Friday, June 29, 2007

Citizens speak out

We've pointed out before that the 49ers are pouring a lot of money into this campaign to win over the "hearts and minds" of Santa Clara. The Support "Our" Niners website is run by the 49er's PR firm. The glossy stadium campaign flyer is distributed as an ad insert in the Santa Clara Weekly -- its publisher, Miles Barber, just happens to be a "truthy" stadium proponent.

We at don't have that kind of money. But we do have lots of people on our side. There are the 55% of Santa Clarans who told CBS5 that they oppose a stadium if it means giving the 49ers a subsidy. Then there are the citizens who have published serious arguments against the stadium.

We have added a new section to our front page to link to these articles and papers. Scroll down and look for "Citizens speak out" in the column on the right. The first link is to a paper from Erlinda Estrada. Ms. Estrada is the retired Interim Library Director at Mission College, and a lifelong Santa Claran. The second link is to a SJ Mercury News opinion column from Kate Grant, a community activist.

We will add more links to this section as the groundswell continues. If you are aware of other papers from residents, please let us know.

Tuesday, June 26, 2007

Misplaced loyalties?

I’ve been reading some disturbing quotes coming from our Mayor and certain council members. They make me wonder for whom they work, and ultimately where their loyalties lie.

Here’s a sampling from our Mayor, Patricia Mahan:

  • “I'm a 49er faithful going back to John Brodie and Kezar Stadium" (Nov 9, 2006)
  • “[T]hat's what it's all about: doing what's best for the 49ers and doing what's best for the fans." (June 19, 2007)

Really? I thought it’s all about doing what's best for Santa Clara residents and taxpayers. Does the Mayor’s “faithfulness” to the 49ers trump her responsibility to the city of Santa Clara?

Another quote, this time from council member Kevin Moore:

  • “It's really good to have the 49ers eating at your restaurant. You know why? They spend a lot of money, eating a lot of food." (at Seniore's Pizza in June 2007)

As the KMA report proves, a more cost-effective use of the land would be Class A offiice project. Not only would this generate more taxes for the city, but an office building full of workers would spend more money … and eat more food, I guess, if that’s council member Moore’s standard for success. Do the 49ers eating habits really impact the economy in any significant way? I know they're big guys, but geez.

But this is potentially the most disturbing: Dominic Caserta is running for the California State Assembly, District 22. This district covers parts of Santa Clara, but also Cupertino, Los Altos, Mountain View, and Sunnyvale. Will council member Caserta attempt to curry favor with this larger electorate by having Santa Clara residents foot the bill for the rest of his district? I've heard from non-Santa Clara 49er fans who would love to have the 49ers in town. Even better if they don't have to pay for it!

Also, one wonders about the funding for his campaign. I wonder if the Yorks might be willing to fund an office seeker who so generously greased the skids for their corporate welfare project.

So Santa Clara City Council, let's see you represent the people who put you in office. And not by simple platitudes whereby you pretend to carefully weigh the pros and cons of a huge white elephant of a stadium. Do it by not giving a dime of our money to a business that can fund their own project itself.

Life's little details

Saturday, June 23, 2007

Doing City Council's homework

Since City Council is not doing much comparison shopping, everyone should help them out by examining other alternatives.

On June 1, Stadium Facts highlighted a successful development that was built entirely with private financing, Santana Row.

On June 5, the KMA report pointed out that a hypothetical Class A office project can generate up to 5 times the fiscal benefits, with zero public subsidy.

Here's another possibility.

Have you ever wondered where all the 1's and 0's of the Internet hang out? Those YouTube videos, the latest movie trailers, the satellite maps at Google Earth, your vacation pictures on Flickr -- they all add up to a lot more 1's and 0's than simple emails. All this data is driving up the need for more and more data centers to store the bits and bytes, and to handle the traffic when grandma wants to see the one that got away in Idaho.

According to the SJ Mercury News, data centers are
... a lucrative place to be. While prime office space in downtown San Jose costs about $2 a square foot per month, David Dunn, senior vice president of Los Angeles-based CRG West, said space in a data center rents from $15 to $30 a square foot per month. Even at that price, it took just nine months last year for CRG to fully lease its newly opened 16th-floor data center at Market Post Tower in downtown San Jose.
And the forecast is for more of the same:
"Do we think this is a gamble? Absolutely not. The forecast for the next 24 months shows demand is rising," [CRG vice president Jameson] Agraz said. "Every TV show you watch will be stored on hard drives so you can have video on demand."
Of course, your mileage may vary. But the point is, there is more than one way to invest $297 million. We would be fools if we didn't check out at least some of them.

