Football is a game of inches, and right now the San Francisco 49ers are losing by miles. Were it not for the winless Cleveland Browns, the five-time Super Bowl-winning 49ers would have a one-win stranglehold on last place in the NFL. The swift success of the Jim Harbaugh years has been undermined at every turn, much like President Obama’s accomplishments will soon be dismantled under his successor.
The most memorable moment of last season’s brief Jim Tomsula era—a coach plumbed from internal ranks and given the unenviable task of replacing Harbaugh—was either a quadruple-take grimace captured via .gif or a phantom press conference fart. In both instances, and so many others, Tomsula seemed deeply vexed.
This year, thanks to general manager Trent Baalke, the team’s new coach, Chip Kelly, inherited a cupboard so bare of talent that Kelly didn't even have the option of running the black superstars out of town like he did in Philly. Quarterback Colin Kaepernick’s best play this season was taking a knee just a few feet off the field, and yet the NFL’s most outspoken advocate for civil rights scoffed at the idea of voting last month—as if the game of inches has taught him nothing about hard-fought, incremental victories on the road to justice.
Rumors are swirling that the team’s CEO, Jed York, who was gifted control of the franchise in 2008 by his mother and father, Denise and John York, could be stripped of all authority on football decisions, which would come as sweet relief to fans who have shelled out thousands on tickets and personal seat licenses. For the last two seasons an unknown party has paid for a plane to fly over Levi’s Stadium during home games with trailing messages that read:
“Hold Jed accountable.”
Or: “Jed & 49ers Should Mutually Part Ways.”
Or, as recently as Sunday: “Jed You Reap What You Sow—Fire Baalke.”
Multiple heads could be on the chopping block this off-season in Santa Clara, but one body in particular could meet its demise before the season’s last whistle—and in no way is the decision dependent on wins and losses, but rather dollars and cents.
On Nov. 23, the city of Santa Clara’s mayor and council, which make up the Stadium Authority board, sent a notice accusing 49ers brass of “potential breaches” of the management agreement for Levi’s Stadium. The letter suggested that the team’s management company has been less than transparent in how the billion-dollar sports complex reports its numbers. The 49ers were given 30 days to deliver reports and information on 15 issues to City Hall or risk losing control of Levi’s Stadium—outside of the 10 home football games each year. Such an action would strip the 49ers of millions in revenue, from overseeing Beyoncé concerts and monster truck rallies to hosting events like WrestleMania or the 2019 College Football National Championship game.
Stadium execs fired back, noting the city had actually not cited any actual breaches and called the question by demanding an estoppel—a statement confirming that the management agreement is in full force and effect. The slick legal maneuver invokes a contract clause that’s traditionally used to satisfy lenders, and the public authority now has until Wednesday, Dec. 21 to comply.
It’s an unprecedented chest-bumping match between a major sports franchise and its landlord, and the 49ers have until Thursday, Dec. 22, to produce the requested records or risk losing control of the very stadium it helped build just three years ago.
Then again, this is Santa Clara—a coming-of-age city often at war with itself, run by part-time politicians and more than a few full-time imbeciles. The insults added to injuries will likely be substantial.
It's rare to get a candid, on-the-record answer from a C-level bureaucrat, but the first response in an interview with Rajeev Batra, the interim city manager of Santa Clara, is anything but refreshing or reassuring.
“So, there’s not going to be a straight answer to a lot of these questions,” he says.
Batra is talking about the city’s dealings with Forty Niners Stadium Management Company (ManCo), the entity the 49ers conceived to handle all non-NFL events at Levi’s Stadium. The team and its two subsidiaries—the other one, StadCo, handles NFL events—lease and operate the 3-year-old stadium, which was approved for construction after Santa Clara voters passed the $937 million Measure J bond in 2010. Since that time, the city has hosted Super Bowl 50, international soccer matches for Copa America, and major acts like Taylor Swift and the Grateful Dead. Under the terms of the agreement, the 49ers pay the city of Santa Clara for police and fire department services for NFL games and split revenue for all non-NFL events after expenses are paid. To date, the city has received more than $5.5 million from non-Niner activities at Levi’s.
At issue is whether the 49ers and ManCo have cooked the books and whether the city is entitled to more money.
