Dramatic change in the America's Cup deal

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Mayor Ed Lee has announced dramatic changes in the deal for the America's Cup race, essentially eliminating the massive real-estate development contract with Oracle CEO Larry Ellison.

Under the new agreement, the city will work with Ellison to host the race -- but that's about the beginning and the end of it.

"There is no long-term development," Stepahnie Martin, spokesperson for the America's Cup Event Authority, told me.

The previous deal, set for a Board of Supervisors vote Feb. 28, has been scrapped, so there won't be any board action tomorrow, Judson True, an aide to Board President David Chiu, told me.

That deal would have given the world's sixth richest person a swath of valuable waterfront property, with 66-year leases and development agreements, in exchange for Ellison investing millions in renovating the aging piers.

But criticism over what some called a huge giveway of public land was diverting discussion of the yacht race and threatened to undermine the city's ability to serve as the venue host. Some supervisors were demanding more guarantees that the city wouldn't lose money on the deal, and Ellison's team was unwilling to budge.

In a Feb. 27 press release, Lee announced that the teams will be building a race village at Piers 27-29 and consolidating the boat launching facilities at Pier 80, on the southern waterfront. The race village will be temporary, and when the yachts leave, Ellison won't have title to that property.

He won't have title or development rights at Pier 80, either, and the plan to let him build on Piers 30-32, 26 and 28 as well as a lot across the Embarcadero appears to be dead.

So the America's Cup is moving back to what it should be -- a sporting event, a race on the Bay, and not some bloated development agreement that involves leases lasting more than half a century.

It's still not clear how this happened -- except that the numbers clearly weren't working out for either side. The scaled-back agreement prevents the city from losing a fortune if the race doesn't draw the anticipated crowds, and protects Ellison from losing money on waterfront development plans that regulators (including the Bay Conservation and Development Commission) might never have approved.

The city will still pay the ACEA about $16 million to fix a few things necessary to make the race work, and it's not clear where that money will come from,

Aaron Peskin, a leading critic of the old deal, told me he's cautiously optimistic. "It sounds promising, we're getting this event down to the proper size," Peskin said.

But he said that he hasn't seen a written agreement "so it's hard to tell what is and isn't still in the deal."

No mattter what the final agreement looks like, it's clear that Ellison's control of the future of the central waterfront has been radically reduced. And it's clear that the deal former Mayor Gavin Newsom cut with Ellison wasn't going to work for the city.

It also showed something that I've seen over and over again in these city deals with private parties: If the public refuses to go along, most of the time the Larry Ellisons of the world -- the same people who insist they won't move an inch and that the deal can't be changed -- will eventually back down.