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San Francisco Will Host 34th America's Cup

An image from Race 1 of the 33rd America's Cup in Valencia
An image from Race 1 of the 33rd America's Cup in Valencia
Announcement comes after days of meetings and months of negotiations

After months of hardball negotiations, the organizers of the America’s Cup sailing regatta announced Friday that the 34th edition of the competition will be held in San Francisco in 2013.

If all goes as planned, the event could generate $1 billion in economic activity, help revitalize part of the city’s waterfront and spur new interest in the sport of competitive sailing.

“We sought a venue that fulfills our promise – to showcase the best sailors in the world competing
on the fastest boats,” Richard Worth, America’s Cup Event Authority Chairman, said in a statement. “And hosting the America’s Cup in San Francisco will realize that promise.“

Software mogul Larry Ellison’s San Francisco-based BMW Oracle Racing team captured the 159-year-old cup off the coast of Spain in February. Ellison’s local roots and the superior sailing venue offered by San Francisco Bay immediately made San Francisco the front runner to host the next round of races.

Under the final deal struck with the city, the America’s Cup Event Authority, which is the group established by Ellison to organize the races, will invest in waterfront improvements and recoup those costs in the form of rent credits.

The group will revive conjoined piers 30 and 32 in the South Beach neighborhood. The expansive piers are currently so badly rotted that they are considered suitable only for light vehicle parking. In addition to being used for the event, the Event Authority will have the right to redevelop them for other purposes in the future.

A triangular parking lot on the other side of the Embarcadero that’s zoned for a 10-story residential building is also part of the deal. That lot might be used for an America’s Cup village and subsequently sold or rented to residents or investors. Piers that lie between the Bay Bridge and piers 30 and 32 could also be used for the event and then redeveloped by Ellison’s group.

Some piers along the northeastern waterfront — between the Ferry Building and Fisherman’s Wharf — will be used for spectator viewing and other uses.

Ellison’s team has developed ambitious plans to expand the appeal of the regatta. The team announced in September that the event would be raced in 72-foot catamarans, which are extremely fast and can sail zigzag courses close to shore, making for an exciting spectator experience. The team has also laid out plans for a series of junior races around the world over several years, culminating in at least 43 days of final-round racing on the bay that would end in the summer of 2013.

While San Francisco Bay is an appealing locale for the races, the deal almost foundered after the city budget analyst and some elected officials objected to an original deal that had been negotiated by Mayor Gavin Newsom and his economic development office.

That first agreement included development rights to Pier 50, which houses numerous city, government and maritime tenants and is located just south of AT&T Park, and called for most of the event activity to take place along the city’s southern and central waterfront. That deal was cut under the incorrect assumption, promulgated by the event organizers, that cities in Spain and Italy were actively bidding against San Francisco to host the event.

The agreement was nixed after the Board of Supervisors’ budget analysts calculated that it would cost the city more than $128 million in land giveaways and event-related expenses to execute. A revised bid, which was unanimously approved by the Board of Supervisors and signed by Newsom in a rare display of City Hall unity on Dec. 14, leaves out Pier 50 and substantially reduces the value of waterfront development rights that are the main financial lure for Ellison’s group.

The revisions followed advice from America's Cup Regatta Director Iain Murray that breakwaters, which are solid wall-like structures built around marinas and other boating areas to protect moored and slow-moving vessels from waves, would not be needed for the catamaran races. That allowed the city to shift proposed race activities north, closer to the city's tourism district, where Port officials had ruled out construction of breakwaters.

The change in the city's plans for the race caused trust to plummet between city and Cup officials. Ellison's negotiators privately accused city negotiators of a bait-and-switch maneuver that robbed the billionaire of prime waterfront development rights. City negotiators, however, insisted that the northern waterfront alternative would provide a superior event experience and argued that a massive public and political outcry over the proposed handover of Pier 50 would doom the event to fail.

Under the revised bid, the budget analysts found that the city and its port are expected to lose $12 million of public funds in event-related costs in exchange for the right to host the event. Event organizers, however, aim to raise $32 million in philanthropic donations to offset city costs, and the city can walk away from the deal one year from now if $12 million has not been raised. That means the event could not only be profitable for the private sector, but also fatten the public purse.

Several days before the Board of Supervisors met to approve the revised bid, BMW Oracle Racing Chief Operating Officer Stephen Barclay fired off a surprising letter to city leaders warning that the new plan was not financially acceptable and would be rejected.

“We take this opportunity to advise the Board that the alternative agreement is not acceptable to the Event Authority,” Barclay wrote in the Dec. 10 letter. “The Event Authority has been advised that this was done to resolve the impact on the City and Port’s finances, however no one asked the Event Authority how it impacted its finances.”

