Santa Clara 49ers stadium hits $1.2B, but who pays?

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.


82 comments on “Santa Clara 49ers stadium hits $1.2B, but who pays?

  1. Neil, Santa Clara gets none of the NFL ticket revenue.
    Neil please correct your second bullet point. It’s the Stadium Authority (Santa Clara’s agency) that will borrow the $450 million, not Stadco (which is the 49ers Stadium Company.) So the Stadium Authority will have its own loan of $450 Million plus Stadco’s loan of $400 Million.

    Santa Clara doesn’t get any of the luxury seat revenue – that all goes to the 49ers and Santa Clarans have been told that the luxury suite revenue will go to pay off the NFL loan of $200 million.

    The SJ Merc said that after seat licenses and naming rights revenue come in during the 2 years of construction, the Stadium AUthority will be left with refinancing $650 Million to $795 Million in debt – with no guaranteed way to pay it off.

    The $30 million in facility rent is unlikely to be enough to pay off both the long term debt and the operational costs.

    We don’t really know if the PSL sales are going well – the 49ers won’t release any numbers, and there has been much information in the press and in the blogs with interviews with fans who are refusing to pay for their seat licenses – saying they’ll buy a big screen tv instead.

    If this was a good deal then they should have presented it to us in June 2010 instead of giving us a ballot measure that didn’t disclose costs and telling us throughout a $5 million campaign that the ’49ers/NFL/stadium revenues’ will pay for 92% of the stadium. They didn’t disclose any loans on the ballot because it wouldn’t have passed. This is a bait and switch. The 49ers should be taking on all of the loans, not a city agency.

  2. No sane person would be mollified if you knew the quality of the city council and staff. They are in over their heads.

    Right, the 49ers keep saying the PSL sales are going great. Isn’t that what a salesman is going to say? They’re pretty close to the vest when it comes to divulging real information though.

  3. Santa Clara is going to get destroyed in this deal. It’s sad to see the repeated stupidity displayed by city after city while ignorant fans repeat the lies that billionaire owners feed them.

    I can only hope for San Diego’s sake that this plays out before we follow you down the drain. Please LA take this cancer (chargers) off of our hands before we too get SantaClaraed*.

    *bankruptcy of city or county due to an NFL stadium deal.

  4. If stadium seat license sales are going so well, then why not reveal financial information which reflects that? The 49ers know they’re skewing information in order to appease a skeptical public. To the contrary, the vast majority of current SF 49ers season ticket holders are reluctant to pay for the asking seat license price(s).

  5. To santaclarawillbebroke:

    Tell me please, how do you know that “the vast majority” of STH are “reluctant to pay the asking price”? The asking price is only known for a very small part of the stadium, and the most expensive part at that, so your contention is clearly complete nonsense skewed by your obvious bias.

    When it comes to revealing financial data, no company goes around telling everybody their financial details, so why should the 49ers?

    If you are so desperate for details, why not actually look for some? It took me maybe 3 minutes to find some quotes from Al Guido, who is in charge of selling the SBLs. I had some problems getting the link to work, so I’ll just quote the relevant parts:

    “We’re approaching $300 million in suite sales and we’ve been on sale with that for the last year,” said Al Guido, Vice President of Sales for Legends Hospitality Management, the firm hired by the 49ers to sell premium seats and luxury boxes.

    “We’ve been on sale with club seats for about two-and-a-half months and we’ll just continue that process,” said Guido. “Right now, we’re just selling club seats in the new stadium. We’ll open up our reserve seats roughly around June.”

    Reserve seats will also require a seat license fee, which has not yet been announced. The 49ers expect to make $500 million dollars in seat license fees, according to the Silicon Valley / San Jose Business Journal.

    I want to commend the author of the article. Most of the stuff here about the Santa Clara project has been unfairly negative, especially in light of how few details were known, but here you really present the facts in an unbiased way.

  6. Paul, those quotes are a joke.

    Al Guido must be a mafia con man. $500 million from seat license fees is beyond ridiculous. Either Silicon Valley / San Jose Business Journal are thoroughly confused or they are just shills.

    No chance at that $500 mil figure.

  7. @JohninSD: Your definition of SantaClaraed is a good one.
    Watch out San Diego. There is no legal requirement in California for cost disclosure on city-wide ballot measures. That’s how our city council pro-stadium majority was able to work with the team lawyers to give us a ballot measure that didn’t disclose the costs. This could happen to any city in CA. In contrast, a statewide or county-wide ballot measure would have to disclose costs.
    This was a pure bait and switch. And people here aren’t ever going to forget that. We should be able to vote on the loans. Our council majority has taken away our right to vote twice.
    And those council members have been funded for their elections by…you guessed it. The 49ers owners, their contractors, the building and trades unions, everyone who stands to make money off of the stadium, but not the people who actually live here or who will get stuck with the bill. If this was a good deal, private investors would line up. No way would the voters have ever approved this deal.

  8. That $500 million figure for PSLs was made up by Goldman Sachs to sell to bankers. Hahaha, unbelievable.

    sportsbusinessdaily.com/Journal/Issues/2012/02/27/Facilities/Niners.aspx

    “Asked about the (PSL) projections, Jed York, the team’s acting owner and chief executive officer, said, “We don’t have an estimate on that.””

    I can’t get over suckers who believe this con.

    At least the chargers have given up on a city vote knowing it wont pass. They’re going to try to screw us on a county wide vote.

  9. Thanks for the correction on StadCo/Stadium Authority – my brain thought one and my fingers typed the other. This is why I should stick to “city” and “49ers.”

