Larry Ellison

Super yachts are hard to move

The Guardian spotted a colossal sailboat mast getting wheeled down Illinois Street yesterday, as it was being transported from a warehouse on Pier 80 to SF Boat Works, a boat yard beside The Ramp restaurant on Terry Francois Boulevard.

It was quite a job – the mast was more than 100 feet in length, encased in protective material, and set up on metal boxes with casters for transport. Instead of being loaded on a big rig, it was simply secured to the back of a pickup truck and towed down Illinois Street, with a team of about half a dozen guys running alongside to make sure it didn’t fishtail into any parked cars. They didn’t use flags or lights or anything, but an SUV followed from behind. Traffic was stopped coming from either direction, but they managed to get it out of the gate at Pier 80 and into the gate at SF Boatworks without any mishaps. It was quite a site to behold. 

Pier 80 will serve as the base for the BMW Oracle racing team during the 34th America’s Cup. Billionaire Larry Ellison’s super yacht, the USA 17 — the winning boat in the last America’s Cup off the coast of Spain — is being stored at Pier 80, according to news reports. So we naturally assumed that this mast was from that world-famous sailing vessel. When we asked one of the movers if this mast was from the USA 17, they confirmed that it was. But then another member of the moving crew gave a different answer, saying this had nothing to do with the America’s Cup.

It seems that it may have been a mast from a different super yacht, the Cheyenne, which was previously named the Play Station. That boat once belonged to the late Steve Fosset, who, in addition to being a sailor, was the first person to fly solo around the world in a hot-air balloon. The Cheyenne was sold to adventurer Chris Welsh, who announced in Los Angeles last month along with billionaire Sir Richard Branson that they will co-pilot a Virgin Oceanic submarine expedition to the greatest depths of the ocean.

The Cheyenne — which recently sailed from San Francisco to Newport Beach — will serve as a “mother ship” for the submarine expedition, and won’t be used for competitive sailing anymore. We’ve contacted the America’s Cup Event Authority, Virgin Oceanic and SF Boatworks to try to get some clarity on whether the mast we saw getting towed along the waterfront belonged to the Cheyenne or the USA 17, but haven’t heard back from anyone yet.

The Virgin Oceanic submarine is expected to descend later this year into the Mariana Trench in the Pacific, a journey that will take the explorers deeper than anyone else has ever gone.

Meanwhile, it seems that when the America’s Cup comes to the city, San Franciscans probably won’t get the chance to see the USA 17 sail on the bay, even though it is being stored here. “The trimaran may not sail again,” noted a February press release from Oracle Racing. “Oracle Racing’s focus is on the next Cup.”

**UPDATE** No sooner had we posted this than we received a call from Ruby Esparrago at SF Boat Works, who said, “Yes, that was the mast for the boat from the America’s Cup.” But then we got an email from someone from Virgin Oceanic who said it was theirs.

Larry Ellison, “city family” therapist

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If billionaire yachtsman and Oracle CEO Larry Ellison rejects San Francisco’s bid for the America’s Cup, the whole ordeal might conclude with the kind of sappy ending that used to punctuate every episode of the sitcom Full House. The moral of the story would go something like this: It was never about the $1.2 billion in economic activity generated by the Cup, San Francisco, but something far more precious — coming together as a “city family.”

I didn’t count how many times the phrase “city family” was uttered at yesterday’s Dec. 14 Board of Supervisors meeting, but it was repeated in so many glowing remarks that I half-expected all 11 supervisors to join hands and start swaying and singing Kumbaya. Board President David Chiu made an analogy of all the crew members having to work together to win a sailing race, and then he took that yachting reference one step further, saying, “I want to thank everyone on the starboard and port side of the Board of Supervisors.”

Even Sup. Chris Daly, who opposed the first plan, threw his support behind the new deal, making for a rare unanimous vote of the Board of Supervisors.

Shortly after, during a ceremony called by Mayor Gavin Newsom to sign the America’s Cup bid, the mayor — who’s often at odds with Board progressives — praised Sup. Ross Mirkarimi and Board President David Chiu, saying, “This process was made better because of their leadership and stewardship.” Newsom also remarked on the unusual spirit of collaboration, saying, “I have rarely been part of something that brought more people of diverse backgrounds together.”

Even Chronicle columnist C.W. Nevius jumped on the big-happy-family bandwagon with a nod to Daly, who’s typically on the receiving end of his rants. In a column published Dec. 14, advising the city to stick to its guns and approve the better deal, Nevius included this astounding assertion: “I will have to say (gulp) I agree with Supervisor Chris Daly.”
 
Although Ellison hasn’t yet selected San Francisco for the Cup, he’s already accomplished a feat that probably no one else — neither shaman nor top-dollar family therapist — could manage. He infused San Francisco City Hall with a sense of harmony. He put forward a deal that was so outrageous, yet with an economic benefit so immense, that the supervisors, the port, the mayor, and the economic advisors were forced to put their differences aside, rise to the challenge, and craft a compromise that everyone (except maybe Ellison) could live with.
 
We knew he was good at winning boat races and lawsuits, but who ever imagined that Ellison’s hidden talent could ever bring such warm holiday cheer to City Hall?

Steven T. Jones contributed to reporting for this piece.

Race against the clock

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rebeccab@sfbg.com

City officials were poised to finalize an offer to host the 34th America’s Cup after amending a sweetheart deal that had city taxpayers heavily subsidizing Oracle billionaire Larry Ellison’s yacht race. But the question now is whether Ellison will accept the new proposal.

The original deal negotiated between representatives for Ellison and Mayor Gavin Newsom called for ceding 35 acres of city-owned waterfront property to Ellison’s America’s Cup Event Authority (ACEA) rent-free, but it was criticized as too expensive for a city facing massive budget deficits (see "The biggest fish," Nov. 30).

