Earlier this week we reported that the city's budget analyst was at work on a report to answer the big question: Can you actually make money hosting the America's Cup? The report is out, and, according to the city's official number-cruncher, the answer is no. A resounding no.
While many millions could be funneled to private businesses, the city stands to lose a pretty penny, claims the report (you can read the whole thing here). Under the provisions of the nonbinding term sheet the Board of Supervisors approved Oct. 5, Budget Analyst Harvey Rose estimates the city will reap $22 million in financial benefits -- but shell out $64.1 million in new costs, a loss of some $42 million. What's more, by ceding up to 75 years of control of Port of San Francisco properties to entities controlled by Oracle CEO and yachting billionaire Larry Ellison, the city stands to give away some $86.2 million in potential tax and lease revenue.
Other findings gleaned from the 46-page report, which will be followed by a second report next week:
- The budget analyst estimates between $928 million and $1.6 billion in spending will benefit the Bay Area economy. The analyst takes the middle ground and settles on $1.2 billion. This spending will bring in the aforementioned $22 million in San Francisco via $10.7 in hotel taxes; $7.1 million in payroll taxes; $2.7 million in sales taxes; and $1.5 million in parking taxes.
- On the other hand, the city is on the hook for $35.8 million in construction, demolition, and tenant relocation costs to the Port; $17.7 million in lost Port revenues; and just shy of $11 million in additional costs incurred by the police, Muni, and other city departments.
- Between 1.8 million and 6.1 million visitors will head to the Bay Area
-- with the variation largely coming due to the unpredictable number of
races and duration of the America's Cup.
- If the city opts to finance the Port project via Certificates of Participation -- essentially bond measures voters don't get to weigh in that carry loanshark rates -- then you can add another $14.5 million to the city's tab -- for a grand total of $78.6 million in costs.
- Should the city give Port land away to Ellison-controlled entities, the group Bay Area Economics determined that a number of lucrative buildings will likely be developed on land that would be lease-free for 66 to 75 years. The loss in property tax, sales, and lease revenue is in the scores of millions of dollars. Of course, that equation changes in the city's favor if Ellison's "Event Authorities" construct a hotel or mixed-use office building. But this would be less profitable for them than, say, building condos and the actual America's Cup facilities.
- If the city doesn't meet agreed-upon benchmarks named in the term sheet, Ellison's Event Authorities could up and move the cup. Therefore, it is possible for San Francisco to invest in the America's Cup and then receive little or no benefits whatsoever.
- While the Event Authority is on the hook for an estimated $106 million in construction costs, the budget analyst thinks this is far too low a figure. The Port of San Francisco estimates work requiring $150 million
- As noted earlier, the budget analyst was unable to ascertain if any other cities are competing to host the America's Cup -- and, therefore, can't compare our term sheets.
- Finally -- and this is not trivial -- the city's Office of Economic and Workforce Development has claimed $32 million in private contributions would offset city expenditures. True -- but, according to the budget analyst's projections, it still won't allow San Francisco to break even. And, per the report, "There is no guarantee that any of the anticipated $32 million in private contributions will be raised."
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