The city of Santa Clara is discovering what happens when a bedroom community of 120,000 people makes a deal with a corporation valued at just shy of $1 billion.
For years, the Santa Clara City Council has been negotiating with the owners of the 49ers to build a $1.2 billion stadium within the city limits — presumably bringing untold riches, in the form of hotel fees and restaurant bills. In 2010, the voters of Santa Clara were asked to decide whether or not to approve the deal. They said yes.
And then the deal started falling apart.
Here are the basic facts of the agreement. The NFL — in other words, the people who own the league’s 32 teams — agreed to lend the owners of the 49ers $200 million for stadium construction. A consortium of banks, led by Goldman Sachs, lent an additional $850 million.
Who will have to pay that back? Representatives of the 49ers insist that they will. But that’s not at all clear; critics in Santa Clara have claimed that the city will share a considerable part of the liability — perhaps as much as $400 million — and city representatives have been maddeningly coy about the structure of the deal.
Santa Clara committed to funding the remaining cost of the stadium’s construction in two forms. Some $35 million was to come from taxes on hotels. The other $40 million was to come from the Redevelopment Agency, using funding that often finances schools, hospitals and public transportation, but can be diverted to invest in massive economic development projects such as shopping malls or, say, football stadiums.
Then, after Santa Clara had already given the team $10 million, last year Gov. Jerry Brown and the state Legislature abolished redevelopment agencies in the state. Cities around California were forced to create interim boards to decide how to spend the remaining money that had been socked away. Santa Clara’s board — which consists of numerous county officials — voted on June 22 to redirect $30 million of the former redevelopment funds away from the stadium and back to public schools.
Perhaps you can guess what happened next: the 49ers sued to get that $30 million back.
Lawyers for the 49ers claim that the voters explicitly agreed to give the team all $40 million in the 2010 referendum. Local critics of the deal claim that the voters only approved giving the team money, and that the sum would not exceed $40 million.
But one thing is clear: The 49ers have not had to pay a cent upfront to fund the stadium. Instead, the team has persuaded other team owners, and foolish city officials, to put their money on the table. And when other, wiser public officials decided that local students needed the money more than team owners sitting on an asset worth $990 million, those owners sued to take it away from them.
The board that redirected the former redevelopment funds has now hired a lawyer, and a lawsuit is set for a July 27 hearing. Santa Clara went long for its deal to bring the 49ers to the South Bay, but the city may have rushed ahead too fast without knowing the full implications. The great deal of having a team looks like it will now sideline much-needed money for other needs there, such as schools.