Despite a recent court ruling upholding the California legislature’s elimination of San Jose’s Redevelopment Agency (RDA), our Downtown has several economic development projects to look forward to. An expanded convention center, a renovated Civic Auditorium, a soccer stadium, a medical clinic, a bus rapid-transit system along East Santa Clara Street, a BART extension to San José are all underway within 2012, and the airport recently underwent a $1.5 billion expansion. None of those projects require a dime of General Fund money, and all have progressed despite the RDA’s demise. As I wrote an op-ed in the Mercury News, San Jose’s optimistic future starkly contrasts that of many cities scrambling to fill the void left by redevelopment’s demise.
One privately-financed economic development project planned at the edge of our Downtown, a major league ballpark, has captured the most media attention. Opening Day in San José awaits the move of the Oakland Athletics southward, which in turn requires approval by Major League Baseball and its constitutionally indecisive Commissioner.
As we have huddled around the Commissioner’s tower, awaiting plumes of white smoke to emerge, rumors swirl of an imminent decision. As hopes are stirred, pundits jockey for microphones, politicians preen for cameras, and lawyers scurry to file complaints.
The latest: a San Francisco-backed group financed a lawsuit against the City of San José, alleging, among other things, that Council somehow violated the law by approving an option agreement with the Athletics ownership that “commits the taxpayer-funded [city] property to exclusive use …without a public vote.” Since stadium opponents—some of whom receive financial backing directly or indirectly from the San Francisco Giants’ ownership—will frequently repeat this claim about a City-subsidized land deal, it bears closer examination:
- There will be a public election by San José voters before anyone constructs a major league ballpark in San José. Some will debate whether the law actually requires such a vote, but the Council has assured as much by approving my motion on November 14, 2011, in which I explicitly conditioned the exercise of the option contract on a vote of the electorate. Every detail of the land agreement has been made public, and every dollar will be accounted for before any vote.
- The City wanted this option—not Lew Wolff. Contrary to some assertions, the A’s ownership didn’t press for this deal; rather, the City sought the option agreement to avoid putting these parcels under a legal cloud which would take years of litigation to clear. In November of 2011, with a California Supreme Court decision looming, it appeared uncertain that that the RDA--which had acquired the parcels--would survive the decision. It didn’t. By encumbering the property with the option agreement in November, we hope to avoid years of legal wrangling to sort out land ownership.
- Under even the most
expansive view of San Jose’s public investment in the project, the land
sale comes at a bargain. Critics assert
that the RDA spent almost $25.2 million in acquisition and relocation
costs for the six parcels, and the City’s Diridon Authority will acquire
only $7 million in return, at a net loss of $18.1 million.
Consider this $18.1 million public investment in a fuller context,
however: it will leverage a private investment of approximately $489
million in new construction, and millions in annual revenues to
restaurants, hotels, and other nearby businesses. For the
taxpayers, the revenue produced directly by the stadium will bring some
$1.5 million to the City’s coffers, and another $3.5 million in annual
revenues to the County, schools, and other local agencies. That does
not even count the additional tax revenues flowing from nearby development
catalyzed by a new stadium; the vastly revitalized urban neighborhoods
surrounding stadiums in cities like Baltimore, San Diego, Denver, and San
Francisco provide ample reason for optimism. The taxpayers will get
their money’s worth.
- The City Got a Fair Price for the Land. Under any ordinary circumstance, only a W.C. Fields would advise selling land for $7 million after spending three times as much to acquire it. Yet the $7 million figure came from an independent appraisal, by a well-regarded consultant, Colliers International. How so? Three factors explain Colliers’ low figure:
- The RDA bought the parcels between 2006 and 2008, before the recession took its toll on land values, while the appraiser evaluated the site in 2010.
- When RDA purchased the parcels, the previous owners had aspirations of building housing. Residential uses buoy land prices. By 2011, after extensive community engagement, the Council approved a revised General Plan and a Diridon Station Area Plan that precluded housing development, allowing only jobs-supporting uses--such as retail, office, or stadium—on the site.
- Most importantly, the City required that the A’s ownership could only take advantage of the $7 million price if they built a stadium—and nothing else-- on the parcels. So, Colliers used a price that reflected that restriction, comparing land prices of other cities’ baseball stadiums, and arrived at a figure of $33/square foot (about $ 7 million for the 4.66 acres).
- If the Ballpark Isn’t Built, the City Keeps the Land—and the Money. Finally, if all goes south, and the Athletics stay north, and no stadium results, what happens? Under the terms of the deal, nothing: the City keeps the land, the City keeps $50,000 option price, and the City keeps the $150,000 in parking revenue from the site. In other words, the City is $200,000 richer, and taxpayers keep the land. And that’s only if things don’t work out… is that so bad?
Of course, before any shovels hit the dirt, there will be much to discuss in public, including the preparation of a management plan for traffic, parking, and construction, to minimize the impacts on surrounding neighborhoods. Along with the terms of the financial deal, all of these issues deserve close scrutiny. Let’s do so with a fair discussion of all of the data, and with a mind open to the extraordinary opportunity that lies ahead.
Sam Liccardo is a Councilmember representing San Jose's 3rd District that includes Downtown. This letter appeared in Sam's monthly newsletter to residents that he gave Baseball San Jose permission to post on our blog.