As we reported last month, the draft development deal with the Golden State Warriors to build an arena upon San Francisco’s Piers 30-32 would cap the City’s exposure on the billion dollar project to a $120,000,000 reimbursement (the “Maximum Reimbursement Amount”) for pier rehabilitation and potential public improvements with funding of the reimbursement limited to rent credits, the sale of Seawall 330 for an estimated $30,400,000, and new property tax revenue generated by the development.

While not highlighted in the summary Fiscal Feasibility and Conceptual Framework presentation for the Piers 30-32 project, however, as Jamie Whitaker over at Rincon Hill notes, according to the detailed Findings of Fiscal Responsibility and Feasibility report, the Golden State Warriors will receive a guaranteed 13 percent annual rate of return from the City on the $120 million they spend for the rehabilitation of Piers 30-32, a return that’s above and beyond the Maximum Reimbursement Amount.

A few other assumptions for the project: 205 events a year with roughly 2 million attendees (1.4 million of which will be from outside the city limits) and an average of around 2,000 cars in need of parking per event.

With a tight timeline in play, the Port Commission has until to February 1, 2013 to endorse the proposed Term Sheet while the Board of Supervisors has until February 15, 2013.

53 thoughts on “All The Devilish Details For The Development Of Piers 30-32”
  1. Guaranteed 13% annual rate of return!!?? This is criminal. Why doesn’t the city simply issue a bond with 13% annual rate of return and we can all buy into it? This rate of return is just a thin disguise for using tax payer money to subsidize a billionaire who owns a sports team.

  2. This is still a process in negotiation, so the rate of return should be reduced to market rate, but the City needs this project. If other cities can do them, so can we.

  3. This whole deal is shady, just shady. I’d love to know what is going on in the back rooms.
    BTW, I know Jamie and would certainly not characterize him as a NIMBY. I think a lot of neighborhood residents fully expect the arena to be built (after many years in the courts) but want to minimize the fiscal detriment to the city (e.g. 13% interest rate) as well as mitigate other impacts (auto traffic, overloaded public transport, illegal activities, etc.).
    Let’s face it, if it was Ellison behind the arena, many more people would hate the idea.

  4. the city needs this deal like a fish needs a bicycle.
    i’ll be happy if it’s built to the shown design & with proper public transit (this will be a traffic nightmare as currently proposed).
    but sf has so many other things going for it, subsidizing a stadium is beyond belief stupid.

  5. I agree with Bob and Marten..
    As a native I fully support this arena…I hate going to oracle or HP for concerts that should be playing here instead.
    Too many people feel like SOMA is their own little piece of the town when really the embarcadero is for everyone to enjoy.
    How many people on this board and other anti-arena activists trully remember how it was before.
    Amazing how short-sided people are.

  6. “i’ll be happy if it’s built to the shown design & with proper public transit”
    By The City’s own admission, there are not going to be any meaningful transit improvements for an extremely long time…like 20 years from now. Certainly none would be in place any time close to 2017 when the arena opening is targeted.

  7. I support the arena but not at any cost. A risk free 13% rate of return on the $120m for the rehab work is rediculous.
    There’s no reason the Port/Board should agree to anything above a sub 4% muni rate considering the city’s guarantee.

  8. “By The City’s own admission, there are not going to be any meaningful transit improvements for an extremely long time…like 20 years from now. Certainly none would be in place any time close to 2017 when the arena opening is targeted.”
    Ummm…no. The Transbay Terminal is scheduled to reopen in 2017.

  9. 200+ events a year? Every year? (approx. 4 events a week including W’s season) Does that seem VERY optimistic? Anyone have any idea how that compares to HP & Oracle arena’s usage?

  10. “The Transbay Terminal is scheduled to reopen in 2017.”
    When the Transbay opens in 2017 it won’t be anything more than a replacement bus station. Prettier building but no improvement in transit until there is train service. In fact, the new station will be farther away from Piers 30/32 than the temporary one.

