Report: 49ers to clear $100m a year in profit on new stadium

This is all based on an unnamed source, but if true, it’s absolutely nuts: San Jose Mercury News reporter Tim Kawakami says that the San Francisco 49ers‘ projected profit for next year, when they move into their new stadium in Santa Clara, is $100 million. That would be up from profits of not very much (Kawakami says the team is breaking even, Forbes says it’s more like $10 million a year in profits), and would make them the fourth most profitable franchise in the NFL — even after having to pay for almost all of the cost of their new $1.3 billion stadium.

How are the 49ers expecting to manage that? Per Kawakami:

That’s thanks to the massive success of the seat-license program, the suites, the sponsorships, and all the varying relationships and deals that the 49ers have strung together in recent months and years in conjunction with the stadium opening.

If true, it certainly explains why the 49ers were willing to take on so much of the stadium cost — if they can shell out an additional $100 million a year to pay off construction and still have another $100 million a year left over, that’s seriously crazy money, and shows that NFL stadiums (or at least, NFL stadiums for winning teams in a part of the country with tons of rich people) are an exception to the rule that stadiums don’t usually earn enough in new revenue to pay back their construction costs. It also makes one wonder why other cities are shelling out hundreds of millions of dollars for new stadiums for their teams when there’s potentially enough new venue revenue for them to pay their own way — not to mention whether Santa Clara could have asked for a cut of the 49ers swag in exchange for its financing piece of the deal, instead of just breaking even as it will currently.

Of course, that money has to come from somewhere, and that somewhere will be 49er fans, either via their eyeballs as advertising consumers or their wallets by paying for tickets (and PSLs). And paying for other things as well:

Parking fees haven’t been set yet, but they run in the $30 to $35 range per car and up to $75 for RVs and buses at Candlestick and at Raiders games. One South Bay city official told me would not be surprised to see prices in the $40 to $50 range for cars at the new 49ers stadium. When the San Jose Sharks arena opened, fans were outraged to pay $10 to park. How much are you willing to pay to park at a 49ers game?

The answer appears to be “a lot.” Or at least, is for the rarified clientele who will make up 49ers ticketholders. Now the 49ers owners had just better hope that the team stays good and popular for the duration of the stadium bonds — and that, you know, football doesn’t get sued out of existence in the meantime.


24 comments on “Report: 49ers to clear $100m a year in profit on new stadium

  1. One factor that will affect all 32 NFL teams profitability in a positive way is the new network TV contracts kicking in next year – 2014 and running for 9 years through 2022. The per team revenue jumps from $80 million this year – 2013 to an average of $137.5 per year for the 9 year period of 2014-2022.

    It is going to be very hard for any team not to make a nice profit!

  2. The 49ers sold out Candlestick when they were horrible, and now the PSLs have locked in customers. The PSLs will pay off the $450 mil short term debt plus interest. They’ve sold over $400 mil in luxury suites that more than covers their contribution, plus in a few years the Raiders will be tenants which will greatly reduce the 9ers annual lease expense.

  3. This sounds terrible — and I want it to sound that way — but I hope this ticks off the Raiders.

    The thing about PSL’s is that when they fail, they usually fail in a huge way. And most of the time, they fail. Ah, but when they succeed, they work great.

    This is one of the rare instances where a public subsidy is working out. Four out of five times, they don’t. But you have to understand that one of the most popular NFL franchises has moved into one of the country’s richest neighborhoods, and as crazy as it sounds, plunking down $100,000 for a PSL isn’t that big a deal in the South Bay. I liken it to the initiation fees at Japanese golf clubs… Sounded crazy to 99% of us, but not any more.

    Back in the 1980’s, when the 49ers were getting more popular (for obvious reasons), I used to get a free seat to games if I did the driving and paid for the gas. I don’t think that deal would be possible any more.

  4. I miss the days when the Usual Suspects would hijack every Santa Clara thread decrying this deal. Where are those cats nowadays?

