Cities and the stadium business

At his blog Field of Schemes, Neil deMause, co-author of the book Field of Schemes, recently summarized an excellent special report from the Baltimore Sun of the pitfalls of stadium ownership for cities. As he writes in his post Aberdeen: How not to build a stadium deal,

It's an outstanding reminder that when it comes to stadium finance, it's increasingly less about who pays the initial bills than about who reaps the revenues down the road.

The experience of Aberdeen is a cautionary tale for any city considering the possibility of operating a professional sports stadium. As Aberdeen's current mayor said in 2005,

Municipalities, especially this one, shouldn't be in this type of business.

The San Francisco 49ers have requested not just $287,000,000 in public assets for the construction of the stadium. They have also requested that the City of Santa Clara create a Sports Authority, which would both assume an additional $330,464,000 in bond debt and operate the stadium.

And taking on debt and operating the stadium are two additional risks, as the experience of Aberdeen demonstrates.

I hope you'll read the full article at the Baltimore Sun website, but here are a few interesting highlights:

Every game has been a sellout since the 6,000-seat stadium opened in 2002. Companies such as Bank of America have paid to be sponsors. . . .

But even on days like this, when the city-owned stadium is packed, Aberdeen loses money.

This is an important cautionary note — a full stadium does not equal profit for the city.

The Harford County community owes $6.7 million in stadium-related debt, and millions in interest, on a payment schedule stretching to 2022. The city's stadium fund has posted operating losses that total more than $1 million since 2001, forcing Aberdeen to dip into its treasury.

And these debts and operating losses are for a small, minor league stadium. The debt and potential for operating losses will be much bigger for an NFL stadium.

In closed-door negotiations, Aberdeen signed over to the Ripken businesses most of the money to be made from the baseball games. City officials had intended to cover the bills in other ways, including fees, taxes and a deal with Nottingham Properties to develop adjacent land. But the city's contract with Nottingham contained no penalty for delay. The land remains mostly acres of dirt.

Under the current proposal from the San Francisco 49ers, the breakdown of revenue streams is the same, with the notable exception of stadium naming rights, personal seat licenses, concessionaire rights, etc. But these revenue streams are NOT profit for the Stadium Authority — the 49ers' proposal calls for the Stadium Authority to borrow against this expected revenue in order to build the stadium. Like the Aberdeen IronBirds, the San Francisco 49ers will make most of the money from the actual football games.

The city, with a general fund budget at the time of just $7.6 million, pledged $4 million.

Most minor-league stadiums are owned by larger jurisdictions that can spread the costs over bigger budgets - the situation in Prince George's County, where the minor-league stadium is overseen by a multi-jurisdictional authority.

What's particularly interesting to me about these numbers is that even in the case of a minor league baseball team, cities look to spread the cost over a larger region. And Aberdeen pledged a little over half of its annual general fund budget to the project. The current San Francisco 49ers' proposal calls for Santa Clara to take on FOUR AND A HALF TIMES its annual general fund budget for a stadium. The scale of the subsidy request is simply shocking.

The city was counting on a ticket tax and the potential for parking fees, advertising on a billboard and non-baseball events. The tax raised about $140,000 the first season, but the city had little success attracting concerts, banquets or similar functions. In 2002, those events brought in only $2,000.

The trickle-down profit scenario outlined in the 49ers' proposal depends on not simply attracting other events, but making a profit from these events. If there is no profit from outside events, no money will be set aside for capital improvements, and I'm sure we can all guess who will be on the hook for those expenses.

"The Ripken family has put Aberdeen on the map," said [Former Mayor Douglas S.] Wilson, after rattling off the names of major leaguers such as Orioles right fielder Nick Markakis who have passed through Aberdeen. "To create that in a small government, to be able to have a minor-league baseball team, I mean, it's pretty phenomenal."

We've seen the same sort of thinking here in Santa Clara. Instead of addressing the very real financial costs and potential risks, stadium supporters draw on such far-fetched comparisons as the Wright brothers and the moon landing.

