The New Rules of Arena Development Are Bad News for Warriors, A's, and Raiders Fans

These days, new pro sports venues have to do more than just house the team. They have to find other ways to pay for construction without public subsidies. And that's a tough landscape for Oakland to compete in.



The current arena.

May Wong

 

In 1997, ardent fans of the Golden State Warriors had reason to be proud. Their team had just started playing in the extensively remodeled Oakland Arena, which was then among the most modern in the National Basketball Association. The rehab seemed to ensure that the Warriors would play in Oakland for decades to come. The renovation included 72 new luxury boxes, nearly 20,000 seats, plenty of gourmet food concessions, and state-of-the-art monitors crowned by a high-definition, center-hung scoreboard with a 360-degree display. And because the taxpayers had paid for this $121 million face-lift, tickets remained affordable.

This upgrade yielded robust attendance, which was aided by the arena’s easy accessibility to fans from across the Bay Area, traveling via Interstate 880 or BART. Seventeen years later, the venue is still popular, rechristened Oracle Arena in 2006. Warriors games regularly sell out, and they continued to do so even amid the team’s long streak of losing seasons. Until 2013, the Warriors had only advanced to the playoffs once in the prior 18 years. But in both of the past two seasons, the Warriors have won at least 47 regular season games and made it to the playoffs.

So why do team owners Peter Gruber and Joe Lacob want to pluck the Warriors from the heart of their East Bay fan base and move them to San Francisco, where their initial plan, now foiled, was to install the team in a shiny, new 18,000-seat arena to be perched atop San Francisco Bay on a heavily reinforced pier?

“We want to build a venue that is not only innovative by today or tomorrow’s standards, but that will stand the test of time and befits the importance of the location,” Gruber said after announcing his plan to move the team. “Great cities have great buildings in great locations. San Francisco is a great city.”

But the great city of San Francisco is not the center of the Warriors’ existing fan base, and even on the best commute days, it would be a much tougher haul for East Bay fans. And with great cities come greater costs. With the inevitable city parking fees and higher ticket prices, access for East Bay fans would become increasingly expensive.

Money is the reason why Gruber and Lacob want to move their team. Just the ZIP code alone would increase the team’s value, with a San Francisco home base giving it access to wealthy downtown corporations in one of the most expensive cities in the United States. And the team’s initial plan was to move into The City in a grandiose fashion. Gruber and Lacob wanted to build a staggering development on Piers 30 and 32, a particularly beautiful stretch of the San Francisco waterfront. The arena’s façade would have been 110 feet tall at its root and 125 feet at the highest point. And the new arena, which also was designed to host concerts and conventions, was only one part of a massive project that also included a 90,000-square-foot shopping mall; a 12-story luxury hotel; a 500-car private garage; and a 17-story luxury condominium tower, in which the price of a single unit would have been an estimated $5 million.

“This is little more than a major development of luxury condos, a mall, and hotel masquerading as an all-American sporting venue,” said former San Francisco Mayor Art Agnos, who emerged as the leading critic of the proposal.

The scope of the proposed Pier 30/32 arena illustrates a striking change in the economics of professional sports venues since the remodeled Oakland Arena opened its doors in 1997. Back then, it was mostly about playing sports, with food courts, luxury boxes, and corporate naming rights thrown in as extras. But because local governments are increasingly wary of investing tax money in professional sports projects, stadium proposals like the one floated by the Warriors have become increasingly dependent on larger development schemes.

A growing body of economic study challenges the benefit of publicly funding such projects. But taxpayers in Oakland and Alameda County don’t need to read any reports to know what a bad deal stadium construction can be. In the 1990s, local politicians eager to lure the errant Raiders back from Los Angeles did so by promising team owner Al Davis an extensive renovation of the Coliseum. The deal was sweet for Davis, who benefited from 22,000 new seats, 90 luxury suites, two private clubs, and state-of-the-art scoreboards. City and county taxpayers, on the other hand, did not make out so well. They are still paying off $113 million in debt for the dubious honor of managing an outdated, crumbling stadium that has become a public embarrassment that no teams want to play in. Added to the $90 million Oracle Arena upgrade, taxpayers continue to shell out $20 million a year in debt service and management costs.