  5. Leave it to Santa Clara to sniff out a winner again. They did the same thing decades ago when they built their own utility company, the same one that helped fund their portion of the Niners Stadium. And it looks like they’ve done it again. Call it luck or good management acumen, but the people running that town do seem to get it right more often than their contemporaries in other California cities.

  6. Dan, Santa Clara is not well managed, and the utility company had nothing to do with the stadium financing (although our elected leaders and the 49ers tried to go that route in 2006/2007 and our City Manager said ‘no’.)

    Santa Clara is currently in a deep pool of hot water of our elected leaders making, and is being sued by the County of Santa Clara over hundreds of millions in property tax dollars, and here’s why. In 2011 the newly elected Gov. Brown announced the end of redevelopment agencies (RDA). By June 2011 the RDA dissolution legislation took effect, and cities were supposed to transfer their RDA assets (cash/bonds/land) to Successor Agencies. In the meantime, trying to beat the clock on the Gov’s pending RDA dissolution legislation, in March 2011 the City of Santa Clara’s RDA (same people as our city council) transferred about $390 million in RDA property tax dollars to the City’s coffers, and then started to spend the money. It’s reported that at least $50 million has been spent by the city on non-RDA projects (a parking garage across from the stadium and a library.) The City wouldn’t stop spending the RDA money when asked to stop by the county, and wouldn’t sequester the money until RDA issues could be resolved, so the County of Santa Clara sued and won a restraining order against the City of SC to stop the spending of former RDA dollars. By law, all of the RDA assets must be handed over to the Successor Agency for distribution to taxing entities (county, water district, fire district, schools, city, community college district.) The state has backed up the County. The City is in hot water, and has to hand over all of the former RDAs assets, including the RDA money it spent which it wasn’t supposed to spend.

    This is going on all over California, and City after City is handing over the assets of their former RDAs to Successor Agencies, as per the Gov’s RDA dissolution legislation. Santa Clara is refusing, and is therefore being sued. This isn’t going to end well for the City of Santa Clara. They have to abide by AB1X26, the RDA dissolution law. The 160 page audit of our RDA performed by County auditors and confirmed by the CA state Controller’s Office shows how many games our City Council was playing with RDA money. Here’s just one example. The RDA had been paying back a loan to the City for some property, but when the loan was paid off, the City kept on collecting loan payments from the RDA – $8 million worth. The County audit showed all sorts of issues with the RDA money, and the County isn’t going to let the City of Santa Clara off the hook.

  7. “If true, it certainly explains why the 49ers were willing to take on so much of the stadium cost ”

    In fact, the 49ers are taking on very little of it, other than the payback of only a portion of the $200M the NFL gave them. And the remaining part of that is purely a grant and not a loan.

    The most that the 49ers are going to do is to cover overruns after our city’s Santa Clara Stadium Authority gets stuck with a cumulative debt in the face amount of up to $950,000,000.

    The stadium’s billion-dollar price tag means that the Santa Clara Stadium Authority is taking nearly all the risks while the 49ers walk away with all the money.

    Tim Kawakami’s estimate of $100M in profits is not too far off. The 49ers – and not the city of Santa Clara or any of its Agencies – get *all* of the TV royalties and *all* of the luxury box rents. I thought I was being conservative in estimating $100M gross for the royalties and $30M gross for the boxes, and now it’s possible that the team will clear even more than we thought.

    Our city’s General Fund gets a stinking $180,000 in Ground Lease the first year the stadium opens.

    And that’s all.

    Bests,
    Bill Bailey, Treasurer,
    SantaClaraPlaysFair.org

    -=0=-

  8. It’s really far too early for the stadium proponents to be taking a ‘victory lap’ on behalf of the city (the Yorks sure, ok).

    I never disputed that the 49ers were going to come out of this fine. My issue is what does the city get out of it? For example, the SA/Council/Yorks tried to lure the ‘Big Game’ to SC recently (an absurd notion really) and were rebuffed due to Cal alumni backlash. But it’s an indication of how desperate they are to find non-NFL events which is where the only way city supposedly makes some money.