  11. Hey ph_goat…I think having the arena in sf will have a certain cache that will bring in more concerts and other events(i.e. conventions, trade shows etc..) compared to those at Oracle or HP. I think the comparison is not equal.
    Or look at it like this way, if you were an event promoter and you had to choose between the other two arenas vs SF …who would you go with? Not to mention that co-owner Peter Guber is in the show business (i.e CEO Mandalay Entertainment) 200+ events at the arena seems very plausible.
    Thats a lot of jobs and tax revenue.

  12. I support the stadium, but definitely not at 13% interest rate, which is almost criminal given that the city could easily sell a bond at 4% or less as Michael pointed out above.
    If this were to become a part of the deal I would go from being a strong supporter to strong opponent.

  13. The transit is sufficient as-is. Bart and Caltrain are walking distance away, so even if you discount Muni entirely, the capacity is there for people coming from outside the city. Improvements would be nice, but are not critical.
    As far as parking needed, well, either the parking is there or it isn’t. If it isn’t, then people won’t be able to park there, and they’ll have to come another way or stay home. Sure, at first people might show up anyway and get frustrated, but that’s not a long-term problem.

  14. Transit is sufficient as is? I suppose you must not live in the area since I’m guessing 99% of SoMa, South Beach and Mission Bay residents would say that public transport is frequently very unsatisfactory.
    Often Muni streetcars can be packed to the max and don’t even make scheduled stops because they are standing room only. And we’re talking about adding an additional say 15,000 people all at once on 200 days of the year.
    And as mentioned, the new transbay terminal brings zero additional transportation when it opens in 2017…

  15. don’t worry we have a transit first policy so everything will be fine. Plus I am sure everyone is going to bike there anyway.

  16. I don’t want the Warriors stadium there. It’s going to make The Embarcadero and dt traffic a f’ing nightmare year-round.

  17. @Alai:
    Have you ever driven (or even walked) in SoMa at rush hour? Or tried taking Muni on a route that transits the vicinity of the Giants stadium during a game day? The transport infrastructure in that area is essentially at capacity now, and any little hiccup — car accident, special event, rain — blows everything to hell. The Transbay Terminal will do nothing to address this and as far as Pier 30/32 is concerned will make things worse by rerouting the KT line away from the Embarcadero.
    Transit issues aside, the 13% guaranteed return represents a staggering and previously unpublicized sweetening of this deal and the way it’s been handled certainly suggests unethical behavior on the part of the public figures supporting this deal — figures who are supposed to be acting in the electorate’s interest, not Guber and Lacob’s.

  18. ^We don’t build things to be able to max peak with ease. If we did that, we’d be investing in ridiculous amounts of excess capacity for 95% of the time.
    Even when Giants games are ongoing, BART and Caltrain are at a much lower load than during normal commute times. No extra capacity needed to bring people in. Muni blows, yes, but most folks will simply learn to walk to BART before/after games.

  19. @anon: I understand queueing theory. My point is that the entire system is operating at near capacity on a regular day, making it extremely sensitive to excess loading.
    And does your “most folks” include or not include the predicted 2,000 cars per event? I’m sure you recall that parking capacity at the new stadium will be 630, with much of that no doubt dedicated to employees and the retail space.

  20. @Adam – the systems (BART and Caltrain) are nowhere near capacity during your average game time, because average game time is after peak commute time.
    2000 cars per event is the same or less than park for AT&T park, and those cars can use the same facilities (and people will learn that they have to park and walk a bit).
    I find it absurd that people in SOMA are whining about a few extra people outside of commute times while the Richmond and Sunset have had to deal with crappy transit that is at or near capacity all day for decades and never had the pleasure of BART and Caltrain at their doorstep.

  21. Sad… the 13 percent per annum guarantee remains after mayoral review. It sucks that I now have to oppose what is otherwise a great project.

  22. Anon 3:17, the loudest squeaky wheel gets the grease.
    If people in the richmond or sunset can’t join together for outcomes in public transportation or other matters that are agreeable to the interests of their neighborhoods, tough! If you want to be an active participant in metters related to the arena’s development or other civic issues, please join the fun. If not, well, then you really have no say, do you? For a lot of people civic matters are their second (unpaid) job.

