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City Observer: May 18, 2016

Council Statement About Stadium Rent, Public Safety Costs Misleads

Just as the Santa Clara City Council embarks on a costly arbitration over Levi’s Stadium facility rent, the Council added to public confusion by implying in its May 6 statement that public safety costs are paid from the facility rent.

Santa Clara is reimbursed for Levi’s Stadium’s public safety costs separately, and in addition to, facility rent. The Council’s statement that stadium rent must “be sufficient for the operating costs, including public safety” is misleading. The two payments are completely separate.

All of these terms were articulated in the 2009 term sheet, the 2011 Disposition and Development Agreement (DDA) and the 2012 and 2013 lease agreements – all approved by then-sitting City Councils.

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The agreements specify that the City is reimbursed for costs for fire and police services at Levi’s Stadium from three sources: fees paid by offsite parking operators for NFL events, the 49ers, and the Stadium Authority Discretionary Fund.

The Santa Clara Stadium Authority is a separate legal entity (a joint powers authority) from the City, not a department of the City; and its revenues and costs are not the City’s –even though the Santa Clara City Council is also the Stadium Authority’s board of directors. Because the SA has no employees it “outsources” its work to the City – in this case the fire and police departments. These hours are tracked and invoiced to the stadium tenant, the 49ers.

Reimbursement for public safety costs was first established in the May 2009 stadium term sheet (item 3.A. of the June 2, 2009 Council meeting). These terms are set out in section 7.5 of the DDA:

“As shall be more particularly provided in the Public Safety Plan, for each Lease Year, Tenant shall reimburse the City the amount by which (i) the Public Safety

Costs (as defined below) attributable to NFL Games during such Lease Year, including a fair share of Public Safety Capital Expenditures attributable to such Tenant Events, exceeds (ii) the fees received by the City during such Lease Year from the holders of Off-Site Parking Permits that are attributable to Tenant Events.” (Section 7.5.2)

The offsite parking operator fees were established at the August 17, 2010 City Council meeting. The 2015-2016 Santa Clara Municipal Fee Schedule set the fee at $5.08 per space per event. The total amount the City received in 2015 was $261,000 according to City financial reports. Because this amount is credited toward public safety costs, it is subtracted from them on financial reports.

If off-site parking fees don’t cover public safety costs, the 49ers can be billed directly for the difference up the Public Safety Costs Threshold. For the first Lease Year, the charge is $170,000 for each pre-season, regular season and post-season NFL game. That amount increases four percent annually and can be renegotiated if costs top the threshold three consecutive years. This is laid out in Section 7.5.3 of the DDA:

“For each Lease Year, Tenant shall … reimburse the City the amount by which (i) the Public Safety Costs (as defined below) attributable to NFL Games during such Lease Year [up to the Public Safety Costs Threshold] including a fair share of Public Safety Capital Expenditures attributable to such NFL Games, exceeds (ii) the fees received by the City during such Lease Year from the holders of Off-Site Parking Permits that are attributable to NFL Games.”

“If due to unanticipated circumstances other than new or expanded security measures mandated by the NFL, Public Safety Costs for NFL Games exceed the Public Safety Costs Threshold over any three consecutive Lease Years, then … the Stadium Authority, Tenant and the City will engage in good faith negotiations with respect to possible increase in the Public Safety Costs Threshold; provided, however, that Tenant will not be obligated to agree to any increase in the Public Safety Costs Threshold … Any such increase in the Public Safety Costs Threshold shall be subject to Tenant’s approval.”

If public safety costs exceed the total of the off-site parking fees and Public Safety Costs Threshold amount, the Stadium Authority can bill the 49ers for the difference – in which case it is a credit to them – or it can be paid out of the Stadium Authority Discretionary Fund (DDA Section 7.5.3):

“…except to the extent the Stadium Authority pays such excess out of the Stadium Authority Discretionary Fund, the amount by which such Public Safety Costs exceed the Public Safety Costs Threshold shall constitute Credited Public Safety Costs and shall be included among the Performance-Based Rent Credits for purposes of determining the amount of Performance-Based Rent payable by the Stadium Authority for such Lease Year pursuant to the Ground Lease.”

Performance rent – which is separate from facility rent – is 50 percent of net revenue, less allowable credits, from non-NFL stadium events.

Half of the $4 non-NFL ticket surcharge is set aside for stadium operating and maintenance costs, and half for discretionary expenses of the Stadium Authority: “One-half (112) of the proceeds of the Non-NFL Ticket Surcharge will be included in Stadium Authority Revenue in the Lease Year received by the Stadium Authority.” (DDA Section 12.1.2).

Here’s how the math works: Total stadium public safety costs, less offsite parking fees, equals the amount billed to the 49ers. If that amount is greater than the Public Safety Costs Threshold, the Stadium Authority can chose to bill the 49ers immediately and give them a performance rent credit, or use the Discretionary Fund to make up the difference. In both cases, the City’s operating funds are reimbursed.

It’s hard to see how the Council could get confused. Over the last nine months, Mayor Lisa Gillmor has doggedly questioned the Police Chief, Fire Chief, Finance Director and two City Managers about whether Santa Clara has been reimbursed properly for public safety costs. Her questions make it unmistakably clear that the City is to be reimbursed directly and not via the facility rent.

Super Bowl 50 Adds $730K to City’s Bottom Line

Super Bowl 50 brought Santa Clara an estimated $730,000 in tax revenue, according to a preliminary report by the City Finance department at last week’s City Council meeting. The final numbers will be published in July, when the City closes the books on FY2015-16. To provide a complete picture, however, the financial reports need to factor in natural economic growth, noted Planning Commissioner Suds Jain at the May 10 meeting.

Hotel tax collected during Super Bowl week is estimated to be $310,000 higher than the same week in 2015, based on occupancy and price increases. Hotel occupancy rates rose 15 percent, to 84 percent. The average daily price during the Super Bowl week nearly doubled – going from $189 to $333, and from $151 for weekend nights to $414 for Super Bowl weekend. Airbnb added $18,000 to revenue.

Total direct and indirect sales tax from the Super Bowl is estimated at $420,000 according to City sales tax consultant, MuniServices.

Hosting the event cost the City roughly $3.5 million. The Super Bowl 50 Host Committee has already reimbursed Santa Clara $3.36 million, and a final payment of $149,500 is due.

Super Community Events Were Super Hits

Santa Clara’s free Countdown to Kickoff “Super Community” events were such a hit that the City is being asked to do similar events every year, said Mayor Gillmor at the May 10 Council meeting. “It was an opportunity to celebrate the Super Bowl and everything that’s good about Santa Clara.”

The events included the holiday tree lighting and a first-time ice skating rink, “Anything’s Possible” commemorative statue, Road to Super Bowl 50 run, Gridiron Glory exhibit, STEM Innovation Bowl, Heart concert, and Super Community Celebration.

Sponsors included Adobe, Devcon, Intel, Kaiser Permanente, Mission Trail Waste,

SCS Development, Taiwan Tourism and Silicon Valley Power. AB In Bev, Plaza Suites, Intel and Vendini gave in-kind donations. The City’s total cost was $1.9 million. One critic said the money would have been better spent paving sidewalks.

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