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The Cup Runneth Over: S.F.'s America's Cup Decision Looms 

Wednesday, Feb 15 2012

Page 3 of 4

As recently as 2009, the port's estimated cost for building the terminal on Pier 27 was $60 million. When the project was ceremonially initiated on Jan. 31, the price tag was announced at $92 million.

When asked how the costs increased by so much in just over two years, the port's reply is straightforward: That was then and this is now. "The simple answer is that initial or early estimates were based on rough drawings without complete knowledge of the existing conditions of the site, site and terminal requirements, etc." writes John Doll, the port's development project manager. The current estimate was "based on final drawings.... The more detailed the drawings, the more precise the cost estimate."

The discovery, in short order, that costs are surging by 50 percent might put the kibosh on a normal development project ("Frankly, the cruise terminal isn't worth the risk"), but not one lashed to the America's Cup like Ahab to Moby Dick. So when some $40 million in mitigation costs were added to the mix, the port had little choice but to soldier on.

To state that the world of San Francisco waterfront development is complex is akin to noting that an America's Cup catamaran is big. But, to greatly simplify, much of local waterfront development falls under the purview of the San Francisco Bay Conservation and Development Commission (BCDC), a state body. The BCDC weighs the impact on the environment and public waterfront access a project like the combined America's Cup Village/cruise terminal would create, and imposes offsetting mitigation projects. The BCDC estimates the cruise terminal's necessary mitigations will total $40 million — costs not included in the project's announced $92 million budget. This was the impetus for port director Monique Moyer's anguished staff e-mail. "I have thought about it and I can't see ... how I can commit the Port not only to prioritizing these items ahead of everything else, but also mortgaging itself to pay for it all," reads that Jan. 5 note. (Subsequent calls and messages for Moyer have not been returned.)

The BCDC did subsequently grant longer timelines for the port to complete the costly mitigations: "That provides them with a lot more time to find funding sources," notes Lindy Lowe, a BCDC senior planner. This is good — while the funding plans the port has thus far generated merit points for creativity, their feasibility is questionable. The port is gambling that a supermajority of voters will approve a bond measure — or, in another ploy, it proposes exploiting property tax payments from a development project that hasn't yet been approved, let alone built. There's also a somewhat fantastic notion about selling air rights to private developers, allowing them to build denser and taller. And if any of these speculative schemes fail, it may become incumbent on the city to swoop in and make up the difference out of its general fund.

"The port is committed to delivering these public benefits," said Brad Benson, the port's special projects manager, at a Feb. 2 BCDC meeting. "Our challenge is figuring out how to fund it."

Expect more sleepless nights for port leadership.

Bill Clinton got a lot of mileage out of parsing the definition of "is." Imagine what he could have done with "endeavor."

This year, the city left a $12 million hole in its budget in anticipation the America's Cup Organizing Committee would provide the funds seven days after the approval of the project's Environmental Impact Report in late January. That did not happen. As of press time, the city has not received "any portion of the $12 million in revenue that is assumed in the City's fiscal year 2011-12 budget," reads a subsequent evaluation from the controller's office.

Glancing over the fine print, however, the Organizing Committee needed only to "endeavor" to raise $32 million over the next three years to offset city costs, and was only required to "endeavor" to "meet its fundraising target of $12 million for year one no later than seven working days after completion of the environmental review." There isn't any language whatsoever in the contract noting when the fundraisers will "endeavor" to actually fork over the loot to the city. Ominously, the $32 million estimate of city-incurred hosting costs the Organizing Committee's contribution is meant to ameliorate appears to be low. The budget analyst now approximates those pending costs at $51.8 million.

"I am very troubled," says Supervisor David Chiu, who ordered the controller's audit. "They are well behind the fundraising requirements put in place to protect the city's costs. It's clear we're not on course."

The Feb. 6 audit revealed the Organizing Committee had about $827,000 in cash, pledges for about $3.2 million payable over the next several years, and an $8 million payment from the America's Cup Event Authority characterized as an advance on future sales to be derived from a revenue-sharing split on sponsorships. Mark Buell, the chairman of the volunteer Organizing Committee, says he's "hopeful" that payments from the Event Authority "will be more than a one-time thing." That would be grand: As Controller Ben Rosenfield tells SF Weekly, "If they don't raise the money, it's on the city."

Chiu states that this must be addressed in the forthcoming negotiations regarding final approval of the America's Cup pact. It's yet another addition to a vast list of numbers that must be crunched, demands that must be answered, and gripes that must be settled before this ship sets sail. And time is running short.

Those about to engage in high-stakes negotiations might also want to know:

• The cost of mitigations to be requested by the National Park Service has yet to be calculated;

• A lawsuit from a group of environmental and neighborhood groups — including Peskin's Telegraph Hill Dwellers — who appealed the project's Environmental Impact Report may be filed by Feb. 24, potentially gumming up the process right when time is of the essence. A lawsuit may be filed regarding the terms of the future development agreement, too;

About The Author

Joe Eskenazi

Joe Eskenazi

Joe Eskenazi was born in San Francisco, raised in the Bay Area, and attended U.C. Berkeley. He never left. "Your humble narrator" was a staff writer and columnist for SF Weekly from 2007 to 2015. He resides in the Excelsior with his wife, 4.3 miles from his birthplace and 5,474 from hers.


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