Stanford economist and co-author of “Sports, Jobs and Taxes” Roger Noll has been quoted a few thousand times in recent years by both supporters and opponents of a 49ers football stadium in Santa Clara. So a couple of weeks ago I had my own conversation with this oracle of sports economics.
Rather than ask Noll what he’s already been asked by countless reporters, I asked him to describe what fortunate conjunction of outcomes was needed for the proposed Santa Clara stadium project to deliver the promised benefits to the City.
Three things, Noll replied: NFL funding, better-than-average revenue, and more events than all the Bay Area’s stadiums put together. It’s a pretty high bar.
The first thing is the NFL must renew its central fund – now empty – for stadium construction, and approve a $250-$300 million contribution to the Santa Clara project’s construction.
These funds come from earnings from broadcasting contracts, Noll explains, and the question is whether other NFL owners will accept about $10 million less in revenue to build a new stadium for another team. “They did in the past,” Noll says, “but I’m not sure they will do it in the future.”
The second thing that has to fall into place is that all Stadium Authority (SA) revenue projections must actually materialize – including about $350-$400 million in naming rights. “If you borrow $350 million to contribute to stadium construction and raise $200 million, what happens? That’s an unresolved issue,” he observes.
The proposed Santa Clara stadium project is structured almost the same as the Oakland Raiders deal, Noll explains. In both cases, “the stadium authority took responsibilities that usually are the team’s.” He points specifically to the SA taking on the sale of personal seat licenses (section 7.3(a) of the June 2009 Stadium Term Sheet).
“It’s extremely difficult to me to understand why a city would take responsibility to sell football tickets,” he continues. “What happens if they don’t sell the personal seat licenses? Why does the Santa Clara City Council think it will be good at selling football tickets?” Last June, for example, the NY Jets cut the prices of personal seat licenses by up to 50 percent – half of which were unsold.
As for the naming rights, the projections aren’t &out of the realm of possibility,& according to Noll. &Santa Clara is relatively advantaged by virtue of being in Silicon Valley.& However, &will Santa Clara get more for naming rights than, say, ATT Park in San Francisco?& In 1997 Pacific Bell (later acquired by AT&T) paid $50 million – about $68 million in 2010 dollars – for naming rights to the San Francisco stadium.
Finally, there’s the assumption that the stadium will earn money from events other than 49ers football games. &Look up all the events at the Oakland Coliseum, Candlestick, AT&T Park,& Noll says. &There are very few. Gone are the days of Beatles concerts with attendance of 70,000. San Jose State isn’t going to play its home games in a stadium for 70,000 people.”
Eight non-football/baseball events are scheduled at the Oakland Coliseum for the rest of this year, one at AT&T Park, and none at the-ballpark-formerly-known-as-Candlestick. “The Santa Clara stadium has to be more successful that all other Bay Area stadiums combined,” Noll adds.
“It’s not the kind of bet a professional gambler would make,” is how Noll assesses the probability that all the pieces will fall into place. “This is a real time bomb,” he continues. The “saving grace,” however, is that Santa Clara has a city budget substantially larger than its financial exposure on the 49ers stadium.
Further, Noll puts at 20 percent the odds of any Santa Clara 49ers stadium being built. “There are too many problems, notably the NFL not kicking in the $250 million,” he says. “Maybe the Yorks are going to come up with the $250 million – the city isn’t. Neither side is in a position to sign a contract until NFL position is resolved.”
Carolyn Schuk can be reached at firstname.lastname@example.org.