Several months ago, and several days before Oracle Team USA won the 34th America’s Cup, I wrote about the amount of money Larry Ellison was throwing at a lost cause.
Well, that call certainly proved premature—at least on the water.
But on land, the debate over how San Francisco will pay to host the 35th America’s Cup still rages on, and Ellison continues to illustrate what shouldn’t be done. These lessons, however, have more to say about the wealthy and philanthropy than they do about sports.
To review the context, San Francisco has joined New York as a U.S. city with the greatest level of economic inequality. Most people can’t afford to live in the city by the bay. The city wrestles with huge costs tied to its aging public transportation system and problems like homelessness and its dearth of residents with school-age children. Earlier this month, a study found that taxpayers covered at least $5.5 million of the costs tied to hosting the America’s Cup. The city spent $20.7 million, and private fundraising—first pegged at $32 million—has only reimbursed taxpayers to the tune of $8.65 million. (The city expects to see $6.6 million from extra tax revenue associated with the event.)
True, the contest drew more than 700,000 people to the waterfront over roughly three months. It also generated some $364 million in total economic impact. But, again, initial projections put the total impact at between $900 million and $1.4 billion.
That’s the rub. Private fundraising, which Ellison and his group touted as the venue was getting organized and the city jumped on, really didn’t materialize. Furthermore, until Oracle Team USA turned its performance around—and how it did so is still fairly controversial—and defeated Emirates Team New Zealand, there was not a huge amount of interest in the races.
As the San Francisco Chronicle recently reported, “Critics contend that using taxpayer funds for the event amounted to subsidizing a vanity race for the ultra-rich. Supporters view it as a smart investment that pumped up the local economy…” For local philanthropists like Ellison, who had promised large donations and a resulting surge in interest around sailing in the United States, expectations were set too high. Plus, these lofty expectations were set against the backdrop of a weak economy and that growing economic inequality in the Bay Area.