Santa Clara Mayor Lisa Gillmor has accused the team of refusing to provide itemized expenditures and revenues, while also shifting costs from Niner gamers—such as replacing chewed-up turf—to events that cover the grass when stages are placed for touring acts. The 49ers have dismissed these suggestions and countered that the mayor and some of her colleagues on the council—namely Debi Davis, Teresa O’Neill and Kathy Watanabe—are engaging in political grandstanding and damaging the team and the stadium’s reputation.
Since the sudden and mysterious February resignation of Santa Clara’s former Mayor Jamie Matthews—just a day after the Super Bowl and less than a week after a San Jose Inside report detailed widespread dysfunction within City Hall—Gillmor has been on a warpath, often painting the Red & Gold as raiders in the night. There is a strong suspicion the 49ers funded the dark money organization BluePAC in the recent election, in a failed attempt to dismantle Gillmor’s council majority.
Batra’s city manager predecessor, Julio Fuentes, was forced out this spring due to his cozy relationship with the team—a rent reset dispute is currently in arbitration—and a racial discrimination complaint he filed that was investigated and dismissed. A 15-year city employee, Batra has been more cautious than the mayor in calling out the Niners. He says the city’s finance director, Gary Ameling, who along with City Attorney Ren Nosky was not made available for an interview before press deadline despite repeated requests, has had opportunities to review some of ManCo’s financial records. However, these reports have never been provided in full to City Hall’s doorstep on 1500 Warburton Ave.
On Nov. 18, the 49ers hosted Santa Clara’s city manager, city attorney and director of finance—the “three amigos” in the mayor’s words—in an executive floor suite at Levi’s Stadium to look over non-NFL revenues and expenses and provide reassurances. It’s unclear what exactly was the point of the meeting. Batra says the team presented several binders full of accounting information, but no real analysis was conducted.
“These were just binders sitting there,” he says. “It's not like I viewed them.”
The city’s independent auditing firm, Harvey Rose, which is currently conducting a review to see if the city violated the terms of Measure J by using general fund money on stadium-related events, also visited the stadium last month to review financial records. 49ers officials say the auditors would have been allowed to leave with itemized revenue and expense reports, but only under the condition that they sign a non-disclosure agreement (NDA) that keeps the information from being publicly disseminated. Auditors apparently demurred on the terms, and team officials say the bean counters have still not made a counter-offer on terms of the NDA. That same day, Nov. 22, the stadium authority board voted unanimously to send a letter demanding that ManCo comply with all requests for information, or risk defaulting on the stadium management agreement. Niners officials say the auditors were still inside the stadium when the mayor began leaking word of the 30-day notice to local media.
On Dec. 6, 49ers general counsel Hannah Gordon sent a terse point-by-point rebuttal, and the team released an accompanying statement that noted it had already fully complied with all terms of the agreements.
“While the Mayor made a big deal of sending a ‘notice’ to our Management Company,” the statement said, “the so-called ‘notice’ did not identify a single breach of the Agreement—because there are none to identify.”
So who is telling the truth?
Even the city manager, who signed the 30-day notice sent to the 49ers—which expires Dec. 22, a day after the estoppel certificate is due—doesn’t seem to know if the team and its subsidiary have complied with the agreement or not.
“In the previous years, our director of finance had gone there and reviewed some numbers,” Batra says. “I’m not saying I’ve viewed those, but our staff has. We are fighting on new ground here.”
The stakes of the fight are enormous, as both the city and 49ers have invested considerable resources into building and running the stadium. If the city were to revoke management of non-NFL events, it would be on the hook for operating a 68,500-person venue, an undertaking far outside the scope of services provided by the city’s 927 full- and part-time workforce. (By comparison, Levi’s employs more than 3,000 workers on an average gameday.)
It’s unclear if the 100-plus full-time ManCo staffers would keep their jobs under a new management company hired by the city. Most of these employees crowded into the council chamber last month for a Stadium Authority meeting, expressing their concerns and slamming the mayor’s criticisms.
“All of that is hogwash,” Gillmor says. “We would hire another management company and we would keep their employees. Absolutely. When they brought all of their employees saying I would take food out of their babies’ mouths, that was pretty low. It's about [the 49ers] not living up to their end of the contract. That’s what it’s about.”
