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Gladwell's Line: America's Cup Challengers - a nice problem to have

by Richard Gladwell, Sail-World.com/nz 10 Dec 2018 21:06 PST 11 December 2018

The flurry of Late Notices of Challenge for the America's Cup, at the end of November, caught everyone by surprise.

As Emirates Team New Zealand's Chief Operating Officer Kevin Shoebridge told the Auckland Council's Governing Body on Thursday afternoon, they all came in on the last day [November 30], and three came in within the last five minutes of entry time - late or otherwise.

Not sure why they were all left so late. Maybe they had forgotten there can be unintended consequences - such as when the 2013 entries opened and RNZYS jumped the gun by a few seconds. They had to re-send and got to be second in the queue behind Artemis Racing - and lived to regret that snafu for the remainder of the 2013 America's Cup - where ETNZ and Luna Rosa found themselves locked against Oracle Team USA and the replacement Challenger of Record Artemis Racing.

As the proverbial Actress said to the Bishop "timing can be everything".

Shoebridge also said that Emirates Team NZ and Royal New Zealand Yacht Squadron had been working with six of the eight late challenges for about six months. So those were of no surprise. By definition, the other two came out of left-field. Interestingly, none are from Australia.

As mentioned two came from teams of whose interest ETNZ were unaware. Shoebridge also added that the quality of all the Challenges was high and they came from respected yacht clubs. That offsets the common misconception that a bunch of flakey teams/clubs woke up on the last day of November, saw that entries for the Cup close that day and thought they'd better throw in a Challenge - see if it got accepted- and then decide if they would go ahead or not..

Minor Protocol changes likely

At the time the Challenges closed, of the eight only one was unconditional (i.e. it accepted all the conditions in the Protocol). That was the Malta Altus Challenge, and at the Council Meeting, Shoebridge announced that another Challenge had gone "unconditional".

We're expecting a public announcement on that sometime this week.

Of the remaining six, Shoebridge said two of those were "possible" in that their Challenge had some conditions attached that could be acceptable to the Defender RNZYS and Challenger of Record. Those changes are expected to be relatively obvious and minor in the grand scheme of things.

The new Challengers are all expected to be single AC75 teams, complete with Surrogates and simulators.

That being the case, there is no way that they can have a Challenge accepted in early December, and be on the start line in October 2019 for the first of the America's Cup World Series event set down for Cagliari, Sardinia. So expect to see that Protocol requirement adjusted for the single AC75 teams.

Expect also to have the 380 days residency rule softened for teams who have competitors involved in Olympic programs, and similar. Ultimately it is to the advantage of the America's Cup regatta to have current Olympic champions and competitors sailing in the fleet. They add credence to the Cup.

Expect some of the Entry Fee, Late Fee and Performance Bonds to be paid on a deferred basis or a changed date - but not eliminated altogether. Sail-World has raised the issue of the Late Fee previously with two of the teams that are either accepted - Malta Altus Challenge, and the next expected Challenger - Team USA21.

Both have said the Late Entry Fee is not a significant barrier to entry. The second Entry Fee, due on November 30 can be put onto a time payment - with the final instalment due in August 2019.

Other than those three changes, there is not a lot of others possible without impacting strategy decisions already made by the initial Challenger group. The Challenger of Record, Circolo della Vela Sicilia is unlikely to agree to any major Protocol changes.

In or Out - your choice

The remaining six Challengers have to make a decision to accept the Conditions as they now stand, or drop out of the 36th America's Cup. The decision is in their hands.

The Defender, under the Deed of Gift, is not allowed to "cherry pick" Challenges, and is obliged to accept all who meet the Protocol conditions. Hypothetically the remaining six could all accept, and that would put the Challenger numbers at 11 from what is expected to be 10 countries, which would be an outstanding outcome.

As America's Cup Events Ltd Chair, Tina Symmans told the Auckland Council: "The more Challengers we have in the Regatta, the better the event from a spectator point of view; the more countries that will be broadcasting; and the more economic benefit arises from each team that joins".

