San Francisco had a deal with the organizers of the America's Cup. The city would pony up a very large pile of dollars up front and then the America's Cup Organizing Committee would go out and raise money to reimburse the city for its $32 million in expenses.
But according to a report by released by City Controller Ben Rosenfield, the committee's fundraising efforts so far have given his office little confidence that that the race's backers will reach their goal unless the pace picks up considerably.
"Given the ACOC's expenses and fundraising payout schedules, significant fundraising beyond those achieved to date will be required to honor the $32 million fundraising goals outlined in the Host Agreement over the coming three years," wrote Rosenfield.
Under the terms of its original 2010 agreement with the city, the ACOC was supposed to raise $12 million by the time the Environmental Impact Report was approved by the Board of Supervisors. The board gave the EIR its seal of approval last month; likewise, the committee announced it had hit its goal with over $12 million pledged over the next three years.
However, not only has the city yet to receive a single dollar, but the vast majority of the committee's money isn't coming from fundraising at all. Instead, $8 million of the projected $9.3 million pledged next year is coming from a revenue sharing agreement with the America's Cup Event Authority--an entity controlled by Oracle billionaire Larry Ellison, which purchased all of the commercial rights to the event from the non-profit ACOC.
As the Huffington Post noted earlier:
Though some see the Committee's decision to tap sponsors as getting creative, others are concerned about whether the Committee is being realistic about its fundraising goals.
The majority of the rest, $1.27 million, will be paid out by 2013 with the remaining $600,000 coming in later that year.
While the event's organizers sold the city on hosting the event with projections of $1.4 billion in increased economic activity and visions of 8,000 new jobs, the city government could still end up in the red on the deal if the committee's fundraising never comes through. As per their agreement with the city, the committee isn't legally required to pay the city anything. Instead, they just have to "endeavor to meet its fundraising target."
The committee only raised $827,000 over the course of last year--less than twice what it spent on operating expenses. Those expenses are expected to rise to $1.36 million this year and $2.12 million in 2013.
"Contracts are to be read in their simple English language," San Francisco Democratic Party chair Aaron Peskin told the San Francisco Chronicle, "which leads everyone to believe that [ACOC President] Mark Buell was on the hook to deliver $12 million to the city last week," Peskin said. "As it stands, they raised $800,000 and spent $400,000 on their salaries."
The Chronicle reports:
The city is obligated to pay for the basic services for the event. But if fundraising falls short or the bill exceeds the projected costs, the city will have to find money elsewhere, according to Michael Martin, the city's point man on the project...Martin said the city could try to make up the difference by using money from the general fund or with hotel and sales taxes, Muni fare increases and other sources of income that would spike when crowds come to town.
Over the past year, the America's Cup has consistently been plagued with reports of lackluster fundraising, initially blaming a lack of tax exempt status for most donors' reticence to give. However, organizations soliciting donations before actually receiving an official non-profit designation from the government is a common practice, as donations can be retroactively be declared tax deductible after the status has been granted.
These disappointing numbers are surprising in light of both the deep pockets and legendary fundraising prowess of the committee members, which include Clinton Foundation director Doug Band, GAP heir Bob Fisher, late private equity kingpin/bluegrass philanthropist Warren Hellman, Intel CEO Paul Otellini, the eponymous chairman of Charles Schwab and the legendary DeDe Wilsey herself.
The ACOC is only one small potion of the event's overall fundraising equation. Its $32 million to pay back the city for the bevvy of required state and federal environmental reports and permitting is just a drop in the bucket when measured against the $270 million Ellison's America's Cup Event Authority hopes to raise to fund infrastructure improvements on the $86 million in rent-free leases the city gave to an organization run by the fifth richest man in the world.
Things aren't just slow on the fundraising side. The number of spectator boats expected on be on the water watching the race was scaled back significantly from around 4,000 to approximately 1,000.
Additionally, only three sailing teams from around the world have so far actually signed up for the event. Last year, Ellison predicted as many as 17. Organizers hope to get at least five more in the months before the deadline this summer.