The city manager seems less sure the 49ers have violated the terms of the agreement, as well as whether Santa Clara is up to the task of taking over Levi’s Stadium
“I can't even venture to answer that,” Batra says. “We are hoping to not even get there.”
Al Guido looks the part of a NFL team president. He’s trim and handsome but not particularly tall. His suit is crisp and he sports his initials, “ACG,” on the left cuff of a pressed white shirt. His hairline runs straight and the cut is precisely cropped. He squints and thinks when he smiles and, like many inside the 49ers organization, is touchy about what he reads in the press.
He grew up in Washington Township in southern New Jersey, where he played football. He wanted to enlist in the Army after high school, according to a report, but ended up getting recruited to play ball at The College of New Jersey, a public liberal arts college that strives to keep the Garden State’s best at home. He majored in business administration and quickly rose up the sales department ranks for a number of professional sports franchises. He takes pride in his work and roots.
In an interview late last year, Guido touted his Jersey bona fides by telling SouthJersey.com that he still summers at “the Shore,” referencing the coastline made famous by a caravan of binge-drinking Dragon Ball Z characters who proudly called themselves “guidos.”
Guido’s path to becoming president of the 49ers was straight if not sudden, as he went from selling minor league baseball tickets to managing sales for the NHL’s Phoenix Coyotes to working with the Dallas Cowboys, right when owner Jerry Jones was building a $1.2 billion monument to himself and America’s team. Guido parlayed this experience into starting his own consulting firm, which brought him into Jed York’s inner circle and landed him a job in 2014 as the 49ers’ chief operating officer. In a fumbled handoff of power that has been indicative of the team’s recent missteps, Guido assumed the role of president as Paraag Marathe was reassigned to the abstract role of chief strategy officer. This spring, Guido appeared on the same “40 under 40” list Marathe had graced in 2015.
In an interview held last week inside a Levi’s Stadium conference room, flanked by the team’s general counsel, Hannah Gordon, whose comments were off the record, Guido admits that the 49ers could have done better in recent years handling community relations. Most notably, he’s referring to a clash over the replacement of fields for a youth soccer league as starting the war with Gillmor, who previously worked with the team on Measure J.
“Look, question us for our record on the field? Sure, we deserve that,” Guido says. “Question us on our decision for coaching or quarterbacks or management or drafts or free agency, fine. What [Gillmor] is doing is she’s bashing our record on management of the building, and that’s very black and white.
“It's completely not true that they’re not getting the full transparency, and I think if you ask Gary (Ameling), and/or Rajeev (Batra) or anybody else who came over to meet with us, they’ll tell you they got the full access to information. There will be no dispute.”
Besides, Guido asks, who would manage the stadium if the mayor manages to sever the management relationship? The replacement manager would have to timeshare its control, meaning it would have to employ year-round staff while only capturing part of the revenues.
And this, it seems, is a key part of the problem: Santa Clara is not only at war with the 49ers; the city is also at war with itself.
“Our staff, very candidly, has not followed up or enforced the contracts,” Gillmor says, noting the difficulty in getting information, getting part-time elected officials up to speed and getting city staff to aggressively monitor the inner workings of a multi-billion dollar enterprise. “We’re bringing a little rubber-band gun to a war. And [the 49ers] are taking advantage of that, very much so.”
Councilwoman Debi Davis admits that the council and mayor, which make up the Stadium Authority board, are uneasy about the information they’re receiving, or lack thereof, on all fronts.
“If [the 49ers] have nothing to hide, then why are they making things so difficult?” Davis says. “I would hope that our staff is giving us everything that we need, but I think there is a real trust issue here. Do I trust the 49ers are giving us everything that we need? I don't.”
In a 90-minute interview, Guido says the team has complied with Santa Clara’s financial information requests on all fronts, but the parsing of language is noteworthy. The team has argued that it is happy to provide all of its non-NFL financial records but simply doesn’t want proprietary information making its way to the public domain. The risk, Guido says, is the team and stadium would lose a competitive edge in bidding contracts that cover everything from concessions and promotions to celebrity entertainer fees. In doing so, both the team, and by extension the city, would lose money, as 49ers CFO Scott Sabatino inartfully expressed to the Stadium Authority board at a recent meeting. “We’re trying to save you from yourselves,” he reportedly told them.