Friday, June 22, 2007

A tale of two cities

A few weeks ago, I analyzed the numbers from a Mercury News article Running 49ers stadium a costly pitfall. In my post A Costly Pitfall, I provided one crucial number that was missing from the initial article — the PER CAPITA cost of the subsidy.

Using just the numbers provided by the Mercury News, Santa Clara's subsidy of $180 million (the Mercury News did not include land value or the parking garage in their total), the PER RESIDENT subsidy of $1,651 was more than THREE TIMES that of the next closest project.

But the story doesn't end there.

Because I relied on the numbers in the Mercury News article, I calculated that the per resident cost of the new stadium for the Arizona Cardinals was $210 per resident.

That number is not exactly right for a few reasons.

First, the stadium is actually located in a suburb of Phoenix — Glendale, Arizona. The population of Glendale is approximately 258,677.

Second, the Mercury News article indicated that the public subsidy for this $455.7 million project was $310 million, but they didn't really break down either of these numbers.

The $455.7 million includes ALL costs related to the construction — including both land acquisition and site improvements. If these costs were added to the current San Francisco 49ers proposal, the total would be just shy of $1 BILLION [about $981 million to be more exact.]

Moreover, the city of Glendale's share of the $310 million subsidy was $9.9 million.

Yes, you read that right. Glendale spent $9.9 million on the project, for a per resident subsidy of about $38.

So where did they get the remaining $300.4 million of public money?

The rest of the subsidy came from the Arizona Sports and Tourism Authority [ASTA], a municipal organization created by the Arizona State Legislature to promote sports and tourism in Maricopa County, the county in which Phoenix and its suburbs are located. The funds for ASTA contribution came from a voter-approved county-wide tax on hotels and rental cars.

[To be clear, I'm not in favor of new taxes, especially to subsidize facilities for privately-held corporations, but the current claim that Santa Clara can provide $180 million in cash with no new taxes and no impact to the general fund or utility ratepayers is wrong. The money has to come from somewhere, and it WILL have an impact either directly or indirectly.]

Sadly, however, the unfavorable comparisons don't end with $38 vs $2,600.

You see, the stadium in Glendale was built with a special field that rolls out so that the stadium can be used for multiple purposes. It also has a retractable roof, again making it suitable for a variety of uses.

And it is.

From August 4, 2006 through January 8, 2007, it hosted events on 110 of the 157 days — about 70% utilization as compared to less than 10% using the most optimistic numbers in the current San Francisco 49ers proposal.

Maybe these numbers will help Santa Clara realize that it's time to do a bit of comparison shopping — and if we still decide to buy, maybe we can get a few friends, like Santa Clara County, to chip in on this purchase.

After all, if the claimed benefits are regional, then the costs should be shared by the region. Glendale didn't shoulder the cost for all of Maricopa County, and the City of Santa Clara cannot and should not assume the entire public expense and risk for this stadium.

Wednesday, June 20, 2007

The Santa Clara Way?

Today's San Jose Mercury News has a couple of brief articles—including Santa Clara mayor touts proposed 49ers site to NFL officials and 49ers see and are seen—on this week's visit from several NFL executives who toured the proposed stadium sites in both San Francisco and Santa Clara.

Is the NFL doing a little comparison shopping?

Why do the NFL executives care?

Well, the Yorks are counting on a loan from the NFL to cover at least part of their proposed contribution to the construction costs, so the NFL executives (unlike the City of Santa Clara, apparently) want to explore their options.

And what did Santa Clara's mayor Patricia Mahan have to say about the comparison shopping?

"This site, we believe, would give the fans a great game-day experience, and that's what it's all about: doing what's best for the 49ers and doing what's best for the fans."

Oh really?

I guess I missed that change to the city's Code of Ethics and Values. The part where they apparently replaced "I convey the City's care for and commitment to its citizens" with "I convey the City's care for and commitment to the San Francisco 49ers and its fans."

That kind of service makes me wish I'd found a way to donate $1,000 to the mayor's campaign.

