Having failed to account for $5.5 million in net costs incurred by the Port of San Francisco, the City’s revised deficit for hosting the 34th America’s Cup has risen from $5.5 million to $11.5 million according to San Francisco’s Budget and Legislative Analyst’s Office.
From the conclusion of the analyst’s full report: “As a result of these net costs to the City of $11.5 million, any agreement between the City and the Event Authority to host a future America’s Cup should require payment to the City for use of City property and for City services, other than services routinely provided by the City.”
Estimated at $364 million, the total economic impact to the city from hosting the America’s Cup was 27 percent of the $1.372 billion originally projected. Also noted, the impact of America’s Cup tourism on hotel occupancy was minimal with increases in hotel occupancy rates during the events generally less than 1.0 percentage point versus prior non-event years.
SF should think twice before doing this again.
SF should bill Larry Ellison for the full amount.
What a rip off we experienced.
The event was empty 80% of the time. The last few days were exciting but the rest sucked. I’m surprised the city lost only $11M
The America’s Cup has always been a sporting event for wealthy yacht owners, and that has not changed. But now apparently the public is expected to subsidize the pet project of one of the richest men in the world, who could pay for the event himself out of the change he forgets in his couch. I can understand if the city were to provide free police and sanitation services to a local pride parade, or a cancer awareness marathon, etc. It is amazingly petty for the Cup organizers and Larry Ellison to demand the same, especially after their math has been proven to be faulty and their old promises unfulfilled.
JILL, I agree with you… and many more who I know.
I would say it worked out pretty well for Ellison. He suckered City Hall into subsidizing the event by waving the prestige card.
Now Ellison KNOWS who is dealing with. He is trying to sucker us out of more millions. Or else he suckers someone else. LOL.
In fairness, Adam, the public has long been expected to subsidize pet projects for the world’s richest people in the form of all sorts of sport stadiums. It’s not just yachting.
But it is insulting. Hopefully the tide is turning. Another reason to root for the Giants is that Pac Bell Park was built without public money.
There was a larger long term impact though. The event was a post card moment for San Francisco that will help attract tourists to the city for years to come.
$11 Million might seem like a lot, but it will be money well spent as the city sees increased tourism that generates 100’s of Millions in extra sales each year after these events.
The key is to think long term !
Joseph, how right you are. Few of the world’s great yachtsmen had ever heard of San Francisco before they caught the few minutes of America’s Cup on ESPN. Now they can’t wait to get here to ride the cable car to coit tower for some rice a roni.
Be glad to lose money on every event, when you can make it up in volume.
I think it was a test run or a way to boost the proposed Warrior’s arena on the waterfront. Maybe Lee “honestly” thought it could propel his legacy plans, and so no accurate assessment was done of this boondogle.
We will always have tourists without events like this. People are coming here either looking for the city of Humphrey Bogart or Michael Douglas/Karl Malden. Or the City of Haight/Ashbury. Or the City of the Castro District and Harvey Milk. Or the City of the Golden Gate Bridge. People around the world know about the Bay already. We don’t need stuff like vanity projects on the waterfront. Buildings or yachts.
People, $11 million for a major sports event very reasonable. Sochi costs $51 billions! And when this done, the city is left with some useful improvement of the streets and the piers, rather than massive white elephant stadiums to maintain.
Joseph A and Wai Yip Tung are right – this is nothing more than bottom-line accouting that completely fails to account for intangibles and positive externalities. We can live in a city where everything is done on a pure cost basis – and we might have paved roads, but we’ll have no art (art costs the city money, and generates zero revenue), or parks (cost money, no revenue), or other perks that separate a world-class city from Reno and Stockton. (Meaning no offense to Reno or Stockton.)
I hope we host this again (and again) – and I also hope that this sudden accounting “find” is simply an effort by the city to firm up its position with Ellison for 2017 – and scare off the competition.
If the City hosted again, wouldn’t the initial costs be amortized over two events? I assume that most of the infrastructure and improvements that were built for the last America’s Cup would still be available for the next one.
@SFRealist
Ah the old “Pac Bell Park was built without public money” canard.
Admittedly, the financing for these complex projects can be opaque, but the estimate offered at the time by the sponsors was $15-27 million, and more recent and thorough accounting puts the taxpayer’s bill at $142 million in 2001 dollars.
From (namelink):
“To see why, let’s take a closer look at the Giants’ Pac Bell Park (now SBC Park, and soon to be AT&T Park if the latest merger-related rumors are true). The widely reported $15 million in public funds–used to relocate a public transit facility that was in the way of the ballpark–was just the tip of the iceberg, it turns out. Long estimates $33 million in value for the land itself, donated by the local government for the cause at no cost to the Giants; $25 million worth of municipal fire, police, and garbage services; and $83 million in forgone property taxes, because despite being privatedly owned, the stadium nonetheless receives a full property tax exemption.”
