Update: City responds to criticism. See below.
For those without clear memories of the 1970s, the specter of double-digit interest rates on loans is something one would likely associate with a dead fish being left on your doorstep.
There'll be no fish-based payment reminders in the ongoing effort between the city and Golden State Warriors to erect an arena on Piers 30-32. But the 13 percent interest rates are in the mix.
Rudy Nothenberg, the city's former chief administrative officer, Muni boss, and PUC director -- and a guy who crunched the numbers for six different city mayors -- yesterday sent a letter to the members of the Board of Supervisors. While Nothenberg would be a neighbor to the proposed stadium and objects to it for standard nervous neighbor reasons, his letter highlights the "outrageous 13% interest rate that the developers of the waterfront arena are proposing to charge the City for their cost of replacing Piers 30/32."
See Also: Agreement Between Warriors, City Features "Nothing" in Writing
You can read Nothenberg's letter here: Rudy Arena Supe Letter [rtf]
Essentially, the agreement as it stands would see the city taking $120 million from the developers of the proposed arena, spiffing up crumbling Piers 30-32 in the shadow of the Bay Bridge, then paying back the developers via long-term rent credits for the site -- with the aforementioned 13 percent interest rate.
In the since-exploded America's Cup deal with Larry Ellison, the city would have entered into a similar deal covering larger swaths of waterfront property -- but with interest rates of "just" 11 percent
Jennifer Matz, who is overseeing the stadium project for the city, has not yet returned SF Weekl
Within his letter, Nothenberg notes that the city of Allentown, Pa., recently obtained a 4.78 percent interest rate for $224.4 million worth of taxable bonds issued to help construct a hockey arena.
"Yet, you are being told the best our city can do is 13% for $120 million," he writes. "No Board of Supervisors I ever appeared before would tolerate such dramatic discrepancy."
Nothenberg told SF Weekly
the Warriors' arena proposal is being moved along too quickly and without enough public oversight. "This requires more study before we make an irrevocable mistake on the waterfront," he says.
Over the weekend, city dwellers received robocalls and discovered flyers on their doors advertising a massive conference call tonight regarding the arena proposal
. Interested parties can dial (877) 229-8493 tonight at 7 p.m. and punch in the code 13781.
Who knows? There may be some interest. There may even be interest in the interest.Update, 4:35 p.m.:
Jennifer Matz returned SF Weekly
's calls. She said a 13 percent interest rate is not unusual in situations in which a private lender fronts money to a municipality for infrastructure work. On Treasure Island, she says, the city will pay back at an 18.5 percent rate. At Hunters Point, the rate is 20 percent.
These high rates come into play, Matz says, because when cities borrow money for infrastructure work, "they do not have a baked-in return. You either have to sell the improved infrastructure or build something on top." In this case, the Warriors would be building an arena on top. And they would be repaid for their loan not in cash but in long-term rent credits for occupancy of the site. "The rent credits are only there because of the value [the Warriors] have created," Matz continues. "This is not some sort of usury rate. Respectfully, I think Rudy is confused."