  10. The 49ers and City beat you through the court system. If you continue to be drawn into a court battle, you will never win. Here is a strategy that will work, if anyone has the energy to proceed.
    1. Start an initiative to overturn Measure J. You got enough signatures last time around, you should be able to get the signatures for the initiative.
    2. Require the city to place before Santa Clara voters the amendment they made in mid-2011 to add the Bayshore North Authority on the Stadium Authority as a defensive measure to the threat of losing the Redevelopment Agency. The City described this as an amendment to Measure J and added 17.25 to the City Code.
    santaclaraca.gov/index.aspx?page=218
    Pursuant to State legislation ABx1 26, the “Dissolution Act,” the Redevelopment Agency (RDA) of the City of Santa Clara has been dissolved effective February 1, 2012.
    santaclaraca.gov/Modules/ShowDocument.aspx?documentid=5662
    On June 28, 2011 Council amended Measure J, adding North Bayshore Development Zone Authority to Stadium Authority and adding Claus 17.25 to City Code created by Measure J.
    Santa Clara City approved this “First Amendment” to the Joint Powers Authority (Stadium Authority).
    The City recites:
    “WHEREAS, Chapter 17.20 SCCC does not prohibit the addition of a new member to the Stadium Authority;”
    But what the voters passed did not specifically allow the addition of a new member. Nor did the State Law establishing the Stadium Authority allow for the addition of new members.
    My opinion is that Measure j passed by the voters cannot be undone by the Council without a vote.
    If correct, all contracts of the Stadium Authority are now potentially null and void since February 1, 2012, because the Stadium Authority is no longer a legal entity as established by Measure J. As such, the Stadium Authority is committing fraud by continuing to enter into illegal contracts.
    Finally, there is a California State Law declaring that the City Council cannot amend a law adopted by initiative without approval of the voters. Measure J was such a law.
    Elections Code § 9217.
    If a majority of the voters voting on a proposed ordinance vote in its favor, the ordinance shall become a valid and binding ordinance of the city. The ordinance shall be considered as adopted upon the date that the vote is declared by the legislative body, and shall go into effect 10 days after that date. No ordinance that is either proposed by initiative petition and adopted by the vote of the legislative body of the city without submission to the voters, or adopted by the voters, shall be repealed or amended except by a vote of the people, unless provision is otherwise made in the original ordinance.
    There is no such a provision in the original ordinance, so my opinion is that the Council has exceeded its power.

  11. Paul G: If the 49ers were building this stadium with 100% private financing, I wouldn’t be second guessing the revenue streams. However, the stadium will be a publicly owned facility whereas the sales of SBL’s are an income component which is expected to raise a siginficant of cash in order to pay the enormous annual debt service that will be made by a municipal agency. As a Santa Clara taxpayer, I believe I am owed an explanation as to whether there’s going to be enough money to pay the stadium’s bills. If you, or the 49ers, fell different, well, they should have built the stadium with their own money.

  12. Paul G: If the 49ers were building this stadium with 100% private financing, I wouldn’t be second guessing the revenue streams. However, the stadium will be a publicly owned facility whereas the sales of SBL’s are an income component which is expected to raise a siginficant amount of cash in order to pay the enormous annual debt service that will be undertaken by a municipal agency. As a Santa Clara taxpayer, I believe I am owed an explanation as to whether there’s going to be enough money to pay the stadium’s bills. If you, or the 49ers, feel different, well, then perhaps they should have built the stadium with their own money.

  13. I agree with ‘santaclarawillbebroke’. If PSL sales aren’t going well at this early juncture, it’s possible that it wouldn’t be in the interest of the city to have this publicly stated. However it’s bad journalistic practice to have reporters say PSL sales are going well when the source is the team. It’s totally unverifiable and not even worth repeating.

    Furthermore suite sales sold to corporations don’t go towards SA debt–this is a misconception many seem to have.

    The SJ Business journal prints press releases.

    Towny I’ll read your post more carefully when I have more energy. I think people are pretty tired right now though.

    Paul G. resident’s should rightly be skeptical of this plan. Doubly so if Goldman Sacs are the ones who came up with it. Did you know that they were taking out advertising in national press last year bragging about their involvement in the Louisville arena and now the arena is have problems meeting its financial obligations?

  14. THIS is why we can’t trust our council acting as the Stadium Authority and can’t trust this deal.

    In Dec. 2011 we were told that our Stadium Authority would take on $850 Million in loans to construct the stadium – the ballot measure we approved contained no loans.

    Tonight’s meeting:
    mercurynews.com/southbayfootball/ci_20185459/santa-clara-oks-final-49ers-stadium-deals-including

    “In its first action, the Stadium Authority approved the final documents for a bank loan of up to $950 million — more than the prior estimate of $850 million because of increases to the stadium’s price tag revealed last week.”

    We cannot trust anything they say. The bait and switch continues.

  15. Wow, Can you believe no one purchased this great deal of buying an option to buy SBLs to buy season tickets?

    AMAZING FIRST ROW SEATS, ONCE IN A LIFETIME OPPORTUNITY

    ebay.com/itm/ws/eBayISAPI.dll?ViewItem&_trksid=p4340.l2557&rt=nc&nma=true&item=190647949087+,190647949087&lgeo=1&si=W%252B%252BSrnG2fkmPFWIjtfxvGMkFRXQ%253D&viewitem=&vectorid=229466&orig_cvip=true&rt=nc

  16. Yup, it’s great having a council of Alfred E. Neumans.

    We’re such a rich city that the high schools were closed a couple days ago as a cost cutting measure. But hey, that’s just so called “education” but 49ers is heavy deep “real” love love to Mayor Jamie “We’re going to build this stadium together-Nothing gonna stop us now” Matthews.

    I see that the more expensive the stadium gets the cheaper it is for the city. Yeah, makes perfect sense!

  17. Has anyone noticed our city council has stopped saying we’re going to make so much money from the stadium and are now reverting to outright lies by stating Santa Clara taxpayers are going to be protected from any stadium financial losses?

  18. Yes, many of us have noticed.
    But then, they lied during Measure J to get that to pass by saying that the stadium would be paid for by the ’49ers/NFL/stadium revenues’. No mention of loans. And then when we objected to the loans they took away our right to vote.

    The council majority stopped representing Santa Clarans years ago. They only represent outside interests which seek to make money off of the city.

  19. I wish we had council members who worried about legacies or the smell they leave behind. They clearly don’t represent the people who actually live here and want to see the community improved.

