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Civil Grand Jury Report Finds Hindsight is 20/20

A new Civil Grand Jury report finds that Santa Clara was outmaneuvered in contract negotiations in its Levi's Stadium management partnership with the 49ers.

Less than 24 hours after it released its report “Irreconcilable Differences,” the Santa Clara County Civil Grand Jury launched another volley into Santa Clara politics, this one aimed at the San Francisco 49ers with a little splash back on the Santa Clara City Council majority.

The title of the report says it all: “Outplayed: Measure J, the City of Santa Clara, and the San Francisco 49ers.” The 83-page report dissects Santa Clara’s deal with the 49ers and reads a bit like a textbook on how not to enter a business deal.

In gist, the City of Santa Clara bent over backward to bring the 49ers to town only to discover it was a bad deal.

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Outplayed is Right

The report makes the argument that Santa Clara was “impatient and overmatched” from the get-go. The Civil Grand Jury examined several aspects of the wording of Measure J and the ensuing contracts, all of which favored the Forty Niners SC Stadium Company (StadCo) over the City.

According to the Civil Grand Jury, this was due to skilled negotiation by StadCo and the City’s lack of experience.

The report highlighted capped public safety costs, “lucrative luxury seats” owned by the 49ers with no fiscal benefit to the City and a poorly structured Management Agreement that heavily favored the 49ers as some of the imbalances in the contracts.

It also looked at how the contracts forced the City into using the Forty Niners Management Company (ManCo) as Levi’s Stadium’s manager despite a conflict of interest.

Yet, for all the criticism, the prevailing theme was that while distasteful, the contracts were above board.

Measure J Promises Met, Mostly

The report also broke down several promises from 2010’s Measure J, the ballot measure that brought the stadium to Santa Clara, and found that many of those promises were met. Most specifically, the deal has protected the City’s General Fund, as promised.

“The promise of taxpayer protections has worked out well for the City and, by extension, the Stadium Authority,” reads the report. “City taxpayers have been well-protected from covering the cost of building and operating the Stadium. In addition, the Stadium’s funding structure has allowed the Stadium Authority to pay down construction loans and fund reserve accounts ahead of schedule.”

While the report questioned the results of a 49ers-backed report that highlighted the significant economic impact of the Stadium to Santa Clara, it also pointed out that the City had never done a study for comparison’s sake.

The investigation found there’s “no evidence” NFL and non-NFL events at Levi’s Stadium increased Convention Center business, but it also offered no evidence to the contrary.

The report said that the promise to turn the City’s Northside into an “entertainment destination has not come to fruition.” It failed to mention the “entertainment destination” falls on the shoulders of Related Companies, which has not broken ground at the site and recently met with the City Council to try and revamp its plans to include data centers.

The report also determined that while performance rent funds have not made their way into the General Fund as much as hoped, there were mitigating factors.

Report “Tsk-tsks” 49ers

Despite the generally positive results, the report’s author infused some finger-wagging at the 49ers.

Large swaths of this report were pieced together in a narrative that outlined the complexities of the Measure J contract, the Levi’s Stadium lease and management structures and the business relationships between the Stadium Authority, ManCo and StadCo.

The report was structured with phrasing designed to blame StadCo for its advantageous positions within the contracts. It made the organization’s attempts to assert the terms of the deals sound shameful.

For example, structured within the contract was a specific breakdown of the property taxes. When StadCo felt it was overcharged, it contested those charges with the Assessment Appeals Board (AAB). ‘

The AAB ruled in StadCo’s favor and the County Assessor sued to reverse the ruling. A local judge upheld the ruling.

But that property tax money went to local schools, education programs, the City and the County. The narrative paints StadCo as a team that stole money away from those entities. It does not clarify that the rulings negate these payments, meaning the money never belonged to the entities in the first place.

Council Majority Singled Out Once Again

While this Civil Grand Jury report focuses on Measure J, the 49ers and how StadCo interacts with the City, the Civil Grand Jury catches the Council majority in the crossfire.

While the language in this report is much more center of the aisle than yesterday’s “Irreconcilable Differences,” there are still instances of rampant speculation without evidence.

In discussing the 2022 settlement of several pending lawsuits between the City and the 49ers, the Civil Grand Jury heavily implies that the settlement directly resulted in political kickbacks to members of the Council majority.

“Third, the agreement immediately triggered (on September 1, 2022) over $700,000 in payments by 49ers PACs to support certain City Council and mayoral candidates,” read the report. “By election day, the total 49ers PACs contributions for these candidates reached $4.5 million. So, if the PAC contributions are any indication of what the 49ers organization thinks about the settlement, once again, the 49ers win.”

Other than the timing, the report offers no evidence to back up this claim.

At various other times in the report, the Civil Grand Jury again takes pains to draw a distinct line between the 49ers and the Council majority. In more than one instance, the term “49er Five” is used as well as “Yorkville” in reference to 49ers owner Jed York’s perceived influence behind the scenes.

However, when a reference is made to “Santa Clarans for Economic Progress,” the citizens group that pushed to pass Measure J, and the money donated to that effort by the 49ers, no mention is made of Mayor Lisa Gillmor and her role as “spokeswoman from the pro-stadium group,” as she was referred to in a 2010 New York Times article.

