The San Francisco 49ers’ planned move to a new billion-dollar stadium in suburban Santa Clara faces what could be its final hurdle on Monday when a judge hears arguments on whether a complex financing deal should be subject to voter approval.
Stadium opponents say an $850 million construction loan for the 68,500-seat National Football League (NFL) facility, led by Goldman Sachs Co, Bank of America Corp and U.S. Bancorp, is too risky for the Silicon Valley city of 119,000.
Supporters, including a majority of city council members, say they have worked hard to ensure residents will never face the kind of stadium liabilities that have burdened other cities, including nearby Oakland.
Santa Clara voters backed the stadium in a 2010 referendum, but the ballot measure did not spell out in detail just how the project would be financed.
The Santa Clara Stadium Authority, whose board is made up of city council members but is legally separate from the city, “is taking on hundreds of millions of dollars of debt,” said Matthew Zinn, attorney for opponents Santa Clara Plays Fair.
“It’s not at all clear that the authority will be able to satisfy that debt,” said Zinn.
Santa Clara Vice-Mayor Lisa Gillmor said the city set up the Stadium Authority “to protect the city and insulate us from any of the risks or obligations for the stadium.”
A judge is scheduled to hear arguments on Monday as to whether the financing agreements can be subject to a vote. Opponents have collected enough signatures to put it on the county ballot in June.
The 49ers, a marquee franchise in the booming NFL, have long been looking to leave aging Candlestick Park in San Francisco. New stadiums in big markets like New York have been built with little or no public funding in recent years, and private investors are eager to build a new stadium in Los Angeles.
But smaller markets like Oakland, Minneapolis, Indianapolis and Cincinnati have been forced to subsidize stadium construction or renovation in order to keep or recruit teams.
Construction of the $1.02 billion Santa Clara stadium on city-owned land that is now a parking lot for the Great America theme park could start this summer and be completed in time for the 2014 NFL season.
COMPLEX BUSINESS PLAN
The stadium plan calls for the consortium of bank to lend $850 million to an entity called the Stadium Funding Trust, which in turn would lend $450 million to the Santa Clara Stadium Authority and $400 million to a 49ers-owned entity known as StadCo.
The loans would be repaid from revenue sources including naming rights, licenses to buy seat tickets and luxury suites, and non-football event and concession rights.
The stadium would be owned by the Stadium Authority; the 49ers would pay $30 million a year in rent and operate the facility during the football season.
Support from the city will also include up to $35 million from a 2 percent hotel room surcharge and a $42 million parking garage. The city redevelopment agency was also slated to provide $40 million, though that is now in doubt due to a statewide phase-out of redevelopment. The NFL announced in January that it would provide $200 million to the 49ers for the project.
The stadium financing contract says “no lender or bondholder under such (financing) documents shall have any recourse to the city or the (redevelopment) agency general funds or operating revenues or to the city enterprise funds.”
City officials said they also have protections for worst-case scenarios such as a strike or lockout.
“The lenders will never be looking to the city of Santa Clara to pay the debt,” Gregory Carey, chairman of the public sector and infrastructure group at Goldman Sachs, told city council members at a December 6 meeting.
Carey declined to comment beyond his public remarks in December, a Goldman Sachs spokeswoman said.
Personal seat licenses, which have had mixed success in other markets, will be a key revenue source. A firm hired by the city to market the licenses, which give the holder the right to buy seats, is initially offering 9,000 licenses to current Candlestick Park season ticketholders for $20,000 to 30,000.
A few choice seat licenses near the 50-yard line are being offered for $80,000 each, and 165 luxury suites with about 20 seats each are being offered for $150,000 to $350,000. Tickets for the licensed seats range from $325 to $375 a game.
Al Guido, vice president of sales at Legends Premium Sales, declined to say how many licenses had been sold. He said he’s booking about 50 appointments a day for fans to see a model of the new stadium and try out the wide, cushioned seats.
Ron Rosberg, 72, of Clearlake, California, who owns 18 seats at Candlestick Park, said after a visit to the sales office he won’t be among the fans at the new stadium.
Four comparable seats at the 50-yard line would cost him $320,000 plus $375 per ticket, he said.
“I’m not going to renew any of the tickets,” Rosberg said. “The tickets are just way too expensive.”
If too many fans take Rosberg’s view, that could leave a hole in the stadium’s revenue plan. It helps that Santa Clara is in the heart of Silicon Valley, home to technology heavyweights including Google and Apple and brimming with newly minted millionaires from growing Internet companies such as Facebook.
Goldman Sachs estimates the naming rights, seat licenses and suites will bring in about $425 million by 2015, and the remainder of the loan will be repaid with long-term debt before September 1, 2015.
It is also possible the Oakland Raiders, eager to shed the Oakland Coliseum despite a major upgrade of that aging facility, could become a second tenant in Santa Clara, further underpinning the economics for both the city and the NFL.
Monday’s hearing is part of a lawsuit filed by the Stadium Authority against Santa Clara Plays Fair, which it accuses of “improperly trying to kill the project in a piecemeal fashion.” The suit seeks to block any public vote.
The construction loan is set to close on March 20, the suit says, and a referendum would require unacceptable delays.
“The $850 million is dependent on income and information that we are not privy to,” countered Deborah Bress, spokeswoman for Santa Clara Plays Fair. “We have never been able to find out what is the pricing structure for all these things.”
Vice-Mayor Gillmor said she believes a referendum would be defeated even if it was on the June 5 ballot.
“I’m still confident that we would win the election and move ahead with the stadium,” Gillmor said.
“This stadium is going to be a catalyst for us and for our revenue opportunities” including new hotels, restaurants, small businesses and entertainment venues in the area, she said.