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Expensive America's Cup Plan Is Out

Sailboats pass the start line to begin the fourth day of racing at the Key West 2010 sailing regatta Jan. 21, 2010 in Key West, Fla.
Sailboats pass the start line to begin the fourth day of racing at the Key West 2010 sailing regatta Jan. 21, 2010 in Key West, Fla.
Supervisors dump original proposal, direct staff to pursue cheaper alternative

The public cost of hosting an America’s Cup along San Francisco’s waterfront is tumbling, with city leaders effectively rejecting an initial proposal Wednesday in favor of a cheaper alternative.

If San Francisco hosts the next America’s Cup, event organizers led by billionaire Larry Ellison will not be allowed to use or develop the heavily occupied industrial Pier 50, as had been initially proposed, the Board of Supervisors’ Budget and Finance Committee concluded at the end of a five-hour hearing Wednesday.

Additionally, America’s Cup organizers must pledge in writing to raise $32 million from the private sector and other sources to help offset city costs associated with at least 43 days of planned sailing culminating with final matches in the summer of 2013, the committee determined.

Mayor Gavin Newsom’s economic development aides agreed during the hearing to attempt to renegotiate and incorporate those changes into a proposed host city agreement that is scheduled to be debated when the committee reconvenes at 1 p.m. Monday.

The Board of Supervisors might vote on the agreement Tuesday, although Supervisor David Campos, who is not a regular member of the committee, said the vote might need to be delayed by a week or more to allow for additional economic analysis and negotiations. His colleagues appeared to agree.

City officials have been locked in negotiations in recent months with Ellison’s team, which won the Cup early this year and controls most aspects of the next event, in an effort to secure rights to hold the next event on San Francisco Bay.

The America’s Cup, which could take place on the bay again in subsequent years if Ellison’s team successfully defends its title, is expected to provide a $1 billion spending boon for local businesses.

But an initial term sheet negotiated largely by Newsom’s economic development aides to host the event came under intense fire for its high public costs.

The proposal would have evicted long-term industrial and maritime tenants from Pier 50, which lies south of AT&T Park. Ellison’s team had planned to reinforce and improve the large pier, use it for race operations and then redevelop it under a long-term lease.

That plan was dismissed Wednesday by the committee of lawmakers in favor of the Northern Waterfront Alternative, which is a cheaper, newer plan strongly backed by the Port of San Francisco that would shift planned race operations north toward the city’s tourism district and closer to the planned racing area. The Port of San Francisco is a quasi-independent city-run agency that oversees state-owned waterfront land.

The alternative is supported by Newsom’s economic development office and by Ellison’s team, although the team initially said there was insufficient time for it to be fully vetted.

Consideration of the alternative proposal began after race organizers announced that the event would involve only catamarans, which do not require the construction of expensive breakwaters needed by traditional yachts, according to port officials.

Under the Northern Waterfront Alternative, race operations would occupy conjoined piers 30 and 32, which are dilapidated piers south of the Bay Bridge that are considered suitable only for light vehicle parking. The team would receive rent credit of $55 million for infrastructure improvements at those piers to put toward long-term leases of the piers and an adjacent triangle of undeveloped residential land. Main spectator viewing areas under the alternative plan would be placed near Fisherman’s Wharf.

San Francisco’s budget analysts plan to analyze the financial impacts of the Northern Waterfront Alternative. Chief analyst Harvey Rose said his office would try to complete a report by Monday, but he indicated that a detailed analysis might take up to two weeks to complete.

Port Executive Director Monique Moyer told lawmakers that the initial term sheet was negotiated without the close involvement of her staff at a time when everybody in the city was “a bit naïve” about what hosting the event would mean for San Francisco.

The deal was also struck under the impression that cities or ports in other nations were bidding against San Francisco to host the event. City officials told lawmakers Wednesday that they have found no documented evidence that any such bids have been filed.

Moyer said San Francisco could lose the right to host the event to Rhode Island, for example, if it can’t reach an agreement with Ellison’s team, but she said she was not surprised by the absence of other international offers to host the race.

“I’ve never ever expected another offer,” Moyer said.

Moyer said the Northern Waterfront Alternative would be a good deal for the city and port.

“When we brought you the term sheet a month ago, the term sheet was characterized largely according to the way the team is accustomed to doing business,” Moyer told lawmakers.

The alternative plan, Moyer said, “looks a lot more like the deals” that the port and the city are accustomed to signing.

Supervisor Campos on Wednesday appeared anxious for the city to continue negotiations into early January with Ellison’s team, which has told the yachting world that it will name an event venue by Dec. 31.

Campos said there is no question that the majority of San Francisco’s lawmakers want the event to be held on the bay.

“It’s just a question of whether or not we have a deal that makes sense for the city and county of San Francisco,” Campos said.

The Dec. 31 deadline is important for potential America’s Cup challengers, who say they need to begin securing sponsors and assembling teams suited to race conditions. The success of the event will depend largely upon attracting a large pool of challengers in order to boost sponsorship deals and interest among fans internationally.

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