So at the Dec. 8 meeting of the Board of Supervisors’ Budget & Finance Committee, that deal was jettisoned in favor of a cheaper alternative that shifted the race venue to the city’s Northern Waterfront and promised long-term leases on commercially reasonable terms. The new agreement appeared on track for approval at the Dec. 14 Board of Supervisors meeting, after Guardian press time.

At the same time, new doubts arose at the last minute when race organizers stated publicly that they were more likely to reject the new option than the original plan because the financial terms were not as attractive. Although expectations have been high all along that San Francisco would be selected to host the next Cup, the team cast doubt on the outcome by publicly criticizing the new plan. According to a source familiar with negotiations, that move came as a jarring surprise to city officials. Nonetheless, supervisors approved the proposal at a Dec. 13 special meeting and sent it on to the full board.

Newsom’s Office of Economic and Workforce Development (OEWD) spent about four months in negotiations with Ellison’s BMW Oracle Racing Team and the ACEA to hash out a host city agreement. The Northern Waterfront scenario emerged in late November after Budget & Legislative Analyst Harvey Rose cautioned in a fiscal impact assessment that the original deal would have cost the city an estimated $128 million, including impacts to the general fund and losses from entering into rent-free leases.

The fundamental shift in the plan at this late stage, less than three weeks before the deadline for a final decision, reflected some deft maneuvering on the part of the board even in the face of intense pressure to approve a binding long-term agreement on an unusually short timeline. Sup. Ross Mirkarimi and Board President David Chiu, who expressed reservations about the original proposal but strongly favored the idea of bringing the race to San Francisco, were able to deflect a deal that would have harmed the city in favor of a wiser alternative by reshaping the proposal at the 11th hour.

"I was a little bit surprised by some of the recent press," Mirkarimi noted at the Dec. 13 meeting, referencing reports that the team was considering rejecting the bid. He asked everyone to keep in mind that "we’re working with public dollars and purse strings."

But the Mayor’s Office supported the modified deal. Press Secretary Tony Winnicker told the Guardian: "The Northern Waterfront bid is good for the city, great for the port, and will provide a spectacular experience for the America’s Cup. Hosting the America’s Cup will bring more than $1 billion in economic activity and thousands of jobs to San Francisco and showcase the city unlike almost any other event."

Speaking at the Dec. 8 committee meeting, Chiu also voiced his support for hosting the Cup. "Obviously this will have enormous benefits," Chiu said. "If this were to come to San Francisco, this will mean $1 billion and likely $1.2 billion in economic activity during the greatest recession since the Great Depression. We cannot ignore this opportunity."

The difference in the two scenarios amounts to tens of millions of dollars in savings. According to a fiscal feasibility analysis released Dec. 13 by the Budget Analyst, the net loss to the city under the Northern Waterfront alternative would be $11.9 million, compared to $57.8 million under the prior agreement (not including costs relating to the rent-free leases proposed earlier). However, that impact doesn’t account for a $32 million contribution that the America’s Cup Organizing Committee is expected to provide to the city to defray municipal costs.

Under the Northern Waterfront plan, Piers 30-32 and Seawall Lot 330 would be leased to race organizers for 66 and 75 years, respectively, on "commercially reasonable terms" with development rights included. The race organizers would receive a rent credit in exchange for investing an estimated $55 million for infrastructure improvements.

Rose’s office also found that the city would realize a net gain by transferring development rights for Piers 30-32 and Seawall Lot 330 with commercially reasonable rents, generating a net $12.3 million in new tax and lease revenues.

"This deal has significantly improved from the prior deal that went before you," Rose noted at the Dec. 13 Budget & Finance Committee meeting. The main reason for the reduction in costs was that under the original plan, ACEA would have been granted rent-free development rights to Pier 50, a 20-acre waterfront parcel needing costly renovations, for 66 years. Removing that costly improvement and shifting dredging costs from the city to race organizers made the prospect more feasible for San Francisco.

Piers 26 and 28 were added to the equation late in the game, too. Under the new plan, ACEA has the option to spend an additional $25 million renovating those piers in exchange for leasing them for 66 years with rent credits. Ted Egan, an economic analyst with the City Controller’s office, noted that the piers were expected to last for only 15 years if they weren’t renovated.

"Without the America’s Cup stepping forward, we lose them, and we lose any potential development that could take place at those piers," he noted. Port Director Monique Moyer also praised the plan at the Dec. 8 meeting, saying piers that would have continued to deteriorate could now be revitalized.

Chiu amended the agreement to secure greater assurance that the city would receive a $32 million contribution from the America’s Cup Organizing Committee (ACOC), the fund-raising arm of the race organizing team, to defray municipal costs. Prior to Chiu’s amendment, there was no guarantee that the city and county would receive that money, Rose pointed out.

Jennifer Matz, director of OEWD, noted that ACOC was "committed to using best efforts" to raise $32 million over the course of three years. Under the agreement, if the committee hasn’t successfully raised $12 million by one week after the environmental review has been completed, the city reserves the right to call off the deal.

The new plan seemed likely to pass muster even with Sup. Chris Daly, the most vocal opponent of the original plan. "One thing that’s clear is that it’s a whole lot better than the previous proposal," Daly said.

Ellison, who captured the 33rd America’s Cup off the coast of Spain and holds exclusive power to choose which city will host the next sailing match, has set Dec. 31 as the deadline for his final decision. But a source familiar with the negotiations told the Guardian an announcement was expected even sooner.

Ironically, there was little doubt that Ellison would select San Francisco until the very end of the process, when the city finally reached an agreement that seemed to satisfy the Mayor’s Office, the Board of Supervisors, and the economic analysts. At press time, it was still an open question whether Ellison will go for it.