Instead of such wishful thinking, we need to focus on the very real financial risks involved in the stadium business.

After all, if there was money to be made in operating a stadium, don't you think the 49ers would want to do that themselves?

What does Cedar Fair want?

Mark Purdy, one of our more thoughtful South Bay sports commentators, wrote a neat essay in the San Jose Mercury early Friday morning on the current rumble between Cedar Fair and the San Francisco 49ers. However, only in his last couple of paragraphs does he touch on the concerns that we Santa Clarans have about subsidizing a billion-dollar stadium with $222 million of public money. We certainly have no such "money" lying around. It will be nearly all public debt which we'll be paying off for many years - all to subsidize a millionaire football team owner.

Getting back to the article itself, Mr. Purdy notes: "Well, what about the opportunity for a theme park corporation to partner with the NFL and one of its most high-visibility franchises?"

I seriously question what kind of partnership that would be, as you'll have a different breed of customers for each venue. The expense of a stadium is so great, it is difficult to imagine that season and individual ticket sales alone will close the gap. Some form of "Personal Seat License" could well be imposed - and Great America visitors won't see the inside of any new stadium unless they shell out for a seat license like everyone else.

Before PSLs for the Oakland Raiders were finally eliminated in late 2005, they ran from $250 to $4000. When 10-game season tickets first took the place of PSLs in Oakland, they ranged from $470 to $910. A current seat map of McAfee Coliseum shows those same ten-game tickets now running from $260 to $1510. How any new "Stadium Builder's Licenses" will be priced for a new stadium in Santa Clara - not to mention the season ticket prices - is the stuff of pure speculation. Simply start with Oakland's example and work your way up from there. In the end, boosters of any stadium in Santa Clara may be in for a rude shock when season ticket - and possibly SBL - prices are finally posted.

Now, Mr. Purdy is right to question Cedar Fair's flip-floppy statements on the stadium proposal. But he appears to be saying that the current agreement on parking spaces for Great America gives Cedar Fair unfair veto power over the stadium. It does not. If Cedar Fair has plans for the future of Great America that would bump up its attendance figures - and fill up a parking area they're contractually entitled to - then they're well within their rights to insist that their needs be honored. Changing that agreement could force the City to accept less in revenue from (or agree to some cash compensation to) Cedar Fair. Either has an immediate negative impact to the City's General Fund - at the same time that compensating revenues from any football stadium are far from guaranteed. In short: A deal's a deal, guys.

Maybe Cedar Fair is as shrewd as Mr. Purdy seems to suspect. With that, here's pure speculation from this writer: Could Cedar Fair also be holding out for televised promotion of Cedar Fair theme parks around the country during 49ers games? It's amusing to contemplate our "roller coaster company" trying to make sense of the NFL's television blackout rules - rules designed to compel local ticket sellouts. In short, sell out your stadium 72 hours in advance of a game - or no game goes on the air for 75 miles. I'm oversimplifying this, I know. But it would sure be a kick if Cedar Fair were to find itself unable to promote Great America on TV in its own city due to poor ticket sales at the football stadium next door.

We could speculate on these corporate intrigues all day.

As a Santa Claran, however, I still oppose the stadium in general - and any corporate welfare for the millionaire Yorks in particular.

Our city - we taxpayers - will incur a debt of approximately $222,000,000.00 in order to hand that tribute over to the 49ers. Our debt service per year on any such amount will certainly wipe out the paltry $5M in rent the 49ers are offering to the Santa Clara Stadium Authority. That, plus those parking tax revenues dangled before our eyes, all accrue to the Stadium Authority - and not to the City's General Fund.

It gets worse: Depleted G-3 Fund or not, the Yorks are squeezing us for money so that they can then squeeze the NFL for more money. They want to use Santa Clara's money to improve their own cash flow and also to make their own private asset - the team - more valuble on the open market. Other NFL owners likely see such a rising tide lifting all boats, and you can be sure that they are delighted at such a prospect. That's still no reason to build a one-billon-dollar stadium in our city, and it's certainly no reason to hand millions in public monies over to a millionaire team owner who should be funding any stadium on his own or with the NFL.