    I’m afraid their mindset is, in the words of G.W. Bush “history, who cares, we’ll all be dead.”

  20. About the PSLs. According to the people who have had their sales meetings about club seating, almost all of the seats on the home side are sold. Don’t have any information about the visitor side.

    It’s worth remembering a few things though: only STHs with equivalent seats at the Stick have had a chance to buy as of yet. Also remember that “club seats” at the stick are VERY cheap compared to other stadiums, and there has been no SBLs or similar to pay. This is significant because it means the owners of these seats aren’t significantly more likely to be able to afford club seats at the new stadium than “regular” STHs.

    Soon other STHs will be offered the opportunity to upgrade to club seating, then people on the waiting list (season tickets are already sold out for 2012), and then the general public. It hardly seems out of the realm of possibility that all club seats will be sold before all is said and done, estimating a little less than half have been sold and only a very small group of people have had a chance to buy.

    Doing a little math, the $500 million also seems doable: with 9000 club seats, estimating an average price of $30000 (conservative, prices are $80000, $30000 & $20000) gives $270 million. That means the remaining 59500 seats would need an average price of approximately $5500 each, hardly impossible.

  21. Sure, according to the 49ers sales department they would state that. However, have they proven it? California consumers are different than most other states. I believe we’re more cost conscious. We have to be. Our cost of living is greater than most. The stadium authority is going to need abundant revenues in an immediate fashion. There will be very little time to defer any of the remaining 59,500 seats which don’t sell for $5500. Its not impossible, but its a tremendous risk.

  22. What would they have to prove?

    Like I said, this comes from people who have had their sales meetings and been told there are almost no club seats left on the home side to choose from.

    Also remember, the $500 million is an estimate, not what they need to sell. The “short term” loan seems to be $450 million which needs to be repaid in three years. That $450 million is not just from the SBLs, but also the naming rights and other not specified incomes, (at least in the original proposals it does not include revenue from the luxury suites).

    Not sure I understand what you mean by deferring the remaining seats?

    The $5500 price would be average, not actual cost. Seats near the 50 yard line would probably cost somewhere not too far from the $20000 club seats, while I’ve seen estimates for the cheapest upper deck seats of around $1000 to $1500.

  23. Now you’re reaching Paul. We don’t know how this is being interpreted. Have they sold the seats with the full payments made or are the 49ers simply accepting deposits? If its the latter, then the cash infusion from the BSL’s will be deferred while the debt service has already begun to accumulate.
    Revenues from luxury suites are not one of the revenue streams for paying back the stadium authority’s debt service. That is income for the San Francisco 49ers, who don’t start paying rent until they begin playing in the facility. In the meantime, the loans have to be repaid.
    What I meant by deferring the remaining 59,9500 $5500 in season ticket sales, if there are customers willing to pay that price, is the problem with the entire financing package of the stadium. While the debt service will continue to grow, the assumption is we can wait and see if ticket sales will materialize to the extent they can pay for the stadium’s debts & expenses. In other words, money for goods & services which have yet to be delivered.

  24. Let me correct myself in one area. I should have stated BSL sales as opposed to ticket sales. The 49ers will receive all the revenues generated from ticket sales. Only the seat license revenues is considered income for the stadium authority.

  25. The debt service is pretty much irrelevant as far as Santa Clara is concerned. Their concern should solely be on the $450 million that is repayable in three years.

    The long term debt is the 49ers problem under the term of the agreement. The rent the team pays will cover the debt repayment. If it doesn’t, the rent goes up.

    Unless SC has the worlds most incompetent lawyers they are free and clear if the SBL and naming rights + whatever other incomes covered by the agreement exceeds $450 million. And as I have stated earlier, I would be very surprised if it doesn’t.

    Even if the 49ers were to have financial difficulties, which seems to be the only way the debt repayment could become SCs problem, there are always rich people willing to buy sports teams ($1,6 billion for the Dodgers as an example).

  26. Unfortunately for other cities with new/renovated NFL stadiums, that hasn’t been the desired result. I don’t see how you view the long term debt as being irrelevant. It remains to be seen whose signatures are on the loan documents. It was revealed the 49ers will sublend their debt service to the SA at nearly double the rate of interest. Wow! What a bargain!
    You need to remember, in addition to the debt service, there are operating costs of the stadium. Normally those annual costs are in the $10-$20 million range.
    I agree, its not impossible. However, in comparison with other NFL stadiums throughout the country, the data shows the inability of stadium authorities to generate significant annual, or one-time, revenues to pay for all of the operating costs.
    Our city attorneys aren’t stupid. But they didn’t provide us with 100% protections from losses. Otherwise, the agreement would have been made with the 49ers organization instead of an easily collapsible Delaware-based LLC called Stadco.

  27. Again, if SC’s lawyers didn’t provide 100% protection they are incompetent.

    I agree the sublending of the loan is a puzzler. There has been no reason given for it as far as I know, so I am assuming there are either tax reasons for it, or they got a reduced rate from the banks for doing it like this.

    I am not saying this is a perfect deal, there is always some risk involved, but from the details we have it seems to be by far the best deal any city has gotten from a sports team.

    If everything goes smoothly SC gets a state of the art stadium for peanuts, and if it doesn’t go smoothly it is still most likely the 49ers who will take the hit.

    BTW, do you think the SBL will move smoothly if the team signs Peyton Manning, as a just broken story claims they might…..

  28. I’d never want to bet the farm on cities having competent lawyers.

    I agree that this deal *could* work out very well, though. But I am puzzled, and a bit concerned, by the convoluted loan deal – if there’s enough money in seat licenses and the like to pay off the stadium, why risk getting people all in an uproar over the sudden appearance of these public loans? Is there some kind of NFL rule, maybe, that views future rent payments as different from future debt payments, and so makes it worthwhile to launder one into the other?

  29. But what does it mean if the deal works out well? At best we don’t lose our shirts and we have a stadium. But what good is the stadium really for anything but NFL football? To see what a stadium is worth w/o a NFL team see the recent post RE the Silverdome.

