The Grid

Sly Finance
An advertisement in the Wall Street Journal last month was cheesy enough, even by advertising standards, to be worthy of note. In it, the San Francisco Giants asked the business elite of America to "Cheer the Future" by purchasing charter seats at the new Major League Baseball stadium to be built on the China Basin channel.

The Giants' ad was cheesy in all the ordinary, hyperbolic, PR-people-on-Quaaludes ways. For example, its small type suggested that charter seats at Pacific Bell Park will offer "an environment of luxury and prestige you would equate to the arts [sic]." Let's see now ...

Bonds turns on an inside fastball ... it's a towering blast deep into the right field seats ... and now, please rise for the first movement of Beethoven's Symphony No. 3, Eroica, in E flat.

But the advertisement was also insulting -- indeed, it took insult to the meta-level -- by incorporating, in a nationwide sales pitch, the disingenuous financial babble the Giants have force-fed to us for way too many months now. Now, the Giants are trying to convince the wide-flung readers of the Wall Street Journal that Pacific Bell Park will be "privately financed."

We guess you can't blame the Giants. By repeating this claim for more than a year to a daily press that, in turn, likes to repeat it to you, the San Francisco Giants have made themselves a Teflon team. Any criticism of the new baseball park, it seems, slides right off the public-spirited Giants, who have a "privately financed" stadium. The criticism then runs across town and adheres to the bad, greedy Eddie DeBartolo, who had the temerity to ask for $100 million in public funding for his new football stadium at Candlestick Point.

But at least Eddie asked. When Eddie wanted to take our money for his private benefit, he, at least, told us how much we were going to fork over. And he, at least, did us the courtesy of asking us before we voted on whether we wanted to pay.

The Giants, on the other hand, are corner-shaving weasels. They want to take our money, without taking any of the heat that should accompany it. They won an election last year by persuading voters that the new stadium wouldn't cost them any money. Of course, the team never exactly promised there would be no public costs. The Giants just kept saying that the ballpark would be "privately financed." And it is absolutely true -- if you ascribe to the Clinton administration's definition of the word "true" -- that the Giants, a private firm, will borrow the money necessary to construct the park from a syndicate of banks that also operate in the private sector.

But the total budget for a modern athletic stadium is composed of many different line items; construction of the park itself is only one of them. Before it opens in 2000, and for decades afterward, Pac Bell Park and the San Francisco Giants will suck in tens of millions of dollars in public subsidies.

What those subsidies will be is not at this point sharply defined. In fact, the financial situation surrounding the new stadium is a sticky, greasy mess. Whether it will adhere to San Francisco's Teflon Giants and their slick-Willie political allies probably depends on how high the stadium fire can be turned up at this late date, and how long the team can be left on the burner.

After two embarrassing defeats at the ballot box, supporters of the China Basin stadium made their stand in March 1996 with Proposition B, which proposed to lift -- for the stadium site alone -- special land-use restrictions freezing non-maritime construction on the waterfront.

The main selling point of a Major League Baseball stadium at China Basin was cost. "No new taxes. No increase in existing taxes. No public subsidies. No hidden costs." These were the pledges (some might say lies) made in the official -- though non-binding -- ballot argument signed by the three co-chairs of the stadium campaign, state Sen. Quentin Kopp, former county Supervisor Roberta Achtenberg, and the Rev. Cecil Williams of Glide Memorial United Methodist Church.

Prop. B passed, winning two-thirds of the vote.
Now, the Giants and the mayor are close to a final deal on a lease of 13 or so acres of public land for the ballpark. The Port Commission and the Board of Supervisors are expected to bless the agreement later this month.

Earlier this year, the China Basin Ballpark Company LLC, a group apparently composed of the same people who own the Giants, announced the formation of a syndicate of private lenders who have pledged $140 million in capital toward construction of the stadium. The rest of the quarter-billion-dollar tab for the park would be covered via the sale of stadium naming rights, the leasing of luxury boxes, and the selling of those artistically inclined charter seats.

The owners of the Giants probably believe that this financing arrangement, and the lease with the port, represents an absolute fulfillment of the bargain they made with voters.

The owners of the Giants are that deluded and condescending.
Although they are seldom publicized and almost never added up in one place, the public costs of the stadium are significant. Let us count the ways the government has already admitted you will be paying to help the Giants to build a stadium:

* The city's Redevelopment Agency will sell $15 million in bonds to build sewers, sidewalks, and other infrastructure around the stadium. The borrowed money will be paid off with increases in taxes related to the stadium site.

The people who support the stadium contend that this arrangement, called tax increment financing, won't cost the taxpayers anything. In the narrowest sense, this assertion is correct.

But here's something for you to consider:
These improvements, which include a snazzy waterfront promenade, will make it easier for customers to enjoy attending the sporting and entertainment events envisioned for the park. Most entrepreneurs who are truly sincere about "privately financing" their projects usually build their own damn sidewalks. And if the Giants did have to pay for the infrastructure costs of the stadium, increased taxes from the stadium would flow into the city's General Fund and help pay for things like Muni buses that run on time.

If you still think the stadium bonds are a good idea, we have a proposal: We'd like you to give us a tax increment district of our own. We'll build a new office for The Grid Inc. We will borrow money for the office (at very low interest under the government's credit rating) and pay it back over a very long time with taxes we would have paid to the government anyway.

