The San Francisco Bay Guardian’s Tim Redmond, who my college newspaper once ran an image of on our cover that was made from a potato stamp (sorry, no image, that was pre-web and my print copy’s in a box somewhere), has an interview up with former San Francisco official Rudy Nothenberg, who according to Redmond “knows more about City Hall, public works, private development, and infrastructure finance than almost anyone alive.” The subject: Nothenberg’s take on the Golden State Warriors’ waterfront arena proposal.
“The Port is really not getting anything out of the deal,” he said. The city will get some increased sales and business taxes, and the Warriors will have to pay housing and transit fees. But there won’t be a lot of new property tax revenue, since that will all go to pay for the arena.
Here’s how Nothenberg laid out his analysis:
The Warriors have to spend $120 million to replace Piers 30-32. (Costs a lot to build such a huge structure over the water.) To make the team whole, the city will sell the Warriors a seawall lot on the other side of the Embarcadero for $30 million, then give the $30 million right back to the team. Then the city will set up an Infrastructure Finance District — the 2013 equivalent of a redevelopment agency — use the future tax increments to fund a $50 million bond. The Warriors get the bond money; the city pays it back. Oh, and then the city gives the team $30 million worth of rent credits, meaning the Warriors will probably never pay any rent at all for the use of that public property. And to make it sweeter, San Francisco will pay the Warriors 13 percent interest on the rent-credit money.
Meanwhile, the local taxpayers will have to come up with a huge amount of money to increase Muni capacity, since the existing transit can’t possibly handle the load of the new arena. Yes, the Warriors, like any developer, will have to pay a modest transit impact fee — “but it’s laughable to thing that this will ever cover the capital and operating costs,” Nothenberg said.
That’s all both more detailed and more worrisome than the last update we heard about the Warriors’ arena plan, and allows us to put a tentative value on the amount of subsidies the team is asking for. Selling public land to the Warriors and then rebating them the sale price is a pretty clear (if weird) subsidy, so that’s $30 million. $50 million in TIFs is likewise a subsidy — you can argue that the property tax money wouldn’t exist without the improvements, but it’d still be the Warriors not having to pay taxes that everybody else has to pay. (As I like to note, walking into a restaurant, ordering dinner, then saying, “I shouldn’t have to pay, because if I hadn’t eaten it nobody else would have” isn’t likely to get you very far.) The rent-credit value is harder to figure, since who’s to say what’s a fair-market rent on the property, but it’s almost certainly more than $30 million, given that exorbitant interest rate.
Given that previously the city was talking about $120 million in TIFs, the total subsidy now probably isn’t any worse than it’s been all along. Still, it’s a decent chunk of change, and as Nothenberg points out, it’s going to be tough for Mayor Ed Lee to keep the public cost from going up since he’s committed himself to not walking away from this deal, no matter what. Doesn’t anyone in city government study the works of Chairman Reinsdorf?