    As Bill Bailey said earlier “who plays only to break even?” That’s about the best that could happen as I see it.

    But I agree the deal is complicated and no one knows what will happen. It’s all a “now is what can be, all the rest is wait and see” situation. Which is like living in a state of suspended animation. Neil you mention that uncertainlty has a monetary value and we’re paying that now. I still think it’s unlikely that this isn’t going to end up costing the city significant money somehwere down the line.

    The other problem is the general corrupting infulence the team has on the city. We’re only 120K people. The 49ers will be seeking to install compliant council members (since they will comprise the SA). Meanwhile everything else in the city is backburnered by officals giddy about what they’ve done.

  30. Thanks Neil. That’s the point of those who oppose the financing plan. If the revenues from SBL licenses, naming rights, sponsorships, etc., are going so well, why is there a need to obligate the public to $950 million in loans?

    BTW Paul, I doubt if the 49ers sign Peyton Manning. If they were to do so, he’s already 35 years old and coming off major neck surgery. Most likely he’ll retire prior to the stadium’s opening. As for its effect on SBL sales, it won’t have much of an impact. I’m sure most fans know that Manning won’t be playing football for the next 40 years.

  31. Personally I’m 50-50 on Manning. It’s a very risky proposition, but with a huge potential dividend.
    What I meant with the SBL and Manning, the excitement for the team would be through the roof (people love a superstar), making people more eager to reach into their pocket, even if it’s unlikely Peyton will ever play in Santa Clara.

    To Jay, I would suggest the PR boost would be a big deal to a city like Santa Clara: just think of “Bringing you Superbowl 50, live from Santa Clara, California”!

    I agree the financial boost directly from the stadium deal is unlikely to be significant, but indirectly the visitors, both for regular games and from potential Superbowls, will spend plenty of money, thus increasing tax revenue.

  32. Paul G: In a perfect world, your assumptions would be correct. However, what you’ve stated is the same trumpet sound made by other municipal governments which advocated building new NFL stadiums.
    Realistically, 8-10 football games per year does not provide a significant economic impact for any city. Ditto for the Superbowl. In fact, I see no real benefit for Santa Clara in hosting the NFL championship as the likelihood is the majority of visitors will spend their money & time in San Francisco. Aside from the Great America amusement park (which is closed during the winter season), there’s no other reason to hang out in Santa Clara.
    I understand your enthusiasm for the stadium in our county. The problem is all the potential revenue streams you keep repeating have been tried with other NFL facilities with less than desired results. In the end, someone has to pay the bills. Whether the methods you’ve read about are enough to pay for everything, well, only time will tell. Unfortunately, history is not on the side of Santa Clara taxpayers.

  33. I agree the financial impact is not the reason to do this, just stating some ways it will positively impact the economy, even slightly.

    As for the Superbowl, quite frankly I expect it to be in Santa Clara multiple times. Look at the current stadiums around the league, how many are likely to get to host?

    The league doesn’t want cold weather (Meadowlands with the new stadium is probably a one time thing). The Florida stadiums are old and crappy, same with the Superdome. It’s pretty much going to be down to Dallas, Indianapolis, Arizona and Santa Clara (maybe the Texans too?) as regular hosts.

  34. Paul,

    What people really desire to live in are well run cities with adequately funded, highly preforming school districts. Santa Clara isn’t making the grade in either regard. This is a reason why it has a clear “second-tier” status in the valley.

    Pro-football isn’t going to change that and it will take(and has taiken) the city’s focus away from core municipal responsiblites.

    Sorry to be a “no-fun” guy, but I have to live here.

  35. Paul G. – Your talking about alot of externalities which generally have no value when it comes to the actual cost of building the stadium. For example, do you spend $1 billion to build an NFL stadium to receive limited television exposure?
    As for hosting the Superbowl, obviously the NFL disagrees with you as the 2014 will be held in New York (may be more than one time). In addition, if Los Angeles does get an NFL franchise and stadium, expect that to be the league’s choice for hosting a Superbowl over Santa Clara. However, its been determined the Superbowl doesn’t have a lasting positive economic impact on the host city. Actually, many cities have lost money from hosting the contest.

  36. Paul,

    You may very well be right. It’s another reason (hardly the only one# that’s making me think about leaving the city.

    In fact I think if there was a vote, #this time on the loan/rent payback scheme) it would be probable that the 49ers could buy another election.

  37. I would suggest the PR boost would be a big deal to a city like Santa Clara: just think of “Bringing you Superbowl 50, live from Santa Clara, California”!

    Like the recent Super Bowls in “North Texas” and “South Florida”?

  38. That’s the sad thing, Jay. The fact our voting public is so smitten with the 49ers, that they’d rather sacrifice the long term financial health of our city, for the sake of a football stadium, is asinine and sickening. Then again, many of my neighbors aren’t very well educated when it comes to issues of business and finance.

  39. I wouldn’t suggest stadium proponents are less intelligent. Go read the comments at various papers about the approval of the stadium deal. I swear 95% of the negative comments about the deal are about how the city is “giving the 9ers a billion dollars”.

  40. There’s hyperbole on both sides. Stadium supporters professed how much of a financial windfall we’re going to get from the stadium when they know none of its true. Stadium opponents believe it will bankrupt the city. Most likely, neither is true. However, we are coming off a decade where poor decisions by business, government(s) and individuals nearly placed us in a period of economic depression. In light of that, its obvious many have not learned a lesson. Given the net worth of the league, and the team owners, its not conceivable to say they can afford to pay for their own facilities. I found it deplorable they asked my city to undertake the responsibility of paying back $950 million inloans without a significant level of income, or reserves, to pay for any shortfalls.
    As I stated before, only time will tell if the stadium generates enough income to pay its bills. History is not on our side.

