, such as the approval of the Raiders and owner Mark Davis. Oakland’s City Council approved the same term sheet late Tuesday night. For what it’s worth, the AlCo BoS vote was 3-1-1. City Council voted 7-0-1. The voted and the completion of the term sheet were needed this week in time for the NFL’s owners meetings, which are taking place in Irving, TX. Updates on stadium plans for the Raiders and Chargers are expected.
I figured I should set the table for my readers and followers, so I tweeted the following shortly after the Council vote:
There may be other votes, including an extension of the ENA if the Raiders are resistant to the proposal, or it changes in major or fundamental ways. As for the cryptic acronyms, drop them in the search box at the top right of this page. Then read.
Let’s take a look at how this framework works.
Lott-Fortress estimate the stadium’s cost to be $1.3 billion for a 55,000 open-air NFL-compliant stadium. The capacity is lower than the average NFL venue by design; it’s what Mark Davis requested. Fans seem to be comfortable with the capacity as well, as that’s nearly the same capacity as the Coliseum’s football configurations over the last several seasons. Curiously, there haven’t been many questions about how the cost ballooned from $700 million to $1.3 billion in a matter of a few years. Some of that can be explained by the new estimate’s inclusion of infrastructure spending, an item often omitted due to it being a table stakes requirement for cities to cover. Oakland and Alameda County are also throwing in the land via lease or sale. The land has an appraised value of $150 million. Combine that with the $200 million in infrastructure and the total public contribution is projected to be $350 million.
City and County are both touting the claim that the $2oo million in bonds that will have to be issued to cover the infrastructure piece won’t affect either party’s general fund. That’s possible because half of the infrastructure will be paid by taxes backing an EIFD (Enhanced Infrastructure Financing District) bond issue, the rest backed by private bonds. This is essentially the new, limited form of redevelopment that Governor Jerry Brown supported after he dismantled legacy redevelopment agencies in 2011. Restrictions include the inability to use the funds for anything other than actual infrastructure (roads, utilities), so cities can’t raise funds directly for stadium construction. Raised money is also restricted from affecting the general fund, though it’s unclear what would happen if an EIFD defaults on its bonds. It will take some education by pols to explain to constituents how Oakland will be kept safe, especially given the debacle that was Mount Davis.
$81 million in debt remains on the stadium, draining city and county coffers every year. Another $100 million remains on Oracle Arena, which will need to be paid off even if/when the Warriors leave for San Francisco. City/County have not factored the debt into the term sheet, so they will continue to pay for it now and into the future. City has been negotiating assuming the debt from the County for years. The Lott-Fortress proposal shifted that a bit, so that the County remains half-ownership of the land but assumes no other risk.
Paying the debt off early would allow Oakland to demolish the existing Coliseum, which sits on a key, central portion of the Coliseum complex.
I don’t know nearly enough about Fortress to comment on them, so I’ll refrain from doing that here. Lott and Fortress say they don’t need an ownership stake to be successful. I can’t see how they can get any kind of good return on a $400 million investment from mostly ancillary revenues. There are no charity cases in the NFL.
Does this move the needle for the league? Not according to stadium/relocation veep Eric Grubman, who threw a bucket of cold water on the proceedings today. Grubman even called the Lott-Fortress proposal a ‘carbon copy’ of last year’s failed Coliseum City plan, which was widely ridiculed in league circles.
Why would Grubman and owners think this way? Because, as I noted previously, what Oakland is offering is table stakes. They aren’t pledging any money towards the construction. They (nor Lott-Fortress) have convinced the Raiders to sign on, though that’s because Davis is committed to Las Vegas, at least until the relocation vote next January or March. Vegas aside, the NFL usually requires a much larger investment from interested cities. The limited risk and exposure that Oakland and Alameda touted in the term sheet is actually a negative for the NFL, whose position is that interested cities prove their worthiness by spending (How else would cities get into such bad stadium deals?). Pro football has kept Oakland in the game in hopes of the City showing the NFL more love. The combination of Oakland’s intransigence and Davis’s recalcitrance makes for a proposal that Grubman characterizes as not a deal at all.
