Alameda County Share Sale Will Damage Oakland Coliseum Bond Credit Rating

On Wednesday of this week, Alameda County Supervisor Nate Miley dropped a bomb during a meeting with the NFL’s Executive Vice President Eric Grubman regarding Coliseum City in announcing the entity’s intent to sell its ownership interest in the Oakland-Alameda County Coliseum. He has also dropped a credit anvil on the Oakland-Alameda County Coliseum Joint Powers Authority’s financial picture.

A Bad Meeting The NFL Witnessed

The City of Oakland obviously lost control of the messaging from that gathering, which should have been very much like that of the City of San Diego the day before, when Mayor Kevin Faulconer stepped out with his public official colleagues and gave a kind of “victory lap” press conference, saying the NFL was presented with a clear choice for the new home for the San Diego Chargers.

And Eric Grubman praised the San Diego meeting, even saying their stadium concept was “exciting”; Oakland and Alameda County didn’t come anywhere close to that mark San Diego set. Instead, we got the legendary Alameda County Supervisor Miley doing no one any favors by issuing a press release that had nothing to do with a stadium plan for the Raiders, and read, in part:

“We believe the sale of our interest to the City of Oakland is in the best interest of everyone – the County taxpayers and the City of Oakland – and it furthers the negotiations to retain the Oakland Raiders NFL franchise,” said Miley, who also serves as vice-chair of the Oakland Alameda County Coliseum Authority, the joint county-city authority overseeing the Oakland Coliseum and Arena.
 
Supervisor Miley said the County has been discussing the sale of the assets to Oakland and reached a consensus that the action would be beneficial.  He said the County and the City each contribute approximately $11 million per year towards debt and obligations and the debt will continue until 2026.
 
“The County and the City are in different positions.  The County loses money each year while the City has more revenue generating opportunities to offset costs and losses associated with property development and sports venues,” Miley said. “The County believed, when it entered this arrangement in 1995, that it would get revenues from operations of the facilities, but they never fully materialized.  Thus, we believe it’s wise to sell our interest to the City, retire our debt, and focus on what we do best—providing our residents with beneficial programs like healthcare and social services.”

Not only does Miley’s press release and proposal have nothing directly to do with the overall progress toward a new stadium for the Raiders and for the Oakland A’s, the simple fact it came out of that meeting was a clear signal the “East Bay Entities” as they’re commonly legally referred to, are not anywhere close to having a clear plan the Silver and Black can take comfort in, let alone the bond rating agencies.

Consider that earlier this year, 2015, Fitch Ratings assigned a AA- rating to the $79.7 million 2015 refunding in lease revenue bonds for the Coliseum Arena, and which were originally floated in 1996 to rebuild what is now called Oracle Arena, where the NBA Champion Golden State Warriors play, as well as the 98.9 million in lease revenue refunding bonds, series 2012. The Fitch Ratings report clearly states that the key ratings factor was Alameda County, and in black and white the report states that the “County rating drives credit quality.”

So, it doesn’t take a brain surgeon to figure out that the County of Alameda pulling out of Coliseum ownership and the Coliseum JPA will damage any future ratings call, almost certainly resulting in an even lower rating. Indeed, Fitch Ratings states that the AA- ratings is “two notches below the county’s ‘AA+’ implied ULTGO rating because Fitch views the risks as somewhat greater than in a typical California abatement lease.” And the reason is because of the long history of operating losses at the stadium, and the “likelihood” of future losses from the Arena, should the Warriors leave Oakland for San Francisco.

Which gets to the other point of the Fitch Ratings Report: the other reason for the AA- rating is the age of the stadium and arena, and the chance that both the Raiders and The Golden State Warriors will leave Oakland and the Coliseum Complex, as well as the disturbing note of “potential lack of property insurance coverage” for the Coliseum, and the fact that the buildings aren’t “essential” – in other words, they’re not utilities.

Thus, if the facilities are severely damaged in an earthquake, because of their old age (this applies more to the stadium than Oracle Arena, reconstructed anew in 1998) Fitch Ratings believes it would be more costly to rebuild them given what Fitch Ratings says is a lack of appropriate earthquake coverage.

In other words, we need new facilities.

(Does anyone now understand why I loudly called for Oakland to sue San Francisco and the Golden State Warriors when they first announced plans for the New Arena at Pier 32 in 2012? I said then that our credit rating would be impacted – no one listened and here we are, now.)