  41. There’s hyperbole on both sides. Stadium supporters professed how much of a financial windfall we’re going to get from the stadium when they know none of its true. Stadium opponents believe it will bankrupt the city. Most likely, that’s not true.
    However, we are coming off a decade where poor decisions by business, government(s) and individuals nearly placed us in a period of economic depression. In light of that, its obvious many have not learned a lesson. Given the net worth of the league, and the team owners, its conceivable to say they can afford to pay for their own facilities. I found it deplorable they asked my city to undertake the responsibility of paying back $950 million in loans without a significant level of income, or reserves, to pay for any shortfalls.
    As I stated before, only time will tell if the stadium generates enough income to pay its bills. History is not on our side.

  42. Paul must work for the 49ers

    Less than 1% of the club PSLs are $80,000

    blogs.mercurynews.com/49ers/2012/01/08/new-stadiums-sbl-go-on-sale-for-20000-to-30000/

    The average is well under $25,000 per club seat so there goes > $75 million.

    I’m betting the SBLs will raise a total of $300 to $350 million. A large, reasonable number but much less than the laughable $500. The $500 million figure comes only from people who want to be dishonest.

  43. Santa Clara will be lucky if the total debt is less than $800 million after counting the NFL loan and the PSL money.

    Don’t be surprised if the stadium ends up costing $1.5 billion. Someone needs to be honest about this stuff.

  44. @JohninSD. Yes, they need to be honest about this, but given their track record, I hold out no hope for that. All of our pro-stadium council members function as if they represent the 49ers and not the citizens of Santa Clara.

    Two of our council members (Kolstad and Gillmor) were former council members during the 49ers stadium campaign, and they were at the helm of the 49ers Yes on Measure J campaign, which repeatedly sent misleading campaign materials into our homes (at least 30 different mailers), none of which disclosed any costs to the Stadium Authority. After the Measure J campaign Kolstad ran for council and was narrowly elected. Gillmor was then appointed by her pro-stadium buddies to an open seat on the council. Kolstad gave numerous pro-stadium speeches in which he showed the false pie chart of stadium construction costs (see the Santa Clara Plays Fair website, and read the ‘timeline’ article.)

    During the Measure J campaign, the 5 pro-stadium council members (Mahan, Matthews, Moore, Caserta, and Kornder) all appeared repeatedly in the misleading Measure J campaign materials, posing with the false pie chart of stadium construction costs. Mathhews/Mahan wrote editorials proclaiming that 92% of the stadium would be paid for by the 49ers/NFL/stadium revenues. Not one word about Stadium Authority loans. Mahan said on TV that the 49ers were paying for 92% of the stadium.

    The stadium ballot measure would never have passed with the loans included. They knew that (wow did they do polling here, it was relentless, so they could figure out exactly how to sell this to voters, i.e. how to lie to voters to get people to vote ‘yes’).

    If this was a good deal, it wouldn’t have taken $5 million in media saturation to get the stadium to pass ($350 per yes vote, more than any other ballot measure in the country, ever.)

    Please read the timeline of how they played the stadium gameplan in Santa Clara on the santaclaraplaysfair dot org website. It will let you know what other communities are in for. Teams seem to learn from each other. For example, the Tampa Bay Bucs campaigned on schools successfully, so the 49ers campaigned on schools, with misleading ballot materials that implied the team/stadium would give $$ to the schools, when in actually it is redevelopment dollars – our own property taxes – that are going to the schools.

    And it will be more than $1.5 Billion when you include the interest, which the city is also ignoring. And the measly rent that will be paid to the city from the Stadium Authority which starts at $180,000/year (that’s ‘us’ paying ‘us’) pales in comparison to the amounts the city is spending on staff salaries for staff to work on the stadium project (another promise broken, ‘ no cost to our General Fund.’)

    I look at the kids in our community and pity them – this debt will be on their shoulders, and they didn’t even get to vote on it.

  45. Too bad. We were having a mature, well reasoned discussion, and then SantaClaraTaxpayer arrived with his fearmongering nonsense.

    To JohninSD:

    – not even close. I’m just a sports fan who takes an interest in the business side of things.

    – That math needs some work. Even if we make it only 500 seats at 80000, and make all the remaining Club seats 20000, it’s only $60 million less than what I estimated. And even if it’s “only” $350 million raised, that means there’s only $100 million needed from the naming rights and other things to pay for the city’s $450 million obligation. Seems like good news to me…

    – why do you care what the final cost will be? Any overruns will be paid by the team, as stated in the final agreement.

    -And again, why do you care about the long term debt? If those payments rise, the rent payments from the team increase to cover it, again as stated clearly in the agreement.

    There are things to worry about, paying the upkeep of the stadium for example, but it’s hard to take you seriously when you keep harping on things that are clearly explained in the agreement.

  46. Paul G. ~ As you may be aware, agreements of this magnitude are full of loopholes. This particular one has many. For example, there is a dispute resolution clause which allows the 49ers to seek arbitration of any disagreements which may arrive as a result of any annual revenue shortfalls of the stadium.
    Also, this agreement is not with the 49ers organization. Its between the stadium authority and a company called Stadco. Its an LLC formulated in Delaware because of the legal protections offered in that state. If Stadco becomes a bankrupt company, what recourse does the stadium authority have? Well, none. It has no assets. What leverage will the 49ers have? Plenty. They can ask the stadium authority to renegotiate the terms of the lease. If they don’t, what can they do? Do you know how difficult it is to rent out a football stadium?
    The revenue issues you’ve mentioned have not been realized. All that’s coming out of the 49ers mouths is the process is going well. Rhetoric doesn’t pay the bills. I quote the movie Jerry McGuire:”Show me the money!”

  47. Paul G

    You have no idea what the fine print of this deal is and your numbers make it impossible to take you seriously.

    All of your estimates are based on fantasy figures from Goldman Sachs. This is beyond best case scenario. The original Cowboys PSL estimates were over $750 million. The Cowboys, Jets, and Giants all lowered their PSL prices and their estimated revenues. For some crazy reason you think all the 49ers PSLs will sell and at rates higher than the Jets or Giants got.

    I’ve seen teams lie about cost guarantees for decades. There’s a reason why the 49ers went with this StadCo silliness. Cost overruns and revenue overestimates are SOP for these deals.

