Levi’s Stadium Financials Beat Expectations with Under-Budget Construction and Over-Budget Surplus
Not only did Santa Clara’s Stadium Authority end the year with a healthy surplus, total construction costs for Levi’s Stadium are projected to be $80 million below budget when the books are closed – which means less construction debt, currently $552 million instead of the anticipated $629 million, less total interest and less time needed to pay it off.
Santa Clara’s Levi’s Stadium is not only in the black, the Stadium Authority is headed into its second year with a $24.5 million in reserves, Santa Clara Finance Director Gary Ameling told the City Council at the March 24 Santa Clara City Council meeting. That surplus is on track to grow to $30 million by the end of FY 2016 (The Authority’s fiscal year runs April to April).
In addition, not only have more seat licenses been sold than were estimated, subscribers have paid them off sooner than expected, which further increases cash available to pay off outstanding debt. And when the final audit of the construction project is complete, Ameling anticipates that the City will benefit from the re-categorizing of some expenditures as tenant improvements, which are paid directly by the 49ers stadium operating company, StadCo.
The stadium has so far delivered about $3.4 million to Santa Clara’s general fund from ground and performance-based rent, additional sales tax revenue, and senior and youth services ticket surcharges (not counting last weekend’s WrestleMania).
For FY 2015-16, anticipated Stadium Authority revenue is $111.4 million – including $24,500 in rent and $30 million in seat license payments. Expenses add up to $81.1 million – $17.2 million in operating expenses (which includes reimbursing City for staff support), $3 million in capital expenditures, and $60.4 million in debt repayment.
Santa Clara Becoming the Playbook for New Stadium Development
Santa Clara’s financial model is proving so successful that other NFL stadium development projects are using it as a model. One is in the Los Angeles suburb of Carson, where the San Diego Chargers and Oakland Raiders last week submitted signatures for a referendum on a new joint-use stadium. Their plan follows Santa Clara’s, with financing by a stadium authority composed of city officials that raises private funding through a consortium of banks, Goldman Sachs Director Tim Romer told ESPN.
“The [Carson stadium] financing will not rely on general fund moneys,” he told ESPN. “The financing will not rely on taxes, new or existing. The taxpayers and the general fund will be isolated and protected from the financing. The financing … will rely solely upon the revenue generated by the stadium from football and other events.”
Another example where the Santa Clara playbook is changing the landscape is in St. Louis, where Rams owner and real estate developer Stan Kroenke is turning down a $400 million public subsidy in favor of moving the team to a $1.8 billion stadium – the most expensive ever – in Inglewood, Calif., according to the LA Times. Kroenke estimates the team could earn $100 million more each year on seat licenses, premium seating, advertising and sponsorships in a privately-funded stadium in suburban L.A. than it could even in a publicly subsidized St. Louis stadium.
Stadium Just the Latest in Public Project Naysayers’ Bad Track Record
When Santa Clara voted to start generating its own electricity in 1896, doomsayers promised that the city would bankrupt itself in short order. Today we’re still reaping dividends on that investment.
In 1915, when Santa Clara voted to pave sidewalks to encourage visitors from the San Francisco Exhibition to visit the Valley of the Heart’s Delight, again there was a vociferous protest that street paving would bankrupt the City. Since the buggy made way for the automobile, no one has questioned the value of paved streets for both commerce and residential desirability.
In 1985, when the City voted to buy Great America rather than have the land sold to an office developer, it provoked what the Mercury called “the longest and most bitter” political wrangle in Santa Clara history. The City had no difficulty leasing the park, raising enough from the lease to pay off the debt, and subsequently selling the amusement park. The city continued to receive $5 million in annual rent from the park, which the county has now appropriated in the unwinding of California’s defunct redevelopment program (although redevelopment property taxes weren’t used to pay for the property).
In 2007 when Santa Clara began talks with the San Francisco 49ers about building their new stadium here, the usual chorus was on hand to predict financial and social catastrophe that would follow in the wake of constructing an NFL stadium.
The Cassandra chorus continued as the City voted to begin negotiations on a term sheet, passed a public referendum on that term sheet; signed a Disposition and Development Agreement for stadium construction, operation and financing in 2011; broke ground on the new stadium in 2012; celebrated the ribbon-cutting in 2014; opened the gates for its first event on Aug. 2, 2014; and concluded its first football season in December.
Now that the numbers are out for the stadium’s first year of operation, it looks like the naysayers were wrong again. But don’t bet on hearing them admit it.