"With this latest bit of vetting by us, I think the city has done the utmost it possibly could do in putting forth the best plan it possibly could craft in such a short period of time," Mirkarimi said at the close of the Dec. 13 meeting. "I think that San Francisco stands to be the best contender for hosting America’s Cup, and let that message ring well toward Mr. Ellison, and around the country, and abroad."

Supes OK America’s Cup deal

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At its meeting today, Dec. 14, the Board of Supervisors unanimously approved a host city agreement for bringing the 34th America’s Cup to San Francisco. However, it’s still unclear whether billionaire yachtsman Larry Ellison and the BMW Oracle Racing Team will select San Francisco as the host city for the next world-famous sailing match.

The agreement solidified a less costly plan and a dramatic improvement over a prior proposal, which the Guardian covered in-depth in a recent cover story. Under the new terms, the America’s Cup Event Authority (ACEA) would be granted long-term leases on commercially reasonable terms for Piers 30-32, Seawall Lot 330, and possibly Piers 26 and 28.

The ACEA would receive rent credits in exchange for investing $55 to $80 million in infrastructure improvements for San Francisco port properties, and San Francisco would benefit from an estimated $20 million boost in revenues from the event. The America’s Cup Organizing Committee would also raise $32 million to help defray municipal costs. The major difference from the prior plan is that Pier 50, a 20-acre waterfront parcel requiring costly renovations that would have been ceded rent-free to the ACEA with development rights for 66 years, was removed from the equation. The America’s Cup is expected to generate more than $1 billion in economic activity, plus create the equivalent of more than 8,000 jobs.

Board president David Chiu called the new plan, which shifts the race venue to the Northern Waterfront instead of the Central Waterfront, “much better, from a business perspective, for the city.”

Sup. Ross Mirkarimi, who supported early efforts to bring the Cup to San Francisco but expressed reservations about the original plan, commended city officials for working around the clock to hammer out a deal on an unusually short timeline.

While doubts arose over the weekend concerning whether or not the BMW Oracle Racing Team and billionaire yachtsman Larry Ellison would accept the latest plan, Port staff member Brad Benson told the Board that he’d met with Stephen Barclay, a representative of the race organizing team, for hours following a Dec. 13 special meeting of the Budget & Finance Committee held to consider the financial impacts of the latest draft.  “They would like to enter into an agreement by the end of this week,” Benson reported.

Sup. Chris Daly, who emerged as the most vocal opponent of the Cup in the early stages of the process, acknowledged that he had used “exciting language” to criticize the initial scheme. “The reason why I amplified the language is because I knew the city just could not afford that kind of financial outlay and cost,” he explained. Daly voted in favor of the revised deal because he said it would grant a “fair return for this city.”

Just before the vote, Daly likely caused representatives from the mayor’s office to groan when he announced that he wanted to propose one last amendment. “I need to borrow the Cup on Jan. 5,” he said. “I need a cup. To drink out of.” His joke elicited laughter. Daly will be the star of a roast scheduled for that date.

For more details on the improved America’s Cup agreement, see tomorrow’s issue of the Guardian.

The America’s Cup rip-off

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EDITORIAL Gigantic international sporting events tend to be great fun for the people who attend. They make great promotional videos for the host city. They can generate big revenue and profits for some private businesses.

But when the party’s over and the bills come due, these extravaganzas aren’t always a boon to the municipal treasury. And at a time when San Francisco can’t afford to pay for teachers and nurses and recreation directors, the supervisors ought to be giving much greater scrutiny to the deal that could bring the America’s Cup yacht races to the bay.

In 2009, as the city of Chicago was preparing an unsuccessful bid for the 2016 Olympics, the Chicago Tribune took a look at what the 1996 games had meant to another U.S. city, Atlanta. The Trib’s conclusion: lots of private outfits and big institutions did well — the Atlanta Braves got a new baseball stadium and the Georgia Institute of Techology got a new swimming and diving center — but the city itself didn’t get much money at all.

That’s exactly the way the deal that Mayor Gavin Newsom negotiated with Larry Ellison, the multibillionaire database mogul and yachtsman, is shaping up. A shadowy new corporation controlled by Ellison would get control of more than 30 acres of prime waterfront land worth hundreds of millions of dollars. The city could lose $42 million, and possibly as much as $128 million.

We don’t dispute the huge economic impact of holding an event that could attract more than 1 million visitors to the Bay Area. Those people will spend money in bars, restaurants, shops, and hotels. The waterfront improvements and increased tourism will create, according to economic reports, 8,840 jobs.

But as the Board of Supervisors budget analyst points out, those are not permanent, full-time jobs; much of the increased employment needs would be met by increased productivity (bartenders and waiters handling more customers than usual), overtime, and temporary jobs. And again: Most of the benefits will go to the private businesses in the tourist industry. The city’s increased tax revenue won’t be nearly enough to cover the expenses. Even if the America’s Cup group raises $32 million — and that’s not guaranteed in the deal — the city would still be down $10 million.

So in effect, San Francisco is preparing to spend $42 million of taxpayer money (and to forego as much as $86 million more by giving away waterfront land that could be developed) to benefit the sixth-richest person in the world, a new company he’s going to create and control, and the tourist-related businesses in town.

Oh, and to make it even juicier: the city is promising to seek state approval for Ellison to build condos or a hotel on the waterfront — something nobody else can legally do.

This doesn’t strike us as a terribly good deal.

It looks worse when you consider how the negotiations proceeded: The mayor and other city officials insisted they were scrambling to give Ellison everything he wanted to make sure that San Francisco beat out two other competitors. But as Rebecca Bowe reports on page 12, there were no other formal bids; Ellison’s team, based at the Golden Gate Yacht Club, was only negotiating with one city, San Francisco.

