America's Cup deal undergoes big changes at the last minute
City officials were poised to finalize an offer to host the 34th America's Cup after amending a sweetheart deal that had city taxpayers heavily subsidizing Oracle billionaire Larry Ellison's yacht race. But the question now is whether Ellison will accept the new proposal.
The original deal negotiated between representatives for Ellison and Mayor Gavin Newsom called for ceding 35 acres of city-owned waterfront property to Ellison's America's Cup Event Authority (ACEA) rent-free, but it was criticized as too expensive for a city facing massive budget deficits (see "The biggest fish," Nov. 30).
So at the Dec. 8 meeting of the Board of Supervisors' Budget & Finance Committee, that deal was jettisoned in favor of a cheaper alternative that shifted the race venue to the city's Northern Waterfront and promised long-term leases on commercially reasonable terms. The new agreement appeared on track for approval at the Dec. 14 Board of Supervisors meeting, after Guardian press time.
At the same time, new doubts arose at the last minute when race organizers stated publicly that they were more likely to reject the new option than the original plan because the financial terms were not as attractive. Although expectations have been high all along that San Francisco would be selected to host the next Cup, the team cast doubt on the outcome by publicly criticizing the new plan. According to a source familiar with negotiations, that move came as a jarring surprise to city officials. Nonetheless, supervisors approved the proposal at a Dec. 13 special meeting and sent it on to the full board.
Newsom's Office of Economic and Workforce Development (OEWD) spent about four months in negotiations with Ellison's BMW Oracle Racing Team and the ACEA to hash out a host city agreement. The Northern Waterfront scenario emerged in late November after Budget & Legislative Analyst Harvey Rose cautioned in a fiscal impact assessment that the original deal would have cost the city an estimated $128 million, including impacts to the general fund and losses from entering into rent-free leases.
The fundamental shift in the plan at this late stage, less than three weeks before the deadline for a final decision, reflected some deft maneuvering on the part of the board even in the face of intense pressure to approve a binding long-term agreement on an unusually short timeline. Sup. Ross Mirkarimi and Board President David Chiu, who expressed reservations about the original proposal but strongly favored the idea of bringing the race to San Francisco, were able to deflect a deal that would have harmed the city in favor of a wiser alternative by reshaping the proposal at the 11th hour.
"I was a little bit surprised by some of the recent press," Mirkarimi noted at the Dec. 13 meeting, referencing reports that the team was considering rejecting the bid. He asked everyone to keep in mind that "we're working with public dollars and purse strings."
But the Mayor's Office supported the modified deal. Press Secretary Tony Winnicker told the Guardian: "The Northern Waterfront bid is good for the city, great for the port, and will provide a spectacular experience for the America's Cup. Hosting the America's Cup will bring more than $1 billion in economic activity and thousands of jobs to San Francisco and showcase the city unlike almost any other event."
Speaking at the Dec. 8 committee meeting, Chiu also voiced his support for hosting the Cup. "Obviously this will have enormous benefits," Chiu said. "If this were to come to San Francisco, this will mean $1 billion and likely $1.2 billion in economic activity during the greatest recession since the Great Depression. We cannot ignore this opportunity."
The difference in the two scenarios amounts to tens of millions of dollars in savings. According to a fiscal feasibility analysis released Dec.