Fitch Report Refers To County Credit, But Not City Of Oakland Credit

The Fitch Ratings Report consistently refers to the County of Alameda’s credit rating and economic strength, but no mention of that of the City of Oakland – that’s telling and should be a clear warning for Supervisor Miley and any other proponent of his proposal. The The Fitch Ratings Report expects “lease rental payments” from both the City and the County, and makes no mention of any provision for the County’s selling off its obligations to the City of Oakland.

The bottom line of this is that while selling off the County Of Alameda’s portion of the Oakland Coliseum to Oakland seems like a good idea from a managerial standpoint (“Back to the good old days,” I told a friend of mine), it’s a terrible idea from a fiscal perspective: the City and County have a Coliseum history such that they’re stronger together rather than apart.

City Of Oakland And County of Alameda Leaders Must Find A Way To Work As One

City Of Oakland and County of Alameda leaders are better off dropping this latest example of navel gazing and open display of their dysfuctional relationship, and fix it by focusing on Coliseum City. Nate Miley has said that the current Coliseum City deal by New City Development LLC is too complicated – it is, and he and the Coliseum JPA would be better served by using my “Coliseum Reboot” proposal because I designed it as an answer to what Floyd Kephart’s group came up with.

I also created it because Oakland Raiders Owner Mark Davis, completely frustrated with being at the San Francisco NFL 2015 Spring Owners Meeting empty-handed in the way of anything from the City of Oakland, asked me to submit a plan. Oakland Mayor Libby Schaaf has repeatedly said that she did not want to spend public money on Coliseum City – I’ve proven that her request is possible to achieve.

Oakland and Alameda County elected and public officials must stop their completely, collectively parochial view of how to come to a Coliseum City plan. All too often, officials are overly concerned with who sits at the table or who’s idea is presented, and the end result isn’t a new stadium plan, but public expressions of dissatisfaction with each other. This bomb drop by Miley isn’t the first time: it happened last year on July 13th – 14th of 2014, and during the negotiations with the Oakland Athletics over their lease.

At that point in time the specter of division between the City and County appeared, and reports of elected officials storming out of meetings, and other soap-opera stories didn’t make the Coliseum JPA or the City of Oakland or Alameda County look anything like professional organizations, yet here they were working with the Oakland Athletics – the very cream of the crop of top examples of well-run sports organizations, and one for which the term “Moneyball” was coined.

Now, one year later, we have the same story: the City and County elected officials acting like kids who can’t agree on who gets the window seat in the car, meeting with Oakland Raiders President Marc Badain and Eric Grubman, a key representative of the National Football League – at the pinnacle of all organization in sports.

The Oakland Super Bowl Bid All Over Again

For me, this is very much like my experience working on the Oakland Super Bowl Bid from 1999 to 2001. The main problem then was that Oakland and Alameda County Officials were too interested in their narrow issues, and not at all interested in my Super Bowl Oakland plan because they didn’t believe I would get far at all, or that we could even come close to winning.

Rather than focus on the completion of the Super Bowl Oakland Plan for the NFL, some were more interested in why I was working at such a fast pace and alone. Moreover, a number of officials in Oakland’s economic development department and also the Oakland Chamber of Commerce at the time, wanted me to wait for them to be ready, rather than meet a particular deadline I was working toward – I’m serious. I reminded them that we had clear deadlines to meet that the NFL set down for us, and I had no help from anyone outside of then Oakland City Manger Robert Bobb and Economic Development Director Bill Claggett; then Oakland Mayor, now California Governor Jerry Brown was more of an impediment than anything else, to be truthful.

I met those time marks in spite of Oakland and Alameda County, and Oakland came just eight NFL Owner votes short of landing the 2005 Super Bowl that Jacksonville won.

Today, while some of the officials are new to Oakland, we have the same pattern of behavior: Oakland’s missed key NFL stadium reporting deadlines, and is on pace to miss another one coming up with the August 11th NFL Owners Meeting in Chicago. Oakland and Alameda County representatives must stop being afraid to win, well, you name it: Super Bowl Bids, World Cup Bids, new stadium competitions. And because it’s that fear of success that drives their behaviors and tracks toward constant missed deadlines, arguments, in-fighting, and failures.

Can’t we all just get along and save our sports teams in Oakland?

Just asking.