Larry Ellison has been mum on a plea that he underwrite any America’s… (AFP, AFP/Getty Images )
Stop me if you've heard this one: Billionaire comes to City Hall. Says that if the city will get behind him, he'll bring a major sports enterprise to town and might even renovate some decrepit municipal infrastructure as part of the bargain. Huge economic boost foreseen. Won't cost taxpayers a dime.
Sounds like Phil Anschutz, the NFL and the Los Angeles Convention Center, doesn't it?
But it's not: We're talking about software billionaire Larry Ellison, the America's Cup sailing race and a few rotting bayside piers in San Francisco.
There are some differences between the L.A. and San Francisco cases: L.A.'s NFL deal is still as vaporous as ever, but San Francisco is actually getting the America's Cup. Races begin on the bay in July, with the finals in September.
The development deal — which started as a $150-million investment by Ellison's group in return for 75 years of rent-free development rights, then evolved into an investment of $55 million in return for nominal rent — has been dropped entirely.
But San Francisco is still nervous about being stuck for a bill for the yacht races that could run as high as $10 million. There may be a lesson looming here for every community that accepts on faith the forecast that any big event will bring riches on such a scale that it produces a cost-free economic boom.
The problem always boils down to the fact that the event's costs are real and near-term, and the riches are conjectural and lurk somewhere over the rainbow.
"The original idea was that we would not have a general fund impact," San Francisco County Supervisor John Avalos, who has been aggressively questioning the America's Cup deal, told me. "At this point we're looking at how much of a subsidy we're going to give it."
Avalos was a member of the Board of Supervisors when it approved the America's Cup event unanimously in 2010. More recently, he has said that "all the members of the Board of Supervisors were … played." If you fill in that ellipsis with a dirty word, you'll have the full accurate quote.
A word about the America's Cup, an event with which landlubbers may be unfamiliar. It's named after the yacht America, which so thoroughly trounced a British vessel in the first race (around the Isle of Wight, 1851), that when Queen Victoria asked who came in second place, she was supposedly told by crestfallen courtiers, "There is no second place."
American yachts enjoyed an unbroken skein of victories for the next 132 years. From 1930 to 1983, the races were staged off Newport, R.I., and I can tell you as a former Rhode Island resident that there are two traditional ways of describing the multimillion-dollar sport of yacht racing: For spectators, it's like watching paint dry; for participants on the open water, whose boats today cost up to $8 million, it's like tearing up $100 bills and tossing them overboard while standing under an ice-cold shower.
The race organizers say the San Francisco version will be unique. The boats are sleeker and faster than ever before, and for the first time the races will be viewable from shore. It's not inconceivable that this will make the event a big draw.
"San Francisco is fortunate," says Stephen Barclay, CEO of the America's Cup Event Authority, the Ellison-affiliated group that is staging the race. "For the first time a family can go to the waterfront and watch." Barclay says that as the races get close, public excitement in the city will emerge "like a light switch turning on."
The current defending champion is a team owned by Ellison, Oracle's CEO and co-founder, who was listed last year by Forbes as America's third-richest individual, with $41 billion to his name. It shouldn't come as any surprise that there's a grassroots movement in San Francisco to ask Ellison to underwrite any shortfall, which he could probably do from spare change. He hasn't responded to the plea.
In 2010, the city and county administrations lined up foursquare behind the municipal bid to host the race. Then-Mayor Gavin Newsom (now California's lieutenant governor) was a big advocate. He was abetted by the Bay Area Council, a local business advocacy group, which projected that the three months of cup-related regattas would produce $1.4 billion in economic activity.
But that figure was always a bit squishy. The council's estimate of new sales, hotel and payroll taxes was as high as $24 million; the Board of Supervisors' estimate was below $18 million.
The council acknowledged that late summer is not exactly a dead period for San Francisco tourism needing to be filled in by a new event; rather, it's the high season, with hotel occupancy running at 85%. That figure itself is misleading, because it's citywide — good luck getting a hotel room around Union Square or the Embarcadero from July through September. So the suggestion that hotels all over the city from downtown to skid row will fill up, producing an additional $12.4 million in hotel taxes, sounds very optimistic.