Spare change, Larry?

Pub date March 20, 2013
WriterRebecca Bowe
SectionPolitics Blog

Tensions flared over the America’s Cup last week as critics called for billionaire yacht owner Larry Ellison to cover the looming city deficit out of his own deep pockets.

It’s evidently a popular idea: A petition asking Ellison to pony up had collected 1,663 signatures as of Wednesday morning.

The language in the petition, started by former Sup. Aaron Peskin, cuts straight to the point: “Your net worth is $43 billion,” it states. “Covering the America’s Cup debt would be equivalent to a person who has $40,000 donating $13.95. Is that too much to ask?”

At a hearing March 13, Sup. John Avalos asked why the city’s General Fund was on the hook to help cover costs for the yachting event, despite earlier assurances that the city would be reimbursed for tournament-related expenses.

The prestigious international yacht race will be held on the San Francisco Bay starting in July. A host and venue agreement hashed out between the city and race organizers provided that the America’s Cup Organizing Committee, the tournament’s fundraising arm, would “endeavor” to solicit donations from private donors to reimburse the city for expenses incurred, originally pegged at $32 million. Total city costs are now estimated to hover around $22 million, but so far ACOC has sent less than $7 million in reimbursement, city agency representatives reported at the hearing.

The fundraising committee has mostly come up dry on the rest — and now Avalos is irked because the city agency that negotiated the deal appears to be “moving the buoys,” as he characterized it, by counting a projected tax revenue boost instead of actual reimbursement dollars as adequate compensation for city spending.

Mike Martin, tasked with leading the city’s involvement in the America’s Cup under the Office of Economic and Workforce Development, showed a slide at the hearing suggesting that ACOC’s “remaining fundraising need” was just $2.6 million, since a projected $13 million in increased tax revenues would bring the city to a break-even point. That projection was based on expected increases in sales, payroll and hotel taxes during the yachting event.

The presentation seemed to reframe the premise that the city would be made whole for tournament-related expenditures, as well as reap the benefits of a tax boost, in exchange for agreeing to host the sailing events. Yet Martin called this notion a “mischaracterization” in a phone interview.

“I don’t disagree that there are people who think that this is not what they understood to be the deal,” Martin said, clearly reacting to Avalos. But “this was part of the policy dialogue at all steps of the conversation.”

Reached by phone after the hearing, Avalos did not sound satisfied with the responses he’d heard. “It seems that the commitments that were made to the Board in 2010 … are not being taken seriously,” he said. “Now that they’re coming up short on fundraising efforts, they’re trying to say the General Fund should be subsidizing the cost of the race.”

Martin pointed to a report prepared by Budget and Legislative Analyst Harvey Rose in December of 2010, before the contract between the city and race organizers was finalized. The report included a break-even analysis that factored in tax revenues, and Martin stressed that this consideration had been part of the dialogue since the outset.

But that same report also contained a key recommendation: Rose advised the supervisors to amend the proposed agreement to “require that the America’s Cup Organizing Committee pay the City and County of San Francisco $32 million, or final estimated city costs.”

No such ironclad requirement was ever included; instead, the fine print in the final agreement wound up containing watered-down language: “The Authority and the City acknowledge and agree that they are not relying in any manner on any current or future commitment … or any statements, representation, or actions of, any … agent of [ACOC].”

Nick Magel, who works for Causes.com, told us that Peskin’s online petition calling on Ellison to cover the fundraising shortfall was gaining more momentum than most online campaigns taken up via the website. “The campaign is performing well, considering it’s less than a day old,” he said March 15. “The most impressive indicator is that over 95 percent of the signatories are from the Bay Area. Seems the campaign is striking a chord with local residents.”