Our Backyard: Oakland Should Move Forward on Raiders Deal
It’s the best plan we’ve seen for a sports stadium in Oakland.
In recent days, critics of a plan for new Raiders stadium in Oakland have argued that the proposal calls for a $350 million public subsidy. But a closer analysis of the current plan, along with interviews with financing experts, reveals that it actually will cost the city no money at all.
Why? The current term sheet calls for $200 million in publicly financed infrastructure improvements for the stadium project, which includes ancillary development, such as restaurants, bars, a hotel, and possibly housing or office space. The sheet also calls for the city to rent or sell the Coliseum land, valued at $150 million, to a development group led by ex-NFL star Ronnie Lott.
But the city is proposing to finance at least $100 million of those improvements through the creation of a so-called “enhanced infrastructure financing district,” or EIFD. These financing entities were created in 2014 by the state legislature and Gov. Jerry Brown after Brown eliminated redevelopment. After the death of redevelopment, planning experts came together to devise a way to pay for infrastructure projects that redevelopment used to finance. They came up with EIFDs.
In an interview, Fred Silva, who helped the legislature create EIFDs and is a senior fiscal advisor of the good government group California Forward, said an EIFD would work well for Oakland’s needs. “It’s a pretty good use of this tool,” he said.
How does it work? Under EIFDs, cities or counties can create a financing district that would act as its own legal entity, completely distinct from the city or county. And this new legal entity can sell bonds to finance infrastructure improvements within the district, such as new roads and sewer and electrical lines. The one hitch is that bond sales must be approved by 55 percent of the voters in the district.
But that’s not a problem in this case for Oakland and Alameda County because they own basically all the land in the Coliseum area that would be included in the EIFD. So once the city or the county or both creates the district and establishes a board of directors to oversee it, then the district will be able to sell bonds to finance the infrastructure improvements. The best part? “The participating entities don’t have any risk,” Silva said. “Only the financing district is at risk.”
In fact, under SB 826, the law that created EIFDs, the financing district is solely responsible for repaying any bond debt—and the city or county’s general fund is not put at risk. EIFDs pay off bonds by taking the increase in tax revenues generated by the project.
Those funds include increases in property tax revenues (minus what would go to schools; EIFDs are prohibited from harming public school revenue streams, Silva said) or increases to so-called possessory interests taxes, which are a form of property taxes generated by lease agreements. If the city and county decide to lease the Coliseum land to Lott’s group or the Raiders, then they would use possessory interests tax revenues to repay the bonds. They also can use sales and other taxes generated by the development, Silva said. Lott group spokesperson Adam Alberti of Sam Singer and Associates said the group hasn’t decided whether it will buy or lease the land. Under California law, the city and county are prohibited from selling it for less than its fair market value.
Silva said that many cities and counties are currently considering whether to use EIFDs, including Los Angeles in a plan to turn the LA River into an actual river.
Currently, Oakland is planning to finance the other $100 million in infrastructure upgrades by having Lott’s group sell private bonds that would also be repaid by tax revenues generated by the project. However, this part of the proposal doesn’t appear to have the strong safeguards of an EIFD. “We need to make sure this is air tight,” said Oakland Assistant City Administrator Claudia Cappio, who is the city’s lead negotiator on the deal. “The bonds have to be back-stopped by the Lott-Fortress group.” Fortress Investment is the financier of Lott’s group. Lott and Fortress, the Raiders, and the NFL would pay for the actual construction of the stadium and the surrounding development.
Cappio said that the city may ultimately decide that doing the entire $200 million in public infrastructure upgrades through the EIFD is the smartest and safest move.
If so, the city would not be spending any money in the deal; rather, it would create a new legal entity that would sell bonds and repay them using tax revenues that currently do not exist—and only will if the Raiders’ project gets built.
In short, this deal is the best one that Oakland has put forward so far, and it’s worth exploring further.
Unfortunately, the NFL and the Raiders have yet to show any interest in it.
Our Backyard is an occasional column by senior editor Robert Gammon.
Published Dec. 12, 2016 at 8:58 p.m.