  23. Jamie Whitaker has BECOME a NIMBY. As many predicted, his obstructionist bent was clear at the start and It was only a matter of time until he and Sue Hector were in cahoots. So loose with the facts and so quick to exaggerate issues that are not even issues with the Giants and AT&T Park.
    2000 parking spaces? BS. The Giants don’t even fill their lots in Mission Bay most of the time. Events at the arena 17k vs. 42k at AT&T. Big difference. In fact, Giants fans mostly take Caltrains and MUNI already….arena attendees will do so even more.
    Jamie seems genuinely concerned with traffic and trash issues in SoMa; yet ignores that the traffic is mostly due to weekday commuting (and increased construction) — NOT events at AT&T Park. Moreover, the homeless and hoodlums do the majority of the trashing up of the neighborhood (and many do the breaking of the car windows and thefts) yet he blames Giants fans, which is simply not the case.
    Build this arena now.
    [Editor’s Note: Please keep in mind that the numbers we reported above (an estimated 205 events a year with roughly 2 million attendees (1.4 million from outside the city limits), an average of around 2,000 cars in need of parking per event, and the 13 percent return) are directly from the feasibility report, not the opinions of Mr. Whitaker.]

  24. The linked PDF summarizing the deal so far is an interesting read. Skimmed it so far but there’s already more transparency there than the America’s Cup deal(s). That doesn’t make this a good deal for the city, especially when there are cheaper and less disruptive locations available within SF city limits.
    A few choice quotes:
    “The evaluation of fiscal feasibility, including financial benefits to the City and its Port, is preliminary, based on the early stage of the Project. The information is subject to change as the project description is revised through the public review process and through negotiation of a term sheet and final transaction documents.”
    “The total cost for other private improvements, including the multi-purpose venue, commercial buildings on Piers 30-32, and the development on SWL 330, are anticipated to cost $1 billion.”
    My take: the costs section does not break out costs among arena, hotel, condos, public open space, and retail construction, instead just stating an aggregate cost of a cool billion, not including pier renovation. Since the Brooklyn Nets new arena alone cost around 800 million (source wikipedia) I’m having trouble believing this number.
    The means for financing the up to $120 million pier renovation costs is to be an IFD (Infrastructure Financing District), with a possible tie-in to Mello-Roos CFD per footnote 13.
    What isn’t clear to me is how long this 13% guaranteed rate of return on $120 million is to go on? For the economic life of the arena (30 years)? Perpetuity? If the NBA has another lockout and self-destructs, resulting in an empty arena with deflated rent value (main source of reimbursement), does that mean the city owes cash to make up for the arena’s economic failure?
    The argument for the 13% rate of return is that successful condo and office projects typically return 12-14%, unleveraged, and the warriors should be compensated for taking a similar risk. How there’s a risk when a billion dollar annual budget municipality is supposed to guarantee the return, I don’t understand. Also, if one were to securitize a 13% AAA revenue stream compared with current muni bond rates, well, WOW! For the math challenged, 13% annual return means you’re paying the principal amount in interest every 5.5 years. Under the terms the 13% guaranteed return charges do not count against the $120 million cap, and if at any point the port is found to have unreasonably delayed approval of any part of the project, the $120 million cap is increased by the resultant costs. Nice leverage to have when negotiating with the port:
    “GSW’s conceptual design for the work that is subject to such reimbursement will be subject to the Port’s prior approval generally consistent with other Port DDAs of commercial projects of similar scale, which approval will not be unreasonably withheld or delayed. If through such approval process the Port requests revisions to GSW’s conceptual design that would materially increase the Pier Substructure Costs, then the Maximum Reimbursable Amount stated above will be increased in connection with the negotiations of the Term Sheet and the Transaction Documents to reflect such increased costs.”

