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January 22, 2006
A's owner to seek "entitlements" instead of subsidies?
In the midst of a long, long Q&A with the San Francisco Chronicle, Oakland A's co-owner Lewis Wolff sheds a little light on his thoughts of how to finance a new stadium for his team:
What cities do have, especially in the area of growth, and the Bay Area, good or bad, is growing, whether it's growing right or not is not my decision totally, they have zoning rights. We call them entitlements; you're entitled to build 1,000 apartment units.Those entitlements are the new currency, in my opinion, for cities, governments and regionals and counties and so forth.So let's assume there is the Oakland army base, and that has a lot of demands from a lot of groups, and it's not a great location for a ballpark. It's a piece of land I think the city owns, but if not, they can get to it.Let's assume that developers, not so much ourselves, feel that is a great housing location. Our idea might be that since it's not zoned right now but is to be zoned or to be entitled, why not entitle it for 3,000 apartment units?Those units might be worth $100,000 a piece. It's sort of your land value. Whether we're the developer or we join with a developer or a developer that we're not associated with says, "We'll pay $300 million for those entitlements rights."We're saying to the city, "That's the subsidy we want, but we don't want it for free. Put it into the ballpark. If the ballpark costs $500 million, we'll add the $200 million, take care of the overruns, and we'll do the land under it."That entitlement is a value, is a currency they can help us with. So what do they get out of it? They get a ballpark, which they'll own, and we'll have a longer lease than we have today, and somebody will build 3,000 apartment units. We think it's a very interesting idea.
Interesting? Definitely. Better for cities than the old dump-a-pile-of-money-in-the-owner's-lap model? That's another story. Even aside from the fact that 3,000 apartment units represent both an asset to a city (increasing the tax base, providing quality housing, etc.) and a liability (increasing the need for schools, emergency services, power grid demands, etc.), if "entitlement rights" are a valuable asset, why shouldn't the city sell them to a developer and use the proceeds to pay for, say, schools instead of stadiums? It's very similar to the question being raised in Pittsburgh, where the Penguins are hoping to get a slots license granted to a casino operator who promises to build a hockey arena: If side agreements like this are kosher, why the heck would your first request be for a hockey arena?
To Wolff's credit, he's smart enough not to try to pass this off as some sort of free lunch. "You could call it a huge subsidy if you want," he told the Chronicle. "You could call it a clever way of getting through the process." That pretty much covers all the bases, yes.
