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SMG SELECTED TO RUN OAKLAND COLISEUM WITHOUT COMPETITIVE BID PROCESS

The article below -- written in 1998 -- serves as a reminder that SMG was hired to be the manager of the Coliseum without a competitive bid process. This fact escaped the Chronicle article, but it remains true that it should have been done such that other stadium management companies -- and other option -- were explored. They were not.

Coliseum Moves To Hire Private Management
Officials hope to cut huge cost to taxpayers
Rick DelVecchio, Chronicle Staff Writer
Thursday, May 28, 1998

(05-28) 04:00 PDT OAKLAND -- In the first of a series of moves intended to cut taxpayer subsidies for the Oakland Coliseum, officials are ready to hire a private firm to pack more events into the complex -- from big-name concerts to business conferences.

Under a proposal scheduled for a vote today, management of the 62,500-seat stadium where the Raiders and A's play and the 19,200-seat arena that is home to the Golden State Warriors would be signed over to a partnership led by Philadelphia-based SMG. The publicly owned complex has been locally run since it opened in 1966.

SMG, an acronym for Spectacor Management Group, and its Oakland partner, Williams Pacific Ventures, would operate the stadium for two years and the arena for up to two years. The purpose of hiring the outside firm would be to reduce the operating deficits for the two facilities, now subsidized by city and Alameda County taxpayers.

Cutting operating costs is a small but crucial step toward getting control of the rolling financial debacle that has plagued the Coliseum since the fan-financed business plan at the heart of the Raiders deal broke down two years ago. Officials hope to reduce the annual subsidy split by the city and county, which could reach $16 million this year, to less than $10 million, although nothing is certain.

"It was an unfortunate transaction in terms of the expectations set up publicly," said Alameda County Supervisor Mary King, who heads the Coliseum authority, which will vote on the management contract today. "It is a mess."

As a result of the failure of the "personal seat license" program, which fell far short of sellout projections, and stadium improvement costs that were not fully accounted for, the city and county are stuck with having to make up for every dollar of debt and operating costs that is not being generated by stadium operations.

"No one says this gets us out of the debt, because it certainly doesn't," King said of the SMG deal. "But they're going to fully utilize the assets in ways we hadn't imagined possible -- trade shows, concerts and exhibits, conferences, using every bit of that public facility."

She said the Coliseum has the potential to become the busiest sports and entertainment complex west of New Jersey.

SMG would be given the challenge of ridding the combined operating loss of the stadium and the arena. It would be paid as much as $500,000 a year to achieve these savings. How much the Coliseum would gain has not been determined, because county Auditor Pat O'Connell has not yet reported the profit and loss statements for the two facilities.

The move to turn over management to a contractor comes at a time when Coliseum officials are embroiled in a legal battle with the Raiders, their prime tenant. They sued the team last year in hopes of restoring a cooperative relationship with Raiders boss Al Davis and thus cementing the Coliseum's main pillar of long-term financial stability.

Officials maintain that the step was prudent and necessary and will result in a comprehensive solution. King said settlement talks have been scheduled for the first time since the suit was filed last fall.

But others see the action and the political environment that produced it as part of the problem.

Raiders attorney Joseph M. Alioto said the suit demonized the team and hurt its relationship with the public agencies.

"It's our view that they have been involved in a number of missteps that have hurt us," he said, adding that fragmented decision- making on the public end has been a source of frustration.

"You never know who you're supposed to be dealing with," he said. "One of them would make a statement and the other would say, `I've never heard of that.' It's like negotiating with a bunch of ghosts."

With Oakland City Manager Robert Bobb sending signals that he wants a cooperative solution and Jerry Brown the front-runner in the mayor's race, the city is likely to become more assertive in its role in Coliseum matters. An added incentive is that Coliseum subsidies hit Oakland taxpayers disproportionately.

Bobb "knows because he's a professional manager," said Assemblyman Don Perata, D-Alameda, who was intimately involved in various efforts to bring the Raiders back to Oakland, "and I know because I've been around Al Davis and the organization enough -- you can't do anything until you put this suit away. But it's rudderless right now."

King defends the move by elected city and county leaders to take over more control of the Coliseum in late 1996. Previously, a nonprofit board of business leaders ran the complex.

If the Raiders suit affirms the team's lease and produces a new deal to share football revenues, and if the Coliseum arena pays for itself, the complex could wind up being a luxury that the public feels is worth the cost.

"If you look at the total cost of the complex, let's say the city ends up picking up $3 million to $4 million a year," City Councilman John Russo said. "That's not such a bad deal, given the number of jobs, tax revenues and intangible benefits. If you can get the number down to $5 million or less a year, the number probably washes financially."

COLISEUM AT A CROSSROADS

Oakland-Alameda County Coliseum officials confront critical issues in the management of the complex and in their relationships with the three pro sports teams that play there.

MANAGEMENT -- Today, the Coliseum joint powers authority considers a proposal to sign up a national management company to run the stadium for two years and the arena for one or two years. The deal with Oakland Coliseum Joint Venture, a partnership of Philadelphia-based SMG, and Oakland-based Williams Pacific Ventures, is designed to trim taxpayer-subsidized operating costs and generate new revenues through national stadium and arena bookings and more entrepreneurial use of both facilities.

RAIDERS -- Coliseum officials must stabilize their adversarial relationship with the NFL team. That is crucial to manage the debt that taxpayers guaranteed to renovate the stadium and arena to bring the team back to Oakland and keep the Golden State Warriors and the A's in Oakland. A lawsuit intended to accomplish this is working its way through the courts. If the deal is to work someday, the public agencies and team would go in together on a new revenue-sharing program that would replace the original one that went bust. And, ideally for the public trust, the Raiders would agree to stay in Oakland for as long it takes to pay the stadium bonds -- that is, until 2025.

A's -- The team can move, provided it follows steps laid out in its 1995 Coliseum lease. The first step: a notice of intent, filed no later than July 1, to break out of the lease after the current baseball season. Although the team is expected to file the notice in order to keep its business options open, financial and legal complications as well as the lack of another home to go to make it unlikely that Oakland would lose the A's before next year. However, the A's could continue on a year-to-year basis through the expiration of the team's lease in 2004. The big question mark: can the Bay Area support two baseball teams?

WARRIORS -- The Warriors deal is what Coliseum officials hope the Raiders deal will look like someday. According to an agreement in principle, the 30-year arena bonds would be matched by a 30-year lease with the NBA team. The team would agree to pay $7.4 million a year, which is short of the annual debt payment of $11 million for the arena renovation. Revenues from arena operations would cover the balance of the public debt cost, according to the latest plan. Starting in July 1999, the arena would be run by a management company formed by Warriors owner Chris Cohan.
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