Sierrajeff,
Yes having all of this is important. A city without an Opera or a Symphony or a number of quality museums will stay off the map to many knowledge workers who want to settle here. I live in LV right now and access to culture seems like a novel concept that has started to pick up only recently.
As far as Yachting is concerned, its impact on our image is debatable. There’s a lot of bad press in the country and beyond on the perceived gentrification lately and it all has to do with a city that moves towards an extremely successful and wealthy tech hub while allegedly pushing out the middle class under the (white) bus at a rate of less than 200 Ellis evictions a year…
I am not against a bit more good press for SF, but heck the people who participate or attend should pay whatever loss the city would incur.
SF doesn’t really need it. It’s a good-to-have event, but not a game changer.
Everyone seems to be missing something here. The city paid 11.5 million to get an economic impact of 364 million. After they tax that to hell, don’t they end up well in the green on this?
Assuming the city does this again, will they again charge $9.2M for “Planning, Permitting and Environmental Review”?
Or are those one-time costs?
An event that brought in $364 million is somehow seen as a loss of $5.5 – then later a loss of $11.4? – this “loss” is only in the eyes of people who think that the only thing that matters in an economy is how much your masters in government benefit.
$11.5mm in a city with a budget of $8 Billion with a B? It’s a rounding error. Irrelevant.
It’s only about 1/50th of what the pension costs are for 2014.
Think of it this way , the city of San Francisco invests a certain amount of money in advertising for its Tourist Industry, in this case it was $11 Million that put San Francisco on a national stage for months
It was a bargain !
The government accounting problem for an event like this is that most of the tax revenue goes to the state in sales and income taxes, while most of the costs are paid by the locality in police, etc.
If we accept the estimate that SF got $5.8 million in taxes, then CA must have made tens of millions of which maybe a million or two trickles back to SF.
Jake, was there a link there? Where did these numbers come from?
I would also note that the ballpark has spurred the ridiculous growth in South Beach. Even if your numbers are true (which I don’t know), the city has made far more back in property taxes. That’s a huge difference from the America’s Cup, which isn’t about to transform a neighborhood.
“…the ballpark has spurred the ridiculous growth in South Beach”
How do you figure that the SB growth was driven by the ballpark? The Bay Area tech industry boom seems like a more likely cause.
Spending 11 million to get 350 million plus in economic activity is a good trade, and if they can run it again they should make more money. But the teams need to pay rent for the piers, pay the local minimum wage, and follow all the regular rules. If they can have 10 teams instead of 4, and they make other adjustments to how the venue is structured, it could be even more fun. The temporary concert arena was a lot of fun, the sports bars at the Cruise Ship Terminal were a lot of fun, and out at the marina, they had a lot of additional racing going on between Cup runs that were fun (Windsurfing Nationals, Kite Boarding Nationals, a few junior national races in lasers and FJs, and some local junior competitions). Plus the support to the Treasure Island Sailing Center, that serves a lot of public school and community kids, was a real plus.
Boat owners tend to be wealthy, the sailors, not so much.
@SFRealist
There was a namelink. Here it is:
http://www.baseballprospectus.com/article.php?articleid=4591
The numbers come from Judith Grant Long, a Harvard prof who does economic research on sports events and stadiums. This article has pointers to her and others trying to account for the total costs and benefits:
http://www.psmag.com/navigation/business-economics/america-has-a-stadium-problem-62665/
Milkshake, I say that because I was here before 2000, when it opened, and there was essentially nothing in the neighborhood.
By, say, 2006, when tech was not booming, South Beach was. If not for the ballpark to kick things off, it’s possible that this present boom would have little effect. Compare South Beach with the Excelsior, or Bayview, or Brisbane, or San Bruno. Those places are growing, but nothing like South Beach.
Without the ballpark, I suspect South Beach would be another neighborhood slowly growing like the others I mentioned.
J wrote:
> Everyone seems to be missing something
> here. The city paid 11.5 million to get
> an economic impact of 364 million
What I’m missing is how the city managed to pay over $9 MILLION for planning, permitting and environmental review. Even at SF average union wages of $100K/year did it really take close to 100 people working full time for a year to plan, permit and review a couple EIRs?
Believe what you want about how much the ball park spurred the development of south beach, but remember that more than a billion dollars of VC and Wall Street money washed through SOMA in the late 1990s leaving behind assets worth far more than AT&T Park.
When Level3 went into the China Basin building around 1996 it blossomed into a Internet startup incubator. Guess where Dropbox grew up?
AboveNet went bankrupt but left behind a world class data center at 365 Main and a dense fiber network throughout SOMA.
There are 4 significant data centers in South Beach alone. Along with the intensive fiber network buildouts of the 1996-2001 period, they account for far more stimulus to the economy than the Giants.