  25. A few notes on neighborhood and event traffic, clearing up some loud assertions from non-residents above:
    Between 5 and 7 PM on weekdays East SOMA/South Beach is on a hair-trigger for gridlock. All it takes is one car to break down on the eastbound bay bridge, or an AT&T event, or Howard St being blocked for a Moscone event. We put up with this about 100 days a year because the neighborhood ahs its benefits such as being able to walk to work. Adding 200 more gridlocks a year will kill this dense, walkable neighborhood that presents urban planning ideals the city claims to believe in.
    Even on non-event days between 5 and 7 PM the muni N and T move at a net walking pace between embarcadero station and caltrain. I wish they’d install a cell station inside the tunnel between embarcadero station and the surface.
    Event-goers start arriving up to 3 hours before the event, with the peak being about 45 minutes before event start time. For a 7:15 game that means muni/caltrain/automobile saturation from 5:45-7pm. This is observation, not projection. Yes, that is in the heart of rush hour.
    Out-of-city warriors fans and concert-goers paying $100+ per ticket will not take lesser means of transportation such as walking, especially in the middle of winter. They’re going to drive. The Warriors own projections say 70% of event attendees will come from outside the city.
    More than half the NBA teams make the playoffs every year, with the playoffs starting in April, then running into June for the good teams. Playoff games are scheduled by TV networks who don’t give a damn about anything except maximizing TV viewership. If that means the warriors get scheduled the same nights as an giants home stand, tough beans for the locals.
    There is a difference between NIMBYism and just standing up for your right to peaceably enjoy your own home. I do not want to share my home with 10,000-20,000 people 200 days a year looking for parking, then pre-gaming, pissing, and post-game vomiting and sharing their taste in music. If that makes me a NIMBY send me the card so I can carry it proudly.

  26. I was a strong supporter of the arena until reading here that the Warriors are trying to rip off the City for a 13% guaranteed rate of return on the $120 million. The city should not pay more than the interest rate on long term bonds. If this provision stays, I will work to stop this project!

  27. I personally believe we’ll have an arena on Piers 30-32, but I believe it is our responsibility to call out terms of this deal that are not in the best interests of the citizens of San Francisco.
    This 13% interest rate on $120 million at a time when the yield on a 30-year treasury is under 3% and the City itself has been borrowing tens of millions of dollars this year for yields around 3% is strikingly out of line with what should be acceptable to even the most fervent arena supporter. Cut that interest rate down to 6%, and I think this fiscal feasibility report becomes a lot easier to swallow.

  28. Out-of-city warriors fans and concert-goers paying $100+ per ticket will not take lesser means of transportation such as walking, especially in the middle of winter. They’re going to drive. The Warriors own projections say 70% of event attendees will come from outside the city.
    Ok, so they drive. They’ll be greeted with this: Then they’ll stop driving and take another look at those “lesser” means of transportation.
    If they don’t build any parking, one of two things will happen: either people will come anyway, on transit or parking in city garages etc–in which case the city wins–or they stay away, in which case the Warriors will have to drop ticket prices to entice them to come–in which case the public and the city still win.
    kill this dense, walkable neighborhood that presents urban planning ideals the city claims to believe in
    Yeah– nothing kills dense, walkable neighborhoods like destinations in walking distance. Except maybe a lack of parking. Or something.
    Regardless, the 13% is absurd. It would be far better for the city to just pay the $120m outright (although, no doubt, it would be banned by the contract, precisely for that reason).

  29. Are the City or Port trying to avoid hitting up against the limits of their bonding capacity? Would that be a motivation for paying an interest rate premium for the pier repair?

  30. @anon, I don’t know about BART but Caltrain IS at capacity on evening game days. People try to get to the games early. It’s standing room only in those situations from Palo Alot to 4th and King, because peak commuter times do coincide with game traffic. They haven’t had to turn anyone away yet, but I don’t think Caltrain could handle more than 10% more people, all of whom would be standing the entire time.

  31. I can’t imagine there would be a problem issuing a bond as property taxes and sales taxes could be designated as the funding source, making it more attractive than other city bonds that don’t have a designated revenue source.
    There’s no way paying 13% makes any sense. There are thousands of investors that would be willing to loan the money at far better terms than that. It’s purely an attempt to make the deal look more attractive until you read the small print. Nobody expects to get a risk free 13% in current markets.
    The is a pure giveaway to the Warriors owners at the cost of SF taxpayers.