FIFA Wasn’t Asked to Come Here

The report closes by lambasting Santa Clara’s FIFA World Cup bid, saying Santa Clara had no input.

“The World Cup bid was negotiated and controlled by ManCo and the Bay Area Host Committee (BAHC), without any initial input from City staff or the Stadium Authority,” read the report.

It also mentioned that Al Guido signed for both the BAHC and the ManCo, something that former City Council Member Teresa O’Neill and two other residents recently wrote to District Attorney Jeff Rosen about.

It does not mention that in several instances, including City Council meetings the Civil Grand Jury members watched, the Council voted to support a bid for the World Cup.

The Civil Grand Jury wraps up this section by asserting the event is not expected to make any money.

“Recent media reporting has stated that the City Attorney has informed the City Council that the Stadium Authority could face multimillion-dollar losses, as much as $38 million, from hosting the World Cup (Williams and Kroichick, 2024),” read the report.

The Civil Grand Jury does not reveal that the reporters received this confidential information from an unnamed City employee nor that this information is not currently available to the public.

Furthermore, the Civil Grand Jury did not state it examined documents connected to confirm these statements despite having the subpoena power to access those documents.

Findings and Recommendations from the Civil Grand Jury

After several dozen pages that broke down its findings and how it reached those findings, the Civil Grand Jury made nine recommendations.

Moving forward, it recommended that the City find advisors with “specialized knowledge” to help them “level the playing field” in future contract talks.

It also determined that the City should commission a report to determine the economic impact of the Stadium.

The Civil Grand Jury said while the promises of Measure J to protect the General Fund have mostly been fulfilled, City staff should develop a long-term plan to ensure the “financial health” of the Stadium Authority, one that would include reserves for capital improvements.

The Civil Grand Jury report found that the Stadium Authority failed to ensure that the Management Agreement with ManCo contained “sufficient language” to prioritize “revenue generation” and that it has failed to hold ManCo accountable since. It advised the Stadium Authority to “retain the expertise needed” so it can “weigh in” on ManCo’s marketing plan and ensure profitability.

The Civil Grand Jury suggested that the City include language in the marketing plan that “incentivizes ManCo marketing staff to prioritize the profitability of the Stadium Authority.”

The report also found that the City of Santa Clara may not be getting all the money it’s supposed to from non-NFL ticket surcharges and suite ticket revenue. It recommended that the Stadium Authority review these items and “ensure that it receives” what it’s owed.

The Civil Grand Jury also suggested that the Stadium Authority hire a professional third-party consultant not affiliated with StadCo or ManCo to help set reasonable expectations for non-NFL event revenue potential.

Jurors found that one of the missed promises of Measure J was a community facility at the stadium. However, the report argues that the Stadium is “not an appropriate location” and the City and StadCo should work together to identify an alternative space.

Finally, on the FIFA World Cup deal, the Civil Grand Jury advised that the Stadium Authority “insist” on consultations before making any major Stadium event commitments.

Out of Luck

The report also outlined several instances where the City would just have to abide by the contract. For example, Santa Clara appears to be locked into using ManCo to handle bookings of non-NFL events at Levi’s Stadium.

What’s more, the City failed to ensure the Management Agreement included a “fair termination” clause or a requirement that the Stadium Authority to provide “full access” to financial records.

The report conceded that financial transparency has improved since 2022 and that testing “generally” supported ManCo’s financial results.

The Stadium Authority also failed to negotiate “pertinent details” on buffet costs, such as thresholds and whether alcohol was included.

Santa Clara’s Stupid Tax

Outnegotiated, outmaneuvered and outplayed.

At every turn, it appears that the 49ers did what any big business does. It used its experience to negotiate an advantageous contract and when conflicts arose, things got litigious. The 49ers used every above-board trick in the book and the City has paid the price.

Unfortunately, it’s what happens in a capitalistic society like America.

It’s called a stupid tax, and Santa Clara will be paying it for a long time.

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3 Comments
  1. Buchser 3 1 month ago
    Reply

    A very well written and informative article exposing the hypocrisy, lies, and misinformation from the Civil Grand Jury report. Thank you, Ericka.

  2. Fred 1 month ago
    Reply

    I guess Gillmor is not quite the savvy business person she pretends to be. Not only did she get outmaneuvered in the initial deal with the 49ers, she lost use of the soccer fields, then wasted our money on frivolous lawsuits against the Niners. And on the fight against the district system.

    I guess inheriting money and a business doesn’t mean you’re clever or effective.

    Thanks Lisa!

  3. Paul 1 month ago
    Reply

    “Out-negotiated, outmaneuvered and outplayed. …. Unfortunately, it’s what happens in a capitalistic society like America.”
    Ms. Towne, you cite a lot of Council misbehavior, but the fault lies with the voters who continue to elect the mis-behavers, year after year after year.

    Capitalism is a level playing field. Even if you are small, intelligent choices and good negotiation skills can lead to a win for everyone. It seems that Santa Clara has not yet fielded a team that can do these things.

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