Going turbothermic...

In 1911, Ambrose Bierce, a San Franciscan journalist, wrote the Devil's Dictionary, a satirical book that lampooned political double-talk. It is fitting that we pay homage to Bierce today, when San Francisco and double-talk are very much in the news.

An updated edition of Devil's Dictionary might have an entry like this:

turbo·thermic, adj. From turbo- (to blow) and -thermic (of or related to heat.)
1. Blowing hot air.
2. Characterized by huffing and puffing, e.g. subsidy supporters trying to blow down Santa Clarans' house of fiscal responsibility.

Have you ever wondered where subsidy opponents get our numbers? The short answer is, they all come directly from reports produced by the city's consultants, or by city staff.

For a slightly longer answer, let's look at the three myths listed in the "Myth Busters" flyer. This flyer was handed out at the Art & Wine Festival by the Santa Clara Plays Fair coalition, of which StadiumFacts is a member.

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Myth: the stadium project would create thousands of jobs.

Fact: the number of jobs is just over 500. Note the fine print: "FTE = Full Time Equivalent. Per CS&L." Because of the highly seasonal nature of the jobs, many of them will be part-time. Their sum total is equivalent to 515 full time jobs.

Source: report from Keyser Marston Associates (KMA, consultants hired by the city) dated June 1, 2007, page 8.

(Click on this small image for a larger version.)

By the way, KMA is in agreement with CS&L on this. CS&L are the consultants hired by the 49ers themselves. CS&L's job is to make the deal look as good as possible. If all they can come up with is 515, then anybody who tells you "thousands of jobs" is just going turbothermic, i.e. blowing hot air.

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Myth: the stadium project would make a lot of money for the city.

Fact: the stadium would generate $650,000 of general fund revenue per year, from a city contribution of $222,000,000.

Source: KMA report dated June 1, 2007, page 8, and Implementation Plan and Timeline for the "City of Santa Clara Principles and Priorities for 2007-09," dated July 12, 2007, page 15.

(Click on these small images for larger versions.)

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Myth: the stadium project will generate a lot of economic activity.

Fact: an office building would generate over 4 times the economic activity, while requiring no subsidy. Besides, if the city is going to "invest" $222,000,000 (assuming a subsidy can ever be called an "investment,") then the return-on-investment is the only bottom line that matters to the city. Keep in mind that the $650,000 annual return to the city discussed above already includes taxes on the $85 million in economic activity. How much revenue other private businesses might gain, or how much salary are being paid to football players, are secondary factors.

Source: KMA report dated June 1, 2007, addendum.

(Click on this small image for a larger version.)

Furthermore, subsidy supporters who cite the $85M as a benefit are being disingenuous because

1. they neglect to mention the comparison to an office building,
2. only $41M of the $85M is actually new benefits; the rest comes from the existing 49ers training center -- the colloquial term for this is "double-dipping." Here is the KMA report again, page 2:

(Click on this small image for a larger version.)

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Notes:

1. The KMA report can be downloaded from here.
2. The Implementation Plan and Timeline for the "City of Santa Clara Principles & Priorities for 2007-09" can be downloaded from here -- click on REPORT under item 5F.

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Last week, prominent subsidy supporter and former Councilmember Lisa Gillmor used the term "fuzzy math" to attack KMA's (and CS&L's!) numbers.

This is a curious phrase to use in this context, considering its history.

In the first presidential debate of 2000, George W. Bush repeatedly used the phrase "fuzzy math" to attack statements made by Al Gore, and to defend his own tax cuts for the rich. According to a CNN poll taken immediately after the debate, most people thought Gore won the debate, 48% vs. 41%.

Why are subsidy supporters jumping on this losing bandwagon?

Infinity not as infinite as it used to be

The feasibility study is not done. No contract has been signed. But already the flip-flopping has begun. The issue is cost overruns, both during construction and operation of the stadium.

At a meeting with the community in May this year, SF 49ers Director of Strategic Planning Jed York tried

to convince skeptical Santa Clarans that they would not be exposed to financial risk, either during construction or once the stadium opens.

"The 49ers' risk is infinite," Jed York, son of 49ers owners John and Denise DeBartolo York, told church members and other city residents Wednesday night at a meeting at the Resurrection Lutheran Church. "In your doomsday scenarios, we are taking that risk."

In September, a flyer distributed by the 49ers at the Art & Wine festival says the offer is still good:

No, there are absolutely no hidden costs. The city and its residents will not be responsible for cost overruns or operational shortfalls.

Here is a picture of the flyer. Click on the image to see a close-up of the highlighted part:

Earlier this month, however, York took a giant step back from that claim. In an interview with Mark Purdy, a sportswriter for the Mercury News, York changed his mind about that willingness to assume all risks:

". . . if you're losing money, the 49ers are going to write a check to the city council at the end of the year to the city general fund to make up for any losses that occur at a football game.''

