Billionaires’ sailboat race may leave San Francisco in debt
On a rare, hot summer Saturday on the San Francisco Bay, a race between a pair of 10 million dollar sailboats has just begun: Team Italy against Team New Zealand. Spectators at a viewing area on San Francisco’s Embarcadero lounge on bean bag chairs. Piers 27-29 have been converted into a giant pavilion, with big screen TVs, picnic tables, a concert space, and Nespresso machines at every corner.
New Zealand rounds the final mark near the Bay Bridge. Spectators run to the edge of the pier to watch the 130-foot tall carbon fibre boat cross the finish line minutes before its competitor, Luna Rossa, owned by Prada billionaire Patrizio Bertelli.
The international sailing competitions here this summer have luxury plastered all over them. For months Oracle, Louis Vuitton, and Emirates have been competing for ad space all over the San Francisco waterfront. Throwing an event like this costs big bucks, too. The most recent estimates show San Francisco will spend 22 million dollars on building costs, port improvements, and extra police. City officials say it’s worth it.
“There’s all these incalculable things,” says Jane Sullivan, who works with the City’s Office of Economic and Workforce Development. “San Francisco is being beamed across the globe, you know, as the host of an international sporting event with these boats and our beautiful Bay highlighting San Francisco.”
Sullivan says that back in 2010, the city estimated the event would produce $1.4 billion in spending. That was when they expected 15 countries to take part. It ended up being four.
She says, “We re-did those projections in April of this year to account for basically fewer teams, which made the most significant difference, and that number came down to about $900 million.”
Ben Rosenfield, San Francisco’s Controller, who also serves as the America’s Cup organizing committee’s auditor, says to figure out where that $900 million is coming from, we need to think of people like Jill and Bob Randall. They’re visiting from Galveston, Texas to see their daughter and the America’s Cup.
Rosenfield says he starts counting the money the Randalls spend as soon as they fly into town.
“Flying into SFO, which is a city function,” he says, “just by virtue of landing the airport receives fees.”
Then they might spend a few nights in a hotel.
“On average they are spending $200 a night for a hotel room,” he says, “and the city has approximately a 14 percent hotel tax. So for every night they stay in San Francisco, they are generating $30 in tax revenues from hotel tax.”
And there’s more.
“While they are here they are shopping at San Francisco businesses,” he adds. “They are buying things and generating sales tax. A portion of that sales tax comes back to the city to support city services. They might have rented a car; they're parking when they go to the event. They are paying parking tax on that. And then, lastly, they are watching the event, which has a number of employees that have been brought in to build things, build boats, or to build venues, and that is generating payroll tax for the city.”
By virtue of the America’s Cup coming to town, the city expected to get anywhere from $13 to $19 million in tax revenues. But that was based on drawing 2 million fans to the sailboat races. By the end of August, only about a quarter of that number had shown up.
City budget analysts say all hotels in San Francisco were booked full for August and September. Rosenfield says that could just be a sign of a strong tourist season. And there are guys like Barry Christensen, a longtime America’s Cup fan from Seattle, who got here on his friend’s boat.
“We’re moored out here at Pier 39,” he says, “hanging on the boat and taking a layover week and having a great time enjoying the racing.”
There are just about two weeks of races left. The city is hoping more visitors will help them break even. A non-profit formed to cover costs has come up about 5 million dollars short, so far, and Rosenfield says he doubts they’re going to make it up.
“I don't think anyone’s expectations at this point is full reimbursement,” he says, “but I'm certainly hoping that that gap is as little as possible.”
It all means that when two of the most expensive sailboats in the world face off for the America’s Cup this weekend, the city of San Francisco will still be far behind.