Critics urge caution on fast-moving Warriors arena deal

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Artist rendering of the arena the Golden State Warriors wants to build on San Francisco's waterfront.

UPDATED The proposal to let the Golden State Warriors build a new sports arena complex at Piers 30-32 is moving forward quickly, with the Board of Supervisors Budget and Finance Committee considering approving its fiscal feasibility tomorrow (Wed/14), the Land Use Committee hearing its design and transportation aspects on Monday, and the full board scheduled to move it forward on Tuesday, two days before Thanksgiving. After that, it will undergo an environmental study and work on myriad fiscal and administrative details, coming back to the board for final approval, probably in the fall, with the goal of opening by the 2017 basketball season.

[UPDATE 11/14: The Finance Committee today voted 3-0 to approve findings of fiscal feasibility for the project after Sup. Jane Kim made amendments delaying the EIR scoping session until January and ensuring the Citizens Advisory Committee will be given more time to review the project and its term sheet. City officials and the Warriors also signed a deal this morning requiring that at least 25 percent of its construction jobs and half of its apprenticeship positions go to local residents or military veterans. We'll have more details and analysis of what happened in the coming days.]

Critics of the project say it is being rammed through too quickly, with too little public notice or attention to blocking off views of the bay, and on terms that are too costly to city taxpayers. To some, Lee's quest for a “legacy project” is reminiscent of the groupthink boosterism that characterized the initial America's Cup proposal, before it was revealed to really be a lucrative waterfront real estate scheme that was great for developers but costly to the public, and later abandoned.

And just like last time, when the Guardian, then-Sup. Chris Daly, Budget Analyst Harvey Rose, and others forced a major scaling back of the developers' ambitions, there are some prominent voices of caution now being raised about the Warriors arena deal and its potential to fleece city taxpayers, including concerns raised by someone with decades of experience shepherding some of San Francisco's biggest public works projects.

Rudy Nothenberg, who served as city administrator and other level fiscal advisory roles to six SF mayors and currently serves as president of the city's Bond Oversight Committee, yesterday wrote a letter to the Board of Supervisors urging it to reject the deal.

Among other things, he criticized the 13 percent interest that city taxpayers would pay on the $120 million in pier restoration work that the Warriors will do. “Quite simply, I would have been ashamed of such a recommendation,” Nothenberg wrote. “In today’s markets it is incomprehensible to have such a stunning recommendation brought to your honorable Board in such haste.”

Project spokesperson PJ Johnston and its main advocate City Hall, Office of Economic and Workforce Development head Jennifer Matz, each disputed Nothenberg's characterization, citing a report by the project consultants, the Berkeley-based Economic and Planning Systems Inc. (EPS), that 13 percent is a “reasonable and appropriate market based return.”

Matz told us the rate was based on the risky nature of rebuilding the piers, for which the Warriors are responsible for any cost overruns. And she compared the project to the massive redevelopment projects now underway on Treasure Island and Hunters Point, from which the city is guaranteeing powerful developer Lennar returns on investment of 18.5 percent and 20 percent respectively.

Johnston, who was press secretary to former Mayor Willie Brown and worked with Nothenberg on building AT&T Park and other projects, told us “ I have great respect for Rudy.” But then he went on to criticize him for taking a self-interested stand to defend the views from the condo he owns nearby: “They don't want anything built in their neighborhood. They would rather leave it a dilapidated parking lot.”

But Nothenberg told us his stand is consistent with the work he did throughout his public service career in trying to keep the waterfront open and accessible to the public, rather than blocking those views with a 14-story stadium and surrounding commercial and hotel complex.

“I have a self-interest as a San Franciscan, and after 20 years of doing the right thing, I don't want to see this rushed through in an arrogant way that would have been unthinkable even a year ago,” Nothenberg told us. “I spent 20 years of my life trying to deal with waterfront issues.”

Among those also sounding the alarm about how quickly this project is moving is land use attorney Sue Hestor and former Mayor Art Agnos, who told us the supervisors should heed the input of Nothenberg and make sure this is a good deal for the city.

Agnos said, "Rudy Nothenberg stands apart from every other department head and CAO in the modern history of San Francisco for his financial and managerial expertise in bringing major projects with complex finances to completion that worked for our City. That is why the past six mayors...whether conservative or liberal...trusted him to advise them and administer the biggest projects in this city from Moscone Convention Center to the new main library to the Giants baseball park and Mission Bay. "

Legislative Analyst Harvey Rose released his initial analysis of the project on Friday. The $120 million plus interest that the city is paying to the Warriors would be partially offset by the $30 million the team would pay for Seawall Lot 330, a one-time payment of $53.8 million (mostly in development impact fees), annual rent of nearly $2 million on its 66-year lease of Piers 30-32, and annual tax and mitigation payments to the city of between $9.8 million and $19 million.