In part because of such bad deals, ancillary projects such as those initially attached to the Warriors arena are now a typical feature of sports-arena development, promoted as necessary to help offset the cost of building new, high-end stadiums. Stadium construction is simply a different game, and making a home for a local sports team can often be a subordinate element in these grandiose developments involving billions of dollars.

That’s what Oakland Athletics’ co-owner Lew Wolff wanted to do in 2006 when he proposed to move the A’s to Fremont. Wolff planned to develop 240 acres with a new stadium and a Santana Row–type “ballpark village,” which included 3,150 homes and 540,000 square feet of commercial space comprising a hotel, restaurants, a movie theater, and several parking garages. Another 1,900 townhouses and 700 homes were to be built in later phases on 115 acres near the ballpark village. Wolff is now trying to build an arena in an underdeveloped area of downtown San Jose, although it is unclear what type of ancillary development, if any, would accompany that stadium, whose time frame seems long-term at best.

Across the bay, when the San Francisco Giants moved out of Candlestick Park and into the baseball stadium now known as AT&T Park, the team failed to capitalize on the resulting development boom that accompanied its relocation. But now that the park has helped to revitalize the South of Market area, a formerly bleak landscape of warehouses and light industry, the Giants want to build a sprawling $1.6 billion development on a 27-acre parking lot next to the stadium. The team’s proposed 3.5 million-square-foot project is bold by San Francisco standards, with 1.7 million square feet of office space, a multistory parking garage, and retail and restaurant space oriented to fans and the growing number of Mission Bay residents and workers.

In short, for a city to properly woo a professional sports team, it’s no longer enough to offer rabid fans and large parcel of land for stadium development. The property must now be seen as desirable for a wide variety of non-sports uses. And that’s an area where Team Oakland still sports a losing record.

So even as Oakland experiences a heartening civic renaissance on a variety of levels, all three of the city’s sports teams are eyeing greener pastures. This uncertainty has created a hand-wringing anxiety for the East Bay’s loyal fans. So, too, for Mayor Jean Quan, who took over a city whose crumbling multiuse stadium holds the distinction of being the only remaining U.S. facility to host both Major League Baseball and National Football League teams.

As all three of Oakland’s pro teams contemplate flight, Quan’s response has been to fight fire with fire. She has attempted to retain the three teams with an ambitious but risky plan to develop up to three brand-new playing venues surrounded by so many ancillary elements that the project would be known as Coliseum City.

It takes a massive development these days to build a new home for a pro sports team. But massive developments aren’t always popular—particularly on the San Francisco waterfront. That was perhaps Oakland’s best hope.

 

If development is inherently political, a billion-dollar development project is all but certain to attract political supporters. After all, large projects create jobs and tax revenue and attract ancillary businesses. And when you include a successful professional sports team, the political dividends are greatly magnified.

In the case of the proposed Warriors arena at Pier 30/32, the erstwhile environmentalist and San Francisco Assemblyman Phil Ting made himself useful by writing a state assembly bill that proposed to let the project bypass the San Francisco Bay Conservation and Development Commission, which oversees development in the San Francisco Bay. Essentially, Ting wanted to fast-track the project by taking away the BCDC’s authority to oversee certain aspects of the Warriors’ proposed waterfront project and putting that responsibility into the hands of his malleable colleagues in the state assembly.

Eagerly backing up Ting was San Francisco Mayor Ed Lee, who seemed particularly excited by the idea of building such a large structure over the bay and famously commented that every time he saw a rendering of the multi-use arena he became “googly-eyed.”

“New York has the Statue of Liberty; now we’re going to have our arena,” Lee proclaimed in October. “It’s going to have the same kind of impact, drawing hundreds of thousands of people to appreciate the waterfront.”

The mayor tied his political reputation to the arena proposal by saying it would be his “legacy project.” Lee sent the commission a lengthy memorandum asking that it remain neutral on Ting’s legislation, and personally called several commission members to follow up.

