San Francisco's red ink from the 34th America's Cup doubled Monday, with updated figures showing the city lost $11.5 million hosting the event.
Preliminary figures released in December showed the regatta had cost taxpayers at least $5.5 million, but that number did not include expenses for the Port of San Francisco, a city department with its own budget funded by rent revenue from its property, not taxes.
The Cup and two related exhibition matches in 2012 had a net cost to the port of $5.5 million, and their cost to the general fund, the city's main spending account, was revised upward to $6 million, according to a new report by the Board of Supervisors budget and legislative analyst. That meant the event cost the city a total of $11.5 million.
The latest analysis, requested by Supervisor John Avalos, a critic of the regatta, also presented a mixed picture on the economic benefits for San Franciscans, finding that officials failed to track local hiring and the inclusion of small businesses during the 2012 events. During the 2013 competitions, however, more than half of the 953 people hired under contracts with race organizers were San Franciscans.
The new findings come as Mayor Ed Lee's administration has reached an impasse in negotiations with software billionaire Larry Ellison's Oracle Team USA sailing club about hosting the next Cup in 2017.
5 race sites on tableRussell Coutts, the CEO of Ellison's sailing team, recently said the organization is looking at five U.S. locations as possible host sites, including San Francisco, San Diego and Hawaii. The winning race syndicate gets to determine the location and boat type for the next Cup, and Ellison's team, sponsored by San Francisco's Golden Gate Yacht Club, has won back-to-back contests.
Hosting sailing's oldest competition, though, did not turn into the financial windfall that organizers and city officials had hoped for. Buffeted by the global economic crisis, few teams were willing to spend the $100 million or more needed to field a competitive team in new, 72-foot, high-tech catamarans used last year.
Projections in 2010 that the races would create $1.4 billion in economic impact for San Francisco fell well short. Instead the figure was $364 million, according to a wrap-up economic impact study by the Bay Area Council Economic Institute released in December. That figure rises to more than $550 million if the long-planned construction of a new cruise ship terminal, which the regatta served as a catalyst to finally get built, is factored in. This new report does not include the impact of the cruise ship terminal because it assumes that it would have been built anyway.
The $1.4 billion figure was based on 15 teams competing, but only four did.
Fundraising also came up short. A committee of civic leaders led by Recreation and Park Commission President Mark Buell sought to raise up to $32 million to cover city costs but ended up with only $12 million. About $8.7 million went to city coffers, according to the latest report. The rest went to cover other obligations under the hosting agreement or was paid elsewhere at the city's direction, including to benefit a nonprofit youth sailing center on Treasure Island for public school children, said Kyri McClellan, CEO of the committee.
Venue rent debatedIn total, the city spent $20.5 million out of its general fund. That was reduced by the $8.7 million from Buell's committee and $5.8 million in new tax revenue from the events.
In the negotiations to hold the Cup in San Francisco a second time, the Oracle team has objected to paying rent for venue space that was provided for free last time and being compelled to pay union rates for labor, people involved in the negotiations said.
The new report from Budget and Legislative Analyst Harvey Rose's office, though, specifically calls for the city to charge rent and to ensure the event authority complies "with local hire and prevailing wage requirements for all events covered by the agreement."
"The mayor is looking to come to an agreement with the event authority that is rooted in lessons learned from these past few years," said Lee's spokeswoman, Christine Falvey. "That means a tighter race schedule, more teams, a significant economic impact to San Francisco and an agreement that protects the city's bottom line."
Coutts and others point to the economic benefits, saying the regatta creates thousands of jobs, brings business to local companies and showcases the host city on TV to viewers around the world.
The report found that 517 San Francisco residents were employed in 2013 through contracts with race organizers, known as the America's Cup Event Authority.
Hiring goals, union ratesThe event authority met the goal of having 50 percent of the new hires on its contracts be San Francisco residents in 2013, but not in the area of temporary installation work, where only 87 of the 252 people hired to set up grandstands and other structures were from the city, the report found. No information was available for two preliminary races in 2012.
The issue became a political flash point for the Local 22 Carpenters Union, which picketed for weeks outside City Hall and race organizers' offices.
The event authority also failed to pay union-level wages as it had agreed to do, a city audit showed, and was assessed more than $400,000 in back wages. The city also is still trying to verify the number of local small businesses that got some of the 328 event authority contracts. So far, it has found six with a special certification from the city verifying their status as small businesses, according to the report, but there may be more.
That wasn't good enough, said Avalos, the progressive supervisor who commissioned the report.
"Harvey's report shows that the event authority and the Lee administration are really committed to the 'trickle' in 'trickle-down economics,' " Avalos said. "Given the cost to the city and failure on commitments to small businesses and local workers, I'd say it wasn't worth it."