But the worst problem with giving corporate welfare to the San Francisco 49ers is that it sets a dangerous precedent: Once we issue debt - or steal from the City's Utility Reserve - and hand those proceeds over to a private, for-profit sports franchise, we'll never be able to stop future "needy" millionaire welfare clients from doing the same thing. Their rationalization will be that, since we subsidized the York family from the public purse in 2008, we will have to do it again. And again.

We should be as concerned about that precedent as we are about Cedar Fair's parking spaces.

I do urge fellow Santa Clarans to beware - this is not the deal we think it is.

What about housing?

Sunday's Mercury News published a thoughtful and thought-provoking article. The author, John Conover, writes about the continuing and desperate need for more affordable housing in the Silicon Valley. No surprise there. What is of interest is that he writes from a business perspective -- he's a bank CEO. His argument is that more affordable housing is just plain good business:

In a global economy, business must be able to attract and retain top talent to be competitive. Yet with the median home costing $794,000 in Santa Clara County and $840,000 in San Mateo County, many middle-class workers are priced out of our market. Or they make a grueling commute for a few years, and then find jobs closer to where they can afford to live. Call it the "revolving door" of hiring. We've seen the quality of life in our communities erode as teachers, firefighters, police officers, and even our own adult children move away.

Given this obvious need, perhaps housing would be a better use of the land that many on our beloved council want to donate to the indigent York family. Talking just pure dollars and cents, would that benefit the city more than a massive multi-million dollar gift to a private corporation?

Increasingly, various communities have latched onto the idea of "smart growth," which according to Smart Growth Online "has a greater mix of housing, commercial and retail uses" than the sprawl that typifies much of the development of the past half century. By comparison, smart growth development is less costly to maintain, especially when the costs incurred by environmental and social problems are also considered. Some smart growth developments take the form of "infill" development, using underutilized land already serviced by many city services and thereby maximizing the investment of those services.

What would be the long and short term benefits of providing housing in an area surrounded by shopping, entertainment, employment and mass transit? I would think that such benefits could be quantified, especially in relation to our strapped city budget. I'd hope that when the city staff comes out with their recommendations on this plan, that housing was at least considered as an alternative.

Stadium proposal discussion on KKUP 91.5 FM

Tomorrow morning — 7:00 am, Wednesday, July 25 — Don Cormier at KKUP 91.5 FM will be interviewing a couple of people regarding the proposed San Francisco 49ers stadium in Santa Clara.

I hope you'll tune in to the show!

Update: if you missed the show, click on the KKUP logo below for a recording (57MB MP3 file)

"A sense of compassion for the community"

When Santa Clara Mayor Patricia Mahan was interviewed for Santa Clara Magazine (published by Santa Clara University) in 2005, Mahan, who received a law degree from SCU in 1980, had this to say about her alma mater:

“They just imbue you with such a sense of compassion for the community ... the higher values and the better values of why you’re doing what you’re being trained to do. It’s not to make a million dollars a year. It’s to be of service.”

Mahan's actions in recent City Council meetings, however, speak far louder than her words.

On several occasions in City Council meetings over the last few months, Mahan has used her position as Mayor to attempt to silence, demean, and disrespect Santa Clara residents who have taken the initiative to come forward and speak publicly about their concerns regarding the proposal to spend $287,000,000 in public assets on a football stadium for the San Francisco 49ers.

Usually, her biases are quite evident to everyone in attendance.

At the City Council meeting on July 17, however, the Mayor made an additional comment that was not heard in the Council chambers, but was quite audible to those watching from home.

"You're wasting your time."

The comment was directed at a resident who had wanted to speak to a report, but the Mayor rushed through the call for public comment without a pause. Instead of acknowledging that she had missed the resident's request, the Mayor blamed the resident.