  32. FYI. For those doing the calculus on congestion, parking, attendees, here’s some data from the “GSW Piers 30-32 Fiscal Feasibility PDF,” in particular Table A-11:
    Event Turnstyle:
    BB games – 14,875
    Concerts – 11,700
    Other sports – 6,300
    Family shows – 5,400
    Fixed fee rentals – 8,100
    % driving:
    BB games – 50%
    Concerts – 50%
    Other sports – 50%
    Family shows – 50%
    Fixed fee rentals – 50%
    Average [attendees] per car:
    BB games – 2.5
    Concerts – 2.8
    Other sports – 2.8
    Family shows – 4.0
    Fixed fee rentals – 1.5
    Daily [parking space] demand:
    BB games – 2,975
    Concerts – 2,089
    Other sports – 1,125
    Family shows – 675
    Fixed fee rentals – 2,700
    Annual events:
    BB games – 50
    Concerts – 45
    Other sports – 30
    Family shows – 50
    Fixed fee rentals – 30
    Annual parking space demand:
    BB games – 148,750
    Concerts – 94,018
    Other sports – 33,750
    Family shows – 33,750
    Fixed fee rentals – 81,000

  33. Oh, and to add to the calculus (maybe not, I’m not a mathematician), don’t forget that SWL337/AT&T parking lot A (2,900 car capacity) starts to come off-line when it starts being developed in 2015. Note though that SWL337 is supposed to be a phased build out based on the economy at the time. So not all 2,900 will be taken away, some will remain. How much – no idea, but you mathletes may want to bake something into your calculations.
    BTW, I’m a resident of the area and this project can be a really great addition. I don’t consider myself a NIMBY. I just would like to make sure all the i’s are dotted and t’s crossed…

  34. So that totals to about 356,000 annual parking demand for all events. 205 events per year, works out to an average of about 1,736 cars per event.
    Now as some have pointed out many of these events tend to be around the time that people are leaving the area to go home after work, meaning parking spots start opening up, so there probably isn’t any need for new parking at all. As others have mentioned the parking for At&T park rarely fills, which provides concrete evidence that this stadium (which is about half the size of AT&T park, doesn’t need much (if any) parking.
    And of course there’s “if you build it, they will come”. If you build more parking, more people will be likely to drive, so if your concern is auto traffic, you should be opposing any parking at all for the stadium.
    Additionally, if traffic gets worse, some people will stop driving to work, which could have a counterbalance for traffic induced by events.
    Finally, many of the events will be on weekends, which will have no big impact on traffic as there isn’t much commute traffic on weekends. You don’t see anything like weekday traffic on weekends.
    I’m against it because of the 13%. Parking and traffic will likely be a non-issue.

  35. And the flip side is that roughly 5,000 people will attend via public transportation for each event. Muni, CalTrain, & BART just need to be ready for that additional (foot) traffic on those days.
    And yeah, that 13% is a shocker…

  36. The 50% driving number comes partly for the Giants data. If 50% of people of driving to Giants games with 2.5 in each car then there are 8000 spots in the area to park. The warriors only need 2300 of those. Plus I think there will be much more than 50% using transit anyway.
    Look at those tax $ numbers this is going to bring in.

  37. A little more info about that 13% guaranteed return. Assuming worst case scenario (no payments by the city towards principle or interest):
    $120 million becomes:
    $407 million in 10 years
    $1.383 billion in 20 years
    $4.695 billion in 30 years
    Yes, it’s a bit of an extreme, and unlikely, scenario, but still possible, so people should understand it.

  38. I assume that unless it specifically states that it’s not compounded then it is, and I didn’t find anything saying it wasn’t, although I didn’t do anywhere near a detailed read of the document.
    I did find this sentence:
    “As provided in the Conceptual Framework, GSW will receive a 13 percent annual rate of return
    for financing the rehabilitation of Piers 30-32.”
    which definitely indicates compound return, as all financing of this sort is done with compound interest.
    Now as I said above, my scenario was worst case and unlikely, but still possible. If the city paid only interest, every year then there would be no compounding to worry about, but the rate is still egregious.
    The reality is that if the city sought financing in the market it would get much more favorable terms, there are tons of pension funds that would love to get just 6%, maybe even less, return on $120 million dollars. As mentioned above municipal bonds are going in the 3-4% range, so why on earth should we pay 13%!?