Certainly the mayors of both cities are treating this like a competition. Gavin Newsom, hardly a non-partisan in this issue, said

"Any city that wants to put $200 million up, I can assure you the worst investment you can make is an NFL stadium."

(I happen to agree with him on this point, but he's not really trying to offer objective advice to a fellow mayor.)

Santa Clara's mayor, in a burst of truthiness, countered Newsom's claim.

"Actually, it's not $200 million, it's $160 million. I would hope that if Mr. Newsom wanted some facts, that he would give me a call."

If he did, Madam Mayor, he apparently would NOT get the facts. The total city contribution requested so far under the current proposal is $180 million in cash for construction and site improvements (moving the electrical substation) PLUS $117 million in land and other property and assets. This does not include debt service payments or additional land for development.

As we've discussed before, $297 million is almost Real Money.

But if Santa Clara's new mission is to serve the 49ers, I guess it's all do-able. No need to wait for the completion of the feasibility studies.

Is this the new Santa Clara Way?

Monday, June 18, 2007

Comparison shopping

Smart consumers look around before they buy things. The bigger the purchase, the more research. For a 10-year-old Toyota to get Junior back and forth to school, you might spend an hour reading Edmunds or Kelly Blue Book, and maybe run a Carfax report. For something more substantial like a house, you might spend a few days on Multiple Listings and Google maps to get the lay of the land, then make your realtor search for comparable sales.

So guess how much comparison shopping was done by Santa Clara City Council for an $854 million football stadium?

Here's a hint... The City's own consultants threw in an oh-by-the-way at the end of their report. They pointed out that a hypothetical office building would generate 5 times the fiscal benefits, while requiring no subsidy from the taxpayers. Immediately all guns came out a-blazin' as if Wyatt Earp himself just popped in at the O.K. Corral!

"Look at all the empty buildings sitting around," the stadium supporters say. "Riding the elevator up and down doesn't count (as entertainment)," they say.

Hey, calm down, gents! Nobody said for sure we're going to build the next Sun campus. Folks are just trying to point out that a big bunch of buckeroonies is about to be spent on another Candlestick, and we as a city have not really looked around to see if there might be better options.

The Vietnamese have a saying, "Có tật, giật mình."

"The guilty are jumpy."

The Beijing Olympics can't come around soon enough. Some sport fans from around here might really clean up on the high jump.

Saturday, June 16, 2007

The Vultures Are Circling...
... or is that your no-good cousin-in-law, twice removed?

Smelling the sweet deals that the city is tripping over itself to serve the Yorks of Ohio, their neighbor is banging on the doors for a piece of the Corporate Subsidy Pie. That neighbor is Ohio-based Cedar Fair, the owner/operator of the Great America Theme Park, which voiced opposition to the proposed 49ers stadium on Friday.

Trouble is, these big boys want a big pie, and City Council intends to max out our credit cards to bake that pie.

"City officials are increasingly optimistic" and feel that a $160M hand-out is "do-able" by "leveraging city-owned lands for private development and issuing redevelopment bonds." They seem to have forgotten that "issuing bonds" is just a fancy way to say "borrowing money" and that Santa Clara taxpayers will end up holding the bag.

How big a bag? Well, there's the $160M subsidy for the stadium, $47M for the parking garage, another $20M or so to move the power station. Then there's whatever reimbursement Cedar Fair extorts -- ahem -- receives for construction traffic, dust, pain and suffering... So, once all diners are served, we'll be making payments on a mortgage far north of $225M.

A loan that big requires monthly payments of over $1,000,000 1 per month! That means we'll need to find another $12 million a year of new money to serve up that Subsidy Pie to our rich friends in Ohio.

What's next? A subsidy for the Greater Ohio Casino District?


1 Payments for a $225M loan at 5% over 30 year are more than $1.2M per month. Even for $160M, we'll be out $859,000 per month.

Monday, June 11, 2007

Jobs, jobs, jobs

The 49er's proposal claims that 830 jobs will be created by the stadium.

Upon closer scrutiny, KMA, the City's consultants, found that 40% of these jobs already exist today. They are jobs at the 49ers' Training Center on Tasman Drive. That means we're really only gaining 498 jobs. Oops.