Lee’s 69-page memorandum had some effect on the bay commissioners. Although they opposed Ting’s legislation as written, insisting that it be watered down before they could support it, they initially withheld their opposition and merely sent legislators a letter expressing their concerns. Contra Costa County Supervisor John Gioia, who sits on the commission, was particularly alarmed by Ting’s proposal. “The BCDC has a well-thought-out process that includes public input,” Gioia said. “What the legislation would have done is shifted that reasoned, thoughtful process away from the public and made it a process considered only by politicians.”

But despite the commission’s concerns, which ultimately prompted it to ask legislators to delay or derail Ting’s bill, the state assembly and senate eventually approved it with minor modifications.

Agnos had some insight into Lee’s enthusiastic state of mind. He said the pressure on a mayor to attract or keep a professional sports team can be overwhelming. In the late 1980s, the Giants were looking for a new stadium and Agnos, who served as mayor from 1988 to 1992, was feeling heat from business leaders, team owners and fans. “You feel pressure and it doesn’t go away until the problem is solved,” Agnos said. “And it becomes a benchmark for your success and it can become a major part of your legacy, as it did for Lt. Gov. Gavin Newsom, who did not respond appropriately to the 49ers need for a new stadium when he was mayor, and it resulted in the team moving to San Jose.”

Ed Lee had no intention of making the same mistake Newsom did. But luckily for East Bay fans, several San Franciscans had no intention of letting the project be constructed on their waterfront.

 

San Franciscans have never liked the idea of tall buildings along the waterfront. They still remember the concrete horror that was the Embarcadero Freeway, and they don’t want views blocked or traffic snarled any more than it already is. Last November, city residents showed their distaste for such development when they came out in droves to vote down the medium-rise luxury tower known as the 8 Washington project.

In part, it was the height of two of the proposed arena-related structures that ultimately put the kibosh on the Warriors’ dreams of a waterfront arena. The existing height limit for the Pier 30/32 site is 40 feet, while the height limit for the site of the proposed 175-foot condo tower, which was across the street, is 105 feet. So, not surprisingly, the San Francisco chapter of the Sierra Club and the same limited-growth activists who defeated 8 Washington turned their well-oiled machine against the Warriors project.

In February, project opponents submitted 21,067 signatures, more than twice the number required, to qualify Proposition B for the June 3 ballot. If approved, the initiative would require voter referendums for all waterfront projects that exceed existing height limits. City real estate interests sued to have the proposition struck from the ballot because it intruded on state jurisdiction over the waterfront. But Superior Court Judge Marla Miller threw out the suit while setting aside consideration of its merits, which leaves the door open to legal challenges should voters approve Prop. B in June.

That led to a small March celebration on the steps of San Francisco’s City Hall. Former Mayor Agnos was exhilarated when he spoke to the assembled growth activists.

“Proposition B puts the community and the neighborhoods in the room with the developers, lobbyists, lawyers, and building trades—all of the powerbrokers who make the major decisions in developing our waterfront” Agnos said. “Prop. B says that no matter what they decide, we’re going to be heard.”

The gathering was modest and temperate, but its message carried across the bay. The judge’s decision had cast a gloomy pall over the Warriors’ ambitious plans.

The upshot was that the team’s owners now had to add legal fees and campaign costs to what was already the most expensive proposed arena in NBA history. Warriors President Rick Welts had admitted that the project’s estimated $1 billion budget was expected to rise as analysis of the 13-acre site continued. Just shoring up the concrete piers the stadium would have rested upon would cost a projected $180 million, three times the original estimate. Last summer, when the estimate was only $120 million, Welts said the team remained undaunted by the growing cost of strengthening the pier. “Right now it’s falling into the Bay,” he said. “A lot of work has to be done to bring it back to a state where we can actually have a place that people can enjoy.”

Proposition B turned out to be the death blow to the Warriors’ ambitious dreams to dominate the city’s waterfront. After Judge Miller’s decision, political momentum slowed on the project. Finally, in mid-April, it was revealed that the Warriors had abandoned their plans to build on Pier 30/32 and that they had purchased a 12-acre site further down the shoreline in the city’s Mission Bay neighborhood, which is undergoing its own redevelopment renaissance.

The announcement was a public admission that the team’s owners and supporters had lost their first game. By then, Mayor Lee had already toned down his breathless comments and shifted his public emphasis to creating affordable housing rather than enabling grand legacy projects.