But the report also notes that many city departments and agencies – including the Department of Public Works, Municipal Transportation Agency, and the Police Department – have yet to estimate their costs. Both Johnston and Matz emphasized Rose's conclusion that the project is “fiscally feasible” – the determination that supervisors will have to agree with to move the project forward – but the report also noted “the finding of 'fiscal feasibility' means only that the project merits further evaluation of environmental review.”

The full text of Nothenberg's letter follows:

Dear Supervisors:

My experience as a high level financial advisor and city administrator for Mayors Moscone, Feinstein, Agnos, Jordan, Brown, and Newsom, and current President of the City’s Bond Oversight Committee cause me to write in the hope that you will reject the outrageous 13% interest rate that the developers of the waterfront arena are proposing to charge the City for their cost of replacing Piers 30/32. 

In my years as General Manager of Public Utilities, the Municipal Railway System, Water and Hetch Hetchy, and later as the Chief Administrative Officer for the City and County of San Francisco, I took probably more that a billion dollars worth of various debt instruments to the Board. 

Never…even in the worst days of highest modern era interest rates of the 1970’s hovering at 20% …never did I ever bring a 13% City borrowing to the Mayor and the Board of Supervisors for approval.  Quite simply, I would have been ashamed of such a recommendation.

In today’s markets it is incomprehensible to have such a stunning recommendation brought to your honorable Board in such haste. 

Even more remarkable is the fact that just weeks ago, Allentown, Pennsylvania has just procured a 4.78 % interest rate for $224.4 million of taxable bonds to help build with private contributions a hockey arena for 8500 seats. 

Yet, you are being told the best our city can do is 13% for $120 million.

No Board of Supervisors I ever appeared before would tolerate such dramatic discrepancy.

It is with this in mind, I would most respectfully urge you to send this proposed deal back to the developers, instructing the City’s negotiators not to bring it back without a far more favorable interest rate for City tax payers not to exceed a maximum of 7.5%.

And that would still be almost twice what the City would need to pay for City issued debt and more than amply compensate the developers for any risk premium that they allege that they are taking. 

Any such instruction from you to the City negotiators should also make it clear that they are not to make any new concessions to the developers in exchange for achieving a still high, but eminently more reasonable interest rate.

Thank you for your attention.

Rudy Nothenberg

Chief Administrative Officer (Ret.)

Documentation:

1.     The Warriors Arena negotiates 13% interest on $120 million from San Francisco when the City of Allentown in Pennsylvania just issued $224.4 million of taxable bonds for an arena at an average interest rate of 4.78%. 

13% for SF versus 4.78%  for Allentown

 http://www.allentownpa.gov/Home/AllentownCityNews/tabid/142/xmmid/636/xmid/2000/xmview/2/Default.aspx

City of Allentown - PA - Official Site

www.allentownpa.gov

The official website for the City of Allentown, PA. Learn about all the exciting events going on in the city of Allentown, from music, arts, theater, and sports. Allentown is the largest city in the 

2.     Allentown hockey arena bonds cost $4.2 million to issue ...

www.lehighvalleylive.com/allentown/.../allentown_hockey_ar...

Oct 10, 2012 – About $224.4 million in municipal bonds were sold last week to help finance arena construction. City officials say the issuance costs are about ...

 

 

Comments

Nightmare NIMBY attorney who's never met a project she hasn't hated.

I hope she brings it to the masses for a vote - the people should have a say in the matter just like they should have a say in Ross Mirkarimi's fate too. I'm consistent on these issues - let the people decide. What's Tim so afraid of?

Posted by Troll II on Nov. 13, 2012 @ 3:57 pm
Posted by Guest on Nov. 13, 2012 @ 4:21 pm

Wait...building an arena on stilts in San Francisco Bay is more expensive and riskier than building a hockey arena in Allentown, PA? How can that be?

Who needs this arena anyway. Look at the area around AT&T Park now and compare it to 15 years ago. We had the beautiful, natural corrosion of the old warehouses, now gone forever. Are we going to let this happen again?

Posted by Guest on Nov. 13, 2012 @ 4:23 pm

Can you imagine if Sue Hestor had been around right after the 1906 earthquake? "We can't rebuild San Francisco - it will cause 'traffic!' Would a condemned pier 32 be better then a arena? These naysayers were wrong about ATT Park and they are wrong now.