You can see the full clip here:




Not only is such a reaction from the Mayor disrespectful, it's also a clear violation of Santa Clara's Code of Ethics & Values, which requires "all elected and appointed officials, City employees, volunteers, and others who participate in the city's government" to agree, in part, that:

3. As a Representative of the City of Santa Clara, I will be service-oriented. . . . :

a. I provide friendly, receptive, courteous service to everyone.
b . I am attuned to, and care about, the needs and issues of citizens, public officials, and city workers.
c. In my interactions with constituents, I am interested, engaged, and responsive.

6. As a Representative of the City of Santa Clara, I will be communicative. . . . :

a. I convey the City's care for and commitment to its citizens.
b. I communicate in various ways that I am approachable, open-minded and willing to participate in dialog.
c. I engage in effective two-way communication, by listening carefully, asking questions, and determining an appropriate response which adds value to conversations.

7. As a Representative of the City of Santa Clara, I will be collaborative.
In practice, this value looks like:

a. I act in a cooperative manner with groups and other individuals, working together in a spirit of tolerance and understanding. . . .

The real test of the City's commitment to ethics will be how they respond to the Mayor's actions, which certainly do not demonstrate "a sense of compassion for the community."

Just $62,000,000 more

Since we started this website, we've consistently said that the actual public subsidy requested by the 49ers in their proposal is nearly $300,000,000 in total public assets. I explained that number in detail in a post entitled Real Money.

Of course, that amount doesn’t cover all the actual and potential costs — things like additional infrastructure improvements, property tax breaks, and lost opportunity costs — but it does include all of assets requested by the 49ers in their proposal.

While the Mayor, certain members of the City Council, and the 49ers have continued to claim that the requested subsidy is a mere $160,000,000, we have insisted that all of the public assets need to be counted.

Here is a video of Mayor Mahan using the incorrect $160,000,000 subsidy request figure on CBS5 TV, as recently as June 19. It's at the 1 minute 27 second mark of the report:



While the Mayor continues to use the incorrect number, the City of Santa Clara is beginning to agree with our estimates.

Buried in a report on the implementation plan and timeline for the "City of Santa Clara Principles & Priorities for 2007-09", which will be presented to the City Council tomorrow, is the City’s estimate of the requested subsidy.

$222,000,000

If you don’t want to do the math, that’s $62,000,000 — or about 39% — more than $160,000,000. This revised estimate of the subsidy includes the projected costs of both moving the electrical substation and the construction of a parking garage on the site, two items that were not included in the 49ers' $853,000,000 construction budget.

The new estimate still doesn't include the value of the land, but at least this number is closer to the true cost of the requested subsidy.

Pocket change, right?

You can view the report yourself from the city's own website:

http://cityclerkdatabase.ci.santa-clara.ca.us/wx/pubhtml/pubhtml/3009.html

It’s the report under Agenda Item 5F - Special Order of Business. The $222,000,000 is on page 15 of the report. Click on the image below for a PDF of the relevant page.



Once again, the City’s staff and consultants have provided a much-needed impartial analysis of this proposal, and we appreciate their hard work.

"Ignorance is Strength"

When is an office development a winner, and when is it a loser?

If you're Councilmember Moore or Casserta, that depends on whether it's a project that competes with the stadium, or a project to make money for building the stadium. The San Jose Mercury News highlighted this Orwellian double-speak today. Here is a quote:

A few weeks ago, consultants said the city of Santa Clara could generate $3.3 million in annual rent if it built office buildings instead of a proposed San Francisco 49ers stadium.

Councilman Dominic Caserta challenged how legitimate the idea was, given the empty office buildings in other parts of the city.

And Councilman Kevin Moore, one of the first to approach the 49ers, joked that a sign advertising a strip of real estate across from the stadium site has been up so long that it's faded.

