America's Cup: A Novel Take on Vastly Scaled-Back Expectations

Think of the money we'll save!

Most San Franciscans picking up the paper the day after the Super Bowl would be reading sad headlines about the 49ers' agonizing loss. That's bad. But, hypothetically, those headlines could have noted that the city had been spared an expensive and destructive post-win riot. That's ... good?

This is the scenario facing San Franciscans today. Readers of the San Francisco Business Times on Monday saw "America's Cup economic impact lowered to $780 million from $1.4 billion." Examiner readers today saw "Cup economic benefits downsized." For the most part, that's bad.

Yet today's above-the-fold, Page One story in the Chronicle notes that "Cup costs down by millions." That's ... good?

It's certainly convenient. Without stumbling into the realm of conspiracy theories, with the private America's Cup Organizing Committee reeling in its attempts to "endeavor" to raise $32 million to offset city costs -- and on the very day of a hearing called by Supervisor John Avalos to check on progress -- here comes a report claiming far less private money is needed to satiate the city.

That city hearing is, at this very moment, under way. But a number of vexing questions still remain. And a number of misconceptions are still being bandied about.

See Also: The Cup Runneth Over

More America's Cup coverage

Let's dig down into the $32 million the ACOC was to "endeavor" to compensate the city. Naturally, city costs figure to be lower with a smaller predicted event. You'll have fewer people riding fewer buses and requiring fewer cops and other city resources. These figures were scalable.

Vance Cardell

Gangway!

But, as we've noted repeatedly, the $32 million figure was long ago irrelevant. According to the most recent analysis by the Board of Supervisors Budget and Legislative Analyst, the prior estimated cup costs the city would incur were pegged at $40.2 million. The Port of San Francisco is pouring $21.9 million into the effort, $3.7 million of which do not come with longterm, non-cup benefits.

Today's scaled-back projections render these numbers somewhat archaic, but it bears mentioning that even if the ACOC fulfilled its loose obligation to raise $32 million -- which it couldn't -- the city potentially stood to lose money.

It still may. That's because both the Budget Analyst's work and the happy statements being made by America's Cup organizers rely on increased tax revenue bailing out the ACOC for its anemic performance. This is a dicey proposition. As numerous economists studying the Super Bowl and other big-time events have repeated, for decades, claims of enormous economic boosts are dubious and rely on a flawed analysis. In order for San Francisco to be flooded with additional tax revenues, for example, far more visitors than usual would have to flock to the city during peak tourism months.

Vance Cardell, Jr.

Beautiful -- but expensive

It's hard to say how many more folks will head to San Francisco than would have anyway. And it's also hard to predict how many people who would have come here will avoid the city due to the America's Cup. As University of South Florida professor Philip Porter noted with regards to the Super Bowl, to claim an economic windfall based on visitor numbers without factoring in those who avoid the area or are pushed out "is like going to the hen-house, counting all the foxes, and saying 'Look at the economic impact of all these foxes here eating!' You're not counting all the hens who are gone."

In short, the city would do well to have cash in hand rather than rely on hotel tax revenue and other funds to materialize at some future time.

Some other items of note:

• The Chronicle notes the ACOC received  an "$8 million ... loan from the America's Cup Event Authority" -- which is putting on the race -- "to be partially repaid through a corporate fundraising program." It should be pointed out that this represents more than half of the money "raised" by the private fund-raisers -- and was handed to the ACOC just in time to meet a fund-raising benchmark. It also warrants mentioning that race organizers described this payment to SF Weekly much differently last year. It wasn't a loan but "An $8 million payment from [race organizers] characterized as an advance on future sales to be derived from a revenue-sharing split on sponsorships."

• Coverage of the scaled-down economic impact report, once again, states how many "jobs" the America's Cup will create (down from around 8,800 to around 5,500). Mayor Ed Lee's blithe statement that the cup would create more than 8,000 jobs is now inaccurate on two levels. First, it was too high. Second, as we've mentioned repeatedly, these reports don't measure "jobs" but "work." Via "labor hours," the report calculates how much extra work will be created by the Cup. This is measured in "jobs," but it's ludicrous to think that this will result in a one-to-one ratio of people being hired. Much of the work will be undertaken by current employees, toiling that much harder. Perhaps they'll make some extra money on the deal. Perhaps not.

Finally, fund-raisers and race organizers have portrayed the more modest projections as a method for private funds and public needs to come into accord. So, it's worth looking back at the following:

•  "I have every confidence we will meet our obligations," -- America's Cup Organizing Committee Executive Director Kyri McClellan, 6/13/11

•   "Yep, we are not running behind in the least bit," -- McClellan, 9/19/11

• "I am confident that all the money will be raised," -- ACOC Chair Mark Buell, 1/6/12

• "I'm busting my ass raising (money) for it." -- Buell, 2/7/12

•  "...we are confident that the agreement we have with the (America's Cup) Event Authority coupled with our continued fundraising successes will ensure we meet our obligations to the city." -- Buell, 2/7/12

•  "There is definitely more heavy lifting to be done, but we think we're well-positioned to do that," -- McClellan, 2/8/12

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