    If BSLs sold better than expected due to the valley turnaround and the team’s recent success, ok, I accept that. It doesn’t mean however that the city isn’t going to lose money operating the stadium (there’s a long period after the honeymoon is over) and that resident’s aren’t going to be inconvenienced on game days.

    We always get into this sort of rhetorical tail chasing it seems–if the deal’s success was such a ‘slam-dunk’ why did the city have to be involved at all? Shouldn’t the Yorks paid for the whole thing themselves? We accepted and are still accepting significant risk on behalf of a very wealthy family and entertainment industry.

    Santa Clara was sagacious decades ago in taking ownership of their own utility and power generation. Lower electricity rates made the city more a competitive business location and benefited residents also. The stadium deal OTOH is a move in the exact opposite direction which benefits few in the city and the eventual (I’m regretfully confident) expense of all.

  9. The way I look at it, the “usual suspects”/”cats” have even more reason to be pissed now – the 49ers could’ve easily bought some land and built a stadium without city involvement. As it should always be for a business with $billions in annual revenue.

  10. Bill, can you show your math on that calculation? The way I have it, between PSL sales (which is undeniably 49ers money), rent (ditto), and naming rights (tougher call, but it’s new stadium revenue in any case), the city will end up paying very little if anything.

    Yes, you can argue that Santa Clara could/should be getting a cut of all this 49ers riches. But that’s a different argument than saying the 49ers aren’t paying for it.

  11. Neil,

    I get your point about PSL sales really being the 49ers contribution and that it’s somewhat disingenuous to state the city is responsible for $950m in loans when there is this substantial income stream (that’s coming in better than anticipated) to service them.

    However, the stadium is still costing and will continue to cost Santa Clara money whatever scenario you envision. How much “off the books” staff time has been dedicated to the stadium over the past seven years is a question no one can answer. Much of what the city loses will be in opportunity costs. Measure J froze the team’s ground lease on their 11 acres of city land at about $25K a year (a tiny % of its FMV). To placate Great America, the city amended their long term ground lease to eliminate scheduled rent increases which will cost the city millions over time. The office market is hot now and the city’s own analysis was that an office building would have generated more income to the city (and certainly jobs) than the stadium.

    As far as rent goes, I’ve seen nothing in writing guaranteeing anything to the city. My belief is that the team is not going to play nice and willing be perfectly willing to have the city endure some stadium pain for the glory of hosting the team. They have already shown on numerous occasions that they aren’t not reluctant to bare their fangs to get what they want.

  12. Dan, you sound an awful lot like someone who works for the City of Santa Clara, named Dan.

  13. Neil, you should also know that the 49ers are currently suing the County of Santa Clara to prevent public agencies from receiving their distribution of $25 million in former redevelopment money. The 49ers want that money, while the Gov’s RDA dissolution law specifies that public agencies will receive property tax dollars from the former RDA. The former RDA Oversight Board, County, and State of CA have all said ‘no’ to the 49ers, something our City Council is unable to do.

    That’s been the 49ers response every time they don’t get their way – sue. Suing is not a good way to start a partnership. Santa Clara should have looked across the bay to see how often Al Davis sued the Oakland Coliseum Authority, and looked at how the 49ers sued San Francisco over Candlestick.

    NFL teams have endless deep pockets to pay for lawyers and spend on campaigns, which puts citizens at a huge disadvantage. If you watch the meetings of Santa Clara’s Oversight Board for the redevelopment successor agency (on video 24/7 on the City’s website) you’ll see the 49ers attorneys stand before the Oversight Board and threaten to sue every time the O Board makes a decision that the 49ers don’t like. The Governor, in his wisdom, created Oversight Boards to oversee the dispensation of former redevelopment agency assets – and made sure the O Boards had only 2 members from the City which formerly owned the RDA. The O Board therefore doesn’t do what the 49ers want it to do, unlike our City Council.

