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11 December 2008

Lucky? San Jose


What you see above is what San Jose Economic Development honcho Paul Krutko might call a “baseball city.” Therein lies the promise of San Jose’s Diridon South site. It’s at the future nexus of Caltrain, BART, High Speed Rail, Light Rail, and bus service. It’s in a downtown locale. And perhaps most important of all, the ballpark planned for the site already has its EIR certified.

Most of the buildings in the foreground are just an artist’s concept, and that’s the point. The area between HP Pavilion and the ballpark site is a relatively blank slate. BART will tunnel underground, leaving plenty of space to develop. It’s just a matter of what type of development the area will see.


Economy
The irony in the whole Fremont/San Jose saga is that what may eventually kill the Fremont concept could make the San Jose concept work. To quote former President Clinton, “It’s the economy, stupid.”

It’s entirely likely that had the housing market not collapsed, we would be moving forward with the Fremont baseball village plan without a Warm Springs alternative, and without most of the hubbub seen Tuesday night at Fremont City Hall. The financing model would be solid and the only remaining issues would be the ones identified well ahead of time: traffic, satisfaction of the Pacific Commons businesses and environmental mitigation. Compared to the messy situation in Fremont now with the differing opinions and multiple conflicts, it would’ve been a cakewalk.

Dual-use infrastructure

The Diridon/Arena area, on the other hand, is destined to get a major infusion of cash. A major overhaul and expansion of the train station will be necessary to support HSR. Mayor Chuck Reed is already on the hunt for funds to improve the area. President-elect Obama’s rising-by-the-week stimulus package will be largely focused on major infrastructure projects. HSR is going to be near the top of the list because much of it is ready to go. I wouldn’t be surprised if movement of PG&E substation on the site was somehow magically appropriated. It certainly wouldn’t be wrong for the substation to be expanded upon its move to accommodate growing demand from BART and HSR.

Parking is the main infrastructure to be built. Additional parking will be needed to handle Caltrain, BART, and HSR users. It’s not known exactly how many spaces we’re talking about, but it will be more than the roughly 800 spaces there now. The beauty of it is that the parking would automatically be dual-use, for transit users and arena/ballpark patrons.

The problem there is that a lot of parking has to be built. San Jose is required to keep 6,650 spaces within a ½-mile radius of the arena. The ballpark has a 1,200-space garage planned to its south. That will help replace some of the spaces that will be lost to future development. Even more has to be built to handle the demand when both a baseball game and an arena event (only 25% are Sharks games) are occurring simultaneously. The good thing is that any new parking in the area can serve both events and transit at different times. Then again, it’s a double-edged sword. Having more parking available invites more drivers. What is currently a manageable system for the arena could turn into gridlock quickly.

The key, then, is to strike a balance. The secret to the traffic success around the arena is that there really isn’t that much parking immediately around it. Most of the area parking is east of Highway 87 in the downtown proper. That parking will continue to be leveraged and may need to be expanded.

In San Jose, the sights are set lower than in Fremont. The dream of serious retail downtown died with the opening of Santana Row. For the moment, housing is a nonstarter. So that basically leaves the ballpark. Chances are that the financing model hinted at by the Wolffs (private funding, additional naming rights and sponsorships – the Giants’ model) will be the one to use for at least the next five years. As much as Selig doesn’t want any team to go down that path, the times dictate alternate methods. It’s no coincidence that the two of the last three major sports venues built in this state within the last decade were privately financed (Staples Center, AT&T Park).

Territorial rights
The unique way the Bay Area is gerrymandered for the two teams is unlike any other two-team market. In May, I advocated for a simple payment of the A’s annual revenue sharing receipt (~$15 million) to the Giants every year until the ballpark opens. That could be $75-105 million depending on the opening date. Beyond that, the A’s could continue to pay some amount until the AT&T Park debt is paid off. Some will argue that this opens a Pandora’s Box regarding T-rights for other times, especially in NYC. However, that view is not the least bit pragmatic. The biggest barrier to entry now is not T-rights. It’s money. To get a team going in, for example, Northern New Jersey, a team will have to pony up close to $1 billion for an adequate ballpark. Where would they build? Can’t be the Meadowlands. Definitely not Newark. Plus if you haven’t noticed, most of the financial institutions that made loans to area MLB and NFL teams are struggling mightily if not belly up. NYC, for all its considerable population and wealth, is tapped out thanks to four (possibly five) new venues along with an on-the-table revamped Madison Square Garden. Teams also had to undergo huge lobbying efforts to get favorable legislation through. Territorial rights as a tool have become obsolete. That’s not to say that MLB will get rid of T-rights tomorrow. As long as they have an antitrust exemption they’re going to use it. This time however, there’s little milk left in that cow.

