This morning, the Forty Niners Stadium Management Company (ManCo) was sent notice that the Santa Clara Stadium Authority has decided to terminate the agreement with ManCo, which manages non-NFL operations and events at Levi’s Stadium in Santa Clara.
“This is about accountability to the public,” said City Attorney and Stadium Authority Counsel Brian Doyle at today’s press conference. “It is not about some personal spat with them. It is not about some effort to get back at them.”
This legal action comes after last night’s Stadium Authority special meeting where the Board voted to initiate termination of the management agreement with ManCo for non-NFL operations and events.
The City of Santa Clara alleges that ManCo, as the Stadium Manager, “has made misrepresentations, failed to comply with laws and the contract, violated prevailing wage laws, and mismanaged operations resulting in declining non-NFL net revenues.”
“When the Forty Niners signed on to become the Stadium Manager for Levi’s Stadium, they represented possessing ‘substantial experience and expertise’ to manage the Stadium on behalf of a public entity,” said Mayor and Stadium Authority Chair Lisa Gillmor.
“In the years since, their lack of the compliance, transparency and accountability expected of managers of a publicly owned facility has made it abundantly clear that this is not the case,” she continued. “Not only have the Forty Niners demonstrated that they are unqualified for the role, they have engaged in egregious state law violations that have put the Stadium Authority in an untenable position. The only path forward at this point is to defend and protect Santa Clarans by terminating our stadium management agreement with the Forty Niners for non-NFL events and operations.”
In a statement to The Weekly, ManCo remains adamant that they will continue to manage Levi’s Stadium.
“The 49ers Management Company will continue to manage Levi’s Stadium and attract the greatest events in the world to the Bay Area,” said Rahul Chandhok, 49ers Vice President of Public Affairs and Strategic Communications.
“The City’s latest announcement is just another step in a self-destructive process they began years ago as part of a petty political vendetta,” he continued. “All of those efforts failed, just as this latest attempt will also fail. The City’s legal case, such as it is, is in direct violation of the clear language of the relevant contracts. We are entirely confident that we will prevail in this dispute.”
Decrease in Non-NFL Net Revenues
As an example of how ManCo mismanaged non-NFL operations of Levi’s Stadium, the City points to the decrease in total non-NFL net revenues.
“Total non-NFL net revenues have declined over the years from a high of $6,079,016 in Fiscal Year 2015/16 to a low of $18,591 for the last fiscal year,” said the City. “Earlier this year, the Forty Niners told the media they projected $0 revenue for the current fiscal year.”
Doyle alleged that ManCo is “booking events that are money losers to Santa Clara when it looks like they may well be benefiting economically from those events.”
The 49ers stadium management claims that they have brought in millions of dollars into the City through non-NFL events.
“The 49ers Management Company has attracted the world’s highest-profile events to the Bay Area, including Super Bowl 50, the College Football Playoff National Championship, the NHL Outdoor Stadium Series, Wrestlemania, Copa America, numerous concerts from the world’s biggest artists; more major events than any other new stadium in its first five years,” said Chandhok. “These events brought hundreds of millions of dollars in positive economic impact to the region and increased Santa Clara’s sales tax and tourism base. As managers of Levi’s Stadium, the 49ers have generated over $22 million in profits to the [Santa Clara Stadium Authority], with $10.6 million going directly to the City’s general fund and an additional $9 million for the Stadium Authority’s Discretionary Fund. By all measures, it continues to be one of the most successful venues in sports and entertainment.”
Violation of Prevailing Wage Laws
Today, Santa Clara Council Chambers’ walls were covered in the City’s proof that ManCo violated prevailing wage laws.
“All you have to do is look around this room to see the extent of the 49ers’ violations,” said Gillmor. “Each one of poster boards around the room here represents an individual who had their wages stolen from them as a result of the 49ers’ poor management.”
“The 49ers have shown that they don’t like to follow the state law,” said Deanna Santana, City Manager and Stadium Authority Executive Director.
“Thanks to the work of City staff, it came to light that the 49ers had not paid prevailing wage on one contract — the NEXSystems contract,” said Ben Field, Executive Officer of the South Bay AFL-CIO Labor Council. “And the total wage theft in that contract is about $85,000.”
Field continued to allege that the 49ers haven’t paid prevailing wage on other contracts, and he announced that he and Ruth Silver Taube, with the Santa Clara County Wage Theft Coalition, have initiated a Public Records Request to the 49ers to get those records.
Field said he believed that “the NEXSystems contract is just the tip of the iceberg” and he called upon the Attorney General to get involved.
ManCo said they have actually paid the additional wages to NExSystems.
“We reported issues surrounding prevailing wage to the Department of Industrial Relations (DIR),” said Chandhok. “The full amount of the additional wages have been paid to NExSystems. They are in the process of distributing it to their employees. Any outstanding issues will be fully remediated in accordance with DIR.”
Mayor Gillmor also stated that ManCo Vice President Jim Mercurio had a conflict of interest and may have participated in self-dealing when he purchased stock in two companies who had Stadium Authority contracts. She said the California Fair Political Practices Commission is currently investigating that situation.
Additionally, many repeatedly said that the 49ers continue to withhold documents from the City. Something that came up time and time again during the Measure J audit of stadium management.
Future Non-NFL Contracts
At last night’s meeting, the Stadium Authority Board also voted to make changes to the delegated contracting authority. Meaning, if the Board votes to adopt the ordinance at their Oct. 8 meeting, it would become effective 30 days later on Nov. 8. and all Stadium Authority contracts will have to be brought to the Board for public approval, no matter the amount.
Previously, ManCo was allowed to procure purchases and services up to $250,000 without prior Board approval.
“This proposed change is to provide the public with assurance that public dollars are being spent correctly after it became known that the Forty Niners did not have expertise in public management and that they had been refusing to provide the Authority with its own financial records,” said the City. “The new process will ensure accountability and transparency to future expenditures.”
The Stadium Authority’s termination of the Forty Niners Stadium Management Agreement will likely proceed to a confidential arbitration proceeding, according to Doyle.
“The Stadium Authority supports moving these proceedings to a public forum and believes that the public has the right to know how the Forty Niners have mismanaged their duties,” said the City in the press release.
Read the “Notice of Termination of Management Agreement in regards to the Stadium Authority, Non-NFL Operations and Non-NFL Events” Doyle sent ManCo President Al Guido here.