    My bet is that the stadium ends up costing $1.5 billion, debt after the NFL loan, SBLs, and Santa Clara money will be well over $800 million. Rent, naming rights, and food & bev rights will have to pay off that massive debt. Doesn’t look good to me.

  48. But as Paul says, if the city isn’t on the hook for overruns – and they’re not – who cares how much the thing ends up costing?

    The real question here is how the PSL sales go, and what they can get for naming rights. I agree that there’s probably a couple of hundred million dollars of uncertainty there, which is indeed a risk I’d be antsy about. But saying that Santa Clara is taking on risk isn’t the same as saying this will inevitably turn out badly. There’s a fair to middling chance that Santa Clara will come out of this will all its debts paid – if so, it will have rolled the dice and won.

    Would I make that deal, just to get to have “From Santa Clara, it’s the San Francisco 49ers” on TV and get whatever money people spend locally on tailgating supplies that they forgot to bring from home? Probably not. But compared to a deal like, say, the one in Indianapolis, at worst this is trashing money with a shovel, not a dump truck.

  49. Exactly what numbers are “fantasy figures from Goldman Sachs”? The only estimate I’ve used was the $500 million, which was a direct quote from the man in charge of selling the SBLs. The only other figures I’ve used are the club level SBL prices themselves, in order to show that the $500 million is possible, though of course not certain.

    I find it kind of funny that you would complain about numbers when I clearly showed that the numbers you used in your previous post were pulled out of your ass, and far worse than a worst case scenario.

    As far as the Stadco is concerned, using a LLC is standard procedure in business, doesn’t mean the 49ers are planning to walk away from their obligations, which you seem to be implying.

    Besides, the city is also protected by the LLC. In the unlikely event Stadco goes bankrupt, the city is under no obligation to pay Stadco’s debt.

    To quote Wikipedia “Limited liability, meaning that the owners of the LLC, called “members,” are protected from some or all liability for acts and debts of the LLC depending on state shield laws”.

  50. Using an LLC in Delaware is standard procdeure if you’re seeking legal or tax protections. What have the 49ers implied by establishing and out of state LLC?
    How can you state the LLC protects the city? If Stadco goes bankrupt, who are creditors going to go after for their money? Well, who is Stadco assiging their loan to? Do you think the banks would have given Stadco a $400+ million loan without a guarantor? I doubt if the 49ers are the collateral behind Stadco’s loan?

  51. So you are suggesting the owners should use a LLC that offers them worse protection because???? That is just a ludicrous position. OF COURSE they’re going to take the deal that protects them the best, they would be absolute morons if they didn’t!

    As for the collateral, this isn’t a youngster that needs help from mommy and daddy to get a home loan. This is high finance, and the banks clearly believe in the financial viability of the project.

    I would assume, as it has been in all other stadium projects I have paid attention to, that the stadium is the collateral. And again, if SC has allowed themselves to be on the hook for Stadco failing, their lawyers should be shot.

  52. I fully understand why the 49ers established the LLC and why the stadium deal is with that particular entity and not the organization which owns the team. I would have done the same thing.
    However, I am not an employee of the 49ers. I am a Santa Clara taxpayer. Therefore, I would like to have my interests protected.

    The banks didn’t make their decision on the viability of the project. No sane bank officer, given the financial risks involved, would have funded an NFL stadium without assurances of repayment. Thus, its unlikely the stadium was offered up as collateral. Most likely, having a municipal government as a guarantor is why Stadco was provided with any financing. This stadium is going to be owned by the City of Santa Clara. How can we not be on the hook?

  53. Not going to get into the sanity of bank officers, I think we’ve all seen the last years that a great number of them belong in asylums.

    To say that the banks didn’t take into account the viability of the project, which at its root decides how likely it is that they will get their money back, is just silly.

  54. I’m sure the banks took into account the viability of the project. However, many perceived viable projects go unfunded. High speed rail is one example. Realistically, an NFL stadium project has too many risks for lenders to simply fork over close to $1 billion. The primary concern of the lending institution is repayment of the P&I. I’m interested in seeing whose signatures are on the loan documents. That has yet to be revealed. But I am steadfast in my belief that Santa Clara is the guarantor of Stadco’s loans.

  55. If the StadCo lean is short term (3 years) why would the banks care about the long term viability of the project? Goldman just wants to collect their fees/commissions and get out, right?

  56. That’s correct. Its precisely why I don’t understand Paul G’s assertion that we’re not on the hook. We are going to own the stadium. Since when is the owner of a building not on the hook for anything that’s part of the overhead? Then again, none of us have seen the loan documents, so its anybody’s guess as to who is responsbile for what.

  57. Nor does it make make sense to me that the stadium would be the collateral for the bank loan. Why on earth would anyone want to own a NFL stadium?

    A lot of details haven’t worked themselves out. It’s let’s build this while there’s an opportunity and then figure it all out. Maybe as Neil says we’re in better shape contract wise than some other municipalities, but the effect here of shortfalls will be much larger than in say, Houston, which has a city budget 27x the size of Santa Clara’s.

  58. One part of the loan is short term, the part that is to be paid back from the SBLs and naming rights + other incomes. That is the part that Santa Clara is on the hook for if the incomes don’t pay the full amount. However, as I hope I have showed, there is a very good chance that their obligation will be met with no problems.

    However there is also a long term loan. This will be repaid, technically by the stadium authority, using “rent” paid the the 49ers.

    As to why anyone would want to own an NFL stadium, in the case of the banks, that would presumably be to make their money back, through rent. The 49ers would still need a stadium, or the Raiders, or another team.

    I’m not saying you should all necessarily be happy about the deal, but a lot of you seem determined that this will be a disaster, and a few of you seem to even hope it will fail.

    Maybe I am just an optimist because my soccer team, Arsenal, recently built a new stadium with no problems. It was debt financed, with the stadium as collateral, and after 6 years of operations they are ahead of schedule on debt repayment.

  59. A very quick look at the Arsenal stadium shows it’s cost was less than the SC stadium and no public subsidies were involved. It’s naming rights generated about $100 million pounds over 15 years. I don’t know the exact length of football season in England, but I’d guess it’s over eight a year. It also sound like the stadium is much more multi use than then SC Stadium could ever dream of being.