Posted by Ed on Nov. 14, 2012 @ 8:36 am

The same design firm doing the arena did the popular Oslo Opera House, also a waterfront venue. Do the local people like it? Yes. 4 out of 5 residents want a Munch Museum built next to it.

Cities like Oslo (and Sydney) have living waterfronts that are a destination for people. What they don't have, apparently, are chronic Nimbys like Sue Hestor and the SFBG.

Posted by Troll on Nov. 14, 2012 @ 8:55 am

What neo-socialist Europe does not have is a planning regime that allows private speculators and developers to build whatever they want wherever they want whenever they want.

Posted by marcos on Nov. 14, 2012 @ 9:02 am

such as "four out of five [blah][blah][blah][blah]," Troll needs to provide a citation for it. Otherwise, based on Troll's track record such a claim ought by all rights be dispensed out of hand.

Posted by lillipublicans on Nov. 14, 2012 @ 9:16 am

I saw your request for a 'citation'...I was torn between ignoring it or taking the time to demonstrate (once again) why you are such a lovable old village idiot.

Decided on the latter:

http://www.newsinenglish.no/2012/10/22/majority-want-new-munch-museum/

Posted by Troll on Nov. 14, 2012 @ 11:16 am

to boot.

Yes. It was just as I suspected. Troll, whether due to mental incompetence or sad compulsion, lied.

"Voters seem to disagree, even with their own parties. A survey conducted by research firm Respons for newspaper Aftenposten shows that four out of five want a new Munch Museum and that the largest single bloc of Oslo voters (39 percent) favours the location on the waterfront at Bjørvika"

Just to be perfectly clear, 4/5 is not equal to 39 percent. Troll wrote " 4 out of 5 residents want a Munch Museum built next to it."

Posted by lillipublicans on Nov. 14, 2012 @ 11:44 am

Fine lilli...they have their Opera on the waterfront and their strongest preference for a new museum is to put it right next to it. I don't spend all day in a home and can't break out all the detail in surveys from Oslo. If you think you proved that they aren't happy with what they built on the waterfront then maybe you should ask the docs to review your meds again.

Posted by Troll on Nov. 14, 2012 @ 11:59 am

credence until it is unequivocally proven to be true by outside sources.

*Nothing*

Troll has repeatedly used this same trick of referencing some source which seems to back up his position when it does nothing of the sort; and naturally, Troll covers for such dishonesty when it is discovered by resorting to baseless ad hominem attacks. Truly reprehensible. Has Troll ever contributed anything factual and pertinent on this forum?

Posted by lillipublicans on Nov. 14, 2012 @ 12:25 pm

moron, I pointed out that the people in Oslo used the same design firm to build on the waterfront and, instead or regretting it, there is a strong desire to build something next to it. Only idiots like you could miss that point.

BTW, any luck in finding another elected LE official who pleaded guilty to a crime while in office and didn't resign?

Or how about that babbling the other day that most of the exhausted ballots in D5 were from Mirkarimi supporters.

Hey, it's harder for us who who can't just make up whatever we want to say. I've said before that I envy you because anything that you babble seems like the truth to you.

Posted by Troll on Nov. 14, 2012 @ 12:37 pm

of law enforcement officials who were convicted and didn't resign; many of these were expunged from my contributions on the SFGate site when dishonest trolls such as yourself gamed the system to have my account censored, but I recently posted an example of a lawman who committed an act of violence and stayed on the job in Pennsylvania.

That man *wasn't* elected, and when I asked your sibling Anonymous Guest why it would seem more objectionable to have an *elected* officer remain in his position -- i.e.: one who can be removed through the ballot box -- than to have an unelected officer remain, AG grew silent. Perhaps you can fabricate some rationale for that.

Jackass.

Posted by lillipublicans on Nov. 14, 2012 @ 1:41 pm

1) Elected officials don't have a boss; they have their own responsibility to maintain and deserve the trust that the public has placed in them. Nobody is supervising them like a beat detective.

2) Elected officials represent are the public face of their department. They are its primary representative to the public.

3) Elected officials set the standard for everyone working for them

4) Elected officials can be removed, yes, if someone has about a half million dollars and a year in which the elected official will be distracted from his/her primary job.

Any luck at all, lilli, at finding ONE other elected official who pleaded guilty and didn't resign? Anything out there? Or just Mirkarimi.

Posted by Troll on Nov. 14, 2012 @ 2:19 pm
Posted by lillipublicans on Nov. 14, 2012 @ 5:56 pm

the person you're taking the time to respond to would add credence to your repeated statements that you're smarter than everyone else who comments. You rarely, if ever, make a point other than to try and persuade readers to skip pass comments with which you disagree. That certainly doesn't say much about either your intellectual fortitude or your self-confidence in being able to hold up your end of an argument.

