49ers “withhold” $5.5m in “rent” on new “stadium,” everyone gets in a needless tizzy

Why is it that just when you’re about to go and declare a new stadium a rare financial success for the public (or at least a rare non-sea of red ink, even if there may be numerous other problems), the team’s owners have to go and ruin it by asking to renegotiate the deal once the place is up and running. Seriously, what’s the deal, San Francisco 49ers?

The Niners agreed to $24.5 million per year for the first two years, but its contract provides a one-time “rent reset” — adjusting the rent based on changes in revenue, updated development costs and expenses.

But the two sides aren’t agreeing on a new rent amount. The team wants to pay $20.25 million. City leaders say they’re still figuring out if that’s enough and are asking for $24.5 million again just to pass a fiscal budget and continue negotiations.

The thing to remember here is that the “rent” involved isn’t actually rent: It’s actually money that the 49ers owners are paying to the Santa Clara stadium authority that the authority will use to repay money that the 49ers loaned to the authority to pay off bank loans for stadium construction that the team took out but the authority is paying for. (If you didn’t understand all that, don’t worry, that’s really only for the tax lawyers to comprehend.) So this is all just a complicated Rube Goldberg scheme for the 49ers to get a federal tax break on paying off their own construction debt.

What’s going on now is that the stadium has been bringing in money at a slightly higher-than-expected pace: Personal seat license holders may be wanting to dump them, but they’re also asking for fewer payment plans than projected, and operating costs have been below expectations as well. So the 49ers, reasonably enough, are saying, “Hey, you don’t need all this money we said we’d give you to pay off our loan, we’re taking some of it back.”

The Santa Clara stadium authority, equally reasonably, is saying that they’re not sure yet what the cash flow is going to look like, so please make your full rent payments so we can balance our budget, and if there’s any left over, we’ll write you a check for the difference. Which the 49ers then agreed to do, sending over a pair of checks worth $5.5 million.

So … what’s the big drama here? Nothing, really, unless abstruse accounting gimmicks are your cup of tea. The rent squabble is just a matter of how the team will pay off its loans — which is a headache for some Santa Clara bean counters, I imagine, but nothing that taxpayers should be worried about. Everything else that’s dysfunctional about Levi’s Stadium is another story, but at least if Santa Clara got a stadium where fans broil, the turf is a disaster, and the team is awful, they’re not stuck with a bill for it as well.

8 comments on “49ers “withhold” $5.5m in “rent” on new “stadium,” everyone gets in a needless tizzy

  1. Neil.This is just another issue regarding the stadium where the 49ers actions appear to be less than amenable. Why are the 49ers making an issue of the whole thing? If they agreed to $24.5 million per year, then why not pay it? Honestly, I thought it would be a few years before there were any financial disputes between the primary parties of Levi’s Stadium. Although this incident may not seem like much, I believe its an indication as to how the 49ers will react towards any future fiscal disputes. And believe me. There will be many others.

  2. They probably want the cash to purchase the park across the street they have been able to steal from the taxpayers of that city.

  3. People here in Santa Clara have been kept in the dark regarding the Stadium Authority finances – it’s a public agency, and there should be transparency regarding its finances. The city/Stadium Authority is being investigated by the Santa Clara County Civil Grand Jury, our mayor resigned the day after the Super Bowl, giving 1 day’s notice, our highly paid City manager is now resigning too, and some of our city council members are asking for financial information about the stadium without receiving answers.

    So there should be no rent reset until the people here actually know what is going on with the stadium finances.

  4. Should be a warning flare for any municipality that relying on
    a mallpark and sports franchise to “balance” a budget is
    fraught with danger.
    The 3/12 post about the rats fleeing the ship isn’t surprising…

  5. The anti stadium socialism mayor in Minneapolis just agreed to a $100mil gift to the NBA. These Mayors will keep selling out the taxpayer as long as they can get away with it.

  6. Here’s more:

    Note that our mayor was the leader of the June 2010 ‘Yes on J’ stadium ballot measure committee, but she apparently now sees what the ‘No on J’ side saw during the stadium campaign – which includes hiding financial information.
    They want a rent reset? We should all wait until the Stadium Authority’s complete financial situation is made public, and the Civil Grand Jury investigation of the Stadium Authority is finished and made public.

  7. Some intriguing details in this Chronicle piece about the collapse of the SBL market. Perhaps most interesting is this:

    “The 49ers just announced that “there are a limited number of season tickets and stadium builder licenses available.” They’ve also sent an offer to season-ticket holders, asking if they’d like to upgrade to better seats.”