Billionaire Oracle CEO Wants Cash-Strapped San Francisco to Pay for His America’s Cup Race

Billionaire boys with very expensive toys want to come play in the San Francisco bay for the 2013 America’s Cup and they want the overstretched taxpayers of the city to pay for their games.

Billionaire Larry Ellison of Oracle, who lives in San Francisco and the Peninsula and has his headquarters in Redwood City, is a sailing enthusiast whose BMW racing team won the America’s Cup in February. As defending winner, Ellison gets to pick the next racing venue and he wants it to be San Francisco.

The come-on for San Francisco is that “at least” $1.2 billion in tourism revenue and 9,000 jobs would be generated.

However, City Analyst Harvey Rose’s report to mayor Gavin Newsom shows the proposed agreement for the America’s Cup will actually be a revenue drain for San Francisco.

Mr. Newsom’s proposal to make San Francisco the seventh host city in the 159-year history of the America’s Cup is creating tension between the mayor and the city’s chief budget analyst, who has raised questions about what some view as an extravagant incentive package from a city facing a $712 million deficit.

Although the mayor’s office initially said San Francisco needed to offer a rich deal to win out over bidders in Spain and Italy, the analyst, Harvey Rose, said recently that he had been unable to confirm that another city was competing with San Francisco to host the regatta.

On Thursday, Mr. Rose released an economic impact report estimating that the America’s Cup would cost San Francisco at least $128.3 million, with expenditures vastly exceeding tax revenue. He said the costs would include an $86.2 million loss from granting development rights and free leases on waterfront property to the Cup organizers, led by Larry Ellison, the billionaire Oracle chief executive.

“I think it is interesting that we would be spending city funds at the same time that departments are getting their budgets cut,” Mr. Rose said in an interview.

Now it appears that Ellison and his BMW boating boys are “exasperated” with San Francisco for not rolling over and liking it. San Francisco may lose the bid.

Some of the sticking points are a $270 million “guarantee” from private donors for the rights to the Cup race. But what if private donors don’t ante up, will the city have to guarantee it? Another unpopular demand is the America’s Cup wants free 66-year leases on downtown waterfront properties which Ellison would be able to develop.

Bay Citizen reports some city supervisors are balking at the deal, while the mayor is pressing to approve it:

The need for such a generous offer has been questioned by critics, including Supervisor Chris Daly, given that city officials have been unable to confirm that any other cities or ports bidding to host the Cup.

“We simply have not been able to verify that there are other bidders out there,” San Francisco Budget Analyst Harvey Rose said Thursday.

Italy appears to have offered tax breaks and help with visas, along with other assistance, as incentives to select that country as host, but the San Francisco budget analyst’s office says it has not been able to find evidence that Italy is offering any money or land.

The mayor of Valencia, Spain recently said the city is not being considered to host the event, despite an offer to provide free use of docking facilities, according to news reports.

San Francisco, if selected, would spend $64.1 million on traffic management, environmental reviews, security and other event-related costs, according to the budget analyst’s report, which was provided in response to a request from Daly.

The city is expected to recoup $22 million of those costs in taxes generated by increased visitor spending.

Overall, that means that San Francisco, which has a current budget of $6.6 billion and is facing a $712 million projected budget shortfall next year, would spend $42.1 million hosting the Cup while city departments are being asked to slash costs, according to Rose.

Additionally, the city would provide the team with $89.8 million worth of property and waterfront development rights, which would be partly recouped with $3.6 million in additional property taxes.

The team, owned by Ellison, who is a multibillionaire, would be granted 66-year leases at piers 30, 32 and 50 and granted ownership of a triangle of land bordered by Beale and Bryant streets and the Embarcadero in exchange for performing $150 million in infrastructure improvements.

The Port of San Francisco, which is a city department that manages state land, would also be required to evict or relocate 87 tenants from the piers and from other waterfront facilities needed to host the event.

Added up, the figures indicate that the net cost to San Francisco of hosting the event would be $128.3 million.

SailWorld.com has editorialized in a series of snarky articles in the past 3 days that the deal is going sour because San Francisco is being short-sighted and changing the deal.

Larry Ellison, according to Forbes, has a net worth of $27 billion. He was the highest-paid CEO in the decade, receiving $1.84 billion in salary. He was the world’s richest man in 2000. He is California’s richest resident.

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Why doesn’t Larry just fund the America’s Cup himself??

Cross-posted at UNCOVERAGE.net

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