Last week, the same city consultants researched the idea of developing that very slab across the street and found it could generate as much as $2 million a year to help support the stadium or other city projects.

So why didn't Moore and Caserta have questions this time about how viable the option is?

You can read the full article here.

Note also that Councilmember Moore finally admitted that the stadium will sit empty and unused 300 days a year. Is that really what we want to spend $287 million to subsidize?

"Her own little rules"

When Nancy Reagan was First Lady, she got into trouble for borrowing fancy clothes and jewelry to wear, but never reporting them as taxable income. After getting caught the first time in 1982, she promised not to do it again. When TIME magazine reported in 1988 that she was still doing it, her press secretary tried to downplay the tax evasion by saying "She set her own little rule, and she broke her own little rule."

Fast forward nearly 20 years later...

On January 9, 2007, Santa Clara City Council approved a number of Guiding Principles to be used in evaluating the 49ers' stadium proposal. Among them are the following:

1. Utility funds only used for utility purposes (electric, water, sewer.)
   
2. City Manager responsible for negotiations.
3. Vacant City lands must return revenue to General Fund.

Well, apparently some of our so-called "City leaders," elected or otherwise, are quite capable of selective amnesia like Mrs Reagan, even if they are not a size-4 fashion plate.

Let's see what's happened to some of these "little rules."

1. Utility funds only used for utility purposes:
   
   On March 26, 2007, the SF Chronicle reported that
   

   Last week ... 49ers officials were openly coordinating with former Santa Clara city staff members and elected officials, who publicly called on the city to study using some of city-owned Silicon Valley Power's money for a stadium project.

   Maybe these Raiders of the Lost Utility Reserve think Santa Clara ought to have a taste of rolling blackouts and skyrocketing electric bills?
   
   
2. City Manager responsible for negotiations:
   
   The first rule of negotiations is "Don't show your cards!" Anybody who has ever negotiated for anything more substantial than a waffle iron at a garage sale knows that. You most certainly don't go in bragging loudly about how big a wad you've got in your back pocket.
   
   Yet that is exactly what Mayor Mahan has done with her infamous proclamations about the $160 million cash subsidy being "doable."
   
   Besides being pure fantasy, this indiscreet flashing of the mayoral wad also showed the 49ers that they have clearly bagged a "motivated" buyer.
   
   Even worse, it got Cedar Fair, the owner of the Great America theme park next door, thinking, "Hey, if she's so willing to throw money at them, where's ours?!"
   
   So much for letting the City Manager do the negotiating.
   
   
3. Vacant City lands must return revenue to General Fund:
   
   A report presented to the City Council on July 10 stated:
   

   One of the possible financing options under consideration is the use of City-owned land that ... could be used ... for a portion of the stadium construction cost.

   Ummm, what part of "General Fund" do you not understand?
   

If our City Council is just going to make their own little rules and break their own little rules, then what's the point of adopting these hallowed Guiding Principles?

Sources for Stadium Subsidy

It was quite a shock to read in yesterday's Mercury News (Theme-park owner willing to consider 49ers stadium ) that:

Mahan said she's encouraged by how city officials and consultants have identified almost two-thirds of the $160 million that the city would need to contribute to help the team build the $854 million stadium.

"This is becoming more and more doable the more we get into it," she said.

We at StadiumFacts.org have been following this issue pretty closely. Without City Staff's capable services, we can not be completely on top of everything. Perhaps we missed a detail or two.

I kind of doubt we missed $100 million.¹

To date, only two sources for this cash have been identified:

1. Issuing redevelopment bonds. This would raise $13.1 million. If the city were to reduce the amount of money invested in affordable housing, they could raise $45.3 million by issuing redevelopment bonds.
2. Leasing out city-owned land. The 7.6 acres under consideration are worth about $20 million. By tying up most of the remaining city-owned land in a 99 year lease, the city could get $2 million per year. But the city needs the money now (stadium builders won't wait 30 years to be paid), so the city would have to get the renter to pre-pay the rent. Unfortunately, that would only get us something like the current value of the land -- $20 million.

