Details about the SJSU/Quakes project have given hints about how the A's-Cisco Field deal will be structured. Before I explain further, take a look at the following table:
First off, it's utterly amazing that the A's stadium, which will hold only 5,000 or so additional people, will cost over six times as much. The ballpark is considerably more complex thanks to additional amenities and MLB stadium requirements, but I'll cover the details of that another day because it can be explained.
The real curiosity is the number of housing units being pitched to help finance each project. For the ballpark it's 2,900. For the stadium it's 1,500. Cisco Field will have over 100 acres of ancillary development to assist (housing, retail, commercial), while no such development is possible at SJSU's South Campus. Included in the SJSU stadium deal will be the creation of public soccer fields nearby (albeit off campus and with some city funds).
Why would the stadium project need 1,500 units? And why would the ballpark, which costs over six times as much, need only 2,900? It's difficult to quantify the impact of the ballpark village portion, but it can't be that much. The volatility of the housing market could make estimating the entitlements' impact difficult as well. Somehow each project has to add up, right? So this leaves me with one possibility:
The San Jose housing sales may help fund the ballpark.
I've been wrong before, and when the details finally emerge I may well be proven wrong on this hypothesis. Right now, the numbers don't add up unless both projects are put together - at least when compared side-by-side. It's likely that Wolff is courting the same investors for both projects, and that moving funds around to get the bills paid may be the only way to get the ballpark (the main project) built. Even if it's true, it may not be considered a big deal since in the end both deals may be viewed as fair - at least on their own terms. Still, it remains something of an eyebrow-raiser, and makes the stadium effort appear less altruistic than how it's currently perceived by some.
All the more reason to get the details out in the open, no?
13 comments:
ML - great questions. I have a theoretical answer:
The ability to mark up the housing units (beyond FMV and/or sufficient rate of return to please the investors) is much lower at the SJSU facility than it is at Cisco Field.
Which might also explain why details are kept secret --- homebuilders aren't exactly candid in sharing their P&L statements (I can hear it now - "My condo got marked up HOW MUCH extra to pay for the ballpark? That's nuts!!!").
It is weird though. If anything I'd push for more housing at Cisco because, as any downtown resident knows, you have to reach a "tipping point" in order to make the full spectrum of neighborhood amenities available (grocery stores, normal shopping, etc.). 1,500 units seems a little thin but I'm not familiar with the area's overall footprint.
I've considered a possible delta in the acquisition costs of the two properties. It would make sense if Cisco were providing the land to the A's at a huge discount. However, the price of the land is undisclosed while Cisco is paying $4 million per year in naming rights. That leads me to believe that the A's are paying straight up for the land option instead of getting a discount.
Other than that the two pieces of land are rather similar. Both are undeveloped parcels within industrial zones. Both had well-publicized development plans in place - Cisco's mid-rise office park campus, mixed use on the old IBM/Hitachi campus. Both would have townhomes or condos, not single family residences. And both have similar price points for such housing in the current market. Rezoning was completed for the San Jose property, but only to commercial/industrial. Retail is already lacking in that part of South San Jose even without the planned shopping center, BTW. I can't imagine there's that big a difference in price per acre between the two properties, considering that Wolff's desired zoning changes to residential/mixed are the linchpin for a windfall on either property.
It's also possible that the Fremont townhomes will have a substantial premium when they finally start selling because of the nearby amenities, but I expect the market to dictate much of that.
Actually it hasn't been fairly obvious. Care to elaborate, BD?
I guess what I'm implying is that buyers will be willing to pay a higher premium to be able to walk to 81 A's games as opposed to a few football/soccer matches, so the "stadium markup" is higher at Cisco. Maybe they have research to back this up... bottom line, like you said, is that the market will dictate it.
Heck, I just want to see the details on it because the concept is unique and more or less unprecedented... if they can pull it off, it may kick off a new era in stadium construction.
If the San Jose housing site helps fund the ballpark at Pacific Commons, then it is a complete 100% lock that the team will be known as the SAN JOSE A'S of Fremont (no question about it).
... looks like wolff the con-artist is up to his old bag of tricks.
Beware Fremont taxpayers ... a con-artist is on the loose and he's after your wallet.
bad dog, 1158, bad dog....back to your own back yard...
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be sure to take your tinfoil hat with you, so you can properly receive your marching orders from shril.
Where was it that WOlf's old bag of tricks involved conning city governments again?
