Post by TheShadow on Jul 14, 2009 4:51:48 GMT -5
www.sfgate.com
Robert Selna, Chronicle Staff Writer
If the city of Santa Clara can get a $900 million National Football League stadium and the San Francisco 49ers in exchange for $100 million in public subsidies, it will have pulled off one of the best deals in NFL history.
But most new publicly subsidized football stadiums in the past two decades have not produced notable economic returns for their communities, analysts say, and in many cases have left them deeply in debt. Taxpayers in Cincinnati and Indianapolis, for instance, will have to pay tens of millions of dollars in the coming years to cover costs that ballooned well beyond expectations.
The proposed 49ers stadium in Santa Clara looks better on paper than most recent plans. The agreement could result in a 68,500-seat state-of-the-art football field on a city-owned parking lot near the Great America amusement park by 2014.
Approximately $100 million would come from public funds, and stadium concessions and licenses would contribute about $300 million. The 49ers say they are taking responsibility for the rest - nearly $500 million.
While the new field promises intangibles such as a national profile and civic pride, observers say it includes hidden costs, lost opportunities and unanswered questions, making it unclear how good a bargain it truly is.
'Not a good deal'
"This is a very low price tag for the city, but it is not a good deal because they are passing up other things they could do there and vastly overplaying the value of non-football events (at the stadium), most of which are highly speculative," said Roger Noll, a Stanford economist who has conducted exhaustive research on professional sports stadiums.
Last month the Santa Clara City Council voted 5-2 in favor of the outline of a plan that would become legally binding if voters approve it next year. Santa Clara Mayor Patricia Mahan gives a long list of reasons why she backs the plan, including millions in rent payments and a city-owned stadium.
"There are built-in protections for the city, and there will be significant economic development for the South Bay as a whole from the presence of the stadium, even if it's for only 10 games a year," Mahan said in an interview.
Residents won't pay
Unlike many stadium financing agreements that have gone sour for taxpayers, the proposal does not call for subsidies directly from Santa Clara residents. Instead, the public money comes from tax revenue captured in a redevelopment zone, special surcharges on eight hotels within 2 miles of the ballpark and funds already set aside for infrastructure improvements.
A stadium authority - composed of city officials who would hire a management company - would be responsible for contributing an additional $330 million toward the stadium through selling things such as stadium naming rights, liquor and other beverage contracts, and personal seat licenses.
The 49ers would have a say in annual stadium budgets. The team has committed to covering "reasonable" stadium operation shortfalls, and a mediator would resolve disputes.
Fixed rent payments would start at $180,000 in the first year and escalate to $1.5 million by the end of the contract. Over the 40-year term, the rent is estimated at $1 million per year. In addition, $250,000 annually would be directed to youth and seniors - a total of $10 million - and $20 million total would be paid to schools.
Non-NFL events are expected to pay $4 million in annual rent, and temporary construction and game-day jobs are part of the deal.
New development
Business in the stadium area also is expected to get a bump from the new development. And if a second NFL team (the Oakland Raiders specifically have been mentioned) decides to play at the new field, the city could see more dollars.
But critics point out that the rent from the non-NFL events, such as concerts and college bowl games - which is not guaranteed - adds up to more than 80 percent of the total rent estimates. They also say that when the city's return on investment from the stadium is compared to the other potential projects at the same location- such as hotels or a business park - the result is a multimillion-dollar loss.
While the recession may stall new office development for years, the economy is expected to rebound well before the stadium has come to the end of its natural life, they say.
"This does not look like a good business decision with respect to the return on the investment," said Councilman Will Kennedy. "I asked whether I was missing something, and I didn't get an answer."
Councilman Kevin Moore, who is pushing for the new stadium, said the project already has piqued developers' interest in nearby vacant land. He believes that it would complement the city's nearby convention center, allowing for larger events.
City officials who helped negotiate terms with the 49ers defend the plan. They say the nature of redevelopment areas is not necessarily to make a big profit off a specific development, but to spend public money to produce economic activity in a particular area - in this case an entertainment zone near Great America.
Complex motivations
But they also acknowledge the City Council's motivations for a stadium are complex and transcend the bottom line.
"Theoretically there are a lot of office buildings out there that could be built, but there are only 32 NFL stadiums and if you want something that is rare, you want it for reasons that are not just financial," said Assistant City Manager Ron Garrett.
Smith College economics Professor Andrew Zimbalist, who wrote a book with Noll on the topic called "Sports, Jobs and Taxes" (1997), said the prominence of sports - and particularly football - in U.S. culture means politicians want to align themselves with teams.
That may partly explain Santa Clara's interest in the 49ers, San Francisco Mayor Gavin Newsom's continuing efforts to court the team despite repeated rebuffs and Sen. Dianne Feinstein's vocal opposition to the team's desire to leave the city.
Historically, new stadiums have been lousy deals for municipalities, said Zimbalist. In addition to Indianapolis and Cincinnati, a cautionary tale can be found just across the bay.
Oakland and Alameda County repay about $11 million per year through 2025 on $200 million in bonds issued to refurbish the Coliseum to lure the Raiders back from Los Angeles. The city and county also cover about $8 million in annual stadium operations shortfalls.
Taxpayers believed they wouldn't have to pay a dime, but a plan to sell personal seat licenses failed, leaving the public with the bill.
The 49ers maintain that they will cover any shortfalls associated with operating a new stadium, but unknowns remain.
Guesswork
The idea that non-football events would produce the majority of a stadium's earnings is guesswork at best, according to Noll. Venues such as HP Pavilion in San Jose and Oakland's Oracle Arena attract a much wider variety of entertainment because they have roofs and are smaller, but they typically only break even, he said.
The other big question is where are the 49ers going to get their $490 million share?
The team says it will in part depend on an NFL contribution. The league recently sank $300 million into a new stadium to be shared by the Jets and Giants, but it also has said that its stadium fund is depleted.
The NFL said it was pleased that Santa Clara had reached a deal with the 49ers and would continue to help with new construction, but thus far, officials have not committed a specific amount. The 49ers have compounded the uncertainty by pledging to make a significant investment toward the new stadium, but failing to offer a financing plan.
"The financing will be a combination of the team and the NFL, but this (stadium project) still needs to go to the voters for approval, so the financing plan will come after that," said Steve Fine, the 49ers' director of business communications.
The series
Sunday: How it came to the point where the 49ers are threatening to leave their namesake city.
Monday: What the city - and fans - stand to lose if the team leaves.
-- Today: Santa Clara's stadium deal: Too good to be true?
Wednesday: What can be learned from the fight that kept the Giants in San Francisco?
Thursday: Battling columnists Scott Ostler and C.W. Nevius offer their thoughts.
-- For the previous installments in this series, go to sfgate.com.
Deal at a glance:
Timing: $937 million stadium by 2014
49ers contribution: $493 million
Public contribution: $114 million
Seat licenses, concessions, etc.: $330 million
Rent, NFL football games: Average $1 million annually over 40 years on escalating schedule
Rent, other events: Average $4.2 million annually over 40 years
Builder: City gives up competitive bidding on project - 49ers decide on builder
Approval: Public must vote on deal