This comes to a grand total of $33.1 million ($65.3 million if we decrease affordable housing) cash identified. This is far less than two-thirds of the $180 million cash subsidy demanded by the 49ers. [Despite the claim from the Mayor and the 49ers, the city would need $180,000,000 in cash for this proposal -- $160,000,000 for the stadium itself PLUS $20,000,000 for site improvements (moving the substation.)]

What's so doable about that?

¹ -- We have a query in to City Staff to confirm all the details of the proposed funding sources, and will update you once we get a response.

A fool's investment

Dave Zirin, a sportswriter who writes for the Nation, SLAM magazine, and the Los Angeles Times, among many other publications, has just written a new book — Welcome to the Terrordome: The Pain, Politics and Promise of Sports — in which he explores the intersections of professional sports and social justice in the world today.

He will be speaking at 7pm tonight [Wednesday, July 11] at Cody's Books in Berkeley. (Check the end of this post for more details about the reading. )



















Not surprisingly, one of subjects he analyzes in this book is public funding for professional sports stadiums. He wrote about the same issue in an article for last Sunday's San Francisco Chronicle.

The entire article — Are stadiums worth the high price? — is worth reading, but here are a few highlights:

Stadiums are sporting shrines to the dogma of trickle-down economics. In the past 10 years, more than $16 billion of the public's money has been spent for stadium construction and upkeep from coast to coast. Though some cities are beginning to resist paying the full tab, any kind of subsidy is a fool's investment, ending up being little more than monuments to corporate greed: $500 million welfare hotels for America's billionaires built with funds that could have been spent more wisely on just about anything else.

. . .

As Neil DeMause, co-author of the book "Field of Schemes" said to me, "The history of the stadium game is the story of how, by slowly refining their blackmail skills, sports owners learned how to turn their industry from one based on selling tickets to one based on extracting public subsidies. It's been a bit like watching a 4-year-old learn how to manipulate his parents into buying him the new toy that he saw on TV; the question now is how long it takes our elected officials to learn to say 'no.' " [emphasis mine]

We've already seen evidence of those refined blackmail skills in Santa Clara. The headline alone — Santa Clara risks losing more than a 49ers stadium: 49ers HQ in play if deal collapses — neatly summarizes the start of a campaign to blackmail the city of Santa Clara into approving this enormous public subsidy for billionaires.

Of course, the fact that the San Francisco 49ers pay the City just $24,000 PER YEAR to lease the 11-acre property should be evidence that the City already provides a significant subsidy to this team. Judging by the numbers presented at Tuesday's City Council meeting, the City should be getting closer to $2,500,000 - $3,100,000 PER YEAR for that land — that's over 100 times more than we're currently getting.

Later in the article, Zirin includes part of a conversation he had with Jim Bouton, a former Major League Baseball All-Star and the author of the memoir Ball Four. Bouton's assessment is even more damning.

It's such a misapplication of the public's money. . . .

It's going to be seen historically as an awful folly, and it's starting to be seen that way now, but historically that will go down as one of the real crimes of American government, national and local, to allow the funneling of people's money directly into the pockets of a handful of very wealthy individuals who could build these stadiums on their own if it made financial sense. If they don't make financial sense, then they shouldn't be building them.

If I was a team owner today, asking for public money, I'd be ashamed of myself. Ashamed of myself. But we've gone beyond shame. There's no such thing as shame anymore. People aren't embarrassed to take -- to do these awful things.

Of course, we certainly haven't seen any evidence of shame among the San Francisco 49ers and their supporters.

I've asked Dave Zirin if he could add a Santa Clara stop on his current book tour, and he's hoping to schedule a visit later this fall. But if you'd like to hear him sooner, the trip to Berkeley will be well worth it.

The talk starts at 7pm at:

Cody's Books
1730 Fourth Street
Berkeley, CA 94710
(510) 559-9500

Click here for the event page.