There are alternative proposals. The Telegraph Hill Dwellers Association wants to see the race complex moved from the Central Waterfront to the Northern Waterfront, and there may be ways of saving money. And Sup. Ross Mirkarimi points out that if Ellison wins the races in 2013 and comes back again the next time around, San Francisco could become what Newport, R.I., once was: a repeat host to an event that will bring more and more benefits as time goes on. That, however, involves a number of risks and variables that are far from certain at this point.

We’d like to know a lot more about what Ellison’s development plans are. We’d like to know who, exactly, will be running his new corporation that will get development rights for a couple of nice waterfront parcels.

But before the supervisors sign off on any deal, they need to set a bottom line: this can’t cost the city any net revenue. The San Francisco city treasury and local taxpayers shouldn’t be subsidizing an event created by and for the very wealthy.

 

The biggest fish

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rebeccab@sfbg.com

Shortly after Larry Ellison, the billionaire CEO of Oracle Corp. and owner of the BMW Oracle Racing Team, won the 33rd America’s Cup off the coast of Valencia, Spain, in February 2010, a reception was held in his honor in the rotunda at San Francisco City Hall.

The event drew members of Ellison’s sailing crew, business and political heavyweights such as former Secretary of State George Schultz, and other VIPs. Attendees posed for photographs with the tall, glittering silver trophy at the base of the grand staircase.

As part of the celebration, Ellison helped Mayor Gavin Newsom into an official BMW Oracle Racing Team jacket, and Newsom granted Ellison a key to the city, a symbolic honor usually reserved for heads of state and the San Francisco Giants after they won the World Series. Shortly after, the mayor and the guest of honor, whom Forbes magazine ranked as the sixth-richest person in the world, sat down for a face-to-face.

That meeting marked the beginning of the city’s bid to host the 34th America’s Cup in San Francisco in 2013. Since securing the Cup, Ellison has made no secret of his desire to stage the 159-year-old sailing match against the iconic backdrop of the San Francisco Bay, a natural amphitheater that could be ringed with spectators gathered ashore while media images of the stunningly expensive yachts are broadcast internationally.

Newsom and other elected officials have feverishly championed the idea, touting it as an opportunity for a boost to the region’s anemic economy. The city’s Budget & Legislative Analyst projects roughly $1.2 billion in economic activity associated with the event — the real prize, as far as business interests are concerned. It would also create the equivalent of 8,840 jobs, mostly in the form of overtime for city workers and short-term gigs for the private sector.

While the idea has won preliminary support from most members of the Board of Supervisors, serious questions are beginning to arise as the finer details of the agreement emerge and the date for a final decision draws near.

Ellison and the race organizers would be granted control of 35 acres of prime waterfront property in exchange for selecting San Francisco as the venue for the Cup and investing $150 million into Port of San Francisco infrastructure. But the event would result in a negative net impact to city coffers.

Hosting the event and meeting Ellison’s demands for property would cost the city about $128 million, according the Budget & Legislative Analyst, just as city leaders grapple with closing a projected $712 million deficit in the budget cycle spanning 2011 and 2012.

Part of the impact is an estimated $86 million in lost revenue associated with rent-free leases the city would enter into with Ellison’s LLC, the America’s Cup Event Authority (ACEA). In exchange for selecting San Francisco as a venue and investing in port infrastructure, ACEA would win long-term control of Piers 30-32, Pier 50, and Seawall Lot 330 — waterfront real estate owned by the Port of San Francisco, with development rights included. Seawall Lot 330, a 2.5-acre triangular parcel bordered by the Embarcadero at the base of Bryant Street, would either be leased long-term or transferred outright to ACEA.

The most vociferous opponent of the America’s Cup plan is Sup. Chris Daly, who has voiced scathing criticism of the notion that the city would subsidize a billionaire’s yacht race at a time of fiscal instability. “The question is whether or not the package that San Francisco’s putting together is good or bad for the city,” Daly told the Guardian, “and whether or not it’s the best deal the city can get.”

 

THE CREW

According to a Forbes calculation from September 2010, Ellison’s net worth is $27 billion, making him several times wealthier than the City and County of San Francisco, which has a total annual budget of about $6 billion. Ellison reportedly spent $100 million and a decade pursuing the Cup.

As soon as Ellison expressed interest in bringing the Cup to San Francisco, Newsom began charting a course. Park Merced architect and Newsom campaign contributor Craig Hartman of the firm Skidmore, Owings & Merrill was tapped to reimagine the piers south of the Bay Bridge as the central hub for the event, and soon Hartman’s vision for a viewing area beneath a whimsical sail-like canopy was forwarded to the media.

The mayor also issued letters of invitation to form the America’s Cup Organizing Committee (ACOC), a group that would be tasked with soliciting corporate funding for the event. ACOC was convened as a nonprofit corporation, and it’s a powerhouse of wealthy, politically connected, and influential members.

Hollywood mogul Steve Bing, who’s donated millions to the Democratic Party and funded former President Bill Clinton’s 2009 trip to North Korea to rescue two imprisoned American journalists, is on the committee. So is Tom Perkins, a Silicon Valley venture capitalist, billionaire, and former mega-yacht owner who was once dubbed “the Captain of Capitalism” by 60 Minutes. George Schultz and his wife, Charlotte, are members. Thomas J. Coates, a powerful San Francisco real estate investor who dumped $1 million into a 2008 California ballot initiative to eliminate rent control, also has a seat. Coates resurfaced in the November 2010 election when he poured $200,000 into local anti-progressive ballot measures and the campaigns of economically conservative supervisorial candidates.