If, as expected, the NFL laughs off the proposal, what will Oakland do next? Will Mayor Libby Schaaf bite the bullet and walk away from the table, or will she rally for Oakland to put together an improved plan that actually includes more public money? At least two Council members (Annie Campbell Washington and Abel Guillen) mentioned that they had many calls and emails asking them to oppose the deal. That sentiment will only grow if more public money is put on the line and the claims of insulation from the general fund become invalid. Vegas has plenty of issues of its own surrounding funding and the potential for Sheldon Adelson to become involved. Deal terms are stronger there thanks to a pledge of $750 million from Clark County.
The Oakland and San Diego questions are not just tests for the incumbent cities. They’re also tests of the NFL itself. In the league insatiable thirst for revenue, it has demanded king’s ransoms from communities. How much is it willing to upset existing fanbases in Roger Goodell’s never ending quest for the almighty dollar? How much does the NFL value regular fans? If history is any guide, it doesn’t look good for them.
P.S. – The funniest and most surprising moment of the proceedings came during the County Board meeting, when noted Raiders ‘superfan’ Dr. Death spoke during the public comments period. After his plea for support, Supervisor Keith Carson asked Death if he was singling Carson out as a ‘No’ vote and spreading rumors. Death didn’t deny this, and Carson blew up at him, yelling that Death didn’t attempt to call Carson’s office and only assumed Carson was a No. Death left, his manhood squashed. He was right, though, Carson did provide the one No vote. Carson later apologized, perhaps after Death left to return to his home in the Sacramento area. If only I had video of the moment…
P.P.S. – There were no new renderings presented.
P.P.P.S. – From SBJ’s Daniel Kaplan:
Finally! Bill King will be in the Hall of Fame.
I remember this routine I had as a child. As a typical latchkey kid, I’d come home with my twin brother to an empty house. During baseball season, my brother and I would have time to watch the dynamic duo of G.I. Joe and Transformers. After the cartoons ended, my brother would head to a neighbor’s house. I’d stay home and go straight to the radio. If the A’s were playing on the East Coast, the cartoons would lead up to an East Coast 4:35 start.
I’d move from the family room to the living room, where the old Sears console stereo sat in corner. The console was multi-functional, as it served as a real piece of furniture that happened to have speakers and an analog dial. I had long ago broken the record player after repeatedly playing an old floppy red Sweet Pickles record one too many times. As…
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Revenue sharing is one of the bigger, yet less understood, items that comes up every time there are CBA negotiations. Since it’s mostly about how teams deal with one another, it’s not a particularly sexy topic. Yet it’s just as important as anything else, since the arguably biggest issue over the last 10-15 years has been how to address the economic disparity between small and large markets.
The A’s are in a gray area as far as how teams are defined. Oakland is considered a part of a large market, but the franchise is hampered by an outdated stadium that hampers their ability to generate local revenue. Some have called the A’s a small market because of these conditions, others call the stadium an excuse to operate on the cheap. I prefer to call the A’s low revenue since it’s an acknowledgement of both the A’s current position and the potential for when a new ballpark occurs. How the A’s and MLB planned to address the franchise’s revenue position and how both failed to execute have led us to this point. That point, for all intents and purposes, is a reset.
To understand why that’s the case, it’s important to know what the climate was like going into the 2011 CBA negotiations. Like the 2006 talks, there was little drama and no major items to discuss. There were tweaks to the draft and compensation system, drug policy, and to revenue sharing as well. Thanks to teams’ expanding media deals and the continued construction of new ballparks, there were few disagreements between MLB and MLBPA as everyone was getting paid. Lew Wolff and John Fisher were well into their plans to move the A’s to San Jose, having released renderings and commencing talks with the City of San Jose more than a year prior. Bud Selig appeared to be working to arbitrate the territorial rights fight between the A’s and Giants. MLB and the owners, knowing about the A’s plans, tacitly approved them by writing into the CBA a schedule to ease the A’s off revenue sharing. I referenced it in the last post.
