Santa Clara to allow 49ers an exception to Levi’s Stadium purchasing agreement

Santa Clara officials Tuesday night said they’ll allow the San Francisco 49ers to make purchases for the upcoming college football Redbox Bowl game, despite recent actions to strip the team’s ability to sign contracts at Levi’s Stadium.

But the NFL team will first have to get approval from the city manager and chief executive for the stadium, Deanna Santana, for each expense, and prove that the team has no conflicts of interest related to the Redbox Bowl.

“I can almost assure you that our executive director won’t be signing anything because this is fraught with conflicts of interest,” Mayor Lisa Gillmor said ahead of the vote.

But team officials said they don’t have a conflict of interest or any ownership stake when it comes to the annual college football game at Levi’s Stadium. The game includes a team from the Pac-12 Conference, which plays against a team from the Big 10 Conference. This year, Cal will play Illinois on Dec. 30.

Some officials said they were concerned about allowing money to be spent on the event because it has not been a profitable game for the city in the past. Councilmembers also raised concerns about portions of a packet provided to the city by the team with redacted information, which they thought might include financial information about the event. Even so, the 49ers have a contract to host the game annually.

The decision to allow the 49ers to make purchases to accommodate the event comes after two September votes by Santa Clara officials revoking the 49ers’ rights to make purchases and the team’s management position at the stadium to oversee non-NFL events.

Team officials protested the decision, saying they need the ability to make decisions quickly. The organization also filed a suit against the city stating officials don’t have the right to remove the team as managers of the stadium.

City staff members, however, said that they felt the move was the responsible choice and that with good planning, all purchases for supplies or contracts for work can be discussed in advance. The stadium is managed by the 49ers, but is overseen by the city’s Stadium Authority Board, which is made up of councilmembers and Gillmor.

Though councilmembers voted unanimously to approve the team’s request to temporarily reverse its revocation of purchasing power between Dec. 17 and the Redbox Bowl game day on Dec. 30, officials criticized team representatives for not coming to the council meeting to ask the city in person.

The NFL team, in its capacity as the the stadium’s manager, says it needs to mobilize to create signs and marketing materials for the event, pay referees, coordinate and pay for transportation and lodging for the visiting teams and staff and buy team gifts, which the 49ers says are an NCAA requirement.

These expenses couldn’t be planned far in advance because it wasn’t clear until earlier this month which teams would participate, according to the team.

“The team participants for the event are selected after the regular season conference games and championship games are concluded following the weekend of December 6th,” according to a city report. “Specific costs and other expenses related to the event are difficult to predict as the associated costs will vary depending on which teams are selected to play.”

The city and the 49ers will enter arbitration over the purchasing rights issue to determine who will have the ultimate say in future purchases for the stadium.

A financial status report for Levi’s Stadium

In the meantime, many councilmembers have repeatedly defended the decision to tighten oversight of the stadium this year, saying they have concerns about dwindling profits, the way the facility is being managed, the team’s transparency and whether contractors working at the stadium are being paid according to state law.

The 49ers, however, say the city has contributed to the declining profits for non-NFL events though restrictive policies, including a curfew that cuts off concerts. On Tuesday, team spokesperson Rahul Chandhok added that declining profits for non-NFL events were due to “dysfunction created by Ms. Santana.”

“Levi’s Stadium has posted positive financial numbers in every year before City Manager Santana’s reign,” Chandhok said in a statement Tuesday night. “To justify her nearly $1 million salary Ms. Santana has pushed improper costs onto the (Santa Clara Stadium Authority) ledger, created enough dysfunction to run off the Rolling Stones, and had Ed Sheeran cancel his record-breaking tour stop altogether.”

Councilmembers on Tuesday dug into Levi’s Stadium finances for the fiscal year, which ended March 31. That financial snapshot, as laid out by city documents, shows an increase in overall expenses, but a reduction in profits for the year compared to years past. It also paints a picture of the team losing money on many non-NFL events at Levi’s Stadium.

The 49ers hosted 10 NFL games last year, selling 651,237 tickets, resulting in $8.1 million in ticket surcharges for the Stadium Authority and another $228,000 in senior and youth program fees for the city. The Tasman parking lot used during the games also generated $24,000 for the city’s general fund, city documents show. That comes to about $8.35 million for the city.

The Stadium Authority Board also receives the revenue from what are known as “Stadium Builder Licenses,” which is part of the business model for Levi’s Stadium that pays down the debt on the more than $1 billion stadium. The licenses are held by individuals — generally fans — and it gives those people the right to purchase season tickets for the 49ers games, as well as offers early access for other events.

Currently, the total value of the active SBLs is $532.4 million, and as of March 31, about 83.1 percent — or $442.3 million — had been collected, according to city documents.

The report also acknowledges that the city has benefited from additional transit occupancy tax, levied on hotel room stays, as a result of events at the stadium.

However, officials say revenue is shrinking in terms of non-NFL events. The stadium hosted 12 ticketed events and 100 other kinds of “special events,” such as weddings, corporate events, birthday parties and other private affairs.

Of the non-ticketed events, the city reports that 75 percent of them “operated at a loss or generated no revenue for the Stadium Authority.” One chart shows the events created a net loss of $2.33 million. Special events, however, generated about $2.35 million in net revenue.

In all, that marks $18,591 in net revenue for non-NFL events, a far cry from the millions generated in previous years.

Chandhok said in a statement to San José Spotlight Tuesday that over the years, non-NFL events at Levi’s Stadium have “generated nearly $22 million in profits to the (Santa Clara Stadium Authority)… This, although the mayor and her army of taxpayer-funded political consultants have done everything in their power to destroy the stadium event business.”

Meanwhile, the city’s discretionary fund, which is made up of non-NFL ticket surcharges continues to grow. This year the 12 ticketed non-NFL events added $796,000 to the fund, minus some expenses, leaving the balance at nearly $2 million.

Councilmembers didn’t take any action on the financial snapshot, except to accept and file it.

But city officials said they were frustrated by the decline in non-NFL revenue and repeatedly said they wished officials from the team were present Tuesday to explain why those events are less profitable.

“If this was my business, I would be fired,” Councilmember Debi Davis said regarding the sharply declining revenue for the non-NFL events.

Contact Janice Bitters at [email protected] or follow @JaniceBitters on Twitter.

Editor’s note: an earlier version of this story indicated that Councilmember Kathy Watanabe had made the comment “If this was my business, I would be fired,” though it was Councilmember Davis who made that comment. This story has been updated to reflect the correction. San Jose Spotlight regrets the error.