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.

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⁽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.

Councilmember Calvin

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 CD	5.05%
Mutual fund, indexed to S&P 500, 5 year average	8.23%
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.

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.

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?

"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.