Little is known about the Warriors’ development plans at the new site, but organized opposition appears far less likely. Former San Francisco Board of Supervisors President Aaron Peskin, a longtime advocate for limited growth, called the new location an excellent choice for the Warriors and the city. “I hope the team will have learned something from the top-down, high-handed tactics they used at Pier 30/32 and will reach out to the neighborhood and people who will be affected by their project,” Peskin said. “But I think it’s an excellent location and will be a fantastic benefit to the city in the long run.”

The size of the site, 12 acres, will limit the scope of development there, but the cost to build is likely to be more predictable, if possibly higher. While the site is smaller than the Pier 30/32 location, space remains for offices or condominiums to offset the arena’s costs, and the change of neighborhood could allow the team to add more height to its development. According to the San Francisco Examiner, the Warriors next step is to redraw their plans for the new site, much of which is already zoned for office and retail development.

The news couldn’t be worse for Oakland, which had been sheepishly waiting in the wings, toeing its instep and hoping that the Warriors’ infatuation with San Francisco would fizzle out. The land deal suggests that the Warriors will leave Oakland for good as soon as 2018. Oakland Mayor Jean Quan has suffered one of a possible three strikes, or what some are calling the “hat trick from hell.”

 

Whatever pressure Art Agnos and Ed Lee felt to retain or attract professional sports teams can be multiplied by three for Oakland Mayor Jean Quan. If the coin toss lands the wrong way, she could be enshrined in the long memory of Oakland sports fans as the mayor who not only lost the Warriors, but also the A’s and Raiders. That would be ironic, since Quan appears seriously dedicated to retaining all three pro sports franchises, unlike her two immediate predecessors.

It will now be next to impossible for Quan to keep the Warriors in Oakland even though Oracle Arena is in good shape and popular with fans. The Raiders and A’s pose a different type of challenge, since they both play in the outdated Oakland Coliseum. Built in 1966, the stadium has become prone to sewage backups in the dugouts and locker rooms. Last June, the A’s were forced to abandon their locker room and share with the Seattle Mariners because of an unfortunate and unsavory backup. This March, third-base coach Mark Gallego made public an embarrassing video of water backing up into the clubhouse showers and toilets after a rainstorm.

Geography is among Quan’s challenges; Oakland simply couldn’t offer the Warriors a site with the perceived allure and prestige of the San Francisco waterfront. Economics is another challenge; Oakland has a thin corporate base and a more working-class fan base that might not be able to sustain the ticket prices imagined by the Warriors management. And, of course, there is the problem of Oakland’s political leadership, which historically has been unable to deal with the city’s greatest economic challenge–its decades-old crime problem.

In recent years, professional sports teams have been retooling their stadiums and arenas for technologically savvy, well-heeled customers. By these new standards, the Oracle Arena’s fancy 1997 renovations are outdated—even though local taxpayers are still paying $20 million a year for them, according to Alameda County Auditor Patrick O’Connell. Sports venues are now trending toward a high-tech experience that that will be accessible to those willing to pay high prices, according to Roger Noll, a Stanford University professor emeritus who specializes in sports economics. “This has been a trend for the past 10 years,” Noll said. “Sports teams are increasingly gearing their venues to the wealthiest 1 percent. These new venues are not bigger, but more expansive—meaning there is less seating because more space is taken up by ways to spend money. Fewer people spending more money.”

This new trend can be seen in the $1.2 billion Levi’s Stadium in Santa Clara, the new home of the San Francisco 49ers. The team has struck a deal with Intel to include the most advanced technological features available. While many details remain under wraps, fans will be offered Wi-Fi, food ordering by phone, digital signage, and very exclusive seating designed for Silicon Valley’s tech millionaires. But those amenities will cost. Fans desiring season tickets had to purchase seat licenses that range in cost from $2,000 to $80,000. Those licenses only give fans the right to buy season tickets, which at a range of $850 to $3,750, are among football’s most expensive. Stadium seat licenses can be resold, sometimes at a huge profit, but Levi’s Stadium licenses are already at the top of the market, so it’s hard to imagine their value going up significantly.

