America's Cup: How City Would End Up On the Hook for $55 Million
Based on the "Northern Waterfront Alternative" plan which is currently en vogue, Harvey Rose warned that billionaire yachtsman Larry Ellison's "Event Authority could end up paying nothing -- nothing -- for infrastructure improvements." Bluntly, $55 million in city money would be siphoned from the general fund and into the kitty of companies controlled by one of the world's wealthiest men.
How would this happen? In not one but two ways.
The deal -- described by Port Director Monique Moyer as "an amazing dream come true for us" -- comes equipped with rent credits for the "Event Authorities." Previous iterations of the America's Cup agreement simply ceded large swaths of the waterfront to private development. Now "fair market rent" must be charged. But those rent credits allow Ellison's companies to pay the city a reduced amount of money, deducting for the $55 million they'll put into infrastructure improvements.
Fred Brousseau is a principal at the Budget Analyst's office who has prepared two different studies analyzing the fiscal impact on the city an America's Cup race would have. He says rent credits aren't an anomaly for a development deal with the Port of San Francisco. The Exploratorium, for example, has rent credits: It will develop the waterfront land on its own dime, and, in return, recoup its costs via reduced rent.
In the long term, of course, this means the city pays the way for a private enterprise. In the short term, the city saves by not having to issue out debt to get the work done.
Yet the proposed deal for the America's Cup would allow Ellison's Event Authorities to recoup their money in another manner as well: via an "incremental property tax." Barring dire times indeed,the land being used by the Authorities can be expected to increase in value. Its property tax should increase as well. Yet, per the deal with the city, that extra money wouldn't go to San Francisco but would be available for reimbursement to the Event Authorities.
Between rent credits and incremental property tax, Brousseau says "recouping $55 million in 30 years is well within the realm of possibilities." In fact, he can't see how all of that money wouldn't be claimed by the Event Authorities.
The Budget Analyst's office is working furiously on a third fiscal feasibility study regarding the America's Cup which is due before the Board of Supervisors by Monday. In addition to the above conundrum, Brousseau et al. will have to figure out how much the city stands to gain or lose from the Port's last-minute switch of development rights on Piers 26 and 28 instead of Pier 50.
But, as Rose has said before, hosting the America's Cup here is "feasible." It all depends upon your definition of that word. "I want to make the Board of Supervisors aware that there is a cost to the city if we do this," he told SF Weekly.