Billionaire Warren Hellman, San Francisco socialite Dede Wilsey, and former Newsom press secretary Peter Ragone are also on ACOC. There are representatives from Wells Fargo, AT&T, and United Airlines. One ACOC member directs a real estate firm that generated $2.5 billion in revenue in 2009. Another is Martin Koffel, CEO of URS Corp., an energy industry heavyweight that made $9.2 billion in revenue in 2009. There’s Richard Kramlich, a cofounder of a Menlo Park venture capital firm that controls $11 billion in “committed capital.” And then there’s Mike Latham, CEO of iShares, which traffics in pooled investment funds worth about $509 billion, according to a BusinessWeek article.

There’s also an honorary branch of ACOC composed of elected officials including House Minority Leader Nancy Pelosi, Gov. Arnold Schwarzenegger, Sen. Dianne Feinstein, and others. Their role is to help the Cup interface with various governmental agencies to control air space, secure areas of the bay exclusively for the event, set up international broadcasts, and bring foreign crew members and fancy sailboats into the United States without a hassle from immigration authorities.

ACOC is expected to raise $270 million in corporate sponsorships for the America’s Cup. That money will be funneled into the budget for ACEA. It’s unclear whether the $150 million ACEA is required to invest in city piers will be derived from ACOC’s fund drive.

The city also anticipates that ACOC would raise $32 million to help defray municipal costs. “However,” the Budget & Legislative Analyst report cautions, “there is no guarantee that any of the anticipated $32 million in private contributions will be raised.”

A seven-member board, chaired by sports management executive Richard Worth, will direct the ACEA, according to Newsom’s economic advisors, but the other six seats have yet to be filled. ACEA’s newly minted CEO is Craig Thompson, a native Californian who previously worked with a governing body for the Olympics and has helped coordinate major sporting events internationally. In an interview with sports blog Valencia Sailing, Thompson provided some insight on why major corporations might be inspired to donate to the cause. Basically, the Cup is the holy grail of networking events.

“It’s a very difficult economic situation we are going through, and it’s not the best time to be looking for sponsors for a major event,” Thompson acknowledged. “On the other hand, the America’s Cup is one of the very few activities … that offer access to really top-level individuals in terms of education or economic situation. The America’s Cup is a unique platform for a lot of companies that want access to those individuals that are very difficult to reach under normal circumstances. I can tell you for example that Oracle is very pleased with the marketing opportunity the America’s Cup has presented to them. They invite their best customers and are very successful in turning the America’s Cup into a platform for generating business. The same thing can be true for a lot of different companies that need access to wealthy individuals.”

But should San Francisco taxpayers really be subsidizing a networking event for the some of the business world’s richest and most powerful players?

 

TRANSFORMING THE WATERFRONT

Over the past four months, Newsom’s Office of Economic and Workforce Development (OEWD) has been negotiating with race organizers to hash out a Host City Agreement outlining the terms of bringing the America’s Cup to San Francisco.

The proposal will go before the Board of Supervisor’s Budget & Finance Committee on Dec. 8, and to the full board Dec. 14. A final decision on whether San Francisco will host the race is expected by Dec. 31. ACEA and ACOC will each sign onto the agreement with the City and County of San Francisco.

From the beginning, the event was envisioned as “the twin transformation,” according to OEWD — the America’s Cup would be transformed by attracting greater crowds and heightened commercial interest while San Francisco’s crumbling piers would be revitalized through ACEA’s $150 million investment in port infrastructure.

The plan paints downtown San Francisco as the “America’s Cup Village” during the sailing events, and a study produced by Beacon Economics estimates that the financial boost would come primarily from hordes of visitors flocking to the event — more than 500,000 are expected to attend. The city expects a minimum of 45 race days, including one pre regatta in 2011 and one in 2012 (or two in 2012 if the one in 2011 doesn’t happen), a challenger series in 2013, and a final match in 2013.

The transformation of the city’s waterfront would be dramatic. In addition to the rent-free leases for Piers 30-32, 50, and Seawall Lot 330, ACEA would be granted exclusive use of much of the central waterfront, water, and piers around Mission Bay, and water and land near Islais Creek during the course of the event. Under the Host City Agreement, race organizers would have use of water space spanning Piers 14 to 22 ½; Piers 28, 38, 40, 48, and 54, a portion of Seawall Lot 337, and Pier 80, where a temporary heliport would be sited.

Seawall Lot 330, a 2.5-acre parcel valued by the Port at $33 million, lies at the base of Bryant Street along the Embarcadero and has a nice unimpeded view of the bay. Piers 30-32 span 12.5 acres, and Pier 50 is 20 acres.

The Budget & Legislative Analyst’s study predicts that the ACEA could opt to build a 250-unit condo high-rise on Seawall Lot 330, deemed the most lucrative use. Under the Host City Agreement, the city would be obligated to remove Tidelands Trust provisions from Seawall Lot 330, which guarantee under state law that waterfront property is used for maritime functions or public benefit. Tweaking the law for a single deal would require approval from the State Lands Commission, but Newsom, in his new capacity as lieutenant governor, would cast one of the three votes on that body.

The combination of construction, demolition, lost rent revenue, police and transit, environmental analysis, and other event costs would hit the city with a bill totaling around $64 million, according to the Budget & Legislative Analyst study. Since city government would recoup around $22 million in revenue from hosting the Cup, the net impact would be around $42 million. That doesn’t include the potential $32 million assistance from ACOC.

At the same time, the city would stand to lose another $86.2 million by granting long-term development rights to 35 acres of Port property for 66 to 75 years without charging rent, bringing the total cost to $128 million. OEWD representatives played down that loss in potential revenue, saying past attempts to redevelop piers hadn’t been successful because none could handle the upfront investment to revitalize the crumbling piers.