Even though Oakland cannot offer generous corporate support or a location of storied beauty, that hasn’t stopped Quan from trying. In March 2012, she rolled out an ambitious proposal to build up to the three sports venues that would be surrounded by what amounts to a small city. This so-called Coliseum City would rise out of 850 acres of land surrounding the existing Coliseum and Oracle Arena. Besides the three new sports venues, there would be plenty of retail, 6,000 units of new housing, and 14 million square feet of new office and light-industrial space for biotech, science, and technology firms. Think of it as a stadium complex with the whole city of Emeryville thrown in for good measure.

“It’s not about the sports stadium,” Quan said last year, demonstrating her understanding of the opportunity. “It’s about how much more profit can be made off the development around the sports teams. The area around the Coliseum is one of the largest areas of undeveloped land in a major urban area, so there’s lots of potential. And it would mean more than 30,000 jobs.”

Quan, whose approval ratings were in the basement when she announced the project, was criticized in the press for the proposal. Adding to skepticism surrounding the announcement, no representatives of the Warriors, A’s, or Raiders appeared with Quan at the press conference. The project hasn’t gained much momentum since then. One developer, Forest City, withdrew more than a year after Quan introduced the plan, saying the project simply did not pencil out. Although Forest City was replaced by Colony Capital LLC, which manages $32 billion in investments; and investor Rashid Al Malik, who served as deputy CEO of a multibillion-dollar aerospace firm with connections to Dubai’s ruling sheik; no contracts have been signed and no contractors have been brought on board.

As if to compound people’s doubts about the project, Quan has generally declined to discuss its specifics. Numerous calls to Quan’s office for this story went unanswered for weeks. When her spokesman, Sean Maher, finally did contact Oakland Magazine, he scheduled an appointment for an interview that Quan ultimately failed to keep. Thus, much is unknown about some of Quan’s claims, such as how she concluded that the project would create 30,000 jobs. Furthermore, when she has commented, she has tended to say the wrong thing. In April, interviewed on FM sportstalk station 95.7 The Game, Quan said that Coliseum City developers “are partnered literally with the prince of Dubai, who is next in line to lead Dubai.” The next day, Maher retracted the comment and reaffirmed that the prince of Dubai is not involved with the Coliseum City project. The gaffe caused a good deal of embarrassment for Quan and further eroded public confidence in the Coliseum City project.

Still, at least until the Warriors announced their land acquisition, City Administrator Fred Blackwell had said the project was moving forward as expected.

“Colony is on schedule with submitting necessary paperwork though it is still early days and the documents are very preliminary,” Blackwell said. “The Raiders continue to show interest. They continue to look at other options, but they continually say they want to stay in Oakland and we believe that to be true.”

Indeed, Raiders owner Mark Davis has been consistent in saying he wants to stay in Oakland provided his team can play in a new stadium. But he regularly makes it known that Los Angeles, Portland, and Oklahoma City are also interested in becoming the Raiders’ home. While Davis’ claims are welcomed by a beleaguered city administration, good wishes are tempered by the fact that football is the least appealing sport to potential stadium investors because there are so few profit-generating home games—roughly 10, compared to more than 40 for basketball and 80 for baseball.

Blackwell was forced to concede that the Warriors and A’s had not participated in any discussions, and that the project’s budget was $500 to $600 million underwater. Then the project took another blow in early April when Blackwell himself announced that he was leaving Oakland to take a job with the San Francisco Foundation. The Warriors subsequently appeared to eliminate any hope of an Oakland rapprochement by purchasing property in San Francisco. Yet Blackwell has insisted that Coliseum City will move forward even if all three teams decide to leave town.

 

Given the almost-certain departure of the Warriors, the good news is that there’s another proposal brewing in a different part of town. A group of investors is trying to keep the A’s in Oakland by building a 38,000-seat waterfront stadium just west of Jack London Square. The plan’s backers are a group of heavy hitters calling themselves the Oakland Waterfront Ballpark LLC. The group includes Clorox CEO Don Knauss, former Dreyer’s Ice Cream CEO Gary Rogers, Signature Development Group partner Michael Ghielmetti, consultant Doug Boxer and—intriguingly—Warriors co-owner Joe Lacob. They are proposing a new stadium be built on a publicly owned 58-acre site controlled by the Port of Oakland. The location, known as Howard Terminal, recently became available for lease, and the Port Commission approved a 10-month window to have exclusive talks with the group about the possibility of building a stadium at the site.