Sign us up, yesterday.
* As part of the complex structure of the stadium deal, the Port of San Francisco will borrow $12 million. (It has to buy some land from the state and relocate a port maintenance facility.) Those with fair-to-middling memories will remember that the Giants were originally supposed to front this money to the port. Instead, the port will borrow it from a Canadian bank that (take a deep breath and try to follow this complicated and ugly scenario) is partly owned by a Hong Kong billionaire who reportedly has the inside track with Willie Brown to get the concession to build a resort on Treasure Island.

* The city has spent $1.5 million on planning costs.
* The city will pay $250,000 in legal and staff costs associated with drawing up the lease and other legal documents. (The Giants paid these costs initially, but the draft lease allows them to recover the costs, with 8.5 percent interest attached, through rent breaks in the first two years of the lease.)

* The port will lose about $300,000 a year in rent paid by the businesses that now occupy the stadium site. (So when the Giants talk about the $1.2 million in annual rent they will provide to the General Fund, do some subtraction and think properly about the direct financial benefit to the city: It's really $900,000 a year.)

And those are just the costs somebody has decided to calculate.

The taxpayer costs of Pacific Bell Park that nobody in the government has felt a need to publicize may be even higher. They could be exorbitant. Astronomical, even. Pick your adjective -- we really can't tell, because no one in the government seems very excited about counting all of these costs up.

Let's just call them the Incredibly Vague Costs.
The Environmental Impact Report for the stadium gives perhaps the best idea of how vague these IVCs are. The report describes a series of "mitigation measures" that should be undertaken to lessen the traffic and pedestrian congestion that will engulf SOMA before and after Giants home games at China Basin.

Get a load of this bureaucratese:
"None of the [mitigation] measures is currently programmed in the formal capital and operating plans for Caltrans, the San Francisco Municipal Railway, the San Francisco Department of Parking and Traffic, the Department of Public Works, the Port of San Francisco or any of the other involved public agencies. The source of funding for each measure is not necessarily known at this time ...."

English translation: Whatever all of this will cost, it's not in the budget yet.

Some of the larger IVCs may be incurred by Muni. After all, if we don't want cars circling SOMA for the three-hour length of every Giants home game, we'll need to have lots of transit to Pac Bell Park. No one, it seems, has put a precise pencil to the extra costs for increased rail and bus service to the new ballpark. But it's pretty clear that there're going to be more buses running, with more drivers driving them, and more trains. It also seems likely there will have to be a new loading platform in front of the park for a new Muni rail line there.

There's been a lot of talk about ferry service to the ballpark. How much do ferry landings cost? The draft lease for the ballpark site makes it clear ferry service won't be the Giants' sole responsibility.

Traffic and parking are the potential stadium problems that have gotten the most ink. Imagine the IVCs of controlling traffic South of Market when you start dumping a stadium's worth of cars down there 81 times a year. Department of Parking and Traffic Director Bill Maher says the 25 or so parking-control folks used at Candlestick will be enough to handle traffic at China Basin. Maybe -- but isn't there just a little more traffic and development and business activity South of Market than there is around Candlestick?

Do you think all these people and cars might create a need for more police on game days and nights?

And we won't even get into the millions of dollars of Partial Incredibly Vague Costs of the new park at China Basin -- all the Muni lines and freeway ramps that have already been built, or are already planned, based in part on the needs of a new ballpark. Adding up all the PIVCs won't do anything but make you mad.

Over the initial term of the lease for the stadium site, which ends in 2022, the Giants will pay a little more than $19.8 million in rent, if you factor in the loss of existing port rentals. Additionally, the port plans to lease parking-lot space to the team for a little more than a million a year for nine years and share some of that revenue with the city -- the terms of the deal are still under negotiation. That gets at least part of the way toward paying us back for the known public subsidies for the ballpark, which come to about $34 million. But it won't come close to generating the revenue to cover the known subsidies and the IVCs. Not to mention all those partial costs.

The sad truth is that the city is going to be out millions and millions of dollars in this China Basin stadium deal. At this point, though, there probably isn't much that can be done about the swelling public tab of the "privately financed" baseball stadium.

Willie Brown has to make a deal to build a new Giants stadium. He just sold voters on providing $100 million in public financing toward a new $525 million mall and football stadium for Eddie DeBartolo. For that deal to go forward, the Giants, who share Candlestick with the 49ers, have to be able to build a new home at China Basin. So the Giants have all the negotiating power here, and the lease for the ballpark will most likely slide through the Board of Supervisors without significant modification.

The performance turned in this year by the 49ers' organization as it stumped for its $100 million football stadium subsidy was truly embarrassing and infuriating to watch. The team's cynical use of the race card, the threats, the refusal to answer well-intentioned questions -- all of these tactics lowered the standard for political debate in San Francisco substantially.

But we'd rather deal with DeBartolo and his bullies, any day of the week, than the sanctimonious hypocrisy -- the flat-out dishonesty -- of the Giants' ownership.

To get an idea of how badly the Giants have screwed the city on China Basin, consider this minor element of the proposed stadium lease. Let's say that, after granting all those millions of dollars in sub rosa subsidies to the owners of the new stadium, the city wants to use it for a special event -- an inauguration of Mayor Brown, say. The city can do it: if the San Francisco Giants are not in town -- and if the city pays the Giants the going rental rate for that privilege.

Chuck Finnie contributed to this column.


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