KMA then went on to note that, on average, Santa Clara residents hold only 13% of the jobs located in the City. This means we're creating only 65 jobs for our city. The rest of the jobs will benefit our neighbors in San Jose, Sunnyvale, etc. Nothing wrong with that, except Santa Clara is footing the whole bill, and Santa Clara's neighbors will be getting the majority of the jobs. Ooops number 2.

Then there's the pay scale. The 49ers claim the 830 jobs will pay a total of $38 million. But wait! KMA pointed out that $21 million of this go to the 332 people already employed at the training center. The remaining $17 million will go to the 498 new jobs. This works out to an average of $34,137/year for these new jobs. Compare this to the median household income of $69,466 (1), and median home prices ranging up to $752,000 (2). Oooops number 3.

So we're going to give the 49ers a subsidy of $297M to create 65 jobs. That's nearly $5 million to create each job! And these jobs pay far less than what it costs to live here. The mother of all "Ooopses?" You decide.


(1) 8-year old census data; the 2007 median income is higher.

(2) San Jose Mercury News, Saturday, June 9, 2007, Real Estate section, page 5.

Saturday, June 9, 2007

Thursday, June 7, 2007

Return on Investment

The 49ers have described this stadium as a partnership where the City joins them in an investment. Now that the proposal has been taken apart by the City's own consultants, let's look at the investment at a back-of-the-napkin level. After all, many Silicon Valley start-ups began similarly in-depth.

The City is being asked to put in $160M of cash, $60M worth of land, $47M to build a parking garage, and $20M to $30M to move a power substation that's in the way. That's $297 million of capital that we are going to tie up.

So what kind of return are we getting out of this investment? How does $650K a year sound? (KMA report, page 3, 2nd paragraph.) That's 0.2% return on investment!

Compare this to some other investments:

12-month CD5.05%
Mutual fund, indexed to S&P 500, 5 year average8.23%
San Jose real estate (median home price, 2000-2005 average)12.6%

Councilmember Kevin Moore says the stadium sounds like "an absolute winner." Maybe. On the Planet Mongo. Not here.

Wednesday, June 6, 2007

From the Inbox

It's Wednesday, so it's time once again to open up our email inbox and see what our readers have to say.

Today's letter comes from Santa Clara resident Steve B. and his family. They are 49er fans, but they don't want a stadium in Santa Clara. Steve writes:

No 49er stadium in Santa Clara
We are football fans.
In fact we are 49er fans.
But we are not in favor of paying for their stadium.
We are residents of the City of Santa Clara.
This is were we own our homes.
This is where we send our children and grandchildren to school.
This is where we shop.
This is where we pay our taxes.
These are our utility funds that you are talking about.
We do not want to pay one penny to the 49ers and their Stadium.
We love the 49ers but we cannot afford to pay for their wealth.
Don't be mislead.
We will not even get a sniff of a stadium seat.
Their are others out there who feel like me.
Who and where are you.
We want to join together and let our options be heard.
Don't give me the blah blah blah, more taxes for the city more revenue, more jobs.
Yeah, seasonal minimum wage jobs.
We do not want or need your stadium traffic and crime.
We do not want the extra cost of policing the area and events.
There will be more that just 8 football games a year.
There is talk about using the stadium for soccer. A whole different crowd and can of worms.
There has to be concerts, monster trucks, tractor pulls, dirt bikes and many other events to please and satisfy the many assorted interest groups.
No 49er stadium in Santa Clara

Thank you,
Steve B. and Family

I don't have much to add — Steve presents his perspective clearly and persuasively. As more and more residents hear about the costs of this proposal, I'm sure the City Council will start to hear from more people like Steve and his family — citizens who want the city to focus on providing services to residents, not contributing to and operating a billion dollar stadium.

Thanks for writing Steve! I hope you'll continue to contribute to the discussion.

Tuesday, June 5, 2007

The forecast for Tuesday evening

According to Yahoo! Weather, the forecast for Tuesday evening in Santa Clara is "a few clouds. Low 49F. Winds NW at 10 to 20 mph."

Sounds like a perfect evening for . . . ?

Well, if you're a Santa Clara resident, it sounds like a perfect evening for attending your City Council's meeting. It should be nice and warm in the Council Chambers, and while you'll be protected from the cool winds, there is certain to be plenty of bluster inside.

