Santa Clara Mayor Questions 49ers Ducking $5 Million in Rent

Newly appointed Santa Clara Mayor Lisa Gillmor had hoped for a fresh start with the San Francisco 49ers.

Clashes over youth soccer fields, turf replacement, fan violence and information being given to the city’s Stadium Authority, which oversees two 49ers subsidiaries overseeing operations at Levi’s Stadium, were expected to be resolved, Gillmor said.

But the discovery that the NFL club went the first three months of the year without paying rent—valued at $5 million—has reignited concerns that top city staff are withholding information from their own colleagues, perhaps in collusion with the 49ers. A civil grand jury investigation is currently looking into the Stadium Authority.

The sudden resignation of the city’s previous mayor, Jamie Matthews—just a day after Super Bowl 50 and the biggest event in the city’s history—paved the way for Gillmor’s move up the ladder. She went from an expected City Council re-election battle to her colleagues giving her the remaining years on Matthews’ term.

Jed York, CEO of the 49ers, was one of the first people to meet with Gillmor following Matthews’ swift exit, scheduling a sit-down at her real estate office. The two had been allies several years prior, when Gillmor worked as the spokeswoman for the Measure J campaign to build Levi’s Stadium and bring the Niners to Santa Clara, but a falling out occurred.

Following Measure J’s approval, Gillmor was appointed back to the council—she previously served two terms—and her feelings about the club changed after the team refused to help a youth soccer league relocate.

Nothing concrete was agreed to during the February pre-appointment meeting, Gillmor said, but both she and York expressed a desire to move forward in a collaborative manner.

Gillmor, in a San Jose Inside report published the week of Super Bowl 50, upbraided City Manager Julio Fuentes—as well as other city officials and the 49ers’ management companies, StadCo and ManagementCo—for providing inadequate information to the Stadium Authority.

Gillmor questioned the transparency of top city executives and whether or not the 49ers were withholding money that should be going into Santa Clara’s general fund.

The news that Fuentes and the 49ers came to a silent agreement to amend the club’s rent, without informing the Stadium Authority, only heightens such concerns—especially when Fuentes has a foot out the door after announcing his impending resignation.

Gillmor told San Jose Inside that the only reason she learned the 49ers stopped making rent payments in December is because of an off-handed comment made by city attorney REN Nosky in a private meeting. The contract requires the 49ers to pay $24.5 million a year in rent, but the team reportedly paid just $19 million through December. The club has made payments to settle the tab, according to the Mercury News, and team officials expressed surprise that there was “drama.”

The matter comes before the council tonight, and Gillmor said she plans to find out, in public session, why the city agreed to let the club off the hook for $5 million in rent.

“It makes no sense to me whatsoever,” Gillmor said. “The 49ers have reset their own rent without our knowledge. There is a process for disputes with rent and it doesn’t include any unilateral decisions by either party.”

The mayor added that the Stadium Authority received a 2016-17 fiscal year budget for Levi’s Stadium last Friday, March 18, after 5pm. The agreement with the 49ers’ ManagementCo requires the budget to be delivered by March 1, Gillmor said, allowing for at least a month to vet the numbers.

“We only have one council meeting between now and April 1,” Gillmor added.

It’s not clear if it was the 49ers’ management companies or city staff that failed to get the budget information to the Stadium Authority in a timely manner.

“Adding insult to injury,” Gillmor said, “we had a council meeting item just a couple weeks ago to talk about the rent reset, and nobody from the team, the city, the attorneys—nobody mentioned this at all.”

UPDATE: Roger Hacker, a senior manager for 49ers communications, sent an email over Tuesday morning with the team’s perspective on the rent payments. He provided the following questions and answers.

1. Can you confirm that the Niners have not made monthly payments in Jan., Feb., and March since a new annual rent hasn't been determined?

A: The 49ers have made all required lease payments for the 2015-2016 fiscal year ending March 31.  The total facility rent paid this year is $24.5 million.

2. Have the Niners submitted a formal request to reset the rent to $20.25 million? When was that request made?

A: There is no formal request to be made on this issue, as the rent adjustment is required by the stadium lease. The $20.25M number was reached after months and months of considerable discussion and input from the Stadium Authority, the 49ers and the outside lenders.

The stadium lease between the Stadium Authority and the San Francisco 49ers in 2013, which was unanimously approved by the Council, calls for an adjustment of facility rent based on actual debt service and operating results following the first year of stadium operations. Facility rent is formulaic and the most significant part of the equation is the amount of the Stadium Authority’s outstanding debt which is significantly lower than estimated in the 2013 rent calculation.

Levi’s Stadium has been a huge success, a model for public-private partnership for any municipality.

Even after adjustment, the 49ers will pay rent that is more than two times higher than the next highest rent paid by any of the other 31 NFL teams.

3. When does this go to arbitration? 

A: There is no need to enter arbitration unless the Council decides to ignore the documented and agreed upon stipulations of the stadium lease, which members of this Council approved in 2013. The 49ers will continue to work with the Stadium Authority to ensure that both parties are in compliance with the lease and the agreements with their lenders, and we look forward to seeing the process through to its completion.

4. When was the last time the Niners made a monthly payment?

A: The most recent facility rent payment made by the 49ers was on March 16, 2016.

Josh Koehn is the managing editor for San Jose Inside and Metro Silicon Valley. Email tips to [email protected] or follow him on Twitter at @Josh_Koehn.

8 Comments

  1. Mayor of Santa Clara, the 49ers and going down the tubes and you know it because the team sucks and as a result they are losing money. Good luck with getting them to pay

    • By the way the traffic and security checks make this place suck for trying to get in to a concert or other event. Did it once and will never visit this site again. SC made a huge mistake by letting the niners come here and now control the site.

      • WORD MY CONCERT EXPERIENCE here was and is the worst 2 events, so each on weekends so bus service was at snails pace, so over 4 hours there and back and this was just across 101, 5 mn by car btw, then ea show was over an hour to get in, just insane that we fund private owners , with tax dollars, what did the taxpayer get, the council get tickets, we get nothing.

  2. Levis stadium is a one trick pony … Visit once and done! Attendance will continue to fall now that people have discovered what a pain and over-hyped pit it is! One event and never again seems to be the common mantra … Santa Clara had better be planning for Karma. They’ve seen all th “success” they are gonna see!

  3. What benefits exactly did the taxpayers receive from the Super Bowl?
    This stadium is a white elephant!

  4. “1. Can you confirm that the Niners have not made monthly payments in Jan., Feb., and March since a new annual rent hasn’t been determined?

    A: The 49ers have made all required lease payments for the 2015-2016 fiscal year ending March 31. The total facility rent paid this year is $24.5 million.”

    This is not completely true. 49ers have made payments, but not to the City of Satna Clara. They pay “StadCo” (a 49ers entity to handle stadium affairs), not the city of Santa Clara. I believe the funds are supposed to go from “StadCo” to the Stadium Authority. However, at least some funds have not been transferred to the Stadium Authority. In the council meeting on March 22, the 49ers reps kept talking about the funds being in a “account lock box” or something to that effect. Also, if the 49ers are successful with this rent reset, they have clearly stated that they will want to get the difference back… I guess from the lock box.

    Bottom line is this, if the 49ers are successful at lowering their rent, it is ~$4M/yr for 40 yrs that evaporates for Santa Clara! Security cost over-runs, needed repairs to the San Thomas Aquino Creek, and the soccer field damage are still expenses that need attention. Kudos to Mayer Gilmor and the city council. They have my vote.