Julio Fuentes lost his cool during the holiday break. While other city officials were off for vacation, and fewer still went through the motions at work in the closing days of 2015, the city manager of Santa Clara threw a tantrum.
He cleaned off his desk and stripped his office’s walls of photos, according to sources at City Hall, and a paper shredder’s gears could be heard in the long corridor that bisects the municipal headquarters’ east wing. These were not the actions of a man getting a jump on his spring cleaning as much as an outburst by the city’s highest paid employee. He was letting his colleagues know that he’d had it.
In October, the City Council authorized a pay increase for the city attorney, but not for Fuentes, who in the months prior had quietly handed out 5-percent merit pay increases to the city clerk and police chief without the council’s knowledge. Instead of getting a raise, the city manager of nearly three years was granted the indignity of a stipend, a one-time 5-percent boost to his $290,000 annual salary.
Fuentes refused it outright, and has since declined interview requests until after Super Bowl 50. He also mysteriously disappeared from his office for two days last week in the all-important lead up to the big game, which is being held at Levi’s Stadium. A request to take a view of Fuentes’ office was denied by his executive assistant, who noted such a sneak peek is “not how we do things.”
Two weeks after the meltdown—which elicited chortles at City Hall over the unrequited, hold-me-back chest puffing—Santa Clara Mayor Jamie Matthews admitted he’d heard about the city manager’s unusual office purge.
“I don’t know what that’s about,” the mayor said, adding that he hopes Fuentes decides to stick around.
Other electeds in Santa Clara seem less sanguine.
Fuentes, and by extension other top city staff, are suspected of withholding and/or obfuscating information related to the operations of Levi’s Stadium, the two-year home of the San Francisco 49ers. The city manager, in response, is apparently fed up and feeling underappreciated for his efforts, but that isn’t the story he’s selling.
Fuentes has explained his housecleaning by informing colleagues he simply wants to “stay nimble.”
That’s one possibility. Another reason could be the civil grand jury investigation that has been quietly looking into the city’s Stadium Authority—tasked with overseeing all operations at Levi’s Stadium—for the last three months.
Play Past the Whistle
The Big Game is just the beginning.
When the million or so visitors to the Bay Area return home and attention shifts away from pursuits involving genetically engineered cyborgs in shoulder pads—and several kickers—giving each other brain damage, the vision for what Santa Clara intends to become will take shape. Football, in fact, is just one piece of Santa Clara’s bid to become the “Capital of Silicon Valley,” if there is such a thing. It’s a title neighboring San Jose—the Bay Area’s largest city and the seat of Northern California’s biggest county—introduced in the 1980s as a marketing slogan.
The rivalry dates back to 1777, when San Jose was established as a pueblo and Santa Clara became home to a mission. Both remained tiny villages of less than a thousand inhabitants until the Gold Rush, when San Jose became the bigger city, and for a short time, California’s capitol. By the early 1950s, San Jose had 100,000 residents and doubled its population in the decade that followed. Santa Clara was a little more than a tenth the size.
The sprawl San Jose cultivated in the 1960s, as it annexed neighboring towns and cities, took a catastrophic turn in 1978, when Proposition 13 capped property taxes. The city’s past emphasis on housing over jobs has steadily diminished the level of core services in San Jose, and startups and established industrial giants favored the Peninsula and San Francisco, despite San Jose’s aggressive wooing of technology companies.
Meanwhile, Santa Clara has remained lean and independent.
The Mission City has its own electric power utility, bypassing the PG&E monopoly and giving residents and some businesses energy bills as much as 40 percent lower than in San Jose. Companies like Intel, Nvidia, Cisco, Oracle, Ericsson and a host of others have scooped up office space in Santa Clara over the years, building a job base that more than doubles the city’s total population Monday through Friday. And, despite being just four miles wide, it’s home to a highly regarded regional university and a shiny new NFL stadium.
Santa Clara scores high marks in every category except the two that make a city livable: residential capacity and a downtown retail district. This will change very soon, and the winners will be measured not in wins and losses but in millions and billions.
Next door to Levi’s Stadium, Related Companies has announced plans to create a $6.5 billion, 239-acre “entertainment destination” district that will be roughly six times the size of Santana Row, the Mediterranean-influenced mixed-use development that creeps right up to the border of Santa Clara’s southern boundary. An environmental impact report is currently making the rounds, after stalling in part because the project requires a 40-acre concrete “podium” to first be built over the city’s old municipal landfill. That aspect of the project alone is expected to cost $800 million.
Surrounding Levi’s Stadium, a collection of 10 properties up for sale, which include Great America theme park’s 116 acres, as well as a Hilton, a Hyatt, the Techmart Center office building and the property under Irvine Company’s Gateway Project office campus, will go up for sale later this year. The city must sell off the land as required by the state’s mandate to purge all properties obtained through now-defunct redevelopment agencies.
