When Oracle billionaire Larry Ellison was selling San Francisco on the benefits of hosting the 2013 America’s Cup, the city was assured that the internationally renowned yacht race would bring in over a billion dollars in revenue into the Bay Area at little to no cost to city government. For San Francisco taxpayers, a group notorious weary of ponying up public funds for private sporting events (the beloved San Francisco Giants couldn’t even get the city to shell out for their fancy, new stadium), it seemed like a dream situation–the opportunity to watch the world’s greatest yacht race in person without needing to travel and having the same cadre of millionaires who pushed for the race in the first place pick up the tab. What could go wrong?
There was just the tiny, little issue of the $12 million in fees the city is supposed to pay this year for environmental planning and state/federal permitting. While the city is on the hook for these fees, the America’s Cup Organizing Committee agreed to fully reimburse all the costs. The problem is that the committee is, reports the Ex, significantly behind in its fundraising and, if things don’t pick up soon, the city will be footing the bill out of its general fund–money that’s supposed to pay for everything from police to road construction.
While the committee has thus far raised a mere $2 million, organizers claim that they’ll be able to gather the rest with ease after the organization is granted tax-exempt status, which Executive Director Kyri McClellan expects to receive in August. Without tax exempt status, argues McClellan, many of the race’s wealthy supporters were uncomfortable making big donations without getting the requisite tax write-off. “I have every confidence we will meet our obligations in the host-city agreement,” she told the Ex.
Depending an organization’s complexity, gaining tax exempt status can take between 3 months to just over a year.
If the tax exempt statues is granted, then the effective day relates back to the date of the formation of the organization–meaning that donations made before the tax exempt status was officially granted would retroactively become tax exempt after the fact.
Why the America’s Cup Organizing Committee hasn’t been exploiting this is unclear. Either backers didn’t feel confident about the eventual granting of tax exempt status or organizers simply felt confident they could raise $12 million at the drop of a hat.
If the committee doesn’t meet its fundraising obligations to the city on time, San Francisco is technically able to pull out of the deal, however the possibility of that actually happening is extremely unlikely.
“If they don’t pay and the city lets them get away with it,” the race’s most high profile critic former Supervisor Chris Daly tells the Appeal, “then they’re just being little bitches.”
Requests for comment from the race’s organizers were not returned at publication time.
That said, it’s not out of the question that the committee could raise the needed funds almost instantly–it’s a veritable Who’s Who of San Francisco high society. The committee is comprised, among others, of William J. Clinton Foundation Director Doug Band, Gap heir Bob Fisher, banjo-picking private equity billionaire Warren Hellman and real estate magnate Mark Buell.
The effort even has Dede Wilsey behind it. Her Wilseyness is the type of legendary fundraiser capable of generating $10 million while taking a nap. Ellison, the effort’s main figurehead, is the sixth richest man in the world.
Having so many deep-pocketed individuals on their team is going to be crucial because the overall cost of the race to the city has been budgeted at $32 million, all of which the committee has pledged to cover. Outside of what it owes to the city, committee is planning on raising a grand total of $270 million to cover all of the necessary infrastructure improvements. That’s in addition to $86 million in rent-free leases the city has granted Ellison for properties along the waterfront.
As originally pitched to the city, the bill for the race was significantly higher. A report prepared by the Budget Analysis Office, at Daly’s bequest, found estimated the cost at $128 million with a mere $22 million coming back to city coffers as increased tax revenue.
As a consequence of the report, the city’s initial plan to create a massive complex in Mission Bay was significantly scaled back and moved to the northwest quadrant of the city–saving San Francisco millions in the process.
Ellison’s sailing team, BMW Oracle Racing, won the last America’s Cup held in Valencia, Spain in 2010. Next time, he’ll have home court advantage.