    It’s also the only tube station that’s named after a football team (I never knew that). SC will have virtually no public transit.

    I think a bank wouldn’t be interested in owning a stadium anymore than they want to own foreclosed homes and then rent them out. It would have to be a loss for them unless somehow their income stream was magically better than what was existing before.

  60. Paul G. As I previously wrote, history is not on our side. NFL stadiums lose money with regularity and those facts are pretty much indisputable.

  61. Lots lose money, some don’t. I think there’s an argument to be made that NFL stadiums have the easiest time repaying their construction costs – if only because of the scarcity of tickets and high level of demand, which makes it hard for the bottom to fall out of the ticket market. Certainly I don’t think you’d see the Cowboys or Giants/Jets stadiums doing as well as they have (admittedly with some public money, but not a stupendous amount) in another sport.

    If the 49ers stadium ends up not costing Santa Clara significant money, it will certainly be an outlier. But outliers exist, and just because they’re unlikely doesn’t mean they’re impossible.

  62. First, let’s remember that ticket sales revenues go directly into the 49ers pockets. Only the SBL sales are being used a revenue source for the stadium authority.
    Second, let’s further recall the deal is with Stadco and not the San Francisco 49ers. If repaying the construction costs is such an easy concept, why are so many NFL stadiums losing money?
    In addition, we’re looking at a 40 year committment. If Stadco collapses, what prevents the 49ers from seeking lower rent payments?
    Finally, the greater likelihood is the revenue streams dissipate over time. However, the debt remains fixed. What will supplements future financial losses?

  63. “First, let’s remember that ticket sales revenues go directly into the 49ers pockets. Only the SBL sales are being used a revenue source for the stadium authority.”

    Right, but what is an SBL? It’s a right to buy future tickets. If an SBL buyer is relatively sure that they can unload their tickets every year – which is a surer thing in the NFL than in any other sport, for the reasons noted above – then they’re more likely to pay through the nose for an SBL. Which is exactly why SBLs/PSLs were used first in the NFL (Carolina Panthers) and continue to be used most widely there.

    “Second, let’s further recall the deal is with Stadco and not the San Francisco 49ers. If repaying the construction costs is such an easy concept, why are so many NFL stadiums losing money?”

    It’s not easy, but it’s possible. Most MLB stadiums lose money, but AT&T Park in San Francisco is an exception. So?

    “In addition, we’re looking at a 40 year committment. If Stadco collapses, what prevents the 49ers from seeking lower rent payments?”

    If the loan to the stadium authority is from Stadco, and the rent is from Stadco, then if Stadco collapses the authority won’t need the rent anymore, will they, since their debt will vanish as well?

    “Finally, the greater likelihood is the revenue streams dissipate over time. However, the debt remains fixed. What will supplements future financial losses?”

    The revenue streams are connected to the short-term loan, which is supposed to be all paid off by, what is it, 2015? So we’ll know in the next couple of years whether this is working or not.

  64. 1. List where the practice of SBL’s have been successful and where they’ve failed for NFL stadiums

    2. Apples & Oranges. AT&T Park was built for $357 million and privately financed. However, 81 games per year as opposed to 8 garners substantially more revenues to pay the stadium debt service.

    3. It depends how the loan agreement is written. If the stadium authority(The City of Santa Clara) is the loan’s guarantor, who becomes responsible in the event of Stadco’s collapse?

    4. Once again, time will tell. However, history is not on our side.

  65. Jay: “A very quick look at the Arsenal stadium shows it’s cost was less than the SC stadium and no public subsidies were involved. It’s naming rights generated about $100 million pounds over 15 years. I don’t know the exact length of football season in England, but I’d guess it’s over eight a year. It also sound like the stadium is much more multi use than then SC Stadium could ever dream of being”.

    It cost a little less, sure. Since 2003 the cost of steel has skyrocketed for one.

    The naming rights deal is considerably less than full value since the team had to take payment up front in order to get the banks to loan them the money.

    A successful team like Arsenal will generally play about 30 home games a season, though only 19 are guaranteed. However, ticket prices are nowhere near what is being talked about for the 49ers. For the current season, Arsenal season tickets were between ÔøΩ855 and ÔøΩ1955, which is by some distance the most expensive in the Premier League. Also remember, 49ers season ticket holders are required to pay for the preseason games as well, so it’s really 10 home games.

    The stadium is in some use as a conference center, but not all that much. Remember, the soccer season runs from August till May so there’s not much time when it’s available. There have been a few concerts, but not many, something like three I think.

  66. Paul G. ~ What I find disturbing is the fact one of the revenue components we’re holding out for is for naming rights of the stadium, yet the new stadiums for the NY Giants/Jets and Dallas Cowboys are still without title sponsors. What does that say about the market?

  67. Paul G. ~ What I find disturbing is the fact one of the revenue components we’re holding out for is for naming rights of the stadium, yet the new stadiums for the NY Giants/Jets and Dallas Cowboys are still without title sponsors. What does that say about the market?

  68. So what happens if the $450 million SA loan can’t be paid back fully in three years? Does anything left over get “rolled” into a new loan that the SA is responsible for? If this happens will the SA begin to ask the city (you can see the SA members switching over to their council hats) for “help” regarding the interest? Or will it be another 6.5-7% loan from Stadco?

    What is typical in the naming rights business, pay as you go, like rent, or most up front, or back-ended? If revenue from naming rights was outside the three year window, wouldn’t this in turn have to be securitized in order to try to pay off the debt at the end of the third year?

    The fact that Neil is saying that this isn’t necessarily a terrible deal means something to me, but even if the SA loan is paid off after three years as planned, there still seems to exist plenty of other risks to the city. Additionally there really isn’t a clear way that I see it can make money unless naming right/PSL sales came in over $450 million (unless the 49ers have a proviso for that).

    Again the primary focus of the city is going to be on running a NFL stadium (and I still don’t believe that staff’s time on the stadium project the past five years has been accurately tracked). Is this desirable for any municipality of 120,000?