But since the 49ers only play at home 10 days a year, does that mean the city is on the hook for the other 355 days? What about maintenance costs? Will they be apportioned by the same ratio, i.e. the city is responsible for 97% of all maintenance cost overruns?

infinite, adj.

1. Having no boundaries or limits.
2. Immeasurably great or large; boundless.

Interview on KKUP 91.5 FM

This morning Michele was interviewed by Don Cormier and Yolanda Reynolds on the Free and Clear show, KKUP 91.5 FM.

There were a report on our tabling at the Art & Wine Festival, as well as updates about the press conference to announce the formation of the Santa Clara Plays Fair coalition.

Click on the KKUP logo below for a recording (53MB MP3 file.)

"Pay no attention to that man behind the curtain."

Former Mayor Gillmor, the power behind the throne in Santa Clara politics, publicly excoriated Cedar Fair this week. The owner of Great America apparently committed a whipping offense when it raised objections to the proposed stadium. Cedar Fair was "acting in [its] narrow self-interest," according to Mr Gillmor.

Let's draw an analogy.

Imagine you are renting a nice little bungalow. One day the landlord just shows up, unannounced, with a casino operator. They proceed to discuss building a card club, right where your garage is.

Would you be upset? Of course you would. You might even oppose the deal. Is that "acting in [your] narrow self-interest?" Most people would say, no probably not. Certainly nobody could blame you for your objections.

So here's Cedar Fair. The owner-operator of the Great America theme park has been renting land from the City for years. They have a long term lease. They pay a fair rent^*, which is more than their neighbor, the SF 49ers, can say.

Now this neighbor wants to build a stadium where Cedar Fair's parking lot is. Apparently nobody got their agreement in advance. Cedar Fair understandably doesn't think this is such a great idea. Nobody can blame them for that.

Or can they?

Mayor Gillmor thinks he can. But since when does a private business have to act in anybody's interest but their stockholders'? It sounds brutal, but that's capitalism, which Mr Gillmor surely knows a thing or two about.

If this episode says anything, it is that the 49ers stadium deal is on life support. Why else would the éminence grise himself have to come out from behind the scenes to stump for it? The simple fact is that the 49ers are demanding an exorbitant subsidy from Santa Clara taxpayers. Furthermore, they are so fixated on the feeding trough that they forget to say "Pardon me" to their neighbors.

In the words of City Manager Jennifer Sparacino, we Santa Clarans should strive to treat all parties "fairly and equally, without special favors."

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^* Cedar Fair pays the city "at least $5.3 million annually in rent" for the Great America property. For their training camp next door, the 49ers pay "about $24,000 a year - less than what it costs to rent some two-bedroom apartments nearby."

Truthiness Illustrated

Mark Purdy posted the full transcript of his interview with Jed York yesterday. It makes for very interesting reading.

There is one point in particular that caught my eye. Near the end of the interview, Mr. York made the following comment:

"... with the city's investment of $160 million, not only are they seeing revenue that's occurring from a 49ers game, they're also seeing direct revenue from the ancillary events, the 14 to 20 major events that can happen here. So the city of Santa Clara can see anywhere from $2 million to $10 million a year in net income going to their general fund because of the stadium being here."

Assume for the moment that his figures are correct. Is this a "good investment"?

• $2 million per year over the 30 year life of the stadium would not even repay $160 million.
• $10 million per year is equivalent to the 49ers Corp. making payments on a 30 year mortgage at 4.75%.
  

The really sad news is that the city's consultants and the 49ers' own consultants have yet to show the public how the general fund could net anywhere near $2 million per year. The Keyser Marsten report shows $700,000 per year. (Referenced below.)

Moreover, the initial subsidy from the city is $222 million -- $160 million cash plus $62 million for a new garage and moving the power substation. (Referenced below.)

As an MBA with experience in the finance industry, Mr. York surely realizes what a bad investment this would be.



References:
See the last page of the Keyser Marsten report at the following location:
http://ci.santa-clara.ca.us/pdf/collateral/49ers-20070605-Agenda-Report-Eval-49ers-Economic-and-Fiscal-Benefits-Study.pdf

For reference, see page 15 of the report under agenda item 5F on the July 17th meeting summary at:
http://cityclerkdatabase.ci.santa-clara.ca.us/wx/pubhtml/pubhtml/3010.html#July-17-07Regular

One wild ride

Yesterday I wrote that the City Council should not spend any more money on studying the San Francisco 49ers' stadium subsidy request until the City had a signed agreement from Cedar Fair.

I didn't really expect the City Council to postpone this request for additional money, but today's press release from Cedar Fair — "Cedar Fair opposes proposed 49ers stadium" — is precisely the reason why the City of Santa Clara should have obtained a signed agreement with Cedar Fair before spending a dime of taxpayer money on studying the proposal.

Cedar Fair's opposition isn't a complete roadblock to the stadium proposal — in its press release, Cedar Fair states its willingness to "consider selling the remainder of its lease and all of its interest and assets to the City or 49ers for fair market value" — but its opposition completely changes the circumstances of the proposal. If the City Council still wants to move forward with this proposal, it needs to study the feasibility in light of these new conditions.

The San Francisco 49ers, however, were quick to provide an alternative plan — they'll just buy the theme park.

A couple of problems with this new proposal.

First, as Santa Clara's Deputy City Manager Carol McCarthy told the San Jose Mercury News "Any sale requires the city's approval and is contingent on having a class A theme-park operator . . . with proven financial ability to operate it."

So, to use a baseball metaphor, strike one.

Second, the San Francisco 49ers have asked the city for $222,000,000 in public assets plus 15 acres of land to build the stadium. If they don't have the money to build their own stadium, how can they afford a theme park? And if we the taxpayers are subsidizing their place of business, is our subsidy helping them to acquire more business assets? Should public money be used to help a wealthy team owner buy even more private assets?

Strike two.

Finally, in many of their presentations to city residents, the 49ers have tried to claim that they want the City to operate the stadium because they "are in the football business, not the stadium business." (My previous responses to that claim have been "our city isn't in the stadium business either" and "that's a little like Intel saying its not in the office building business." Intel certainly isn't in the office building business, but it didn't use that argument to try and convince the city to build an office for them.)

But if the 49ers don't want to be in the stadium business, why on earth are they considering a leap into the theme park business? Shouldn't they stick a little closer to their core competencies?

I'll call that strike three.

Is this latest theme park idea just a last-minute desperation strategy? Are the 49ers merely clinging to any shred of hope that this proposal is viable? Do the San Francisco 49ers need to keep up the image that the Santa Clara plan is viable in order to put pressure on San Francisco to complete its proposal? Once the San Francisco proposal is in place, will the 49ers still be talking about venturing into the theme park business?

Time will certainly tell, but until then, be sure your seat belt is fastened and keep your arms and legs inside the car at all times.

It looks like it's going to be a wild ride.


UPDATE:

According to Julie Patel's article in the Mercury News today — Niners eye new spot for possible stadium — there may be another option. The proposed stadium site would be moved to an overflow parking on the other side of San Tomas Creek. But if they used this site, the 49ers would need to resubmit all of their site plans and traffic analysis, and the City would have to develop a plan to replace the parking Cedar Fair would be losing.

So this is yet another reason the City Council should have received Great America's approval in writing before spending any money even studying this proposal. As Ms. Patel writes in her article: "Whatever happens, the shifting debate is bound to cost the city of Santa Clara more time and money, on top of the $500,000 approved to research a stadium."

Back to school

It's been almost three months since the City Council last had any public agenda item related to the San Francisco 49ers' request for the City of Santa Clara to contribute $222,000,000 in public funds for a football stadium (although it seems that they have been having plenty of closed-door meetings.)

Tonight, however, the proposal will be back in public session.

At this evening's meeting, the City Council will consider the request to spend an additional $185,000 in public money to continue to study this proposal.

In case you've lost track of the total to date, this new request will bring the total to an even $500,000. And of course that figure doesn't include all of the staff time that has also been spent on this proposal.

I'm certainly in favor of study and research in general, but before continuing to spend any more money studying this proposal, the City Council needs to get back to the Guiding Principles it established for itself back in January.

One of those principles was a requirement that Cedar Fair agree that they will not assert business interference or negative effects from the feasibility studies and that this agreement needed to be in place "prior to pursuing discussions with the 49ers."

The City does not yet have that agreement.

So, the problem with spending money NOW on a feasibility study is that conditions may change by the time Cedar Fair is willing to agree to moving forward with a stadium without any reduction in their payments to the City or any City agency.

Therefore, we shouldn't be spending money on a study now. We should wait until Cedar Fair has agreed in writing to not assert their own business interests. When Cedar Fair does sign such an agreement -- then we can take up the question of whether additional public funds should be spent studying it.

And there's one more issue.

The cost estimates in the San Francisco 49ers' proposal were based on the City Council approving the project in July 2007.

So once we have Cedar Fair's approval, the City Council needs to ask the San Francisco 49ers to submit a revised construction budget.

Once those two pieces are in place, then and only then should we even consider spending more money studying this proposal. Financial conditions can change, and there's no point determining whether or not the July 2007 estimate is feasible, since we are already well past that approval date.

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:

mailto:MayorandCouncil@ci.santa-clara.ca.us?subject=Concerns%20about%20stadium%20proposal

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