Think about it this way. What if T-rights ended tomorrow? What would happen? The A’s could try to get a ballpark deal done in San Francisco. What land could they conceivably build upon? How much would it cost? How would they know they could siphon enough of the Giants’ fanbase away to make it worthwhile? In reality, they couldn’t. It’s bad leveraging of the market. Politically, it’s not doable due to a populace and pols who won’t bend for the 49ers, let alone some new baseball team.

Let’s not forget that T-rights are entirely wrapped up in the Major League Constitution, which bars teams from suing either the league or each other. Any disagreements have to be wrapped up within The Lodge (though Bill Neukom didn’t earn his reputation as being soft).


Political will
Nothing gets built without a champion. Reed may be a fiscally conservative Democrat from Kansas, but he’s got former Mayor Tom McEnery in his ear. McEnery’s Siliicon Valley Sports & Entertainment owns the Sharks and just signed a deal to operate the Earthquakes’ new stadium. McEnery, Sharks president Greg Jamison, and Lew Wolff are good friends from way back. McEnery has long advocated bringing a baseball team to San Jose. If there’s a power behind the throne to get this done, it’s him. Even in City Hall there are able and willing participants. Dave Cortese, the current Vice Mayor, is about to step into a new County Supervisor role. He also is a major proponent of MLB-to-San Jose, HSR, and BART, and may look at all three with the same vision. Krutko plays the role of Robert Bobb in San Jose. From this Merc article, they're both quite excited about the prospects. That's just the tip of the iceberg. There’s no telling how many other high-powered proponents, such as the Silicon Valley Leadership Group, will come out of the woodwork should a real proposal become public.

It’s amazing how the landscape has changed in such a short time. The economic collapse has hit many of us or our friends and family, yet the A’s and San Jose may benefit in an odd way. I didn’t see the Warm Springs alternative coming, and while I understand why it’s out there I could also see the opposition coming from a mile away. I don’t think San Jose would’ve opened up as a possibility if Santa Clara County Measure B had not passed. Proposition 1A had some pull as well, as it opens up the floodgates to federal transportation funds and private investment. It has taken a rather unusual, unforeseen set of circumstances to make San Jose a possibility, and I think we’re on the cusp of that moment.

26 comments:

Anonymous said...

ML,
All of this said, what level of difficulty will they run into trying to change MLB territorial rights the Giants hold over Santa Clara County? I can't imagine that the Giants will roll over and let the A's have a city of 1 million people?

Anonymous said...

SJ is in the Best Interest of Major League Baseball.

Anonymous said...

I am very impressed at your analysis, and dedication.

I have few very basic questions:
Why do A's want to move?
What limits them from moving into Santa Clara county.
Who makes those rules? if it baseball commission then how is government involved?

If you have time.. and inclination this could be basic FAQ for your blog. :-)

FC said...

ML,

Awesome writeup. What an amazing confluence of events. All of which may actually lead to A's baseball in SJ.

Since SJ already has a certified EIR for their site, what would be the next step should the A's decide to focus on SJ? I'm guessing the EIR would have to be amended to reflect a 32K seat ballpark. Would there need to be additional hearings?

Marine Layer said...

All the A's can do is make their case. It's one that can't just address their own fiscal well-being but also MLB in total. If it's pitched as the best (perhaps only) way to remove the A's from the list of small revenue teams, it's got a good shot. If it doesn't fly or if there's major local resistance, I fear the dreaded word "contraction" may be uttered from Selig's lips. I've already written about how crazy the idea is.

The FAQ needs to be updated at some point as it's almost entirely Fremont-based. Should there be official proposals or discussions about San Jose, I'll add information accordingly.

MLB has kept the government at arm's length for decades. They have the most powerful lobby in pro sports.

I don't think the EIR would have to be amended. The EIR anticipates worst-case scenarios, and a smaller ballpark would obviously make a lesser impact.

Oakland Sí said...

While I have always been -- and remain -- an advocate of the A's staying in Oakland, I've also believed that if they were to move San José would make the most sense.

One big question, of course, is how a ballpark in San José would be funded.

gojohn10 said...

ML,

You had me at "Lucky..."

-John

transic said...