Wolff’s San Jose plans stalled, then fell apart with a lawsuit launched by the City of San Jose failing to sway The Lodge, leaving the franchise to head back to Oakland with no other clear choices for a ballpark in their East Bay territory. The A’s three-year run of success coincided with the beginning of the CBA. The final two years were marked by a selloff of veterans and the recent tanking regime. Some looked at the recent years as little more than profit-taking by Wolff while the A’s on-field product languished. I’d rather look at it as the Beane tendency to sell early. However many teams resented the A’s (cough*Giants*cough) for supposedly pocketing the revenue sharing checks, it wasn’t enough to change how the A’s would be treated under the new CBA. The new disqualification system is the exact same formula as last time. What I was worried about was the A’s getting cut off cold turkey, which would’ve raised serious economic difficulties for the franchise going forward. It’s not so much about setting the budget, it’s about what would happen if the A’s had another magical season like 2012. If they wanted to get a rental, the ownership group would have to dig into their pockets as part of a cash call to pay for a trade. Unlike the high revenue teams with huge season ticket and corporate bases, the A’s don’t get $150-200 million up front every year to pay for everything. Even if revenue sharing continued indefinitely, the check comes when MLB completes its annual audit after the end of the season, so they couldn’t use it for in-season moves if they wanted to.
What happens now that the revenue sharing scheme from the last CBA has carried over into the new CBA? There’s talk of greater urgency to build in Oakland, a sentiment supported by A’s officials including new team president David Kaval. But if the disqualification schedule is the same as five years ago, why wasn’t there talk of urgency back then? Did people not consider the ramifications if nothing got built? Did some expect San Jose to happen with less resistance? I know I did. There is a great sense of renewed optimism in Oakland, and early indications are that Mayor Libby Schaaf will provide real material support for the A’s instead of the posturing of her predecessors. However, with the plan now limited to Oakland, the circumstances can now be considered a new ballpark in Oakland, or bust. The logic is quite simple: the A’s have no other options. I really hope the A’s get a deal done in the next two years, because I personally don’t feel any more secure about the A’s future than I have before. If the A’s encounter more difficulty and Oakland has trouble getting out of its own way, MLB and Commissioner Rob Manfred will stop playing Mr. Nice Guy and they will ratchet up the pressure on the A’s and the City. Baseball is nearing peak TV-revenue, so they will look at other ways to grow the pie. Yes, that could mean moving the team to a different market. I still don’t think contraction (which would include the Rays) is in the cards given the optics of it, but I wouldn’t put it past Manfred, who was a lead negotiator for the 2001 CBA talks, the last time the threat of contraction loomed. Let’s all hope we never get to that fearsome point.
P.S. – Sometimes I wonder how much the A’s stature within the Lodge would’ve been improved if they didn’t trade Josh Donaldson and Yoenis Cespedes. If one of the problems with the A’s was their cheapskate tendencies, would simply having a larger payroll by retaining key veterans have changed the detractors’ views of the A’s? Or was it more about the fundamentals of the A’s not making progress of the stadium, even though many within the Lodge actively blocked the A’s efforts? It should be the latter, though the former came up frequently in news reports.
P.P.S. – The A’s revenue sharing check is speculated to be some $34-35 million. The A’s gate revenue, as reported by Forbes last year, was $43 million. Kaval will have to work some magic to make up for the lost revenue sharing at the existing Coliseum.
MLB and MLBPA burned the midnight oil the last couple of days to get a CBA approved before tonight’s midnight deadline. Though the talk did not include the same kinds of contentious items other leagues normally argue over (salary cap, players’ percentage of revenue), the sides still worked hard to avoid any kind of work stoppage. As of this post, both sides are touting a tentative agreement with much of the fine print to be worked out over the coming weeks. Like the last CBA, the new one will run for five years through the 2021 season. Major items that were up for grabs, such as the international draft and 26-man rosters were left by the wayside in order to get the deal done. What did apparently get through was a tweaking – if not an overhaul – of baseball’s revenue sharing system.
That news got started by Jeff Passan:
And was built upon by Ken Rosenthal:
Okay, let’s start with the Rosenthal scoop. As a way to “motivate” the A’s to build a new ballpark, they will be phased out of revenue sharing. This was the plan under the last agreement too, except that the A’s were given an exemption as long as they continued to play at the Coliseum. Since that didn’t net a change in the A’s venue, the owners (with the union’s help?) may have decided to light a fire under A’s ownership to build that. Nevermind that the A’s would already be in a new home in San Jose if MLB actually supported the A’s plans in 2012, that’s water under the bridge. Now John Fisher has the reins of the efforts to build in Oakland. And by phasing out the A’s revenue sharing check over the life of the CBA, the A’s won’t realize up to $90 million over the five years. That’s just as well for many A’s fans and rival owners who believe ownership has been pocketing those checks for years. The A’s weren’t spending it on payroll anyway.