  69. Giants/Jets sold the naming right for 25 years/$400 million, Metlife stadium anyone? Jerry Jones decided that no one was offering enough for the blessed by God himself Cowboys. How much he was offered no one knows.

    A brand new article just posted: www.pressdemocrat.com/article/20120317/sports/120319601

    Pay attention to almost the last line where it says that if the debt isn’t paid back, the field will be foreclosed on…

  70. Jay, in one of the articles about the city council signing the final agreements it was stated that the stadium authority would be hiring the 49ers to actually run the stadium. Which makes sense, otherwise both parties would have to hire staff to run the stadium for only part of the year.

  71. Well, the $30 million in annual rent is itself a joke. Its simply paying for Stadco’s loan. What is the annual payment for a $400,000,000 loan @ 7% for 30 years. That comes out to nearly $32 million per year. So, at least that might be covered. So, what covers approximately $10-
    $20 million per year in stadium operating expenses? What pays for any shortfalls if there aren’t sufficient revenues to pay for the $450 million in three years?

  72. RE Giants/Jets that’s two teams in the nation’s #1 market. The question is what is the PV of that $400 million? Would the 49ers be lucky to get 50% of what the Jets/Giants did?

    Tnx for the Press demo link which I’ll read later, but I think that foreclosure is something the lenders would be very reluctant to do because I fail to see how it could work to their advantage. Much better from their perspective to arrive at a deal with the city to string things along-esp. if the general fund could get tapped into by a backdoor method.

    SCWBB, those maintenance costs can be the real devil in this deal. This is where I see a lot of potential for disputes down the line. Unless of course the 49ers can install “friendly” councils the next 40 years to see things their way.

  73. After the stadium is complete and the exact amount of long term debt is known it is considered likely the loan will be refinanced and possibly a bond issued. This a little above my financial knowledge, but maybe someone else can tell us about the benefits of this?

    BTW, Arsenal also used a bond issue. To quote some figures, from Wikipedia: “Arsenal issued 210 million pounds worth of 13.5-year bonds and 50 million pounds of 7.1-year bonds The effective interest rate on these bonds is 5.14% and 5.97%, respectively, and are due to be paid back over a 25-year period”.

  74. The 49ers have to reimburse the stadium authority for all operating costs:

    49ers.savesantaclara.org/49ers_term_sheet_article_12.php

    The only major exception is capital expenditures. That’s a slight concern, as we could conceivably see the 49ers coming back for major stadium improvements in 10-20 years and insisting that Santa Clara pay for them. But at least they didn’t get a “state of the art” clause requiring the city to do so – all they can do is whine about it, really.

  75. Paul G.~ There’s really no benefit to issuing bonds. In fact, a bond rating agency had determined the stadium bonds to have a “BBB” grade which places them one step above junk bond status. Thus, the interest rate will likely be much higher than the prime lending rate. Debt is debt no matter how many times it gets painted over.

  76. Paul G.~ There’s really no benefit to issuing bonds. In fact, a bond rating agency had determined the stadium bonds to have a “BBB” grade which places them one step above junk bond status. Thus, the interest rate will likely be much higher than the prime lending rate. Debt is debt no matter how many times it gets painted over.

  77. Its to bad that the ones who voted “Yes” on Measure J, and the residents in Santa Clara that support the Stadium can’t pay for the whole damn thing! But see…the Yorks need all of the taxpayers of Santa Clara to help the ones who voted yes on Measure J, to support the this boondoggle.

    I still say “Where are your State wide Legislator, & National Elected Legislators in this matter?” Get on the horn folks, until you get someones attention in the corrupt Stadium project! It is NOT too late!

    Something is wrong when this much risky debt is put upon a small town, & its taxpayers. And your City Elected Officials stay by & with the the Professional Sports team, and not by the people who elected them…”The Taxpayers”

  78. I wonder about what impact a high-use stadium (5 in-season 49ers games, 5 in-season Oakland Raiders games and 5 other spring/summer events) would have on Great America Amusement Park. They are going to close on any day the stadium is used. They are closed November through February or March, but NFL games from two teams in August through October has got to hurt their bottom line as does a successful non-NFL season for the stadium.

    Great America has a lease with the city and took cash from the 49ers in exchange for closing on game days. Will Great America have to remain open for years (to avoid lawsuits from the city or maybe even 49ers) even if they are losing money at that site?

  79. I think there is virtually no risk to Santa Clara as the 49ers could buy the stadium on their own. Despite the fact that the city is putting in some money their contribution is a small enough part of the total that I think Santa Clara is involved as an owner almost exclusively for the tax savings the 49ers will get from public ownership. now that the 49ers have gotten their tax savings they will keep the thing afloat.

    The $500 million from Stadium Builder Licenses sounds very believable when you see the price of the club seats. That and the fact that every seat in the stadium will have an SBL. That’s close to 60,000 seats. The Cowboys got more than $500 million for their stadium.

  80. The only “no risk to Santa Clara” reality would be if the 49ers construct, develop, operate and own the stadium with their own money. Most of they revenue streams are based on assumptions. If they don’t materialize, who pays for the shortfalls? Our city officials continue to say the 49ers will, but I have yet to see anything in writing which fully obligates them to paying for revenue shortfalls on a yearly basis. Also, the stadium will be owned by the City of Santa Clara. That does not exempt my city from paying property taxes which are owed to the County of Santa Clara.

  81. “Most of they revenue streams are based on assumptions. If they don’t materialize, who pays for the shortfalls?”

    I think the 49ers do. They have the money now, and they will have even more money from a new stadium. I don’t see where they would want to get into a fight with the city about a shortfall. The NFL also wouldn’t want a fight as that would blow the whole NFL marketing story about stadiums being great deals for cities. Imagine if people fighting new stadiums in other cities were able to say “look what is going on out in Santa Clara”.

    “That does not exempt my city from paying property taxes which are owed to the County of Santa Clara.”

    Cities in Santa Clara County pay property taxes?

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