  14. Also Neil, the newspapers here are playing ‘nicey-nice’ with the 49ers so the papers won’t cover the 49ers lawsuit against the County over the former RDA money, although they are covering the County’s lawsuit against the City of SC, albeit with heavily biased coverage in favor of the City’s woe-is-me stance.

  15. Parking is also going to be a real problem. Santa Clara Plays Fair said from the beginning that convincing business owners to allow their parking lots to be used by NFL patrons was problematic. So today there’s finally an article about the problems with getting business owners to agree to parking contracts.
    http://www.santaclaraweekly.com/2013/Issue-36/milestones.html

  16. But it won’t change the fact that there is no public financing available for new facilities, private financing is not feasible in Oakland and neither the owners nor the two leagues are going to charitably donate new facilities (and deal with the precedent that sets up). If there is one city that should be expected to pay for new facilities on the public dime, it would be Oakland. MLB subsidizes the A’s and does not profit from them. The Raiders are ranked dead-last in franchise value in Forbes. But there is no public dime to be had, unfortunately. In other states where there tend to be just one big league team, the state steps in and pays. But in California, cities are expected to go it alone. All this points to the writing on the wall that nobody wants to read – moving the two teams to other cities. But to where? LA doesn’t have its act together (yet) and San Jose, the obvious solution for the A’s, has been designated a colony under control of the San Francisco Giants.

  17. Neil, it’s basically a number. The Santa Clara Stadium Authority is down for $950,000,000 in stadium construction costs – not the 49ers, and not Stadco=Forty Niners SC Stadium Co., LLC.

    It does not matter that part of that will be paid down with PSL sales – it is still public debt, and the 49ers make no contribution to that. If they wish to claim that they do, then they should be selling their own PSLs and they should be paying for the construction costs – and the operating costs – of the stadium themselves.

    The reason this was done was to exempt PSL sales from CA sales taxes – with tax exemptions in general being the lure of public financing for billionaires’ sports palaces in general. We learned that from you, in fact – we just didn’t appreciate how well an NFL franchise could exploit that to the detriment of one small city.

    The 49ers are down to pay off a portion of the $200M from the NFL, which portion they won’t state. But one sports blog I found over a year ago claimed that about half of that, $100M was to be paid back by the team. The other half was free money for Jed.

    =-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=
    Public debt IS public money. And once the 49ers started using our public debt for their stadium, they lost the privilege of claiming that they were paying down what will be nearly a billion dollars of that same debt.
    =-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=

    And after that, note that the Santa Clara Stadium Authority is still liable for the annual operating costs of the stadium at about $25M to $35M a year, every year.

    I’m carefully distinguishing between the city as a legal corporation and the Santa Clara Stadium Authority as a legally-formed joint powers authority. And the Santa Clara Stadium Authority is the body that’s paying for nearly all of the stadium’s construction.

    The Ground Rent actually paid to the City? That miserable $180K in the first year is a true report, by the way.

    Bests,
    Bill Bailey, Treasurer,
    SantaClaraPlaysFair.org

    -=0=-

    They must pay off those, and they must

  18. “Public debt IS public money.”

    If you genuinely think that it’s about who borrows the money, not who pays it off, then I have some mortgage payments I’d be happy for you to make.

  19. But it *is* about who pays it off.

    That’s the Santa Clara Stadium Authority. Not the San Francisco 49ers.

    Bests,
    Bill Bailey, Treasurer,
    SantaClaraPlaysFair.org

    -=0=-

  20. Remember the “Would you like to have an argument?” Python sketch…

    From what we’re being told (by the Mercury [hardly an unbiased source]), the BSL sales have gone so well that short term construction loan debt will be met. If one accepts this at face value, then the deal will not be an unmitigated financial disaster for Santa Clara it seems. But of course two years ago no one knew for sure that the BSL sales would go well (and if the 49ers were in the tank the past couple of years they probably wouldn’t have). Then it would have been–whatever protestations from the council (I mean SA) otherwise–very likely the city’s (and not the 49ers) big problem. This is real risk the city took on and while they may have dodged a bullet here, as Neil had mentioned in another post, there is a cost in doing this.

