Oakland Must Sue Golden State Warriors After Salesforce Arena Deal

Oakland Must Sue Golden State Warriors After Salesforce Arena Deal

The Golden State Warriors are in the NBA Playoffs, and have a tough battle against the Los Angeles Clippers, but they’re about to be in an even harder fight against the City of Oakland, and as of now, San Francisco Mayor Ed Lee doesn’t have the stomach to help them.

In making the deal to acquire SaleForce.com land in the Warriors quest to leave Oakland (and for reasons that some in Oakland believe to be racist) owners Joe Lacob and Peter Guber have pissed off Oakland Mayor Jean Quan, and blindsided San Francisco Mayor Ed Lee. According to folks I’ve talked to, Mayor Lee not only didn’t see this coming, but is wondering what all the work done by his staff to get the Pier 30-32 site (shown here) going was for?

It’s not so much that the Warriors got a new piece of land in San Francisco, which would seem to be something for Mayor Lee to celebrate, it’s how they did it: without involving Mayor Lee’s office, and certainly under the collective nose of the Office Of Oakland Mayor Jean Quan, which was, on Tuesday, in a state of shock almost equal to that after they learned Fred Blackwell was jumping ship to be CEO of the San Francisco Foundation, and just one month into the job.

The Golden State Warriors might think they’re making the right moves, but they’re flirting closer to a massive lawsuit from the City of Oakland, and very much so compared to their silly ‘fake ground breaking’ party of 2012.

Remember that shindig held on the grounds of Pier 32 referred to above? It was the same from which this video-blog account sprang:

And, if you’ve watched it by now, you know that Joe Lacob was first faced with the possibility that his organization would be sued by the City of Oakland. That didn’t seem to matter much to him, at least not as much as noting that Oakland had leadership problems, giving a not-too-veiled swipe at Mayor Quan. (And it must be noted that public management is a factor in the determination of a city’s credit rating – read this report.)

But Mayor Quan is the least of Lacob and Gruber’s problems; what they now face is a growing perception that they’re completely racist. One perception coming out of City Hall is that Lacob and Gruber are completely turning their backs on Oakland’s minority population, prefering to bask in the imagined glow of San Francisco’s majority white demographic makeup. The other view is based on a very real encounter that one person had, and that person said Lacob and Gruber never wanted to be in Oakland, and were trying to escape from the moment they bought the team.

The trouble with their plan is that they would owe the City of Oakland and the County of Alameda just south of $100 million in money that came from a 1998 bond issue floated to build a newly-renovated Oakland Coliseum Arena. Those bonds are still subject to market whim, and one well-placed bad item of information could cause the task of selling them to be that much harder.

So what if the Golden State Warriors do build a new stadium and skip town for San Francisco, stiffing the Coliseum Authority, and by extension the City of Oakland in the process – thus robbing the Oakland-Alameda County Coliseum Authority of the ability to sell suite-licenses and charge user fees to pay off the bond debt? That’s the spectre that stares the Authority in the face at this moment. And it’s even worse than that: it sends a signal that could ultimately wreck the credit rating of the City of Oakland and the County of Alameda, and most certainly would, from a ‘credit image’ standpoint.

The bottom line is the Warriors moves threaten the entire bond debt payment structure, and with the Oakland A’s overtures to San Jose, overall will hamper Oakland’s ability to sell investment banks that it can pay off a sports-related bond it may decide to float in the future.

That’s the reason the original master lease agreement between the Oakland Raiders and the Coliseum Authority included a clause that the Raiders would not make negative public statements about the deal. I know because in 1996 I was Economic Adviser To Oakland Mayor Elihu Harris, and the assigned expert on the Raiders Deal at the behest of then-Assistant City Manager Ezra Rapport. To digress, it was Ezra who insisted that I know the Raiders deal “backward and forwards” because others in Oakland, including the City Council, did not.

The Raiders did violate that part of the agreement in October of 1997, and we came very close to hauling them into court – and that was upon my urging.

Oakland Must Fight

The answer to this problem isn’t for the Mayor or Oakland City Council member to say “I’m not going to spend public money” – in fact, any comment of that kind by any Oakland official will immediately demonstrate that that person doesn’t understand the different types of public financing the city has orchestrated or is capable of doing. To put it simply, all the city has to do is be in the position of issuing a bond. Even if it’s an industrial revenue bond, the bond holders are going to want to know they’re not going to be left holding the debt bag.

The Golden State Warriors moves are a threat to the City of Oakland’s current and future credit position.

A lawsuit must be filed to stop them.

The Warriors must be forced to remain in Oakland until, at least, the bond debt is paid off, and not a moment sooner than that. If the Warriors truly intend to pay off what’s remaining, and that’s about $80 million, now, then it should provide an up front payment to the Coliseum Authority now, today, and not ‘on the come.’

The Mayor of Oakland, and her staff, must get over their collective disbelief in what’s happened, and act.

Joe Lacob and Peter Guber have demonstrated a willingness to use the Hollywood-style business tactic of working what seems to be a deal with the City of Oakland, all the while working on another deal, the Salesforce land purchase behind its back.

Mayor Quan has been too nice. It’s time to get mad and punch them right where they’ll feel it: in the legal nose. The Mayor hasn’t said this, and you may not hear them say this publicly, but I can tell you there’s a lot of anger among the staffers who represent Mayor Quan, and they’ll feel blindsided and humiliated, and that’s a fact.

If I were Mayor of Oakland, I’d sue ASAP. And on that, so far, I don’t see a single candidate showing any real ‘leadership’ and calling for such an action.

Shameful. Someone has to fight for Oakland.

Stay tuned.