San Francisco Mayor Ed Lee got an unwelcome letter late Tuesday night: As rumored, the city was ruled out of hosting the 2017 America's Cup sailing races.

Russell Coutts, director of the America's Cup Event Authority, e-mailed the mayor confirming news reports that San Francisco hadn't made the short list to host the 35th sailing regatta. San Diego, Chicago and Bermuda are still in the running.

"Given the tight timeline and demands from prospective teams to confirm the final venue, it has been necessary to continue reducing the shortlist of candidate cities," Coutts wrote. "We have therefore taken the difficult decision to no longer consider San Francisco as a possible candidate to host AC35."

The letter gives no explanation, but Lee has been adamant that the city not use general fund money to host the event after losing $11.5 million in city funds on the sailing races last year. In addition, the mayor wanted the race organizers to pay rent on the piers and to pay prevailing union wages for construction projects. Those demands seemed to be a no-go with Coutts and Larry Ellison, CEO of Oracle. As last year's winner, Ellison gets to make the ultimate decision on the host city.

Coutts in his letter said that the race organizers would be open to discussing hosting the 36th event in San Francisco - probably in 2021 or thereabouts. He also said he'd be open to hosting an America's Cup World Series event in San Francisco in 2015 or 2016. Those are a series of races leading up to the big America's Cup event.

Lee said he would be open to hosting a World Series event since they're not as expensive and don't take as much preparation. He didn't seem to be too disappointed in losing the larger race.

"We've been very reasonable in our approach," he said. "We were hoping that the success of the event (last year) would have them take another look, but I think all we can do is be proud of the fact that we hosted a really great event and that we were willing to do it again in a more rational way."