The Host City Agreement has raised skepticism among Port staff and the Budget Analyst that tempered initial enthusiasm for the event. “The terms of the Host City Agreement will require significant city capital investment and will result in substantial lost revenue to the Port,” a Port study determined. Faith in that plan seems to be eroding and it may be scrapped for an alternative plan that’s cheaper for the city.

The Northern Waterfront alternative substitutes Piers 19-29 as the primary location for the event and eliminates the Mission Bay piers from the equation. Under this scenario, ACEA would invest an estimated $55 million, instead of $150 million. In exchange, it would receive long-term development rights to Piers 30-32 and Seawall 330 on “commercially reasonable terms,” according to a Port staff report.

Board of Supervisors President David Chiu requested that the Port explore that second option more fully, and the Port report notes that it would reduce the strain on Port revenue. The Northern Waterfront plan would cost the Port a total of $15.8 million, instead of $43 million, the report notes. Port staff recommended in its report that both the original agreement and the alternative be forwarded to the full board for consideration.

 

PHANTOM BIDS?

Under the competition’s official protocol, Ellison, as defender of the Cup, has unilateral power to decide where the next regatta will be held. Race organizers have said it’s a toss-up between San Francisco and an unnamed port in Italy — though it’s anyone’s guess how seriously a European site is being considered by a team headquartered at the Golden Gate Yacht Club, a stone’s throw from the Golden Gate Bridge.

According to a San Francisco Chronicle article published in early September, Newsom issued a memo stating that San Francisco was competing against Spain and Italy to become the chosen venue. Valencia was said to be offering a “generous financial bid,” and a group in Rome was rumored to have offered some $645 million to bring the Cup to Italian shores, the memo noted. It was a call for the city to present Ellison with the most attractive deal possible to compel him to pick San Francisco.

Speaking at an Oct. 4 Land Use Committee hearing, OEWD director Jennifer Matz told supervisors: “San Francisco was designated the only city under consideration back in July. Now we are competing against the prime minister of Italy and the king of Spain.”

However, the veracity of those claims came into question in mid-November. Daly, incensed that the Mayor’s Office never communicated with him about the Cup despite wanting to hold it in his sixth supervisorial district, launched his own personal investigation. He fired off an e-mail to Team Alinghi, a prior America’s Cup winner, and began communicating with other European contacts until he got in touch with someone in Valencia’s municipal government.

“I got a call back from a representative who basically said I should know something,” Daly recounted. Valencia, his source said, never submitted a bid to host the Cup. At a Nov. 13 press conference, Valencia’s mayor Rita Barbera confirmed this claim, according to a Spanish press report, expressing disappointment that the city had been eliminated from consideration as a host venue. “There was no formal bidding process,” she charged. She also denied reports that any money had been offered.

Meanwhile, the Budget Analyst was unable to find any concrete evidence that other host city bids had been submitted. “We have nothing to confirm that other offers have been made,” Fred Brousseau of the Budget Analyst’s office told the Guardian.

In response to Guardian queries about whether the Mayor’s Office had evidence that Italy had indeed submitted a bid, Project Manager Kyri McClellan of the OEWD forwarded a one-page resolution from the Italian prime minister assuring race organizers that there would be tax breaks, accelerated approvals, and other perks guaranteed if the Cup came to Italy. However, an Italian journalist who looked over the resolution told the Guardian that the document didn’t appear to be a formal bid, merely a response to a query from race organizers.

Daly has his doubts that either Valencia or the Italian port were ever seriously considered. “I think they were phantom bids,” he said, “created by either Larry Ellison or the Newsom administration … to place pressure on the Board of Supervisors.”

A representative from OEWD told the Guardian that officials have no reason to doubt that the European bids, and accompanying offers of money, were real. However, the city wasn’t privy to race organizer’s discussions about possible European venues. A final decision is expected before the end of the year.

Daly hasn’t held back in voicing opposition to the America’s Cup and blasted it at an Oct. 5 Board meeting. “This tacking around Sup. Daly will not get you in calmer waters,” Daly said. “I told myself I was not going to make a yachting reference. But I will bring a white squall onto this race and onto this Cup, and I will do everything in my power starting on Jan. 8 to make sure these boats never see that water.”

 

WIND IN WHOSE SAILS?

The America’s Cup would undoubtedly bring economic benefit to the area and create work at a time when jobs are scarce. Police officers would get overtime. Restaurant servers would be scrambling to keep up with demand. Construction workers seeking temporary employment would get gigs. Hotels would rake it in. Pier 39 would be booming. However, the Budget Analyst report cautioned: “It is unlikely that any labor benefits would remain in the years after the America’s Cup event is completed.”

Certain small businesses would catch a windfall. John Caine, owner the Hi Dive bar at Pier 28, didn’t hesitate when asked about his opinion on the city hosting the Cup. “Please come fix our piers. It’s a shout-out to Larry Ellison,” he said. Caine said he supports the America’s Cup bid 100 percent, and is excited about the boost it could give his business. The Hi Dive would not be required to relocate under the proposal, he added.

At the same time, other small business would be negatively affected, particularly those among the 87 Port tenants who would be forced to relocate to make way for the America’s Cup. The Budget Analyst’s report also notes that retail businesses in the area whose services had no appeal to race-goers might suffer from reduced access to their stores, since crowding and street closures would shut out their customers.

The sailing community has rallied in support of the Cup, and Newsom has received hundreds of e-mails from yachting enthusiasts from as far away as Hawaii and Florida promising to travel to San Francisco with all their sailing friends to watch the world-famous vessels compete.

