49ers Seek Formal Arbitration to Settle Stadium Rent Dispute

The San Francisco 49ers couldn’t convince Santa Clara city officials to lower rent on Levi’s Stadium, so they’re taking the fight to court.

Negotiations came to a halt Tuesday. The dispute erupted in March, when city leader contended that the Niners withheld more than $5 million in rent since December while lobbying to lower payments.

While the team paid up just before news outlets picked up the story, club officials failed to see eye-to-eye with the city over how much is owed moving forward.

The 49ers agreed to shell out $24.5 million annually for the first two years at Levi’s Stadium. However, a provision in the contract allows a single rent reset based on fluctuation in revenue, debt, expenses and development costs. Neither side could agree on a new amount.

City officials—minus former city manager Julio Fuentes—demanded to keep it at $24.5 million, while the team wanted to cut payments down to $20.25 million. The lower amount is more than any other NFL teams pay, the 49ers maintain.

“[If] financial performance had been worse than expected, then the one-time adjustment would increase rent,” the team wrote in a press release. “Because it was far better than expected, the rent is required to be reduced accordingly. That is the nature of the agreement. Unfortunately, that is not how it is working.”

Mayor Lisa Gillmor—whose predecessor, Jamie Matthews, abruptly resigned a day after the Super Bowl—lambasted the team in March for going behind the city’s back and hacking millions of dollars off its rent payments.

Then-City Manager Julio Fuentes, who was forced out after the imbroglio, didn’t see it that way, and as a result he saw his resignation expedited. Fuentes sided with the Niners in agreeing that they were entitled to a rent reset. Here’s a look at that provision in the lease agreement:

49ers Lease

Santa Clara’s City Council voted in March to bring the case to a court-appointed arbitrator, but first tried to work through a 15-day “cooling off” period.

Clearly, things aren’t cool.

For more background on the issue, take a look at Santa Clara’s Economic Development Officer Ruth Shikada’s March 8 memo on the lease adjustment.

Also, here's a link to the full agenda from that meeting.

Jennifer Wadsworth is a staff writer for San Jose Inside and Metro Newspaper. Email tips to [email protected] or follow her on Twitter at @jennwadsworth.

6 Comments

  1. Hello Ms. Wadsworth – Ruth Shikada’s memo link does not work. That happens ALL of the time with City of Santa Clara documents – links get reset. It’s really frustrating for City residents who want to know what their city council/staff are doing.. It’s best to download the document and then upload the file here on San Jose Inside.
    Could you please do that? Thank you.

  2. understand Ahmad Rafah has organized a consulting group from Mike Honda with Doug Greven to unseat Debi Davis and Teresa O’Neill. The group is beginning to poll and Ahmad is also going after Lisa Gillmor. Did not SJI do a report on Greven and his antics?

  3. Arbitration could cost way more than the 5 million in dispute. The party involved would be better off using Judge Judy!

  4. And we are surprised at the actions of a large corporation to renege on its tax liability?

    Have we not seen this before?

    It is too bad that the 49ers were not able to invert their Santa Clara Investment by moving the stadium to Ireland where they could play their NFL games there with very little tax liability but also very much less attendance. (For which they would have sought redress from the Irish Government!)

    The 49ers have played Santa Clara public officials for the chumps that they are.

  5. The 49ers assert that their rent is higher than other NFL teams. Well, so is my rent, anybody’s rent in Silicon Valley is very high. Why should the football team get a break on rent that nobody else gets? If the 49ers want cheaper rent, they can move to Wisconsin or Missouri. If they want to occupy ground zero of the economy, they should pay even more than they do now (assuming they are paying this month).