The cost of a stadium for the San Francisco 49ers is now up to $1.2 billion, according to financing agreements approved by the Santa Clara city council approved Tuesday night, but the team insists that costs to the public will actually go down. The reason: Tickets are selling more briskly than expected, which would pay back the city’s costs sooner than planned in the original deal.
This is probably a good time to revisit the Santa Clara financing plan, which is very possibly the most convoluted deal in sports history, leading to much confusion about who exactly is paying for what — and perhaps more important, who’s taking on what risk. There are two main pieces to the deal that involve public funds, or at least public borrowing:
- The 49ers (actually a separate corporation called StadCo owned by the 49ers owners) will borrow $400 million from banks and then re-lend it to the Santa Clara stadium authority, at a likely interest rate of 6.5-7.5%. That’s crazy high, but the 49ers say it doesn’t matter, because the team will (watch closely now) pay enough rent to the stadium authority so that the authority can use it to pay off its loans from StadCo.
StadCoThe stadium authority will borrow $450 million directly from the banks, which must be paid off in three years, using a combination of personal seat licenses, naming rights, and luxury suite revenue.
The first part is the one that’s been subjected to the most scrutiny, mostly because the bizarre we-loan-you-money-then-pay-rent-so-you-can-pay-us-back deal wasn’t part of the 2010 deal that was approved by Santa Clara voters, which is the crux of the argument over whether residents can force another vote. That’s the relatively non-risky piece, though — the main fear looks to be that StadCo would go bankrupt and stop paying rent, but that’d be pretty unprecedented in the history of convoluted stadium financing deals.
Item two, though, remains dicier: If the money from PSLs, naming rights, and suites doesn’t add up to $450 million (plus interest) over three years, then Santa Clara could be left holding a very large bag. That PSL sales are going well so far is certainly good news, but there’s still a bunch of uncertainty — in particular, the naming-rights market has been all over the place of late — and it’s Santa Clara that’s taking the risk on this, not the 49ers.
In short, we’re still back where we were in December: This could turn out to be one of the best stadium deals for a city ever … or it could turn out to be a bait-and-switch in which taxpayers get stuck with a multi-million-dollar tab that they never voted for. There’s really no way of saying until we see whether all those new revenue streams turn up. And even if things work out, that doesn’t mean that the public gave up nothing to the 49ers in this deal — after all, risk has a monetary value, too, even if no one can agree what it is.