America's Cup: Who's on the Hook for Private Fund-Raisers' $5 Million Loan?
|Somebody owes somebody else some money...|
New projections put the expected public and private benefits of hosting the America's Cup way down from prior numbers -- but also pare back the anticipated city costs of hosting the event.
The latter is, ostensibly, good news. The private America's Cup Organizing Committee, tasked to "endeavor" to raise $32 million to compensate the city, is dead in the water. It met its benchmark last year of raising $12 million only via a last-minute influx of $8 million from the America's Cup Event Authority, which is putting on the race. At the time, this was characterized as an advance on future revenue-sharing.
In the year and change since, the ACOC has managed to only amass an additional $1.9 million in written donor pledges. And that cash advance from race organizers is now being characterized as a loan. This prompts the pertinent question of who will be left holding the bag for that loan if the ACOC does as well paying it back as it has thus far of raising funds for the city.
See Also: Dueling Takes on Sinking America's Cup Report
Per city controller Ben Rosenfield, it's not the city.
"My read of the situation is that it's a non-recourse loan. The two parties in the deal are the America's Cup Organizing Committee and America's Cup Event Authority, and there's no recourse through the America's Cup Organizing Committee to the city if that loan isn't ultimately repaid," he says. "It's the Event Authority that has to worry about the America's Cup Organizing Committee endeavoring to fulfull the fund-raising..."
The deal as it stands is that the ACOC must repay $5 million of the $8 million it was handed. It will do so by sending three-quarters of the money it receives via future corporate pledges to the Event Authority, with one-quarter left for the city. Non-corporate donations go straight to the city, 100 percent.
Rosenfield said both Event Authority personnel and city officials have assured him that there's no means to collect this loan from the city.
That's not to say that the ACOC's fund-raising struggles won't bite the city on its bottom line. Even with the city's estimated reduced costs of putting on the event, there's a lot of money to be fund-raised in not much time. The number to hit now is $22.5 million and Rosenfield says the ACOC has $13.9 million in hard cash. This leads to an area of contention between America's Cup cheerleaders and nay-sayers. Are anticipated influxes of hotel, sales, and residential taxes enough to satiate the city? Rosenfield is skeptical.
"I'm hopeful the tax revenues will materialize. I'm certain some will," he says. "But whether they will at the level they've been estimated is heavily based on how many people attend the race and how many hotels they fill up." SF Weekly has written about this before, incidentally -- and the experts we spoke with can't suggest firmly enough that you don't equate cash in hand with illusory tax boons.
But, as Rosenfield notes, relying on potential tax influxes to even things out is an alteration of the prior arrangement.
"This is a change in the value proposition from where we were to where we are today," he says. "The financial model was that the city would incur expenses, and fund-raising would offset the costs, and any economic benefit the city saw would accrue to the benefit of the overall economy and the city's general fund. But now we're in a different place. We're incurring expenses and we're hoping, when we've gone through and seen what actually occurred with the hotel, business, and sales taxes, there'll be enough to cover the delta.
"But we won't know that until long after we incur those expenses," he says. This is a different deal entirely. "And one with more risk to the city."