With A’s, it ain’t over till it’s over: Stadium drama keeps San Jose plans on ice

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Stand at the corner of Park Avenue and South Montgomery Street, three blocks from San Jose’s biggest arena, SAP Center. Then face north.

A concrete foundation is all that remains of the old KNTV studio, which burned in April after a homeless man reportedly set fire to it, killing two dogs.

The building was part of five acres the city of San Jose bought to assemble a proposed Oakland Athletics stadium site, paying about $25 million.

It’s hard to imagine this could one day be the centerpiece of a bustling, mixed-use neighborhood, with a 32,000-seat ballpark pumping hundreds of millions of dollars into the surrounding area currently dominated by auto-body shops. That has been the dream of San Jose officials — and A’s co-owner Lew Wolff — for nearly five years.

But today, those chances have never been more uncertain. Forty-two miles up I-880, Oakland and the A’s are haggling over a 10-year lease agreement at the East Bay city’s O.co Coliseum. Meanwhile, a federal appeals court next month will hear San Jose’s challenge to Major League Baseball’s antitrust exemption, which has so far blocked the A’s move south.

The stakes for San Jose — the largest U.S. city without an MLB, NFL or NBA team — are not just about municipal prestige. City officials have positioned the proposed stadium as a game-changer for not only the slowly reviving downtown, but also the 250-acre area around Diridon Station, where Bay Area Rapid Transit is planned to arrive by 2025.

But the formidable hurdles raise questions worth pondering now. If Oakland locks in the A’s long-term, can the downtown surge without a baseball turbocharge? And how long should city officials hold on to prime downtown land currently being reserved for a ballpark that may never happen?

Still in play

City officials bristle at writing the obituary for the San Jose A’s just yet. “I’m still optimistic,” Mayor Chuck Reed said. “We’re looking forward to having our date in court.” He added that exit clauses in any A’s lease agreement with Oakland would keep San Jose in play.

And Wolff — who has built numerous projects downtown and still holds an ownership interest in the Fairmont Hotel — says he isn’t giving up on San Jose.

“We’re looking at Oakland, in the Coliseum area, and hopefully we’ll also look at San Jose,” he said last week. “I’m going to make a sincere effort on both if they’re available.”

On Wednesday, following a rancorous debate, the Oakland City Council approved a lease agreement that included amendments the A’s did not want. Wolff said the next day the teamwas willing to look at the deal, despite earlier statements that the A’s were done negotiating.

Some experts agree that San Jose is still in the mix. Silicon Valley companies and well-heeled residents are too attractive, said Wayne McDonnell, chair of the sports management program at New York University.

“This is a long game, and you have to play it slow,” he said. “The time when you know it’s over is when a team locks into a 25-year lease agreement.”

And the daily drama coming out of Oakland may give San Jose officials heart: On July 9, the San Francisco Chronicle reported that Oakland city officials were in talks with the Raiders to tear down O.co Coliseum next year even as they were negotiating the 10-year lease extension for the A’s.

“Oakland has had a long history of having situations that appear clear, become cloudy,” said Mark Nagel, professor of sport and entertainment management at the University of South Carolina in Columbia. “In the last week, we’ve seen a prime example of this, where the whole thing seems much more chaotic.”

Field of dreams

Opened in 1966, O.co Coliseum, which hosts both the A’s and the Raiders, is the fifth-oldest MLB ballpark, and its attendance lags. A sewage backup last year in the clubhouse made headlines, showcasing the facility’s shortcomings.

The A’s for the last decade or so have been trying to find a new home. In 2009, the team and San Jose announced the ballpark plan after a deal in Fremont fell through. It calls for a $500 million, privately funded ballpark — dubbed Cisco Field — on about 13 acres adjacent to Diridon Station, which lies about five long blocks from downtown’s office towers. The city owns about half of the land necessary, with the other half owned by AT&T and the Havens family.

“It is the best opportunity for the A’s. It’s a great market. And there should be a Major League Baseball team there,” said Daniel Rascher of Orinda-based SportsEconomics LLC. “It might as well be the A’s.”

But the San Francisco Giants, which control the territorial rights to Santa Clara County, oppose the move. Last June, Major League Baseball denied the A’s request to relocate.

San Jose filed suit against the league the next day, targeting the league’s antitrust exemption. The city suffered a legal setback last October, but the 9th U.S. Circuit Court of Appeals agreed to hear an appeal on Aug. 12.

There is good reason to hang in there, at least if you believe the city’s projections. A city-funded 2009 report said the ballpark would generate 1,000 new jobs and create $130 million a year in annual spending, $2.9 billion over a 30-year period. (Wolff already has a major sports complex under construction in San Jose: The $100 million stadium, near Mineta San Jose International Airport, for the San Jose Earthquakes, which he owns.)

“You can build a great museum, hotel and conference center, but baseball is 81 days a year of national television,” said Robert Boland, a sports attorney who is a professor of sports management at NYU.

Rascher, who has studied the economics of the San Jose Sharks, says stadiums do bring significant spending. But he added that real estate development is less certain.

“As a development tool, it’s mixed,” Rascher said.

Still, San Jose real estate observers said a stadium could transform the area the same way AT&T Park revived China Basin in San Francisco.

While it’s early, the signs are positive a little ways up Highway 101, where the 49ers’ $1.3 billion Levi’s Stadium celebrated its opening with a ribbon cutting on Thursday. A $6.5 billion office and retail juggernaut from Related Companies is in the early planning stages next door.