But the nitty gritty details cannot be ascertained in the span of a single afternoon at 4900 Marie P. DeBartolo Way, and it’s not clear if the stadium management agreement requires the 49ers to deliver their financial records directly to City Hall, as requested in the 30-day notice.
Throughout the 49ers fiery response to the city, this phrase is repeated: “The Agreement does not require that these policies and controls be submitted to the Stadium Authority; it only requires that they be developed and put in place.”
The endgame of this public spat eludes Guido, who says the mayor—a legacy politician whose father, Gary, once served as the city’s mayor and figured heavily in its political life for decades—has made this a personal crusade that offers little benefit to either party. Santa Clara, he says, doesn’t have the capital or expertise to take over the stadium’s operations, and the 49ers’ struggling brand has made it an easy target.
“You’ll notice she never says: ‘Well, they didn’t deliver on the money,” Guido says. Instead, it's more a matter of “they just didn’t make me as much money as I want. She can’t point to one specific thing that we actually haven’t delivered on financially.”
Gillmor, a real estate agent by day who owns at least $6 million in city property and large land holdings in Gilroy (the value is probably much, much more, as statements of economic interest cap holdings at “$1 million or more”), openly gripes about the millions the 49ers have made since coming to Santa Clara, and how this windfall hasn’t trickled down to the city’s coffers in equally impressive fashion. The 49ers, now the fifth-most valuable NFL franchise at $2.7 billion in Forbes’ latest estimate, have seen record profits in their new stadium, selling six-figure luxury suites and season tickets that reportedly range from $375 to $3,750. Meanwhile, average fans have helped pay down the stadium debt by forking over thousands in license fees just for the right to buy season tickets and have first dibs on non-NFL events.
“Why are we teeny? Why are we so small?” Gillmor asks. “Why are we right on budget when their numbers have gone through the roof? It’s all about the money. I’m happy for them, I think it’s fabulous, but they want all the benefits without all the responsibilities of dealing with a public agency.”
Fourth & Goals
Santa Clara intends to get serious in dealing with the 49ers and Levi’s Stadium. The plan: creating a full-time position to monitor Levi’s Stadium-related issues. It’s an overdue maneuver and absurdly inadequate for addressing the real issue, according to Roger Noll, a professor emeritus of economics at Stanford University. One of the most outspoken critics of publicly subsidized professional sports venues, Noll has studied stadium deals across the country, and his conclusion on the current imbroglio between the city of Santa Clara and 49ers is that they’ve both behaved badly, and they’re both right, due to a poorly drafted agreement.
“I think it's probably correct that the 49ers have provided information,” Noll says. “I think it's also correct that the 49ers have not answered all the questions the city has. … I’m not surprised that [the 49ers] have not been transparent. It’s partly because constituents want [the stadium], and partly because the people making the decisions are not particularly skilled or experienced in these kinds of operations. It's easy for them to get caught up in the enthusiasm of the moment.”
A key complaint among cities that have helped subsidize stadiums—and especially outdoor NFL venues—is that revenue projections don't match reality, Noll says. They’re overly optimistic about the number of events that will occur compared with what would be possible in a convention center or, say, an arena like SAP Center.
“When you have a big business that is very sophisticated, located in this kind of city, exercising this asymmetrical influence, or one-sided influence, it’s amateurs to professionals; it’s like the 49ers playing high schoolers.” Noll says. “I’ve spoken with some of the current and former City Council people, and they’re well-meaning people. They just don't know anything.”
Ignorance, it seems, is the common thread in this tattered quilt of interests. City officials claim not to know how the money moves at Levi’s Stadium. 49ers brass claim not to know how they could be any more transparent. And the public is left to wonder who will blink first, unsure when things will get better on the field or in the front office.
As the revolving door at City Hall prepares to spin again, the spat with the football team comes on the heels of a legal battle with neighboring San Jose, which filed suit to stop construction of City Place, a $6.5 billion mixed-use retail and office complex next door to Levi’s Stadium. It has been called the largest private development in Silicon Valley history. Santa Clara fired back by suing San Jose over a much smaller expansion of Santana Row.
We’ll soon find out whether Gillmor, her allies and constituents have the will to finish a fight with formidable adversaries in a two-front war.