Looking at the analysts report again, it is pretty comprehensive and it has already taken into account many of the items that are discussed here. The total tax revenue is listed here at 5.7 million. The capital improvement to the port is accounted inside the report. What you see here is $10 million net expenditure to the city.
I still enjoy the race and I still don’t see this as an unreasonable cost. On the other hand I think it is right for the city and to negotiate for a better deal, arming with the actual cost and benefit report from the last race and rather than imaginary projection from the first time.
Lie down with dogs, get up with fleas.
South Park was already “Multimedia Gulch” at least five years before the park opened, and this held throughout SOMA, basically Townsend and northward. It’s only the old warehouse areas around the train station that were “transformed.” Frankly, I’d say that the park was sited there to capitalize on the business that was already happening around there. For people to now say that the park started it all is just hilariously ignorant carpetbagger-blather.
Big f’ng deal! We’re talking the equivalent of a couple blocks of curb-and-gutter job on outer Taraval. Way more than well worth it for all the City got out of it. We should only hope we get the opportunity again.
EH, riiiiiiight.
It was happening there in 1995. That’s why the Beacon (crappy building, but still) opened in 2004; the Palms (also crappy) in 2006; One Rincon in 2008, etc. etc. Yep, it was happening bigtime in 1995.
My question is the same as FmrAptBroker: HOW on earth does the city spend $9.3M on planning and permitting? That cannot be a direct cost, can it? I’d put that firmly in the “only themselves to blame” category.
EH you’re full of it. Wired, Infoseek and Netguide were there, and that was about it. The ballpark was already known to be happening. It was well known. Known to all of those employees who only had lunch in south park at one of the maybe three places there. It was quite, quite dead at night in the area– in the late ’90s. “Multimedia Gulch” came later.
@Scooter
The last page of the report has a breakdown, including more than $3 million paid to the Park Service for a permit and more than $4 million for the EIR.
I’ve never liked the term “Multimedia Gulch” but it definitely predates the web. I always associate it with people trying to convince me that the future is cdroms and hypercard.
There were a lot fewer residents before the ballpark but definitely better nightlife.
Here’s a fun blast from the past:
SAN FRANCISCO’S MULTIMEDIA GULCH
(FORTUNE Magazine)
By Alan Deutschman
March 7, 1994
A new hot spot for high-tech startups is San Francisco’s so-called Multimedia Gulch, a warehouse district hard by the ramps to the Bay Bridge. Here’s where an urban breed of computer programmer — too hip to live in the banal suburbia of Silicon Valley — is getting together with the city’s artists to create software filled with video, animation, and music. In only a year or two of colonization, the Gulch has become a high-tech version of New York City’s SoHo, with loft offices, trendy restaurants, and art galleries interspersed among factories and gas stations. Denizens include Wired magazine; director Tim Burton’s animation studio; Macromedia, a leading maker of software used for creating CD-ROMs — and the San Francisco Multimedia Development Group, a trade association with 400 member companies. Typical of the Gulch trend: Vivid Publishing, founded in 1990. The 18- person startup develops software and produces books such as Demystifying Multimedia. Vivid took over a 4,000-square-foot space previously filled with immigrant Chinese women hunched over sewing machines. Monthly rent: 60 cents a square foot, which is around one-third of downtown rates. Vivid’s founders gutted the space and installed 4,000 feet of cable to connect their Macintoshes. Now a massage table occupies the conference room, and an iguana named Jim roams around freely. Vivid’s entrepreneurs say that San Francisco’s lively and diverse subcultures and its antiestablishment aura contribute to a creative environment, as does the proximity of hundreds of photographers, designers, cartoonists, and documentary filmmakers.
NYTimes has another take from 1994:
http://www.nytimes.com/1994/09/04/style/gurus-of-multimedia-gulch.html
southbeach and mission bay grew because of the ballpark, pure and simple. yes, start-ups had started in this part of SOMA because it was cheap, but it grew because of the ballpark
Here are some facts according to the SF Planning Dept (pdf at namelink).
VCs funding to Internet and other high-tech start-ups in San Francisco:
1996 $10 billion
1997 $10 billion
1998 $12 billion
1999 $40 billion
2000 $50 billion
High-tech office leasing increased from about 0.5 million sq ft to 4.25 million sq ft.
Are we to believe that more than $120 billion in VC money in 5 years is negligible when compared to $400 million in stadium construction and related city improvements and the Giants $200 million or so annual revenue? Because, uh, math is hard or what?
Face it folks, the stadium had and has an impact for about a one block radius. Beyond that it doesn’t matter much if there was a baseball park or a public park or an office park there, except for the traffic.
Yeah, I’ve got friends who love baseball and friends who love walking to work/cafes/bars/etc but absolutly no one I know ever mentioned being near a baseball stadium as a search critera for locating a house, job or startup.
The stadium’s grea, but the idea that the stadium drove SOMA is total nonsense.