The fun starts at 7:00 P.M. at City Hall in the Council Chambers, 1500 Warburton Avenue, Santa Clara, 95050.

The hot topic for the evening will probably be Keyser Marston Associates' evaluation of the 49er/CS&L Economic and Fiscal Benefits Study — what did we get for our $75,000?

You can read the report yourself — click the "Report" link after item 5C on the City Council's agenda for June 5.

With some notable exceptions (like the fact that using the same land for an office building would generate almost 5 times the revenue to the City with little or no public subsidy), the report generally confirms the 49ers' numbers, while offering similarly limited evidence that would help to evaluate the claims.

Also like the 49ers' report, it fails to consider the three important issues economist Brad Humphreys has identified as weaknesses in most economic impact studies (and which we discussed here last week): gross spending vs. net spending, concentrated benefits but diffuse costs, and forecast uncertainty.

From my point of view, this forecast raises more questions than it answers.

Here's a few random ones I have:
  • How much interest will we pay on $180+ million in debt?

  • What fraction of this interest will be covered by the estimated $700,000 in direct General Fund Revenue generated by a stadium?

  • After subtracting interest costs, will the city get anything close to a reasonable return on this "investment"?

  • That $700,000 assumes that the Stadium Authority will reimburse the city for "all municipal costs associated with the stadium's on-going operations." Which, of course, also assumes that the Stadium Authority will have the money to make these payments. How reasonable is that assumption?

  • If we're being asked to partner with the San Francisco 49ers in building this stadium, can we find out how much money THEY expect to make from it? What do THEIR revenue streams look like?
So what questions will you ask the City Council?

Friday, June 1, 2007

"Imagination and a bit of daring"

Yesterday the San Jose Mercury News published an interesting article by Alan Hess about "Why Santana Row succeeds."

Why is this article relevant to a website about the proposed stadium?

Well, at least one City Council Member has emphasized the desire to create an entertainment district in the area of Santa Clara where the stadium is planned. It is useful, therefore, to think about what makes an entertainment area successful.

Santana Row is clearly an example of such a district.

As Hess notes,

Residents of the townhomes on the upper levels of Santana Row's blocks can look from their windows and balconies and see something pretty much like real life on the streets below: fitness freaks on their way to the health club at dawn, mothers with strollers sitting in the parks in the mid-morning sun, business people business-lunching at sidewalk cafes at noon, shoppers cruising in and out of stores all day long, and San Jose residents of different sorts arriving to dine, drink, shop, buy a book, watch movies or dance until late at night.

Have you tried to go there on a Friday or Saturday night? It may be hard to find a parking spot, but once you get there, there's lively street life. On other days, there are free concerts, a farmers' market, open-air movies, and other events and activities.

It may have its origins in mall development, but as Hess writes

Santana Row realizes that we want to be with our fellow humans for reasons other than selling or being sold to. We dine at sidewalk cafes to enjoy good food and good friends, not to increase the stock price of an agribusiness corporation. We want to be near the action. We want to see what other people are doing - and we want other people to know what we are doing, wearing and saying.

A stadium used less than 30 days a year, on the other hand, would not enable the kind of daily interaction needed to create a vibrant social scene.

And one more important point —
Santana Row was built through private financing. As Hess explains,

Ironically it's everything that the publicly funded San Jose Redevelopment Agency has been trying to achieve in downtown San Jose for 20 years. The privately financed Santana Row made it happen first.

True, Santana Row is much smaller than downtown San Jose. The real difference, though, is the design.

So, "with imagination and a bit of daring" what could Santa Clara do to create an entertainment district that would succeed like Santana Row has?

From the Inbox — Special Edition

Because we expect the volume of mail to increase in response to the next City Council meeting (the one where city staff will return with their analysis of the San Francisco 49ers' economic impact report), we thought we'd run a special "From the Inbox" post today.

Our letter today comes from Bill B. of Santa Clara. He wrote to us about a leaflet entitled "The Real 49ers Stadium Story That the Citizens of Santa Clara Need to Hear" that was distributed at the last City Council meeting.

I haven't seen this leaflet, but Bill responded to a number of the issues identified in it. With his permission, I'm excerpting portions of his response here. The statements in bold italics are from the original leaflet.

"Are the 49ers going to take money from the cities [sic] General Fund?"

This is a diversionary tactic by pro-stadium pressure groups, and it's designed to fool people into thinking that 'no one is asking for public support for a football stadium.'

Make no mistake, that is exactly what the 49ers' front office is asking for.

To see why, let's play "The Devil's Advocate": If we were to pay for our $160,000,000.00 share in a stadium, how COULD we do it?
. . .
[One possibility is to issue bonds] That's a debt backed by the City of Santa Clara - so you better settle in for ten, fifteen or twenty years of principal and interest payments. The interest we'll owe on the bonds will be determined by a bond rating service. They'll look at how much we're borrowing, how much we owe - and how much we have. Compare the obligation - the $160 MILLION - with our yearly budget turnover - that's about $500M - and add the fact that we have NO reserves, NOTHING set aside for emergencies, NO slack at all. THAT will determine the likelihood, however small, that we'd default on our obligation - and it will determine the interest we will pay on $160,000,000.00.

Bill also examined a couple of other scenarios — including taking money from the utility reserve fund — but the San Francisco 49ers have already clearly stated that they will expect the Stadium Authority to issue bonds, and the city is likely to propose bonds for part of their funding too, so Bill's concerns about bonds are well founded.

Since there is no plan for financing yet, it is premature for anyone to say that funding for the stadium will have no impact on the general fund. Certainly, that was one of the guiding principles for the city, but unless some generous soul is planning on donating the cash the city would need for this project, any of the financing options mentioned to date COULD impact the city's general fund either directly or indirectly.

"Will the City of Santa Clara get a return on their investment?"

The claim of $440M in lease and expense payments is pure nonsense - the best we'd ever be able to do is probably is the numbers presented to the City Council by Larry MacNeil back on April 24th - $21M per year in revenues. Which we pray will match the $21M in expenses that first year.

If the author of the leaflet claims that the lease and expense payments would go to the city, then he or she needs to re-examine the 49ers' proposal. These payments, according to the proposal, are going to the Stadium Authority. While the Stadium Authority would be formed by the city, the lease and expense payments DO NOT go to the city's general fund. As far I can tell, the only way the city receives any direct cash under the current proposal is if the Stadium Authority NETS a profit of over $1 million a year.

"Will the residents have to fork over $1,400 to $4,300 for each family member?"

If stadium supporters don't believe these numbers, then they are obligated to come forward with how they'll get $160,000,000.00 - and how they'll pay it back.

Personally, I'm not quite as cynical as Bill. I think we'd see a citizen revolt if the City Council voted to request $1,400 to $4,300 in cash from every single resident.

But there's no such thing as free money. If the City Council decides to subsidize this project, the money will have to come from somewhere, and there will be a cost. If they are lucky, they'll be able to hide the real costs. If not, residents will pay in some way — whether directly via a special assessment or indirectly through higher fees and/or reduced services.

"The Naysayers are saying that the jobs that would be created would be minimum wage jobs, most without health benefits"

Absolutely, and this stadium opponent stands by that claim - there is no way that a stadium will create any kind of decent jobs, save for the trades that will be paid union-scale for the their labors.

. . . [W]hen the union labor has left the site - you'll be left with low-wage concessionaires selling five-dollar hot-dogs, three-dollar Dasanis, six-dollar plastic helmets. For eight game days per year. You just try and prove that those people will earn anything like a living wage, much less be assured of any kind of medical insurance. There's just no way.

On this point, I'm just as cynical as Bill. During the construction phase, the union jobs will certainly have good pay and benefits, but after that, there won't be many full-time jobs at all. Remember, the most optimistic projections include fewer than 30 event days a year. Worst case is just 10 games (or perhaps even none if the players were to go on strike.) The vast majority of the jobs during the operation phase will be part-time, low-wage, no benefit positions.

Bill concluded his letter by noting that the leaflet "had NO contact info, NO Website, NO telephone numbers."

In other words, no way to know who was presenting this information.

We do want to offer the best possible analysis of this proposal here, and we recognize that reasonable people can take different positions on this issue. In that spirit, we would welcome the author(s) of the leaflet Bill referenced to send us their analysis and evidence so that we could see for ourselves how they reached their conclusions. Our goal is to provide impartial analysis of this proposal.

Our only concerns are the financial health of Santa Clara, well-managed development within the city, and potential burdens on the residents.