Posted by Troll II on Nov. 14, 2012 @ 12:47 pm

as is evidenced by the fact that not one part of the above comment is in the least part true.

Posted by lillipublicans on Nov. 14, 2012 @ 1:30 pm

the people there are very comfortable with that. Same with many other major cities across the planet, and most in the US too. San Francisco is almost alone in having a constituency who oppose just about everything tht isn't public.

Posted by Guest on Nov. 14, 2012 @ 10:31 am

Go to England and tell them that they're European and/or socialist and see how far that gets you. I remember when I used to go to SPUR, they had people from Zurich explaining that in a redevelopment of a train yard, they'd never consider allowing luxury housing because nobody would be able to afford that. And Switzerland is hardly the most socialist nation in Europe.

Posted by marcos on Nov. 14, 2012 @ 10:58 am

The Oslo Opera House is a 1,364 seat auditorium, less than 10% the size of the proposed Warriors Arena, and is built in a business district. The Sidney Opera House is built on a peninsula near the business district and has 2,679 seats in its main concert hall and a total of 5,738 seats spread amongst 6 different venues (unlikely to be used simultaneously). The scale of those facilities is much smaller than the 19,000 seat Warriors Arena and the potential impact on a residential community is much greater.

We should be thankful for people like Sue Hestor who protect the public trust.

Posted by Guest on Jan. 23, 2013 @ 10:14 am

I grew up in Allentown. I wouldn't use something they're doing to justify anything. The last time they built on this location the building lasted for 8 years and then was swallowed up by a giant sinkhole, which also consumed 3 other buildings including a senior center.

Posted by Guest on Nov. 14, 2012 @ 11:19 am

I've been hearing a lot about the absolute hysteria storm being brewed up by "save the san francisco waterfront" led by uber NIMBY Larry Stokus.
They educated their list on how to cheat online surveys when one was pointing to most of SF wanting this arena.

now the latest bugaboo is over the 13% rate of return, except the rates of return for other pieces of land similar to this like TI and HP are actually higher.

SF would be a dirty version of Carmel is Sue hestor and the luddites at the SFBG had their way with things.

Posted by Dedicated_local on Nov. 14, 2012 @ 11:35 am

going to abide by them anyway. This is the kind of public-private partnership we need more of in San Francisco.

Sue Hestor, Tim Redmond, Larry Stokus - they all go into absolute reactionary mode when ANY development is proposed. They start off with the determination that the owners of the project are here to fuck everyone over so the city must act absolutist or the project must be killed off. It's a highly reactionary position from which to begin anything, especially a major construction project and shows a worldview that preempts cooperation with any entity the holder considers to be "big business." It's why the SFBG opposed BART, the Transamerica Pyramid, Moscone Convention Center, Yerba Buena etc... And it's why the Guardian lost all those battles and will lose this one too.

Posted by Troll II on Nov. 14, 2012 @ 12:15 pm

NIMBY is going to save this city.
People from every neighborhood have only one way to influence big development, and that is through the NIMBY process. This means that NIMBY is a great thing for all of us because the concerns of an apartment dweller in the Sunset (complaining about inappropriate development, let's say) can thereby be linked with similar concerns of a Rincon Towers condo development.

NIMBY is no longer a dirty word -- it is the guide by which neighbors can coordinate their defense of their neighborhoods!

Posted by Guest on Nov. 14, 2012 @ 2:43 pm

They're defending their neighborhood. Why isn't The Guardian defending their right to do so? It makes me so sad when I see this hypocrisy.

Posted by Troll II on Nov. 14, 2012 @ 2:58 pm

NIMBY is never going to be a positive word.
NIMBYs are not working for the city they love, they are working for their selfish desires - projected onto the idea of "protecting the city for all"

NIMBY's have done much to harm the city. They have accelerated gentrification, they have enshrined architectural mediocrity, they have driven up the cost of doing business. Sue Hestor and others like her have done immeasurable harm to SF.

Watch the NIMBY sheep that show up to protest any project at the BOS or planning commission: the lack of diversity is clear. A bunch of old white baby boomers with a sprinkling of the diversity that is actually seen on SF streets.

They were right on the freeway revolt (in the sense of being opposed to what was being proposed) but thats about it

Posted by Dedicated_local on Nov. 14, 2012 @ 4:20 pm

Uber NIMBY = civic hero.

Posted by marcos on Nov. 14, 2012 @ 5:28 pm

Hi, thanks for sharing

Posted by tiger on Apr. 12, 2013 @ 3:41 am

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