The America’s Cup yacht race is bringing more than big boats to town.
It also comes with a deal involving some of The City’s most valuable public real estate, and the pact with race officials needs significant changes if San Francisco’s financial ship is going to stay on course, a budget analyst’s report released Thursday says.
The business arm of the race, the America’s Cup Event Authority, plans to finance waterfront pier improvements that the Port of San Francisco cannot afford. In return, race officials would receive ownership and long-term rent-free leases after the 2013 event for some of The City’s most desirable Bay-front property to build luxury condominiums, retail outlets and other developments yet to be determined.
Although the Port normally requires such deals to include a portion of future lease revenue to be funneled back into public coffers, that’s not currently part of the America’s Cup agreement. But the report conducted by budget and legislative analyst Harvey Rose recommends a 1 percent equivalent of all condominium sales be retained by the Port and that it also should receive a cut of real estate transfer fees.
Under the terms of the current deal, the authority would initially invest $55 million in pier improvements in exchange for a 66-year lease at Piers 30-32 and ownership of Seawall Lot 330, a property already approved for condos.
The authority could then opt to do additional pier work and get 66-year leases on piers 26, 28 and 29, which would trigger repayment from The City with an 11 percent interest rate. The report recommends that a cap be placed on the amount race officials can spend on improvements, or else The City could end up being roped into repayment for up to 91 years after the event.
The report suggests The City should nix Pier 29, at the foot of Telegraph Hill, from being transferred to race officials after the event. Board of Supervisors President David Chiu has been pointing to the lucrative property as a problem spot in the deal.
“Pier 29 needs to come off the table,” Chiu said in a statement Thursday. “I’ll push to have it removed in the weeks ahead.”
Stephen Barclay, a board member of the authority and the group’s primary negotiator, has been talking tough in recent weeks, saying concessions have already been made to mitigate the financial stress on the Port. Barclay said on Tuesday he will “draw the line” with Pier 29, because it is essential to the authority seeing a return on the total $111 million it plans to spend.
“We face an urgent deadline to get construction under way, so any additional changes would detrimentally affect the balance of the bargain,” Barclay said recently in a statement.
The report also levies concern about potentially lax fundraising by the America’s Cup Organizing Committee, the nonprofit in charge of covering The City’s $52 million cost of putting on the race in September 2013.
If the committee raises its goal of $32 million by 2013 and The City can generate $22 million in hotel and sales taxes during the event, San Francisco will come out more than $2 million ahead, the report says. But if fundraising stagnates at its current $8 million level, The City’s taxpayers could be in the hole for nearly $22 million.
Local Democratic Party Chairman Aaron Peskin said the long-term fiscal impact of the race shouldn’t be taken lightly, and upcoming Board of Supervisors hearings on the matter should include discussions about how to expose The City to less risk.
“As currently structured, this transaction is still taking San Francisco and its taxpayers to the poor house, and many of us are hopeful the Board of Supervisors will insist on some rational changes,” Peskin said.
$300M Total cost for competition
$52M Cost to The City
$32M City costs to be offset by fundraising
$22M City costs to be offset by hotel and sales taxes
$1.4B Economic benefits for Bay Area, as estimated by race officials
Sources: America’s Cup Event Authority, San Francisco budget and legislative analyst report