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.