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June 02, 2009
Noll: Santa Clara 49ers deal is tops
Stanford economist Roger Noll has analyzed Santa Clara's proposed deal with the San Francisco 49ers for the San Jose Mercury News and concluded that while some of the revenue projections may be overly optimistic, "you're still going to end up with a better deal than just about any other city has received." While that's admittedly not a very high bar to set, it still should ease qualms about the deal somewhat, given that Noll has been doing this since we were knee-high to David Samson.
In the same article, Santa Clara assistant city manager Ron Garratt responds to my concern that the stadium authority could face revenue shortfalls and require an Indianapolis-style bailout, saying that in either cases of cost overruns or revenue shortfalls, "the city isn't going to pay those expenses." If so, that's great — but it's not what it says in the term sheet. There is a provision stating that "the Stadium Authority will be liable for development costs of the Stadium only to the extent of Stadium Authority Construction Sources actually available," but given that it doesn't say who'll pay these costs otherwise — not to mention that construction would need to begin before things like naming rights and certainly PSLs are sold — this hardly looks like an iron-clad guarantee.
Meanwhile, two community activist groups, Santa Clara Plays Fair and Not With My Money, have begun organizing to defeat the plan if it goes to referendum next spring, saying any government subsidies for a football stadium would be too much. What, like there's something else they could be doing with the money?
Be interesting to see how this one shakes out. As far as NFL stadium plans go it is definitely appearing to be one of the better ones. But it still has the public contribution unlike say Gillette Stadium which could very well kill it if the SC Plays Fair and others get their way.
Posted by Dan on June 2, 2009 01:21 PM
I'm one of the organizers of one of the groups opposing this subsidy. We've been poring over the details this weekend, and one of the things I've been wondering is just how much money the TEAM will be making on this deal. If it's really such a partnership, shouldn't both parties be spelling out their contributions and hoped-for profits to ensure that everyone is getting a fair deal?
Not to mention the fact that in addition to all the normal ways teams profit from these deals (luxury boxes, naming rights to parts of the stadium, etc.), the deal also forsees that the team will be lending money to the Stadium Authority and the hotel district and collecting interest on these loans. Gee, if they have the money to loan, why don't they just build it themselves??
The other big issue I see is that this is not a deal with the 49ers TEAM. As even the signature page of the term sheet indicates, this deal is with the 49ers Stadium Company LLC. The profits from the deal accrue to the TEAM, not the 49ers Stadium Company, so it seems like it would be fairly simple for the 49ers Stadium Company to suddenly decide it is broke and threaten to go bankrupt. Neither the team nor the owners are putting their assets on the line.
Not that any owner has ever tried that before. Ha ha.
Posted by Michele Ryan on June 2, 2009 02:06 PM
I hadn't thought about the LLC acting as a firewall for the 49ers — it's certainly worth investigating.
As for profits, it looks like virtually all of them accrue to the team, though there's some odd language in there about the stadium authority getting parking and concessions money "except as otherwise agreed" by the team and the authority. So you could certainly make the case that the Niners would be putting up half the money and getting the lion's share of the revenues, while the city would be putting up about one-seventh and getting bupkis.
It's really hard to say without seeing the full breakdown of costs and revenues, though, which so far hasn't been made available.
Posted by Neil on June 2, 2009 02:41 PM
Roger Noll, is correct in stating its a better deal than what most other cities received for new NFL stadiums. However, we need to remember that those cities are now suffering as a result of such poorly negotiated deals. New taxes, and fee increases, are now being proposed to pay for revenue shortfalls of recently built NFL stadiums. There is no reasont to believe, a similar result won't occur in Santa Clara.
Posted by Juan Pardell on July 13, 2009 01:31 PM