Floyd Kephart’s Oakland Coliseum City Financing Proposal: No There, There

At the NFL Special Owners Meeting at the Hyatt Regency Schaumberg, Ill, of two weeks ago, I had a good, long, 46 minute talk with ESPN’s John Clayton. It was 80 percent me talking and John listening and asking questions, which I appreciated because there was no one in the hotel, let alone the damn midwest that knew more about my favorite topic of late, Oakland and the effort to retain its sports teams, than me. I also liked it, because he was the only white media guy to actually care enough to talk to me other than Tony Bruno.

(I know folks do not like the racial references, but too bad. Many black folks express this point of view to me, so I’m sharing the pain. When there are more John Claytons, I’ll stop.)

Later, and after yet another disasterous no-show performance by Oakland and Alameda County, Clayton said of Oakland, “Well, there’s no there, there.”

In the case of the financial plan part of the proposal that Floyd presented to a small group in Oakland (I stayed in Georgia as I knew ahead of time many city and county officials planned to skip the meeting and were miffed that Floyd held the event), it was a complete disaster to anyone who understands stadium finance – and those types were not in attendance.

Who was there ate what Floyd gave them hook line and sinker. Kephart must be having a lot of fun thinking these folks are fools, based on what he told them. It’s either that, or Floyd doesn’t really know stadium finance, but just will not admit it – which would also explain the total garbage that came out of a restaurant known for good food.

First, regarding the $900 million to $1.1 billion stadium, Kephart told them that he planned to have the City of Oakland float a “conduit bond” of about $300 million, then reportedly said the bond would be paid for by “various stadium revenue” and said “naming rights, non-game day revenue and ticket or parking assessments” – which means he didn’t have it all spelled out one bit, and was guessing.

Where’s the detailed spreadsheet?

Moreover, anyone knows that you don’t even try to float a fucking “conduit” bond for a damn NFL stadium project: those types of bonds are used for non-profit housing projects.

Hello!

Floyd’s lucky I wasn’t in the room to call him out on this. Nothing personal – this is business, and from that perspective, this is terrible. But wait, it gets better, folks.

A common naming rights deal alone for a stadium like the one the Raiders want can fetch $200 million to $300 million, alone. Moreover, Floyd set the bond period for 20 years, rather than for 30 years or 40 years. Where he got the idea that was OK to do, I don’t know. Colorado State University, to give one of many examples, issued bonds for its new football stadium that were over a 40-year period. The reason for that is simple: the common useful life for a stadium is assumed to be 30 to 40 years – forget that some stadiums seem to get replaced over a shorter time frame, from a financing perspective, that’s the standard range. Thus, the bond issue follows the useful life of the stadium.

Floyd’s lucky I wasn’t in the room to call him out on this. But wait, it gets better, folks.

Basically, Floyd just screwed himself out of about at least $200 million of that $400 million gap he claims exists just with that screwy, short, bond issue period he points to of 20 years. But then, he also robbed himself of an additional $50 million, because early documents had him using NFL G4 Loan money at $200 million.

Folks, the NFL G4 Loan Program was extended to $250 million about two months ago – Floyd never adjusted for that fact. Then, he never explained how ticket revenues would be used to pay back the NFL – that’s the idea. But then he says that the $300 million conduit loan (HAHHAHA) will be paid, in part, with ticket revenues.

Okay. Right.

An earlier document had Floyd using $200 million in personal seat license revenues, but then he never explained how much the seats would cost on the average or how many of them there were. Plus, how many luxury boxes are we talking about?

Did anyone of the folks ask, or did they just laugh at Floyd’s quips? Anyone? Anyone?

Buehler?

And in then what about that “tax district” Floyd talked about. Well, here’s some info for you, as I wrote to a friend of mine:

Floyd mentioned the use of a tax district as part of his financing plan.

That will automatically trigger a public vote, and lest you say it will not, I must inform you I also have covered San Diego Comic Con for the last six years. One of the major stories has been around the need for the expansion of the San Jose Convention Center.

To that end, the City of San Diego and the local hotel industry came up with a cool financing plan that involved the use of what we call “Mello-Roos” financing. This is where the property owners in a California City and in an area elect to tax themselves to pay for improvements. Well, reads good on paper, but it was challenged by a local businessman in court, and guess what?

He won last fall.

Personally, I still am in disbelief, but as David Glanzer of Comic Con told me, they’ve given up on an appeal of the judge’s decision. This has opened the door for major change in the use of Mello-Roos Financing. Here’s an article on what I’m writing about: Comic Con San Diego Convention Financing

While Floyd will say it’s not a tax increase, the application of a new tax in the way of a tax district will be considered exactly that, and that is because of this recent legal precedent.

Geez…

Oh, and then Kephart says the debt service is $21 million a year, according to reports. And then he says there’s a $400 million gap, right?

But here’s a question: what’s $21 million times 40 years?

Answer: $840 million.

DOES FLOYD OR ANYONE IN THAT ROOM AT JACK LONDON SQUARE KNOW NOW TO USE A DAMN CALCULATOR?

Seriously. I’m asking.

If his debt service numbers are sound, he can extend the damn bond issue period to 40 years.

Now, I am thinking maybe his debt service numbers aren’t sound at all. This is all shaky.

Floyd should have made sure I was there to help him out.

I could go on, but I’ve said enough. Floyd Kephart and New City Development LLC just didn’t do the work on this. Floyd mentioned he was involved in other projects around the World, and his efforts of late have shown that.

I have to say I’m not surprised, nor am I disappointed.

My plan’s better.

Next man up.