Levi's Stadium: 49ers happy, Santa Clara may be on hook 49ers already winners, but taxpayers could be on hook

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Almost eight years ago, San Francisco 49ers co-owner John York sat in a Hilton Hotel conference room not far from the team's headquarters in Santa Clara and stunned the Bay Area when he announced his plan to build a new stadium in a nearby parking lot rather than in San Francisco.

Back in November 2006, York projected the stadium would cost $600 million to $800 million to build. The price tag ended up at $1.27 billion, and it likely will take years to know how good of a deal Levi's Stadium is for Santa Clara taxpayers.

That price tag doesn't include a combined $37 million that Santa Clara spent to move an electrical substation and the stadium's share of a new city-built parking garage that had already been planned to serve the nearby convention center. Accounting for those costs, the stadium project comes out to $1.31 billion before interest payments averaging $14.6 million per year for 25 years.

The bone-white and cranberry-red high-tech football temple that now rises from what had been the backup parking lot for the Great America theme park already appears to be a good deal for the team.

No agreement was in place when the team's owners dumped their plan to build a stadium near Candlestick Park, home of the 49ers since 1971, in favor of Santa Clara. The pitch was to build the 68,500-seat stadium "without touching the city's general fund or raising taxes," York said at the time. Within two years, he and wife Denise DeBartolo York had ceded control of the team's day-to-day operations to their son, Jed York, now the 49ers' CEO and the driving force in getting the stadium built.

Complex financing plan

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Years of complex negotiations, at least four lawsuits, special state legislation and a successful ballot measure - which stadium opponents contend was a bait-and-switch - have produced a financing plan that includes a new tax on hotel guests near the stadium and $621 million in construction loans taken out by a city-related entity.

Levi's Stadium is on city land and is owned by that specially created public agency, the Santa Clara Stadium Authority, whose members are the Santa Clara City Council. The authority was created as a separate legal entity to shield city coffers from being used to cover stadium costs. The 49ers have a 40-year lease, with options to extend it up to 20 more years. The team's annual rent is $24.5 million.

The authority, which is responsible for the construction loans, is supposed to pay them back using revenue generated by the stadium, including its $154 million cut of the $220 million, 20-year naming rights deal with Levi Strauss & Co. and the sale of seat licenses - one-time fees ranging from $2,000 to $250,000 per seat that give people the right to purchase 49ers' season tickets. The licenses are budgeted to bring in $312 million.

"The issue in the stadium financing deal always has been whether the planned revenues and expenses of the Stadium Authority were realistic," said Roger Noll, a professor emeritus of economics at Stanford University. "The structure of the financing package is such that it will take at least three years to know whether the authority is financially viable."

Scheduled games, events

Besides the 49ers' eight regular and two preseason home games, Levi's Stadium hosted a San Jose Earthquakes soccer game this month and is scheduled to hold this year's Cal-Oregon football game, the Pac-12 championship game and the San Francisco Bowl, formerly known as the Kraft Fight Hunger Bowl. Next year the stadium will host Wrestlemania 31, the Monster Jam monster truck show, and the motorcycle contest Monster Energy Supercross.

"How much revenue is generated by these events remains to be seen," Noll said, "but, in any case, they need more to hit the budget target."

Publicly owned football stadiums are notorious for being a drag on public coffers as they age. It currently would cost about $100 million, for example, to pay off the bond debt still attached to O.co Coliseum after Oakland and Alameda County paid for major upgrades in 1995.

Niners Executive Vice President of Development Larry MacNeil said the Santa Clara Stadium Authority "has a very, very strong income statement and cash flow because of the incredible success of the (seat) license program, and the naming rights deal with Levi's."

"That is why there was such high demand from the lenders to be a part of the lending group," MacNeil said via e-mail.

The team and the Stadium Authority have also struck sponsorship deals with United Airlines, Dignity Health, Yahoo, Verizon, investment firm BNY Mellon and others on such features as first aid stations and a 44,000-square-foot club in the sold-out suite tower.

Exceeds expectations

Before a football game has been played there, Santa Clara Mayor Jamie Matthews views the stadium as a success, saying it has attracted $12 billion in private investment for projects either built, under construction or entitled in the surrounding area, including 900,000 square feet of office space at the recently completed Santa Clara Gateway office complex. One source affiliated with that office development, though, said it would have been built with or without a stadium nearby.

"This stadium has exceeded everyone's expectations," said Matthews, a longtime backer. "Is it worth it? Absolutely. ... Santa Clara is going to be the epicenter of entertainment and culture" in Silicon Valley.

That's not enough to win over Santa Clara residents like Deborah Bress, a member of the grassroots group that opposed the city subsidizing the stadium.

"This is not a good deal for Santa Clara. It wasn't then, and it isn't now," said Bress, who warns the stadium will cut into the city's general fund. She also pointed to the negative impact on traffic, parking and a youth soccer park next to the stadium.

Certainly the deal changed from the nonbinding term sheet that was on the table when Santa Clara residents voted in June 2010 to use public money for the stadium.

At that point, the price tag for the project was $937 million.

The initial deal

About $114 million was to come from public money, including $42 million in redevelopment funds and $35 million in bonds to be paid from a new tax on guests at eight hotels near the site. Also included was $20 million to relocate an electricity substation and $17 million for the stadium's share of the already-planned parking garage, financed from redevelopment bonds.

The newly created Stadium Authority would've been responsible for another $330 million from the sale of naming rights, seat licenses, sponsorships and other sources. The 49ers and the NFL were to come up with $493 million, and the 49ers would pay for any cost overruns.

Stadium opponents like Bress accused the 49ers and pro-stadium city officials of spreading misinformation during the campaign by lumping in the Stadium Authority's obligations with those of the team and NFL, minimizing Santa Clara's share and hiding risk to the authority, a public agency.

Deal changed in 2011

Voters approved the stadium measure with 58 percent support, but the deal changed in December 2011.

That agreement, which did not go before voters, called for the Stadium Authority to borrow up to $850 million for construction of a stadium with a price tag north of $1 billion at that point. The final deal increased the maximum loan amount to $950 million: $450 million from a consortium of investment banks led by Goldman Sachs and $500 million from a 49ers affiliate company, Forty Niners Stadium LLC, that first borrowed at least some of it from the consortium of banks. The Stadium Authority hasn't needed to borrow the full amount.

The NFL also provided $200 million for the project through the 49ers' stadium affiliate. The team would not disclose the terms. The 49ers stadium company also advanced the $35 million to be paid back by the new hotel tax.

Taking all that into consideration, Noll, the Stanford economist, said it is a good deal for the 49ers, but maybe not so much for the city.

"The risk for the team is whether they make X million dollars or Y million dollars in profits," Noll said. "The risk for the Stadium Authority is whether it generates a small surplus or experiences a loss."