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.