A fun-filled summer evening

Tonight's City Council meeting might not be quite as much fun as a trip to an amusement park, but it's likely to be a whole other kind of wild ride.

This evening, the City Council will consider two reports related to the proposal to provide nearly $300,000,000 in public assets to help build a stadium for the San Francisco 49ers.

What are the items on tonight's agenda?:

1. In April, the City Council authorized spending $200,000 on consultants to provide analysis of the proposal. At the meeting tonight, City staff will recommended that the City Council authorize spending an additional $115,000 for consulting services.

2. The City Council will review KMA's report on developing an additional 11 acres to the east and west of Centennial Boulevard along Stars and Stripes Drive for the potential purpose of raising money to pay for the stadium.

The agenda is available here:

http://cityclerkdatabase.ci.santa-clara.ca.us/wx/pubhtml/pubhtml/3009.html

You can open the specific reports on these two items from the online agenda.

What can you do?:

1. Attend the City Council meeting on TONIGHT at 7pm and speak out! Speakers will probably be limited to 2 minutes each.

2. Call the Santa Clara City Council at

(408) 615-2250

3. Write a Letter to:

Patricia M. Mahan, Mayor
City Hall
1500 Warburton Avenue
Santa Clara, CA 95050

4. Send an email to:

MayorandCouncil@ci.santa-clara.ca.us

5. Spread the word! Tell your neighbors and friends and encourage them to get involved!

Who really profits?

The San Francisco 49ers have been more than willing to talk about the potential economic benefits a stadium might have for Santa Clara and the surrounding region.

They haven't been quite so open about how they will benefit economically from that same new stadium.

Why not?

Well, it's probably because the value of their team will increase substantially if they get a new stadium — an immediate increase in value of somewhere between $250,000,000 and $700,000,000.

That's a much bigger increase than your average bathroom remodel.

How does the team's value increase?

Each year, Forbes magazine assesses the value of all 32 NFL teams. In their most recent list, the San Francisco 49ers are valued at $734 million — near the bottom of the pack (29th place.)

As Forbes states, this valuation is a reflection of the fact that "the 49ers have some of the lowest revenues in the league thanks to an antiquated stadium that features no club seating, and an onerous lease that forces the team to share concession, luxury-suite, naming-rights and signage revenue with the city."

A new stadium with a better revenue stream would increase the team's value. Could the new value go as high as $1.423 BILLION — Forbes' valuation of the Washington Redskins (and the team currently at the top of the list)? Maybe not. But it is certain that a new stadium with more favorable revenue stream would markedly increase the team's value.

Mike Swift at the San Jose Mercury News analyzed this very issue back in November 2006, shortly after the Santa Clara proposal was announced.

As he wrote in his article "Deluxe Stadium May Enrich 49ers"

. . . in many markets, a new stadium has produced a windfall for owners.

Patriots owner Robert Kraft paid $172 million for the team in 1994. Today, with the Patriots playing in a new suburban Boston stadium partly financed by the NFL, in a market with wealthy demographics like the Bay Area's, the franchise is valued by Forbes magazine at $1.2 billion. That is the second-highest among the four major sports (football, basketball, baseball and hockey), more valuable than even the storied New York Yankees.

By the way, it's worth noting that the new Patriots stadium (in Foxboro, MA, a town of about 16,000) was paid for ENTIRELY by the team's owner, Robert Kraft. [State taxpayers did finance about $75 million in infrastructure improvements, but the team is responsible for paying back that debt.]

As reporter David Copeland noted in his article "Patriots teach lesson about stadium financing",

By conventional "wisdom" for financing sports stadiums, Kraft should be crying poor. That conventional wisdom says that teams -- no matter what the sport -- can't possibly pay for a new stadium on their own and remain competitive.

The Patriots finished the regular season with an NFL-best 14-2 record. On top of that, Forbes magazine valued the team at $756 million [in 2003] -- in large part because of the new stadium -- up considerably from the $158 million Kraft paid for the Patriots in 1994.