Here is one question I think more people should keep in mind: How long until the major sports media, and here I'm referring to ESPN, various sports reporters, the Official MLB Party Organ...eh, I mean MLB Network, FOX, etc., start hyping up the A's possible move to the South Bay? OK, maybe not Espn, as they're still in Northeast mode, but one sign to look out for if there is serious movement is if you see Gammons, et al, start talking about it like it's the best idea since sliced bread. The media is the message, as we've learned in past winter meetings when certain free agents get hyped up to the max, overcoming all sorts of baseball logic. You'd have to think that if there's hype about this project that Selig would have approved it beforehand.

With that said, who would that favor other than the Athletics? It would be sad to see the A's leave Oakland, even though there is a slight chance still that all this would not work out and they'd be forced to extend their lease at the Coliseum. Forty-plus years of tradition is nothing to sneeze at.

Anonymous said...

ML

Who, in your mind, is standing on the iceberg?

Anonymous said...

The Santa Clara Great America site makes the most sense! Road improvements already in place, no land to buy, best access. The last San Jose ball park plan lost by a large number of votes.

Prediction 49ers buy amusement park then the A's wisely chose Santa Clara. The santa clara site is very large with plenty of parking options. I will vote again against any halfbake San Jose plan, but will support a good location for the A's in Santa Clara or Fremont.

Billy
San Jose

Marine Layer said...

A San Jose deal will be constructed in a manner that doesn't require a vote (no public money). The SJ old guard learned their lesson, if it happens they're not taking a chance with a referendum.

I have no idea what "standing on the iceberg means," sorry.

Jesse said...

The Giants get 15 million a year for 5 to 7 years until the ballpark is ready? Seriously, 5 to 7 Years, Does Lew Wolff want to wait that long to build a ballpark, I really doubt it. Frankly neither do I.

The traffic concerns at Pacific Commons are overblown. Its much less than a quarter of the freaking year and a lot the games would be on the weekends. Arrgghhh.

I just hope that the Wolff's and the stake holders in Fremont come to terms in the coming weeks. Because I really don't want wait 7 years.

Tony D. said...

As everyone who reads this site knows, as a SJ native, I've hated the territorial rights since day one. That said, "changing" them won't (or shouldn't) be about "revoking" or "rolling over" the Giants. It's all about compromise and compensation. R.M.'s revenue sharing idea is awesome. Or as I've mentioned in the past, perhaps a long-term TV deal for the A's on CSNBA (thus adding to the Giants long-term coffers); what's going on on the TV side anyway? A one-time pay-off; $50 million was once thrown around, but is that still possible in this economy? Guaranteed franchise value for the Giants ala Orioles/Expos? I also think a possible deal for SJ would make Santa Clara County a shared territory like the other two-team markets, allowing SJ to pursue the A's legally, allowing the Giants to keep SCCo. as part of "their" territory (as it relates to franchise value) and wouldn't set a precedent detrimental to MLB. Great post R.M.! However, I won't get to excited (had the rug pulled out from under me once to many times).

Marine Layer said...

5-7 years is a very loose figure. I wouldn't expect a San Jose ballpark later than a Fremont ballpark process-wise. It could conceivably happen sooner.

Marine Layer said...

I forgot to mention that the revenue sharing payment schedule is always in the winter, right about now in fact. So the way it would work the A's would pay the Giants 2008's payment now, then 2009 next December. Through 2012, that's 5 payments.

Anonymous said...

Great overview ML---agree with all the points--"a perfect storm" that has put San Jose back into the game---Remember that San Jose has always been Wolff's first choice---Fremont only came about as a logical and strategic second choice---Santa Clara offers a good site for football but nothing for baseball where 80 plus home games/year make a downtown location ideal.

On the territorial rights issue--one thing that has always amazed me about SJ business community is that they don't step up and lead an effort to change this--if MLB tried to hold Chicago, NY or Boston to any of these types of restrictions their business community would rally together to change it---SVLG does a great job but not too many leaders outside of this.

If SJ becomes an option I would bet a new stadium will happen would happen in the next 4-5 years--I don't live in San Jose but it would be the tipping peice for the downtown to really take off--

Tony D. said...

anon 8:01,

Nice post. I believe the the SJ/SV business community, along with local politicians, would look for compromise/compensation regarding T-Rights rather than seeking outright "change." "Change" suggests forcibly removing the T-rights or taking hostile actions against the Giants. Again, as much as I've disliked those rights, I now believe cooler heads need to prevail to allow a win win for everybody; Giants, A's, MLB and city of SJ. It's possible.

Anonymous said...