As you can see from the table above, the previous CBA called for revenue sharing to be phased out for all of the Top 15 “Big Market” teams. The A’s are in a big market, but they are a relatively low-revenue franchise thanks to the dilapidated Coliseum. MLB carried over the last agreement while it also more-or-less imposed a deadline to complete the ballpark of 2021 or 2022. There’s always another side to the story, which makes me wonder what MLB will offer to the A’s to make the stadium project worth Fisher’s while. After all, if Fisher’s going to take all the risk while not getting monetary help from either MLB or the City of Oakland, what’s in it for him? The A’s aren’t guaranteed to get a
Rob Manfred called for the A’s to be more proactive in the stadium pursuit. The recent ownership change and other moves indicate that the A’s are serious. Still, the Raiders are the biggest obstacle to getting the Coliseum site as well as a competitor for scarce infrastructural funding should both teams get Oakland projects going. MLB’s pitch to Fisher may be “Once the Raiders and Warriors leave you’ll have the East Bay all to yourself. We’ll throw our weight behind your plans when that happens.” Will MLB provide funding to the A’s to get through lean years? Will Manfred finally play the heavy when it comes time to negotiate with the City?
Now about that performance factor. Performance factor is a key feature of the revenue sharing scheme. There are two parts of the scheme, the 34% straight pool Base Plan and the (14%) Supplemental Plan. The Base Pool plan is simple: every team contributes 34% of their local revenue after deductions regardless of how little/much that is. All teams above the average (mean) amount lose the difference between the mean and their contribution. Those below the fold receive the difference between their respective contributions and the mean.The Supplemental Plan takes the aggregate of 14% of local revenue for all teams, pulls from the Top 15 teams based on each team’s Performance Factor and sends that to the Bottom 15 based on their PF’s. It’s unclear whether MLB got rid of the Supplemental Pool altogether or calibrated revenue sharing by folding the Supplemental Plan into the Base Plan. That would make the whole plan a 48% straight pool Base Plan, one that would penalize rich teams for being rich less than before. Elements of the new plan may be released in the coming days. Eventually we’ll know what it is and what the A’s have to deal with.
A’s brass were hoping revenue sharing would stay intact, but the writing’s on the wall. The business model should stay intact, in that they plan their payroll limits and roster makeup based on regularly-sourced revenue (stadium, TV/radio, streaming) not including the revenue sharing receipt, which is received in December after the usual rash of free agent signings. I always figured that if the A’s needed that last piece for a championship roster, they’d dig into that receipt. Now Fisher will have to make a cash call to himself. The dynamic of trying to field a more competitive team to hopefully help sell a new ballpark vs. the need to save pennies for the ballpark by reducing costs is plenty fascinating on its own. Which way Fisher will turn will show us what his priorities are.
Last week, Oakland Mayor Libby Schaaf declared that the City was close to approving a framework for a potential stadium deal for the Coliseum. The framework would allow for Oakland’s exposure to be limited, while bringing in a big money financier to bridge the lingering (and growing) funding gap.
Today, media were assembled to cover yet another closed session of the Oakland City Council to further discuss the deal. The thought was the Council would come out of the meeting announcing the approval of the framework. What happened?
Okay, there’s always next week. Regardless, Council members sounded confident, especially Noel Gallo. Soundbites sound practically ebullient, despite the fact that the Raiders aren’t a participant in these talks. So what were they ready to pop the corks over? Matier and Ross revealed an outline of the framework (a more tenuous-sounding description is hard to come up with). I’ll summarize:
The inflated price of the project is due to the inclusion of 35 acres of ancillary development (retail/commercial). As usual, costs tend to rise over time thanks to inflation and other factors. What I like is that the whole project’s cost is being considered, an improvement over previous proposals with lots of hidden public costs.
The stadium remains a venue with a projected capacity of 58,000 or so, too small for the Super Bowl, right-sized for Mark Davis in Oakland. Davis remains committed to the Las Vegas stadium project, his sugar daddy being
MGM Sands mogul and LV Review-Journal owner Sheldon Adelson. Whether Vegas is approved or Davis is forced to go back to Oakland with his tail between his legs, he will require a benefactor to effectively subsidize the stadium over the short term. Long-term, Davis will either have to give up a piece of the team or a percentage of stadium revenues. Otherwise, Davis and the Raiders are a charity case. Most of the time the taxpayers are the benefactor as their tax dollars subsidize that gap. The NFL even prefers that kind of arrangement as the municipality acting as an equity partner, even though they see little in the way of event revenue.
