At a late January America's Cup press conference, Lieutenant Governor Gavin Newsom said something a bit odd regarding the city's dramatically hammered-out deal to host the race: "We made a lot of promises. A lot of them have been reported. Candidly, a lot of them have not."
In fact, a full 16 pages of the compact had been crossed out and rewritten per then-Mayor Newsom between the Board of Supervisors signing off on the deal in mid-December and the deal's official acceptance on the final day of the year. Altering large sections of what is, in essence, a multi-million dollar real estate deal can have some financial consequences. Now we have an idea what they are.
An audit of the changes to the America's Cup deal by budget analyst Harvey Rose was released early this evening. While he hesitates to attach a dollar figure to the consequences of the altered deal, Rose notes "the cost could be very significant." Under certain circumstances, it appears the city could be out hundreds of thousands if not several million dollars a year -- over the course of a 66-year agreement.
Newsom was entitled to make changes to the Board of Supervisors-approved bid, so long as the "modifications did not materially increase the obligations or liabilities of the City." Reviewing the long list of alterations made to the agreement, however, Rose tells SF Weekly, "If that's not material, I don't know what is!"
At the top of Rose's list of questionable changes is a new agreement that would allow the Event Authority -- the organization created by yachting billionaire Larry Ellison to run the Cup -- to enter into long-term leases on a number of new waterfront properties. While the city could decline to allow Ellison's group to lease Piers 19, 23, 27, or 80, the deal as it stands allows the Event Authority "the unilateral right to establish a long-term lease for Pier 29." This, in Rose's eyes, is the epitome of a material alteration.
Another eye-catching change is the setting of just what the rates of those long-term leases would be. While the Board of Supervisors explicitly endorsed an independent appraisal, Newsom's office went 180 degrees the other direction. It set the rates of $4 or $6 per gross square foot "through negotiation between the Mayor's Office and other City officials and the Event Authority." Rather than an independent assessor, then, the city negotiated with the very group that intends to lease the land, allowing it a say in naming its price.
"The Board of Supervisors, when they approved this agreement, said it should be an independent appraisal," Rose says. "And here we find a situation where, in fact, rent is to be negotiated with the party of interest. That, to my judgment, is material."
Other findings of the fourth -- and most complicated -- budget analyst's report on the America's Cup deal: