Santa Clara, 49ers announce deal to pay for stadium - San Jose Mercury News
Santa Clara, 49ers announce deal to pay for stadium
At long last, the 49ers' turbulent drive for a new home in Silicon Valley is reaching the end zone.
The NFL team and Santa Clara announced Friday that they have captured all the money needed to build a proposed $1 billion football stadium next to the Great America theme park -- the largest and final obstacle needed before construction can start.
"It's like first-and-goal from the 9-yard line," said Ron Garratt, a consultant helping lead the project for the city. "We think we're going to score from here."
The funding deal was spelled out in a development contract that caps two-and-a-half years of closed-door negotiations between city and team leaders and essentially completes a planning process that began when the team announced interest in abandoning San Francisco five years ago.
Goldman Sachs, U.S. Bank and Bank of America have agreed to loan the city and team a combined $850 million to pay for the lion's share of the construction, which could start as soon as next year. But critics are alarmed by a major shift in the funding plan that emerged Friday: The city will take on more than twice as much debt as was promised to voters, even though the 49ers vow they won't leave the city holding the bag.
Revenues from the stadium, such as ticket sales, stadium naming rights and the team's rent, are supposed to pay back most of the loans. The rest will come from the NFL, which is expected to chip in $150 million; the city's redevelopment agency, which will contribute $40 million; and a local hotel tax expected to generate $35 million.
"This makes it a reality," said Mayor Jamie Matthews. "For all the people who thought it would be impossible to get financing in this environment, we got three of the biggest banks. Next to the groundbreaking, this is the biggest event."
The price of the 68,500-seat, coliseum-style home field has jumped from $987 million to $1.02 billion, largely because of tweaks to stadium design, more refined construction estimates and inflation.
But city and team leaders are betting the stadium will create so much profit that they will be able to pay off the loans in about 25 years using only money generated by the stadium. If their estimates don't pan out, the 49ers would be on the hook to pay the difference through higher rent payments to the city. The team would also fork over any extra construction costs that may come up. The city's general budget can't be touched, according to the deal.
The 49ers are expected to make a significantly higher profit at a new stadium, but the team hasn't released those figures.
"This is not about the profits of the team, it is about securing the future of the franchise in the Bay Area in the long term," said team CFO Larry MacNeil. "Candlestick (Park) is just not a sustainable model for the 49ers."
In addition to the loans, the 49ers will contribute $150 million to building the stadium, largely through luxury suites they have already sold. The final $20 million is expected to come from various revenues expected before construction starts, such as season ticket sales.
The two sides are now so confident in their funding prospects that they are "motivated" to start building the stadium as soon as mid-2012, with a chance it could be completed in 2014. Conservatively, they still expect to start building by January 2013 and open for the 2015 season.
49ers CEO Jed York has already approved the 75-page deal and the City Council is expected to follow suit Dec. 13, cementing a "formal commitment" from both sides.
The plan does not spell out the likelihood of the Raiders also playing games in Santa Clara, as the teams continue to discuss moving in together. If the Raiders joined the project, the city could see millions more in funding from the Oakland team and the NFL.
The deal calls for the 49ers to pay the city about $30 million per year to lease the city-owned land, a large increase from the previous estimate of $5 million.
The team would operate the stadium year-round, and take on operating costs during the six months of the season. The city would pay for the cost to run the stadium during the offseason, and the two entities would split the revenues from non-NFL events such as concerts, which would carry a $4 ticket surcharge. It's still unclear whether they'd charge a tax on NFL games.
The lease would last 40 years, with options to extend the deal an additional 20 years.
The financing deal is a far cry from the one voters approved, when they were told the team and NFL would pay about half the cost and the city's stadium arm would pay about one-third.
"It appears on first glance that this is not what we agreed to," said project opponent Debbie Bress, a Santa Clara resident. "The amount is over $1 billion, the amount the 49ers are paying is very small. It continues to be irresponsible and swayed toward the advantage of the 49ers."
Officials cited the profitability of the NFL, the team's popularity and the real estate market in Silicon Valley as rationales for the banks to agree to the loan.
The city will hold public hearings at City Hall at 7 p.m. Tuesday and Thursday to talk about the "disposition and development agreement" and hear what residents have to say. The banks will be on hand to provide a presentation, too. Though the city manager's office negotiated the deal, the overwhelmingly pro-stadium council participated in the talks and is set to approve the contract in 10 days. The $10 million prep-work on the site will begin in January