Stop the Bleeding -- Vote No on J!

With this year's $13.5 Million deficit (expected to grow further next year) the City of Santa Clara is sinking from the ranks of fiscally sound, well-managed cities. It's saddening that we may lose yet another guaranteed $5 Million per year in rent from our fabled theme park, Great America.

Saddening, but not surprising. We already provide an annual give-away of $2.5 Million to the San Francisco 49ers' in the form of below-market rent on their training center.

Measure J extends that deal and expands the loss. The San Francisco 49ers would rent a brand new, state-of-the-art stadium for 25% of fair market value of the land it sits on!

Worse, they'd pay only 14% of the land's fair market value during the first 10 years of operation. Over the next two years, as our deficits sky-rocket, they'd pay nothing.

Don't Sign the Petition!

In Santa Clara, it takes something like 6,000 signatures to get a measure on the ballot. The SF 49ers have stated they will pay to get the signatures (generally those nice signature-gatherers in front of the Safeway, etc., are paid per signature.) This is stated in a letter from the SF 49ers for Tuesday's agenda.

The letter also includes a copy of their petition & proposal.

It all looks pretty innocuous. The verbiage of the proposed change to law is likely to be almost (if not completely) identical to what the City Council will put forward.

The pernicious aspect of this move is that with the SF 49ers' backed initiative, they can bypass CEQA.

The California Environmental Quality Act safeguards only apply to projects which are put forward by the City Council. So, the City Council could not put this on the ballot until everyone is satisfied with the Environmental Impact Report, proposed mitigations, as well as the City Council's acceptance of certain things that won't be mitigated (e.g., "Yeah, it will be loud & disruptive -- deal with it.")

This Tuesday's City Council (15 Dec 2009) has one agenda item (6B-1) which is basically a proposal for the City Council to step away from performing the due diligence for our city.

From the agenda report:

The Council can consider various options in how they review the stadium related materials on this evening's agenda:

Option 1: Take under review the staff's report dealing with the EIR's required Mitigation, Monitoring or Reporting Program and related ballot measure funding; or

Option 2: Have the 49ers present the initiative petition filed with the City Clerk and briefly address the substance of the initiative. If Council is satisfied with the community initiated petition process then it would not be necessary for Council to take action on the MMRP and related findings. Additionally, if Council determines that the Ordinance portions of the community initiative petition and the Council initiated ballot measure are sufficiently similar, then Council could continue discussion of their ballot measure language and the EIR's MMRP and related findings to a later date in January/February 2010 to allow the initiative petition process to proceed to qualification for the June 2010 ballot.

In other words, Tuesday night, the Council can vote to abdicate their responsibilities.

What can you do?

• Come out & speak against this end run around our rights!
• Send email to let the Mayor & City Council know you are outraged by their actions!
• Send letters to the editor!
  
• Spread the word!
  

Mary Emerson for City Council

"We must be the change we wish to see in the world."

-- Mahatma Gandhi

After watching city politics for the past few years, I have come to realize that our city and our communities are the direct result of what we put into them. I would like to serve the City by representing you on City Council.

My analytical skills and business experience complement the other skills on City Council. I will fight for fiscal accountability, ensure community involvement in decision making processes, work for transparency of City Government, and advocate for green initiatives.

Please check out my website at:

maryemerson.org

If you like what you see, please help spread the word by talking to your friends and neighbors, endorsing me, contributing or volunteering to work with me on the campaign.

I would be deeply honored to have your vote & your support!

Regards,

Mary

Starbucks on Mars

The article is almost a year old — A stadium in Santa Clara? You'll be dead before it happens — but every time I read this line . . .

There will be a Starbucks on Mars before there's a 49ers stadium in Santa Clara.

. . I have just a little hope that fiscal sanity will triumph over reckless spending in Santa Clara. [And if it doesn't, maybe the latte run will be just a bit more exciting.]

Thanks Scott Ostler!

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!

The 700 Pound Gorilla

Funny you should mention Great America, and their parent company Cedar Fair.

Back in January, the Santa Clara Mayor and City Council formally adopted a set of principles for evaluating the 49ers stadium proposal. These included a requirement that Cedar Fair agree in writing to not interfere with the stadium feasibility study, and that this agreement was required prior to pursuing discussions with the 49ers.

Here it is September, with no agreement in sight. The Mayor is saying that Cedar Fair's opposition is "the most substantive" problem delaying the feasibility study. However, "We haven't come up against one obstacle, or one factor, that violates our principles for going forward," Mahan said. (SJMN, Sept 4 2007)

Hmm... I think we have a touch of selective amnesia going on here.

From the inbox

It's been a few weeks since we've had the opportunity to open up our inbox and post an email from one of our readers, but I'm glad we have the chance to do so this week.

Today's letter comes from Santa Clara resident Susan H., who lives in a neighborhood very close to the location of the proposed stadium. She sent us a copy of the letter she sent to the Mayor and City Council, and we are posting it here with her permission:

Dear Mayor Mahan and Council Members,

We have been living in the area near the proposed stadium site for the past 30 years. We’ve seen changes such as new housing developments in place of where the stable used to be, and erection of the power stations, the Niners training camp and soccer field, as well as improvements to this area, especially the addition of Rivermark Plaza. All was fine and added value to a quality of life to the area residents.

However, I cannot see the benefit of having a stadium near our residential area because facts have always shown that property value will decrease in areas near any stadium, not to mention the noise pollution, environmental pollution, and excess wear and tear on our local roads, not to mention the decrease in the quality of life in our neighborhood. We certainly do not welcome the sound of construction going on for the next few years as well.

Since the City is planning to subsidize this project with public money, then it should be put up for a public vote. You need to allow the public to decide, not just amongst the Council. I urge you to place this up for a public vote for the sake of the residents in Santa Clara, as well as your integrity. This is a republic country and we should have a say so in how our tax dollars are spent. If you do not allow us to vote, then it would be no different from a dictatorship. I urge you to give this much reconsideration and thoughts. I am sure that you would want to leave a positive legacy, not a negative one. Thank you.

Sincerely,
Susan H.

It's no surprise that all of us at Stadium Facts share Susan's concerns about the impact a stadium would have on Santa Clara, and Susan summarizes these concerns well. For those residents who live in the immediate vicinity of the proposed stadium, those impacts are even more significant. The years of construction would be just the start. Once the stadium is opened, anyone who lives anywhere near the stadium will have to contend with street closures and restrictions, increased noise and traffic, and increased crime.

NFL football stadiums are not an asset to a neighborhood, and if property values in these neighborhoods fall, the city will collect less in property taxes. In fact, at least one study suggests that simply announcing plans to build a publicly-subsidized stadium can cause property values in the entire city to decrease.

In their study The Impact of Stadium Announcements on Residential Property Values: Evidence from a Natural Experiment in Dallas-Fort Worth, economists Carolyn A. Dehring, Craig A. Depken, II, Michael R. Ward found that

. . . a series of announcements regarding a new publicly-subsidized stadium in nearby Arlington, Texas, had a deleterious effect on residential property values in Arlington. In aggregate, average property values declined approximately 1.5% relative to the surrounding area before stadium construction commenced.

Every property owner in Santa Clara, especially those who live closest to the proposed stadium, should be concerned about this evidence.

We also support Susan's call for a public vote on any proposal that would require any public financing for or operation of a stadium. The City Council should WANT the support of the residents for any project of this size.

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

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?

"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 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!

"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.

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.

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?

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?

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.