At around the same time, Ellison’s team flew off to Rhode Island in an effort to generate a competing bid from Newport and the state, where America’s Cup events were raced on Narragansett Bay from 1930 to 1983.

Event organizers asked Rhode Island officials to submit a bid to host the event by Dec. 31, which was an important deadline because organizers had committed to prospective racing teams that they would announce a venue by that date. It also turned out to be an impossible deadline, with Rhode Island economic development officials announcing on Wednesday that they would need an additional week or two to consider public costs of hosting the race and conduct rigorous financial analyses.

Detail of the America's Cup, engraved with the names of previous winners
Detail of the America's Cup, engraved with the names of previous winners

The negotiations between Ellison’s team and Rhode Island officials were viewed skeptically as a ploy to increase the value of San Francisco’s bid. San Francisco officials were unmoved by the negotiations and firmly stood by the city’s Dec. 14 bid, which was accepted following tweaks on Friday by the event organizers. Organizers’ acceptance of the bid followed days of intense meetings with city and port officials and lawyers. During those meetings, government officials worked to tighten up bid language and assure the team that it is likely to recoup its investments in public infrastructure, despite uncertainties over the costs of needed infrastructure repairs and the value of waterfront development rights.

San Francisco did not agree during those discussions to increase the value of its bid, according to Jennifer Matz, Newsom's chief economic development adviser. Any changes to the value of the city's bid would require approval from its Board of Supervisors.

"The mayor engaged more directly with the team in the last couple of weeks," Matz said. "There were incredibly cautious, detailed conversations between our lawyers and their lawyers around some of the concepts. It took a lot of time, but it was time well spent."

The catamaran regatta will be held in a series of races around the world before at least 43 staggered days of sailing are staged near the Golden Gate Bridge, culminating in September 2013 with a best-of-nine series of final Cup matches.

Consultants working for the Bay Area Council, which is a group representing the region’s largest corporations, calculated that the event could infuse more than $1 billion into the region’s battered economy and create jobs.

But uncertainties prevail. The success of the event and its impacts on local employers will be shaped largely by three factors: the number of racing teams that participate as challengers; the number of spectators who watch the races from shorelines; and the amount of money raised in corporate sponsorships, which will be affected by the size of worldwide broadcast audiences.

If organizers fail to raise at least $270 million from sponsors, the event could be pared down, with fewer days of racing scheduled.

Organizers aim to attract at least 10 racing teams to participate, and they recently dropped entry fees from $1.3 million apiece to $100,000 in an effort to boost registration numbers. Several challengers have already been confirmed as entrants in the regatta, including Artemis Racing and Aleph-Equipe de France. A third challenger has chosen to not yet announce its entry, according to event spokeswoman Stephanie Martin.

Additionally, an Australian team recently submitted an application to participate as a challenger. Yacht racing is extremely popular in parts of Australia and the nation in 1983 became the first to win the America’s Cup away from the United States.

Ellison’s team will also participate, as will Club Nautico di Roma, represented by its team Mascalzone Latino, which was selected as the event’s Challenger of Record. That means that at least six teams are already slated to take part in the multi-year regatta.

The number of spectators who will flock to the city to watch the event is difficult to predict. Despite San Francisco Bay’s predictably strong winds and numerous marinas, the sport of yacht racing is less popular in the region than it is in other parts of the world.

Terms of San Francisco’s bid aim to boost local participation and interest in the sport, which has long been a goal of officials at the Golden Gate Yacht Club, which sponsors Ellison's team. San Francisco’s bid compels race organizers to create sailing-related educational programs and experiences for families and children and to provide some of them with free event passes, which could help increase interest in the sport and boost spectator numbers.

Official attendance projections are speculative and optimistic. Event organizers say up to 600,000 people could watch the main races from San Francisco’s shorelines, skyscrapers and hills. The Bay Area Council, meanwhile, optimistically assumed in its report that the race would attract twice as many people to San Francisco as Fleet Week, the annual military event that includes a wildly popular air show. Those spectator projections underpinned the Council’s giddy forecasts of regional economic benefits.

Subsequent America’s Cup regattas could be held on San Francisco Bay if Ellison’s team, which is sponsored by the Golden Gate Yacht Club on San Francisco’s northern waterfront, successfully defends its title.

Even if the event flops or the team fails to defends its title, massive infrastructure and construction investments that are planned for San Francisco’s shorelines will sculpt a spectacular yacht-racing amphitheater that could be used for subsequent sailing races in the coming decades, transforming the charming hill-flanked mouth of a sprawling estuary into an occasional professional sports arena.

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