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For America's Cup, San Francisco Return No Sure Thing

Oracle Team USA crosses the finish line during the 18th race of the America's Cup sailing event against Emirates Team New Zealand, Sept. 24, 2013, in San Francisco.
Oracle Team USA crosses the finish line during the 18th race of the America's Cup sailing event against Emirates Team New Zealand, Sept. 24, 2013, in San Francisco.
After a spectacular America's Cup regatta capped by home-team Oracle's thrilling comeback victory, there should be little question about the event returning to San Francisco.
Yet the Cup has many critics in this famously liberal city, and they had plenty to say as controversies dogged the event in the long run-up to the exciting final series. It's far from certain that Oracle boss Larry Ellison — who, as the Cup holder, has the right to choose the venue — will be able to reach an agreement with the city for the next Cup, which is likely to take place four years from now.
Some local officials and political activists have objected from the beginning to city support for what critics deride as a rich man's yacht race. While most of the direct costs were born by the America's Cup Event Authority or recouped as part of complicated deals on infrastructure improvements, the city agreed to spend $20 million on policing, facilities and other services. City officials planned to raise the money from private donors but have so far come up about $4 million short.
"We would love to come back to San Francisco," Ellison said at a news conference Wednesday. "San Francisco's a great place. This has been a spectacular regatta. But we're going to sit down and talk with the officials in San Francisco and see if it's going to be possible to come back."
For the city, the economic benefits in the form of increased tourism, temporary jobs and the payoff from the images of San Francisco that formed a perfect backdrop for TV coverage are hard to calculate and have not yet been tallied.
Still, the Cup was not the boon to local businesses that officials had predicted. With only three challenger teams rather than the 12 to 15 once anticipated, the summer-long preliminary matches were interesting mainly for the wrong reasons — including a fatal accident and a cheating scandal — and crowds were far smaller than expected. Until the dramatic finale, local merchants complained that they hadn't seen much additional business.
Even after the finals began on Sept. 7, San Francisco Supervisor John Avalos quipped that there were "more California seals than people" taking in the action along the waterfront.
"San Francisco Mayor Ed Lee and California Lieutenant Governor Gavin Newsom, who was instrumental in negotiating the Cup deal when he was mayor, rejected the idea that the event had not been worth it for the city.
Newsom said the Cup's economic benefits would come in "well north" of the $480 million in economic activity generated by the most recent Super Bowl. He said it would be substantially more the next time around.
"All that heartache, all the lessons learned, all that's banked now," Newsom told Reuters. "We're uniquely positioned to take it to a whole 'nother level. Then the economic benefits are extraordinary."
If organizers change the boat design rules to lower entry costs and attract more challengers, as they have pledged to do, all agree that the economic benefits for the host city would be greater.
'Very, very complex'
Yet plenty of political and practical challenges remain. A new cruise ship terminal built by the city was the primary onshore venue for the event, housing a media center for some 550 journalists along with shops, restaurants, a concert arena and docking areas for officials’ boats and visiting mega-yachts.
Whether the city could make other arrangements for cruise ships so Ellison could use the terminal during a subsequent regatta is expected to be subject to negotiations. Another pair of piers that housed two of the challenger teams are set to become the home of a new arena for the NBA's Golden State Warriors basketball team — a franchise that Ellison, ironically, tried and failed to buy three years ago.
Newsom said finding locations wouldn't be a problem. “This is a huge waterfront," he said. "There'll be plenty of options if they choose to stay."
Ellison alluded Wednesday to lessons he had learned from the often-contentious 2010 negotiations with the city, which ended with one major part of an initial agreement — a deal in which Ellison would have renovated crumbling piers in exchange for development rights — being scrapped. Many local political leaders feared the city was giving too much away. Ellison said he and the city had unrealistic expectations when they signed "very, very complex development deals," with neither anticipating how difficult it would be to obtain federal and state development permits along the waterfront, or how costly it would be to repair city piers.
"There are so many different government agencies having to approve the development of the piers, and getting all of that done in a very short period of time was probably an overly ambitious ask on our part and very difficult for the government of San Francisco to actually deliver," he said.
Ellison insisted that he did not take the criticism directed his way by Cup opponents personally. Yet the city has long had a love-hate relationship with its billionaires, and local crowds appeared to be cheering for New Zealand until Oracle mounted its epic comeback from an 8-1 deficit to keep the trophy.
"My hope is that Larry Ellison will give the good people of San Diego the opportunity to subsidize his race the next time," quipped Aaron Peskin, a former supervisor and an influential Democratic power broker — though he conceded that he enjoyed the races.
Ellison certainly has plenty of choices. He joked at the press conference about racing around Lanai, the Hawaiian island that he purchased almost in its entirety last year. San Diego has hosted the Cup in the past, and for decades the races were run in Newport, Rhode Island, which unsuccessfully offered Ellison a sweet deal for this year's Cup.

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