Subsidies have to be measured in degrees, not absolutes. Otherwise nothing would get built.
Exactly what situation would incur property taxes going to Wolff? Again, a TIF mechanism only works if there's a bond behind it, and Wolff has said no bond issue will be necessary. So where's the disconnect? One other thing - there are already TIF bonds for the nearby highway interchanges. Pols would have to deal with the gauntlet of extending and repurposing TIF funds as the bonds mature in 6 years.
However, a Mello-Roos situation makes sense for ongoing services. If the area requires extra police and emergency services, an extra assessment works. $200 a year X 2900 homes = more than half a million. That breaks down to $16 per month per household. Should the public quake in their boots over that, considering that potential homebuyers should expect the extra cost if they're considering the area? I haven't even included a possible levy on business owners in the area. Best of all, Mello-Roos only requires approval of the affected landowners - and in all likelihood there will only be one.
And there's still the issue of the entertainment gross receipts tax. Combined with the MR assessment, it's well over $1 million in tax revenue.
If you think that's still not enough, let's start throwing around numbers. I'm happy to debate this.
PROFIT FROM A REZONING DOES NOT EQUATE TO A "PUBLIC SUBSIDY!" For crying out loud people, Lew Wolff is proposing to build two stadiums, which thousands will enjoy, without raising city taxes or raiding general funds! And don't listen to anything that the Merc's Barry "I have no wit" Witt scribbles on newsprint; Barry is completely anti-sports who shouldn't have a forum such as the Merc to express his ludicrous "absolutely no money for sports" viewpoint!
I can't see how TIF would take care of a significant amount of the financial burden. The numbers don't add up.
Wolff isn't asking for a bond, so we can cross that off the list. You might think that TIF could be used to service debt on privately raised bonds, but as I understand it that practice is illegal since state law requires public bond issuance for municipalities to receive tax increment. Even if it were legal, all of the deductions through pass-throughs and allocations for affordable housing and such would make the actual proceeds rather low.
An increase in sales tax is out of the question because that would require a vote.
Where can the A's take advantage of rebates or refunds? The gross receipts tax I cited is one but it's a drop in the bucket. In that regard I haven't seen any low hanging fruit. I think this is where Mello-Roos comes in, but that will only go so far.
Residents would not be paying $16/month for public services. I was simply illustrating the impact of a such a fee on funds that would be used to cover enhanced services. The residents/landlords would have to pay regular property taxes just like everybody else.
The redevelopment zone sunsets in 2014 as the bonds on the highway upgrades are paid off. I recall a one-year extension approved some time ago because of forecasting problems or something related. To approve another extension for something completely unrelated would be highly controversial - and if it were to service private financing, illegal.
I think this is the quote you're looking for:
"...we're not asking for any taxes to be levied on anybody. The generation of what we do at the village, if - and it is a low density urban village - if it's something the community wants - will generate its own revenue to pay for schools, taxes..."
He didn't say the revenue would pay for the ballpark, it would pay for the community infrastructure. The traditional mechanisms are a Mello-Roos assessment and a set amount ($20-40K) built into each housing unit. These are common to just about every new development these days, so I don't think this will be any different.
The letters were skeptical, yet the public meetings for the project so far have been overwhelmingly pro-A's. Either way the sample size is too small.
Let's just say the jury's out.
BD, the intentionally vague yet wordy quote you snipped could lead some to think TIF. I know that Neil deMause thinks that's the idea, but specifically for the private financing issue I described, I don't think TIF is available. The words "revenues and resources" open up a lot of different possibilities.
The problem is that describing the funding mix is inherently complex. What percentages of certain revenues will be applied? Here are some obvious follow-up questions:
1. Will it all be townhomes, or will there some leased apartments? Or condos? Revenue generation for any of those three could be different.
2. How much impact will affordable housing requirements have on the project's profitability and housing prices?
3. Would the developer get the standard credit/dispensation for affordable housing or something greater/less? What if the developer chose to pay a fee to the city not to build affordable housing instead?
4. How much impact will the commercial development have on ballpark debt service?
5. What is the proposed Mello-Roos assessment, if any?
6. Will there be a method of funneling non-property taxes revenues back to the city directly?
There are any number of permutations for revenue generation that make it difficult to assess. I haven't even gone into my "San Jose pays for some of it" theory. Even though I'm not an accountant, I'd prefer to have all the numbers.
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