    But if the stadium starts running operational shortfalls a few years down the road, whose problem will that be? As a regular reader of this site, I’m not betting on the 49ers here.

    The city s/h done better than it did. The area is rich (not generally the residents of Santa Clara of course) and a more savvy negotiating coterie than the SA would have driven a harder bargain–knowing full well how badly the 49ers wanted a new stadium and how limited their options really were. Instead the city foolishly acted desperate for the team to build here (and desperation is not a good tactic in attempting to date or make business deals).

    Of course our mayor didn’t want to see this as a mere business deal but something more special–like a romantic involvement (or a way to connect with her late father–who took her as a child to fondly recalled games at Kezar).

    Since Santa Clara has no equity stake in the 49ers, any increase in the team’s value has no benefit to us–only the York’s and their partners. The only way the city can actually make any money (the essence of most business deals), is to book non-NFL events (of which revenues will be split 50-50% with any the 49ers decide to co-promote (the “good stuff” in other words). Now to date all I’ve heard of is a fourth tier bowl game called the Kraft “Fight Hunger” Bowl (that was being played up the road at AT&T “Keeping your phone records for 25 years for the Feds–just in case” Park).

    Fortunately for me, I don’t live in the immediate vicinity of park (actually I live much closer to the future Apple world HQ’s donut building) so my concerns are more focused on the financials to the city than immediate quality of life issues that will beset those unfortunate enough to live in 95054. Regardless, the city will gain little or nothing in terms of prestige or livability for all the misplaced effort.

  21. One issue which will not ever go away is this:
    If the stadium is such a good deal, why lie and hide information in the stadium ballot measure and Yes on J stadium campaign? Why did the city council, working with the 49ers,purposefully leave the term sheet table of stadium construction costs off of the ballot? Why not disclose to voters in the ballot measure that the Stadium Authority would take on hundreds of millions in loans for stadium construction? Why argue in front of a judge that cost disclosure isn’t required on city-wide ballot measures, so the city council/49ers were not legally required to disclose the loss to our general fund and Stadium Authority obligations? Why not just tell the truth instead of hiding information?

    Failure to disclose the truth about the financials on ballot measures typically means that ballot measure sponsors have something to hide; and ballot measure sponsors think that their ballot measure won’t pass if they tell the truth. In this case, coming back to voters 18 months later with a DDA which requires the Stadium Authority to take on $850 million in loans, which quickly ballooned to $950 million. The press can argue all it wants about how this is a good deal, but those of us who live hear and lived through the deceitful campaign which was Measure J know the truth about how we’ve been lied to.

  22. wow are these comments two years old? i swear i have read them before ;)

    “I get your point about PSL sales really being the 49ers contribution and that it’s somewhat disingenuous to state the city is responsible for $950m in loans when there is this substantial income stream (that’s coming in better than anticipated) to service them.” -sc jay

    but thats what i keep hearing from the SC crowd??? come on guys lets move forward sc Jay has!!

  23. Straw man, Guey.

    First of all, no one stated that the City of Santa Clara was responsible for stadium debt – the Santa Clara Stadium Authority, a joint-powers authority, will be ultimately on the hook for the $950,000,000 in stadium costs.

    Second, that same Stadium Authority will also be responsible for running the stadium for Jed – hosing off the sidewalks and rolling the dumpsters out to the curb – at what will probably be a cost of $25M to $35M a year, every year.

    The City itself gets a stinking $180,000 in Fixed Ground Lease the first year.

    You don’t have to look any further than that to see what a crummy deal Measure Jed locked in back in June of 2010. We’re seeing only a taste of that now.

    Bests,
    Bill Bailey, Treasurer,
    SantaClaraPlaysFair.org

    -=0=-