Ariane Paul, commodore of a classic wooden boat club called the Master Mariners Benevolent Association, told the Guardian that she was excited about the opportunity for the America’s Cup to showcase sailing on the bay. “In the long term, it’s a win-win,” Paul said. “It would be great to have that boost.” As for the financial terms of the deal, she remained confident, saying, “I don’t think that the city is going to let Larry Ellison walk all over them.”

Sup. Ross Mirkarimi is often politically aligned with Daly, but not when it comes to the issue of the America’s Cup. As a kid growing up on the island of Jamestown, a tiny blue-collar community located off the coast of Rhode Island, Mirkarimi learned to sail and occasionally spent summers working as a deckhand. Every few years, the America’s Cup would come to nearby Newport, transforming the area into a bustling hub and bringing the locals into contact with famous sailors. It left an everlasting impression. When the BMW Oracle Racing Team secured the 33rd Cup off the coast of Valencia, Mirkarimi did a double-take when he saw a photograph of the winning team — his childhood friend from Rhode Island was on the crew.

Mirkarimi told the Guardian he supports bringing the Cup to San Francisco because of the economic boost the area will receive — if the Cup continues to return to San Francisco as it did for 53 years in Newport, he said, the city could look forward to a free gift in improved revenue associated with the event, and that could help quiet the tired annual debates over painful budget cuts.

At the same time, he acknowledged that the Budget Analyst report had prompted what he called healthy skepticism. “I think the onus is on the city and Cup organizers to make sure the benefits far, far outweigh the investment,” Mirkarimi said. “This effort is not just about making one of the wealthiest men in the United States that much more wealthy … That can’t be the case,” he said. “It has to be about what will the Cup do in order to be a win-win for the people of San Francisco.” Mirkarimi said he expected scrutiny of the details of the agreement at the Dec. 8 Budget and Finance Committee hearing: “Naturally, in this time of economic downturn … people want to know, what’s the outlay of cost, and what are we going to get in return?” 

Breaking down the cost of hosting the America’s Cup

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San Francisco’s Budget and Legislative Analyst has released a report outlining the costs and benefits of hosting the 34th America’s Cup in San Francisco. Bottom line: If the world-famous yacht race is held here, it will cost the city an estimated $42 million.

The Guardian will publish a more detailed report in coming weeks, but for now, here are a few highlights from the report, which was requested by Sup. Chris Daly and released to the media on Nov. 18.

* The overall cost breaks down like this: The Budget Analyst estimates that the city would receive an estimated $22 million in revenue, and incur new costs of $64 million, resulting in a net loss of $42 million.

* The city would receive an estimated $3.6 million from property tax revenues from new development (probably luxury condos) if the event organizers built on the port properties they’d receive as part of the deal. Billionaire Larry Ellison, who has the ultimate say in selecting the venue for the America’s Cup, would receive several port properties rent-free for 66 to 75 years, under leases which haven’t yet been formally approved. However, if the city obtained a private developer through a competitive process instead, it could receive increased tax revenues of $89.8 million. According to the Budget Analyst, this estimated net loss of $86.2 million “is in addition to the estimated net loss … of $42.1 million.”

* The major benefit to hosting the prestigious yacht race in San Francisco would be an estimated $1.2 billion in new spending in San Francisco’s economy, and the Budget Analyst predicts a range of $928 million to $1.6 billion in economic activity – undoubtedly a good thing for a troubled economy.

* However, the creation of “9,000 jobs” you may have heard about isn’t as simple as it sounds. According to the report: “All ‘jobs’ predicted … are not permanent full time jobs, and therefore would not result in hiring 8,840 employees.” Instead, the Budget Analyst prefers to frame it in terms of work hours, noting that the additional work would be either absorbed by the existing workforce (as in a server waiting on more customers per hour), greater overtime for the existing workforce (think police), or temporary jobs.

The Budget Analyst is careful to state that the report is not meant as a recommendation one way or another for hosting the America’s Cup. “However,” it states, “it is the responsibility of the Budget and Legislative Analyst to report the facts to the Board of Supervisors.”

Editor’s Notes

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› tredmond@sfbg.com

Jane Reilly, a candidate for supervisor in District Two, came in to talk to us last week, and before we got around to interrogating her about tax policy, she told us a bit about her background. And while she was describing all of her (considerable) qualifications for the job, she noted that she’s done a lot of good work in the community and is "passionate about volunteerism."

Reilly’s a nice person, and (like a lot of wealthy people) she means well, so I didn’t get all Marxist on her and say that volunteerism is a bourgeois concept. And I know, poor people volunteer too, and it’s a wonderful thing that so many people do so much for so many, thousands of points of light and all that. It’s great, I really mean it.

But I’m also getting fucking sick of volunteerism and charity.

Because it’s not only an incomplete solution to our worst social problems — it also diverts attention from the full solutions.

Warren Buffett, the multibillionaire, is getting a lot of press attention and lavish praise for his pledge to give half of his fortune to charity. He’s got Larry Ellison and David Rockefeller and Ted Turner and a bunch of others to join him. How grand.

Meanwhile, most of these people have been paying a fraction of the tax burden that falls on the middle class (what’s left of it) and getting more and more wealthy from Reagan-, Bush-, Clinton-, and Bush II–era tax breaks.

The richest 5,000 Americans now own more than the poorest 160 million, combined. Millions are out of work while the nation’s infrastructure crumbles. The connection between those problems is clear and direct: since 1980, the U.S. government has stopped trying to redistribute the wealth of the superrich in ways that create jobs and economic opportunities for everyone else.

No amount of charity will change that (especially since "charity" includes gifts to extrawealthy institutions like Harvard University and the Getty Museum). No amount of volunteerism will lift huge masses out of poverty. There’s only one institution that can do that — government — and one effective way to make it work: progressive and redistributive taxation.

