Tough questions asked on America's Cup fundraising shortfall

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At a March 13 subcommittee hearing called by Sup. John Avalos, representatives from the city’s Office of Economic and Workforce Development (OEWD), the America's Cup Organizing Committee (ACOC) and others were called upon to explain why coordinators of the prestigious yacht race have failed to reach projected fundraising targets to defray city costs. If the fundraising goals aren't reached, the city’s General Fund could weather a $13 million hit to cover costs for the sailing event.

San Francisco struck an agreement to host the sailing competition in 2010, following negotiations initiated under former Mayor Gavin Newsom with entities associated with Oracle Racing Team, owned by billionaire Larry Ellison. The events will culminate with a sailing match on the San Francisco Bay this coming summer.

Mark Buell, who chairs the board of ACOC, told supervisors original projections had pegged total event revenue at $300 million, with eight to twelve vessels competing in the race. Those projections have decreased dramatically, with only a handful of teams entering and other “unknowns” amounting to the fact that “revenues are not what we had hoped,” Buell explained. Yet he tried to put a good face on it, saying, “All told, I believe that the city will come out whole.”

Kyri McClellan, who became CEO of ACOC just after helping negotiate the deal to bring the America’s Cup to San Francisco at her previous job with OEWD, told supervisors that ACOC had hired a fundraising expert and launched an initiative called ONESF to kick up the fundraising efforts.

She added that Mayor Ed Lee was helping to secure funding commitments for the race, by "holding breakfasts with CEOs" and asking them to commit funding. Lee is “putting in an incredible amount of energy behind this,” McClellan said, “and people are responding.” She said Sen. Dianne Feinstein had also been involved in helping to secure funding for the sailing competition.

San Francisco Controller Ben Rosenfield provided a breakdown of the funding shortfall so far. An economic analysis conducted a year ago found that ACOC had $12 million cash in hand, he said, less than half the $32 million initially projected as what was needed to defray city costs. Only $13.9 million in pledges and documented cash can be accounted for thus far, Rosenfield added, and the committee has raised around $10 million less than it originally planned for at this stage of the game. “We found they’ve fallen short,” he explained. 

McClellan reported that an additional $1.1 million would be coming in, “from donors and pledges, between now and January of 2014.”

Mike Martin, tasked with leading the city’s involvement in the America’s Cup on behalf of OEWD, displayed a slide that seemed to paint a much rosier picture of the fundraising shortfall than the $20 million cited in recent media reports.

The total city budget projection for covering costs of the race is actually closer to $22 million, lower than the initially projected $32 million, according to his slide. So far the city has been reimbursed for $6.8 million of that, he said. But the next line on Martin’s slide subtracted “projected event-related tax revenues” pegged at around $13 million, apparently suggesting that the city would be made whole by increased tax revenue rather than by receiving an actual reimbursement payment to defray city costs. According to OEWD’s calculation, that makes the “remaining fundraising need” only about $2.67 million, according to Martin’s presentation.

“I don’t think it’s been the intent to say, let’s stop there,” Martin explained. “We have a few months to capitalize on the growing awareness and excitement about the event.”

Reached after the hearing, Sup. Avalos did not sound very excited by what he had heard in response to his inquiries. “It seems that the commitments that were made to the board in 2010 … are not being taken seriously,” Avalos said. “Now that they’re coming up short on fundraising efforts, they’re trying to say the General Fund should be subsidizing the cost of the race.”

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