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Will Larry Ellison's Ego Capsize the America's Cup?

Lawsuits, dropouts, political posturing, and fast-as-hell boats: Welcome to the billionaire sailing circus.

| Tue Aug. 20, 2013 6:21 AM PDT

Eventually, the terms of the race were settled and everything was set to proceed until, just days before the race, Ellison replaced the soft sail of his boat with a stiff carbon-fiber wing. Bertarelli's boat couldn't compete with the new design, and Ellison prevailed.

To the casual observer, all these lawsuits, dangerous boats—a sailor was killed after a team's AC72 capsized earlier this year—and obsessive one-upmanship might make it seem like Ellison is trying to destroy a 160-year-old regatta. But such power plays are as much a part of the event as the actual sailing, according to America's Cup historian Chris Pastore. "Yacht racing is inherently litigious," he says.

This is hardly the first time people have fretted about the race being too dangerous. In 1903, Cornelious Vanderbilt and William Rockefeller spent about $4.6 million in today's dollars to build the Reliance, a marvel of engineering in its day—just like the AC72 is in ours—in order to best their rival, Sir Thomas Lipton. They employed engineering tricks that let their boat be bigger than Lipton's while still meeting the technical specifications for the race.

Half a million people gathered to watch Lipton's defeat off the coast of Sandy Hook, New Jersey. After the race, both parties agreed to ban boats like the Reliance from future America's Cup regattas because the boat, it was said, was too dangerous to sail.
 

will the Cup be a win for San Francisco?
If a billionaire wants to build a $8 million boat, race it against his wealthy friends, and commission his son to make a documentary about it, that's all fine and good. But even someone as wealthy as Ellison needs to enter into a relationship with the host city to put on an event of this size.

Early on, San Francisco intended to give Ellison rights—valued at $90 million—to land and piers on the waterfront; a 66-year lease agreement would allow him to improve the run-down properties and run things as he pleased. The plans were even more ambitious then: Bleachers on Alcatraz Island, a heli-pad barge, and a floating 44-foot video screen (a particularly contentious element) were all in the works.

Opponents, ranging from community groups to the Sierra Club, began filing complaints—and eventually a lawsuit that settled out of court. In a plan they dubbed "Occupy the Bay," a Bay Area swimming club threatened to swim into the paths of yachts and spectator boats during the races if the Jumbotron were built. Over time, organizers' ambitions were pared down, and Ellison's lease agreement was dialed back to something far more modest. Former SF Supervisor Aaron Peskin, who led the lawsuit, thinks the city was daft when it first started playing ball with Ellison. "You didn't need to do a lot of research to realize that no matter how many times Gavin Newsom said it, it's not the Olympics, it's not the Super Bowl, and it's not the Olympics and the Super Bowl combined," he says.

Gavin Newsom and Larry Ellison
Gavin Newsom and Larry Ellison with the Cup, February 2010 Mayor Gavin Newsom/Flickr

As Cup preparations were underway, it became clearer that the race wasn't going to yield all of the glittering benefits Ellison initially promised: An economic downturn in Europe, combined with the extreme price of entry and San Francisco's nonidentity as a yachting destination all conspired against the Cup. The city now expects around 2 million spectators, down from 2.7 million, and only four boats, not a dozen or more. Louis Vuitton, one of the key sponsors, was so disappointed by the turnout of competitors that it asked for and received a $3 million refund.

There were labor troubles as well. Last spring, the city ordered Ellison's Event Authority to pay $460,000 in back wages to workers who had built bleachers by the waterfront because the organization had failed to pay the prevailing wage—basically wages plus benefits—as it had agreed to do.

Supervisor John Avalos, who held a city hearing about the back wages, expressed disappointment over what the Cup wasn't bringing to San Francisco: Originally, there had been talk of neighborhood art, increased tourism across the city, and other general benefits. "We were promised so many things," Avalos told Mother Jones. "We've really seen nothing if you're not directly in the port industry or the racing industry."

David Chiu, president of the San Francisco Board of Supervisors, insists that the Cup will bring broader benefits and that San Franciscans shouldn't be too quick to write it off. "When you put close to $900 million into the local economy, that has multiplier impacts throughout the entire city," he says.
 

Will taxpayers have to pick up the tab?
Fundraising to cover city expenses also has fallen short of expectations. At first, local developer and politico Mark Buell, who ran the organizing committee for the event, was tasked with raising $32 million to defray the city's costs. But Buell and the committee were under no actual obligation—they promised to "endeavor" to raise the money. As of January, Buell had only secured $9 million, so Mayor Ed Lee wound up taking on the task himself. If Lee fails to raise enough through donations and Cup-related tax revenues fall short, the city may be adding millions to its $100 million deficit.

But city taxpayers won't have to shell out as much as some critics feared, thanks to the lower projected attendance. Also, developers who are eager to build on the city's waterfront have begun ponying up. In June alone, a real estate developer battling to build luxury condos donated $10,000; the Golden State Warriors, who are vying for that waterfront stadium (and have been accused of trying to cut corners) gave $25,000; and developer Thomas Coates contributed $100,000. The new fundraising total is around $16 million, only half the original goal, but just $6 million short of the city's break-even point.


So What's a San Franciscan to do?
It's hard to say who will have the last laugh. The America's Cup could be a bust, giving some satisfaction to the naysayers who have been waiting three years to gloat: "I told you so." Or it could scrape by, thanks to the reduced scope of the event and the down-to-the-wire push to raise funds. But if it does okay, and if Ellison wins the race and decides to host it here again, it could help make San Francisco a sailing destination.

In the meantime, here's the race schedule, so you can buy yourself an $8 Bud Light and enjoy the spoils of the city's latest culture war. Maybe you'll even catch a glimpse of Ellison's Danish-designed Musashi megayacht, which is a touch longer than a city block and has a glass elevator to shuttle passengers between its three decks.

If you're going to root for a team, consider Team New Zealand, the only boat without a billionaire behind it. If New Zealand wins, team leader Greg Dalton has said he'd like to pare down the hype and get rid of the "sailing billboards," as he calls the new high-tech sails.

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