My new hero is a woman named Jill Heavenrich, of Milwaukee, Wisconsin. The New York Times published a letter from her on Sept. 20, which reads:


I’m 81. I don’t have to worry about losing my home. I know I’ll never go hungry.

I can help my grandchildren go to college. I can give to causes I believe in.

Why am I not being taxed more? Why was I told to go out and shop after 9/11? Why wasn’t I asked to help pay for two wars in which brave young men and women are dying? The question remains for me: ‘It’s my country. I love it. Where is my responsibility to help the only way I can with my taxes?’


That’s not charity. That’s reality.

Upside Woodside

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› paulr@sfbg.com

"Are we on the San Andreas Fault?" my companion asked uneasily as we stepped from the car and stood looking at the Bella Vista Continental Restaurant, lit up like something out of a Hans Christian Andersen tale in the soft winter gloaming. "No," I said. "The fault" — really a rift zone, so I’d learned in my college geology class — "is down there." I gestured vaguely past the rambling structure, perched at the edge of a woody abyss, toward the twinkles and shadows below, perhaps at Larry Ellison’s $27 million Woodside backyard. The fault, or rift zone, as I understand it, creates the long, narrow valley that separates Skyline Boulevard and I-280 for much of the northern length of the Peninsula. The valley’s chain of lakes look like Scottish lochs but are in fact reservoirs run by the San Francisco Water Department. Larry Ellison runs Oracle; would we find him at the bar at Bella Vista? Is he a regular?

When we stepped inside, we found no sign of him, but the bar was lightly populated by a quartet of young men in sweatpants and sneakers staring at a flat-screen broadcast of some Stanford game.

"We’re overdressed," my companion hissed, and my heart sank. I remembered the restaurant as being agreeably classy in an Aspen-ish, horse-country way, with a wealth of rustic, roadside-inn touches — exposed wood beams, picture lamps with their cords trailing down the walls, an unpaved parking lot among the cedars — but my last visit had been some years earlier, in the summer of 1980, when Jimmy Carter’s solar panels were still in place on the White House roof and the phrase "President Reagan" was still tinged with irreality. Had the past quarter century brought a down-market slalom to this handsome and atmospheric stalwart, which opened in 1927? Had it become a kind of Dutch Goose with a view, or a rival to Zott’s, the fabled hamburger stand and beer garden (once a stagecoach stop, now called something else) on nearby Alpine Road? We were led to our table, which was set with a red rose and a frosted hurricane lamp with a real candle, and our server shortly appeared in a black dinner jacket and black tie, speaking with an Old World accent we guessed might be Belgian. No, no down-market drift.

Cuisine described as "continental" might have had an alluring patina a generation or two ago, but nowadays it suggests museum cooking. Bella Vista is one of the Bay Area’s premier view restaurants anyway, and views tend to be conversation pieces. The view is why people are there, and the food only has to be good enough to keep them from getting up and leaving in disappointment.

As it turns out, Bella Vista’s food is quite a bit better than that, and while it is old-fashioned — I found myself wondering if the Dining Room at the Ritz-Carlton might offer a similar menu if it were moved to a lonely mountain road — it’s far from arthritic. Good food always does honor to a restaurant, of course, and is a sound fallback plan for any view restaurant in the event (at some point inevitable) that the view is temporarily obscured by weather or … other forces. We found the air hazy and smoke scented when we arrived; was Larry Ellison hosting a huge barbecue somewhere on the glittering carpet of lights below?

No grilling at Bella Vista. The kitchen’s main instruments are the sauté pan and the oven. New Zealand mussels ($14), for instance — gigantic ones — were arrayed on the half shell, slathered with garlic, parsley, and butter, and briefly roasted. This was fine by us, especially since the puddles of leftover melted butter were perfect for sopping up with the formidably sour sourdough bread.

For the relief of unbearable garlic breath, we were presented with an intermezzo of peach sorbet, spooned into sturdy sherry glasses that resembled dwarf champagne trumpets. Across the way: a birthday gathering of eight or so, with some off-key singing, which grew lustier as the wine disappeared. If we were at all tempted to join in, we were soon distracted by the arrival of our big plates, one of which was a simply gorgeous lobster tail ($55), shelled and sautéed in butter. The less done to lobster, the better; no fancy sauces, please, or incorporations into pasta or risotto. Just butter, and maybe some boiled new potatoes, a ration of seared green beans (squared off and stacked like firewood), and a smear of splendidly orange puree of roasted carrot.

Veal au poivre ($24) was similarly accompanied, except the potatoes gave way to a wild-rice pilaf. The slender, tender sheets of meat were bathed in a Dijon cream sauce dotted with green peppercorns, and while I have become uneasy about meat and almost always shun veal, whose production doesn’t bear much looking into, I was not at all sorry I failed to shun here.

Dessert production tilts toward soufflés for two ($18), and trayfuls emerge regularly from the kitchen. Raspberry was recommended to us (over chocolate and Grand Marnier); I found the soufflé itself to be eggy (with no burst of raspberry inside) but the swirl of sauce on the plate to be a winsome combination of butter, caramelized sugar, and whole raspberries. It could easily have been spooned over vanilla ice cream or pound cake or just eaten like zabaglione from a tall glass. Even if someone (not me!) were seen licking it right off the plate, it would be hard to find fault. *

BELLA VISTA CONTINENTAL RESTAURANT

Dinner: Tues.–Thurs., 5–9 p.m.; Fri.–Sat., 5–10 p.m.

13451 Skyline Blvd., Woodside

(650) 851-1229

www.bvrestaurant.com

Full bar

AE/DC/DISC/MC/V

Pleasant noise level

Wheelchair accessible

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