We need to remember that professional sports are a big business, just like any other business, and the example of the New England Patriots is clear evidence that teams don't need public money to succeed.

Happy Fourth of July!

Today, as we celebrate the founding of our nation 231 years ago, I thought the following quotation from Thomas Jefferson was particularly appropriate both to honor our national holiday and to describe our particular mission here at StadiumFacts.org.

As Jefferson wrote in a letter in 1789,

Whenever the people are well informed, they can be trusted with their own government; that whenever things get so far wrong as to attract their notice, they may be relied on to set them to rights.

And here at Stadium Facts, we share Jefferson's confidence. We believe that once citizens of the community are well-informed about the stadium proposal, we can rely on them to set the Santa Clara City Council to rights.

Best wishes for a Happy Fourth of July!

"A gift of public funds"

City Council voted last week to foot the entire bill for repairing the streets in the South of Forest neighborhood. It was a difficult decision for some Councilmembers. Besides the fairness issue, there are the ever-present concerns about fiscal health.

Fairness is an issue because there are similarly-annexed neighborhoods that had to pay for their own improvements. Fiscal health is a concern because the City has been running pretty lean since the recession of 2002.

Understandably, many public figures voiced strong opinions, on both sides. "Simply put, this is a gift of public funds," said former Mayor Bill Gissler.

What's remarkable is that there may be an even bigger gift of public funds going out on Santa Clara's next sleigh. Yet we have not seen anywhere near the same kind of outrage, from any public figure, elected or otherwise.

In fact, it's quite the opposite. Many have been very willing to fall on their swords to fawn over the would-be beneficiaries of this gift. By the way, the reindeers are headed for Ohio, because these lucky boys and girls are not even Santa Clara residents!

Exactly how big a load is Rudolph hauling? Here's a comparison to bring it home.

Joe Average is just getting by. His savings are cleaned out. He was maxed out on his credit cards a couple of years ago, but he just managed to pay that off with careful budgeting. Still, Joe and his family are pretty much going hand-to-mouth on their annual income of $70,000. Joe's wife needs to replace her 1983 Dodge Omni. Joe buys her a 3-year-old Dodge Neon for $8,000. He has to take out a loan, because he doesn't have that much cash. Credit counseling will probably frown on that, but hey, it's either that or she can't get to her job. Then Joe buys for himself a brand new Ferrari F430 for $178,000, on credit.

You think that's far-fetched? This comparison is not at all hypothetical. Joe's salary is the same as the median income in Santa Clara. Joe Average can easily be our City.

Santa Clara is just barely running a surplus, and the forecast is for zero surplus by 2012 ¹. We had a budget deficit from 2003 to 2006. The General Fund Reserves are low. There is a hiring freeze on 30 staff positions ². The SOFNA repairs cost $15M. City Council bit the bullet and committed to spending that money, even though it would probably mean deficit spending. Now the stadium proponents want Santa Clara to spend $297M to build a ballpark that will sit empty 11 months out of the year.

Look at the numbers in comparison:

• The Neon for Joe's wife costs about 1/8 of their annual income. The SOFNA repairs cost about 1/8 of the City's annual revenues.
• Joe's Ferrari costs about 20 times more than his wife's Neon. The stadium will cost 20 times more than the SOFNA repairs.
• Joe's Ferrari costs 2.5 times their annual income. The stadium will cost 2.5 times the City's annual revenues.
• Ferrari parts and labor are ... well, you don't want to know. The stadium operating costs are ... well, "Trust us" said the 49ers.

So which is the more outrageous "gift of public funds?"


--
¹ City Council meeting minutes, May 15, 2007, section 4: Special Order of Business, item E: Joint Study Session on the Proposed Five-Year Financial plan for 2008-09 through 2012-13 and Proposed Capital Improvement Project Budget for FY 2007-08. Report, page 8 of 18.

² Ibid, page 4 of 18.