“We started buying land near the Santa Clara stadium as soon we saw construction equipment on the stadium site,” said Ardie Zahedani, principal with apartment builder St. Anton Capital.

The same thing could happen here, said Mike Kim, chief investment officer with Simeon Residential Properties, which has a 21-story apartment tower under construction downtown.

“The Oakland A’s in San Jose would be like steroids for the local economy,” Kim said.

Life after the A’s?

And without the team? Most executives surveyed for this story said they didn’t think the A’s remaining in Oakland would deal downtown San Jose a body blow given momentum in the market. But they agreed that development in the area would take longer.

In June, the city approved a plan for the 250-acre Diridon Station Area that allows 4.96 million square feet of office space, 424,000 square feet of retail, 2,600 residential units and 900 hotel rooms. Without an A’s move, the ballpark area would be zoned for office and retail.

“It will just move with the economic cycle,” Kim said. “So as important and monumental as the A’s would be, it wouldn’t be enough to impact the growth and prosperity of the region.”

Egon Terplan, planning director for SPUR, the urban research think tank, said that absent a ballpark, Diridon — separated from San Jose’s traditional downtown by Highway 87 and the Guadalupe River — could still take off on the strength of transit and the difficulty of building elsewhere in Silicon Valley.

“A ballpark would be great, but downtown and the Diridon area can be great without the ballpark,” he said.“BART doesn’t yet go to Downtown San Jose and Caltrain isn’t yet electrified. Those sorts of dynamics, in an environment without new freeways, add to its value.”

Rob Hollister, president of real estate the Sobrato Organization, one of Silicon Valley’s largest landlords, agreed. While he’d welcome a ballpark, he said the impact might be overstated.

“It doesn’t make sense to me that you need to ballpark to make downtown lively,” he said. “I’m a pretty big baseball fan, but I’ve never taken proximity into account when making a housing decision.”

Some said San Jose could benefit from putting the A’s in the rearview mirror. Chris Neale of San Jose-based the Core Companies says he has been unsuccessful in doing deals in the Diridon area partly because of uncertainty over the A’s.

“I think it impacts a seller’s perception of the value of their land,” he said. “If I’m going to sign a purchase contract for 18 months, by that time the A’s might be coming, and my land’s worth a lot more.”

Without a ballpark, though, the area would probably need a “superboom” stronger and more sustained than the current market to spur office development, said Mark Ritchie of downtown brokerage Ritchie Commercial.

“Not a boom, but a superboom,” he said. “If that happens, Diridon becomes very desirable.”

What next?

There are challenges even if San Jose’s prospects for landing the A’s improve. The city — or the A’s — still needs to buy the additional parcels. AT&T reiterated this week that it’s not interested in selling “at this time.”

“AT&T is constantly evaluating our real estate needs to help us best serve our customers and we are always willing to listen,” a spokesman said.

Time is also a factor. The A’s option to purchase the land for a discounted $7 million expires in November, but San Jose could still retain the property for a ballpark longer, city attorneyRick Doyle said.

How long exactly is unclear, because the state has ordered cities to dispose of property acquired by redevelopment agencies, which were disbanded in 2011.

“The short answer is, we do have to sell it at some point no matter what,” said Richard Keit, head of the Successor Agency to the San Jose Redevelopment Agency, which technically owns the land. “What we do have is a little bit of latitude in when we do that.”

Marc Morris, a nearby resident who formed a stadium opposition group several years ago called Better Sense San Jose, said the city should put the land in play.

“It’s just the best parcel in San Jose, and to have it sit there doing nothing now — for how many years? — it’s quite a large opportunity cost,” said Morris. “It’s just a dead zone.”

But when that happens is the crux.

Mark Nagel said it’s rational for politicians to hold out as long as they can.

“The upside from the politicians’ standpoint is so big — to say, ‘We brought MLB,’” he said. “The downside is the amount of time and effort and energy you put into it.”

Options

The two men running to replace Mayor Reed both support an A’s stadium. But they differ on Plan B.

District 3 Councilman Sam Liccardo, who represents the area, wants to keep the ballpark site’s alternative use — office space — even though residential builders are more likely to snap it up, given the depth of demand for housing.

“It’s an ideal corporate headquarters site,” Liccardo said. “In the long run, that station will accommodate 600 trains a day. That makes that site one of the prime sites in the entire Bay Area for office.”

Besides, Liccardo hasn’t received any offers from private developers.

“I don’t think we’re holding anything up,” he said. “You can shoot a cannon in several directions without hitting anything for blocks.”

County Supervisor Dave Cortese, however, says the site shouldn’t be reserved only for office, urging that the residential option be left open.

“What should dictate is highest and best use and not anything abstract, or an arbitrary general plan designation,” he said. “What’s most important about Diridon is we light the fuse and get the explosion of growth to go off down there.”

Cortese is also less willing to hold on to the land if the next baseball commissioner doesn’t sound receptive.

“I’d wait long enough to sit down with a new commissioner and judge eye-to-eye whether or not there’s a path to get a stadium there,” he said. “You just can’t miss any more opportunities.”

Mayor Reed, however, is in no rush to close off the A’s option.

“We can wait quite some time,” he said. “I have a dozen other sites downtown I’d rather see someone develop on.”

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