Hey Tony D- agree with you on my choice of words- definetely I am looking for the win-win situation- maybe just a bit jaded by the fact that the only reason that the Giants have these territorial rights is because Walter Haas, a great community citizen, gave them to the Giants back in 1992, free of charge, so that they could purse San Jose in the 1992 failed ballpark initiative. Had the Giants paid for them than I could understand requesting some compensation---

Add to this that the Giants do zero and I mean zero community outreach to San Jose---The A's were in San Jose's Holiday parade and two players stayed after to sign autographs in the park--The A's donated the scoreboard for my kids Little League field--Giants nothing--I don't even live in San Jose and this bothers me---just suprised that the business community doesn't have more passion/pride around San Jose.

Bottom line--afford to the Bay Area the same territorial rights that are afforded to all other 2 team markets and you have a solution---all cities/counties are shared---Giants lose nothing---

BleacherDave said...

Is this when I say I told you so? Some have been counting those Fremont chickens waaaay before they hatched.

Seriously premature incubation on the part of the Fremont crowd.

Neither of these deals are likely to materialize in the near term. The OAKLAND A's - your 2015 World Series Champeens!

bartleby said...

How's this for a settlement: The A's take Barry Zito and the $100 million or so left on his salary off the Giants' hands in exchange for the T-rights.

The Giants lose a giant millstone around their neck that will otherwise hamper their efforts to improve their team and attendance for the next five years. They could use the savings to pursue a free agent like Ramirez or Texeira who will draw fans to the park and may even help their team on the field.

For the A's, the deal is worth it to secure their financial future even if Zito does nothing. But there's also upside if Zito regains some of his old form back in the comfortable surroundings of the Coli.

Anonymous said...

For all the flack Bud takes from the fans, he is the first commissioner in the history of the game who has truly understood the "idea" role of the office. He is interested in the long term financial health of the entire league, not just the individual franchises. He also has a firm grasp on the infighting among the ownership that has done plenty of damage to them collectively.

He won't act without being absolutely sure of his position and his constituency. He would have abolished the Giants rights long ago if doing so wouldn't have started a bloody battle which results in the formations of cliques. This he won't do. He will, however, lead the pack in dismembering one of their own if he can convince everyone that it's in their best interests.

All this to say, look for the relative ease in which the TR claims of the Giants will collapse. The other owners have already been convinced that it is best for the A's and the league for them to be in a market where they are not perpetual welfare recipients from the league. They can be counted on to vote their pocketbooks. The Giants will get their pound of flesh, but it isn't going to be nearly what we think it is.

Transic said...

In the cases of New York and L.A., since those two metropolises are gigantic then it makes sense that more than one team share those respective territories. The Bay Area is stretching it at best.

Even if the territorial rights are re-opened it may not mean all that much. Remember when almost everyone thought that Fremont would solve the location issue for the stadium?

I still think the Fremont deal is still doable but there is going to be a lot of give and take before it is over.

Anonymous said...

What? A smaller metro makes it even more important that both teams share it completely rather than carve it up. You can get away with that in the very largest metros, as there are plenty of fans in each "half" (tongue in cheek as we know the A's don't have anything close to half). The not-so-gigantic metros need to be shared equally, so both teams have equal chance to attract the maximum number of fans.

Transic said...

The Bay Area has many options with respect to sports and entertainment. So do NY and L.A.. The difference is both are much larger in terms of population, therefore, better able to absorb the competition.

When the A's win, they do decently at the gate. But otherwise both the A's and Jints have struggled at the gate in the thirty years since the A's moved in. Only in the 2000's has the situation more or less improved. Theoretically, the A's could stay at the Coliseum and still do decently. The problem is that the standards for being a stable franchise have dramatically risen to the point that the A's are now considered a small-time club, even with their history of past successes. It's not fair to A's fans who have stuck through but sometimes you don't get the breaks.

With the changes in demographics and economics, we will see how the organization handles their effects.

Michael said...

Im am a San Jose native and I would love to see my favorite baseball team who are the A's move to the Largest city in the bay area. San Jose has over 1 million people and can definetly have another sports team. I believe that San Jose is ready to take the next big step. The Giants better get ready because San Jose will go down with a fight.

Anonymous said...

Keep the A's out of San Jose! It's already very difficult to drive and park around here when the hockey arena is in use, and the downtown has been growing quite rapidly, to the point that parking is becoming problematic.

If anyone thinks this ballpark can be built with the costs falling entirely on private individuals, they clearly haven't paid attention to recent examples of cost overruns, or the kind of demands that team owners consistently keep demanding of local communities.

Bribe the A's to come to San Jose, and the city will find itself in the uncomfortable position of having to bribe them every few years to stay here.