If you saw how the Vegas stadium was rammed through various levels of government over the course of two weeks once it was drawn up, you can appreciate how, well, different Oakland operates. Oakland is mostly working the process on its own, the pace and work has been less than impressive and for all but the most faithful Raider fans, not particularly inspirational. Even the celebratory tone taken by the Council feels more like bravado than actual confidence. They “got it done” according to CM Gallo, but what exactly did they get done? While Coliseum City suffered through its own bouts of stuttering and stalling, the City has gone silent this round, scrambling after the last sugar daddy, Egbert Perry, embarrassed Lott by going behind Lott’s back to make a lowball offer on the Coliseum complex. We should see more details in the coming days, though we’re still talking about a framework, so most of the details we might want to scrutinize won’t be worked out. The play is to wait for Vegas to get rejected, present the plan to Davis, and have him work out the private-side details with Fortress and Lott, with all parties believing they have leverage over the others.
That’s about as forward an approach as Schaaf can take given her previous statements about not putting any public money towards construction – which given the paucity of information, we should still believe to some extent. Infrastructure, if that’s where the $200 million is destined, is technically not stadium construction, though it goes right up to the line. Will that satisfy the NFL owners enough to vote in Oakland’s favor? Unless they collectively have an overwhelming desire to keep the team in Oakland, probably not. They didn’t like how the pie was getting split in St. Louis, so why should they like Oakland’s less committal plan? If the idea for Schaaf and the Council is to present a united front and declare that they putting their best foot forward, they can celebrate. To keep the Raiders, the NFL’s gonna make you take more than a step or two.
To call today momentous would be an understatement. For now I’ll post a bunch of links, with commentary to follow.
Susan Slusser first broke the news that Lew Wolff would step down and sell most of his stake in the A’s. John Fisher is taking over as the control person (managing partner) of A’s ownership, a.k.a. the Athletics Investment Group, LLP. Fisher was approved to day as control person by MLB during the owners’ meetings in Chicago today. Wolff will maintain a small share of the team and a Chairman Emeritus title. Mike Crowley is also stepping down as team president, to be replaced by Earthquakes president Dave Kaval. Crowley will remain a senior advisor, while Kaval will continue to run both the A’s and Quakes. Now the links:
A’s shakeup: Wolff, Crowley out as team redoubles stadium efforts (Susan Slusser, Chronicle)
A’s: Wolff exits, more change coming; may bode well for future in Oakland (John Hickey, BANG)
Lew Wolff would not be stepping down if he was 20 years younger (Joe Stiglich, CSN)
Earthquakes, A’s promotion increases profile of new soccer GM (Elliot Almond, BANG)
Will A’s ownership shift hit stadium plan out of the park? (Ron Leuty, SFBT)
New A’s president Dave Kaval focused on stadium, community (Susan Slusser, Chronicle)
New A’s man Kaval tasked with performing stadium-sized magic (Ray Ratto, CSN)
And the A’s press release:
This is not moving the deck chairs, as Bruce Jenkins would suggest. Nor is it clearing the decks, as Fisher is still the money man and majority partner in shifted ownership group. What matters is Fisher’s commitment to the ballpark effort and the presence of Kaval, a gifted salesman/marketer who was a key player in completing Avaya Stadium. Kaval is bringing over many of the tools he used during his Quakes tenure: social media, accessibility through regular office hours, and thinking outside the box. That said, the Quakes bear one very similar operational trait as the A’s: a resistance to big expensive player contracts. That’s despite a new stadium and a league salary cap designed to prevent profligate spending by teams. MLB’s a few levels up from MLS economically, so that could potentially be different for the A’s, but it will all depend on revenue in the short term, and projected boosts if the A’s get an Oakland ballpark deal done. Still, there is much greater hope for a ballpark than there has been in several years. Kaval is an engaging, smart guy who knows how to read a room. Just the fact that he’s much more approachable than Wolff, Crowley, and especially Fisher should help the A’s standing in Oakland. It can’t hurt. The A’s will need strong community support to build their ballpark. Maybe, just maybe, we’ll see a plan in the coming months. Wolff and Fisher have experienced success with Kaval running point. They’re hoping he can repeat that success with a much tougher project.