  39. The City typically borrows at interest rates of no more than 3.90 percent for 20 year terms, and sometimes gets loans nearer to 3 percent. Why would our elected officials choose to subject themselves (and us, the taxpayers) to such usurious interest rates, when they can readily issue capital improvement bonds at 3 percent to 4 percent with proper approvals from voters?
    One can only conclude that The City wants to pull the wool over the eyes of the people, the media, and other interested parties while it subsidizes the Golden State Warriors management, the arena, and the real estate developers. The more one looks into this proposed project that was touted as being “privately financed by the Golden State Warriors, without relying on the city’s general fund or any new taxes,” the more it reeks of a back room deal to fleece The City (and the taxpayers) to benefit a cadre of political insiders.

  40. Hahaha. From the link above:
    “We have been characterized as “NIMBYs.” Nothing could be farther from the truth: there are other, more suitable venues …All of these sites offer everything an arena requires, but do not impact the livability of the South Beach or Mission Bay neighborhoods.”
    Not sure they understand what NIMBY stands for.

  41. That blog is disgusting. I do have a huge problem with the 13% interest, but there’s simply no better place in the entire Bay Area (entire country west of the Mississippi?) for a new ~18-20,000 seat arena. No new infrastructure needed, perfectly melds into the edge of an urban area (instead of creating a dead spot, as anything not along the coast would do), replaces a decrepit wasteland currently there, etc, etc, etc.
    Let’s fix this BS 13% stuff and get this little piece of awesomeness built! (don’t even care if it includes the Warriors, though that’s a nice bonus).

  42. I agree the location is ideal, and I think the parking traffic concerns are overblown at best, but I can’t support a project that is trying to cheat the taxpayers with that 13% interest rate. If it was a reasonable rate I would support the project. Or even if they were honest and said it will cost more than $120 million, I might still support it.
    I cannot support a project that is so blatantly try to cheat us.

  43. Looking at this again It either looks like something from the Jetson’s cartoon or it looks like my dogs water bowl turned upside down.
    The NIMBY’s NooBees, and Hippies are great telling people what to do with their own money and property!

  44. Isn’t it funny that the City of Allentown just recently issued $224.4 million of taxable bonds at an average interest rate of 4.78% to build (drumroll please) an arena? (see City of Allentown’s website: )
    I guess I could spend the day looking up more bond issues and loans to verify 13% is in fact way higher than what today’s yield curve justifies for this project. Does anyone think building an arena here at Piers 30-32 has a risk profile that justifies a higher interest rate than what investors were willing to pay on $224.4 million for an arena project bond in Allentown, Pennsylvania?

  45. From the City of Allentown website about an October 2012 bond issue to build an arena:
    “The Allentown Neighborhood Improvement Zone Development Authority (ANIZDA) successfully closed its $224,380,000 bond issue this morning, providing the necessary funding to construct the arena complex. ”
    “The bonds were sold at an overall average interest rate of 4.7786% and were issued in very favorable market conditions, with both tax-exempt and taxable yield curves near all-time lows. ”
    Keep in mind this is to build an arena in a city with I’m daring to guess fewer visitors and probably a lower amount of disposable income for entertainment. I guess the risk profile in Allentown justifies 4.7786% for $224.4 million while San Francisco’s 100% Port-owned Piers which may happen to get an arena built on top cannot go out to bid for lower interest rates and are stuck with 13%. Who doesn’t know what they’re talking about?

  46. Sorry to hog the air time, but Tom Lockard of Stone & Youngberg in this video from a redevelopment vigil at the Federal Reserve Bank of San Francisco says that IFD Bonds are “not a marketable security” because of the lack of geographic diversity and the lack of ownership diversity. Even then, he says 8% is a rate his investors would probably ask for. Fast forward to 5:55 if you don’t want to hear the entire video, but its all good stuff and I think it really should make people scrutinize that 13% interest rate and assumptions that another $60 million will be issued as IFD bonds on their own to pay down the $120 million at 13%. Let’s party like its 2008 again, okay Lehman Brothers?:

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