The proposal is still in its infancy. The Oakland Waterfront Ballpark will have to put down a $100,000 deposit, much of which will go to site studies and feasibility analysis. But Boxer, who has been interested in the site for four years, believes Howard Terminal is brimming with possibilities. “We’ve looked at access, egress, utilities—water, electricity, sewer—and our original review is that it’s possible,” said Boxer, the son of Sen. Barbara Boxer. “There are no major disqualifiers, nothing that would kill the project, and we plan to ask the port to negotiate a lease with our group.”

Boxer said the location makes sense economically because there is already redevelopment going on in and around Jack London Square, which has seen a surge in new restaurants, bars, clubs, and housing. Just south of Jack London Square, Ghielmetti’s company recently broke ground on the Brooklyn Basin project, which will include 200,000 square feet of retail space, 32 acres of new city parks, and 3,100 apartments, condominiums, loft spaces, and townhouses.

“In city after city, baseball parks have been a part of the renaissance of downtowns,” Boxer noted. “Not the sole catalyst, but they help catalyze existing efforts. The ballpark is a massive opportunity to jump-start redevelopment and create construction jobs and permanent jobs.”

While a Howard Terminal waterfront baseball park sounds like a fantastic idea, and Boxer’s enthusiasm for the project is infectious, it faces a difficult obstacle. A’s co-owner Lew Wolff, a developer who previously built projects like San Jose’s Fairmont Hotel, has for years single-mindedly pursued the South Bay as a new home for his baseball team. Wolff has scoffed at the idea of a Howard Terminal stadium, saying the location is contaminated and would never pass the muster of an environmental impact report—though he has refused to provide any data or evaluations that substantiate his claims. An A’s public relations representative declined to talk about Howard Terminal, saying team management is now focused on the 2014 season.

But Wolff still faces stiff opposition to his San Jose proposal, and once again Oakland’s best hopes originate in San Francisco. The National Baseball League refused to let Wolff move the A’s to San Jose because the San Francisco Giants claim it as their territory. The final outcome probably rides on San Jose’s lawsuit seeking to get Major League Baseball to reverse its stance. In the meantime, the team appears to be seeking a long-term extension of its Coliseum lease.

As for Howard Terminal, Boxer admits there are some toxins, but said they are secured beneath a pavement cap and that the state Department of Toxic Substance Control has said it would be fine to build a stadium on top of it. “They said if piers need to be set in the ground, there’s a way to do that without causing any environmental problems above ground,” Boxer said. “The A’s argue differently, but you can’t just say it’s ‘impossible to do.’ If it’s impossible to do at Howard Terminal, then it’s not possible at any site.”

Of course, the Howard Terminal site also could be repurposed for a Warriors arena on the now-unlikely chance that things once again go sour in San Francisco. “We don’t want to close any doors to any potential successful venues for them,” Ghielmetti said before the recent land deal. “It could fit potentially more than one venue. We just want to keep Oakland’s options open.”

Elected officials from Alameda and Contra Costa counties will have to unite behind a common cause if the East Bay is to retain its pro sports teams, Agnos said. “The mayors, supervisors, and state assembly members are going to have to step up as if it’s a ninth-inning rally or as if the game has gone into overtime and it’s up to them to save it.”

Berkeley Mayor Tom Bates doesn’t seem too excited about joining such an effort. He remains hopeful that Quan can find a way forward, but worries that Oakland simply cannot overcome the economic lure of San Francisco.

“The Warriors had a shitty product for all these years, and now that they’re good, what do they do?” Bates asked. “They punish the people who have supported them through the rough years. I would hope the Warriors would realize what a great fan base they have here and decide to stay. But the Warriors owners want major corporate support like there is in Silicon Valley and San Francisco.”

But if the Warriors do leave, it won’t much affect the 76-year-old mayor, who said he doesn’t really enjoy attending games anymore. Bates recently attended a Warriors game from the comfort of a luxury suite, but wasn’t won over by the experience: “You sit in this very comfortable space at the arena and you watch the game on a TV monitor.”

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