That daisy chain of relationships seemed to be lost on a minority of Councillors, who insisted that the America's Cup was a game played out between self-indulgent billionaires. After about the third comment in that line, the always quietly spoken Kevin Shoebridge stepped in, and with a very hard edge on his voice told the group that the people involved were not billionaires, but most were working folk - the ones the Councillors claimed to represent. "We've heard for years that the America's Cup is a rich mans sport. While there are wealthy people funding the teams, the people who are in these teams, and spend their lives, doing this competition - are not rich people. They are normal people. They come from normal backgrounds and they are committed to a sport. So it is a little bit of a misconception that it keeps getting called that."

But that fell on deaf ears.

They ignored the fact that the Council was spending its money, on its asset (Wynyard Point). It was not spending a cent of its money on the Hosting fee ($40million) which was all covered by the Government. And that in fact, the America's Cup staging had led to some Government investment into an Auckland Council asset which the Government didn't own.

The Government's view seems to be that the event is largely cost neutral for the Council, in that they are either spending money on deferred maintenance, or on rectification work for which they were liable before the America's Cup was won, or on an asset that should earn them revenue in the years to come - superyacht berthage fees, for instance. Again that point seem to escape the minority of Councillors.

Previously some Councillors had questioned how much of the benefit of the Event would go to industries in the South, West and SE Auckland, they were supplied with a list of those industries and companies. One Councillor (Alf Filipaina) had contacted some of those companies and got very favourable references for the benefits they had received from the America's Cup. He read these out to little effect on the so-called "B Team".

The 36th America's Cup is projected to generate employment for 8,000 people, many of whom live in the areas of interest to some Council members.

Instead of lauding the team, the opposed group turned to the economic benefit of the Council being asked to invest a further $14.5million into the project.

The Government's contribution of $22.5million offsets some of a $100million project underestimation - caused largely by Council/Government indecision over which of eight proposals it favoured. Part of that rushed estimation process included the aborting of the first Resource Consent application - due to yet another politically inspired change of plan. But of course none of the current Council had any responsibility in that process - instead going after the consultants who had done the estimates under massive time pressure.

Interestingly in the economic benefit argument, the opposed Councillors all decided to quote from the marginal economic benefits of the Cup in San Francisco in 2013, which as anyone who followed that event knows had numerous flaws in the way it was structured - triggered by a Board of Supervisors intent on pursuing a political agenda.

More relevant was the last America's Cup in Bermuda - an event much closer to the Auckland model. That showed a return of $5.25 for every $1 invested. However, that didn't rate a mention. Neither did it include the industry expenditure of the likes of Southern Spars having to build 13 masts for the Challengers and Defender at the cost of $1million each.

Neither did the opposed-Councillors consider the fact that there was such a shortage of staff in Auckland, that most of the companies were engaging apprentices to cope with the shortfall.

Emirates Team New Zealand told the Governing Body that the construction of the team's first AC75 was already underway, in a facility on Auckland's North Shore and was employing 40 people. "We're not only employing highly skilled labour, but we are also trying to bring a new generation of young people through to teach them the skills as well. We have just signed up the youngest guy we have ever involved in the team - the other day he came in his school uniform to sign his work contract, which was nice."

"We're also running an apprentice program, along with all the other suppliers, who are actively involved in the Cup," Shoebridge added.

The real issue for Auckland

Of course, the most serious issue is if there are more teams than bases. Currently, there are six bases for Challengers. Three were taken before late entries were made - all were double bases which go in the order of acceptance to the "Super Teams" (USA, the British and Italians).

That leaves three single bases - two of which have gone to the Late Entry teams whose Challenge has been accepted. That leaves just one single boat base. There are six Late Challenges on the hook - and able to go unconditional at any time - bases available or not.

The popular misconception is that once all bases are gone the Defender is entitled to hang up the "No Vacancy" sign on Wynyard Point, but that is not what the Protocol provides.

"...RNZYS shall allocate, at a reasonable commercial fee, a temporary space to each Challenger on which they will build at their own expenses their Team Bases," says Article 43.1. Of course, that can be changed by CoR/D - but currently, the hosts have to find a space for the teams to lease and build their own bases.

It's a situation that is yet to unfold, but the obvious point is that far from being involved in a grandiose scheme, with the benefit of hindsight, there will not be enough space. That may trigger the redevelopment of the whole of Wynyard Point - with the second stage ready for occupancy and base construction in mid-2020.

Entirely how that plays out with a Council which says it has no more money, will be interesting to see.

But at this stage, the Council are in the Challengers hands - and don't know it.

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