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

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.

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.

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?

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.

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?

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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.