Suitors include Related and the Newport Beach-based Irvine Company. It would stand to reason Irvine owner Donald Bren would want to avoid paying rent on the very office property his buildings sit. The developer’s many other Santa Clara projects include a Whole Foods Market, 1,800 neighboring residential units and a 400-unit project by the city’s Caltrain station.
For a sense of how many big projects are taking place in Santa Clara, this is the same city that rejoiced in 2014 over getting a Target.
“We were very excited when we got our first Target,” Mayor Jamie Matthews said. “Practically, key to the city time.”
The celebration, however, may be short-lived as residents realize their gains could come at a cost.
Irvine Company has an exceptionally close working relationship with the 49ers, and recent efforts by the team to displace a youth soccer league from a parcel adjacent to Levi’s Stadium are apparently part of a much larger plan. City Hall insiders discreetly admit that Great America, which has been in operation since 1976, could be demolished in the very near future to make way for a mix of high-density housing and office space.
In a governance committee meeting near the end of 2015, City Manager Fuentes acknowledged, “Whether you want to believe it or not, we’re becoming a big city.”
Baby Goes for a Ride
Head down and engrossed in his phone, Jamie Matthews sits large on the loveseat in the waiting room that also serves as his executive assistant’s office. He greets with a squinting smile and a question that is equal parts unexpected and ingratiating.
“How we doing, baby?”
Baby has come to City Hall for a ride-along at the invitation of the mayor of Santa Clara, and within a few minutes we’re strapped into his burnt orange Fiat 500e, an electronic lunchbox on wheels that zips from 0 to 60 in six seconds. I know the specs because the mayor tells them to me as we floor it out of the parking lot to begin our tour of Santa Clara, a.k.a. The Mission City.
First stop: Santa Clara University, the pristine private school that counts among its graduates Gov. Jerry Brown, author Khaled Hosseini and expected NBA hall of famer Steve Nash. Instruction at the school has been grounded in Jesuit principles since 1851, just five years after the Matthews family’s story took a fortuitous turn.
We pull up to a security tollbooth on the campus’ perimeter, and the mayor says casually as pie, “This is actually where my family story begins, after my family came by wagon train in 1846. My family split up; half of them went through the Donner Party experience, and half of them went the tried and true route. And that’s how William McCutcheon—”
“When you say Donner Party experience,” I interject, “we’re not saying they were part of the people eating each other, are we?”
“Your family ate people?”
“No, they didn’t.” The mayor chuckles. “But some of them died and were eaten.”
Matthews informs the university security guard that we intend to take a quick drive through campus, and I realize I’m not the only one.
“Hey, brother. We’re just doing a tour. I’m the mayor,” he says. “How are things going, baby?”
Red and Goooooold
Twice a month representatives of the San Francisco 49ers’ stadium operations meet with Santa Clara city officials. The get-togethers allow representatives of two team subsidiaries, StadCo and ManagementCo, to provide updates on all of Levi’s Stadium operations, expenditures and revenue. In its first year of operation the stadium reportedly netted the city $2.9 million.
Jim Mercurio, 49ers vice president of stadium ops and general manager, will sit with an assortment of his colleagues on one side of a table in a City Hall conference room, and city manager Julio Fuentes, chief financial officer Gary Ameling and city attorney Ren Nosky will sit on the other side of the table to represent Santa Clara. For all intents and purposes, the two sides might as well sit on the same side of the room.
A recent records requests for all notes taken at the meetings, where multi-million dollar decisions are regularly made, turned up nothing. This is due to the fact that Nosky is the only city official to take any notes at these meetings, and he happens to have the unique ability to shield any document he touches under the umbrella of attorney-client privilege. The city manager and CFO say they stick to their memories or handwritten honey-do lists, which are scrapped shortly thereafter.
Beyond Nosky’s confidential journals and a few jotted-down reminders that are quickly tossed, CFO Ameling said, “I don’t see anybody (from the city) taking notes. The Niners, I see them carrying notebooks, passing notes back and forth, but their notes are private. They take notes as they see fit. They usually bring a computer.”
The few notes Ameling admitted to taking with stadium managers and club officials present occurred during negotiations on the financing of Levi’s Stadium. These too have been discarded.
“I do not have those notes,” he says. “They’ve all been destroyed, I guess.”
The dearth of documentation on the city’s side is compounded by the fact that few emails are shared between the club and executive staff beyond coordinating invitations to team-sponsored photo-ops.
The Niners did not return multiple requests for comment for this story until Wednesday morning. When asked about the civil grand jury investigation, 49ers senior communications manager Roger Hacker said the team would follow up after the Super Bowl.
Records requests to the city found that team representatives routinely email city staff and council members at their personal email addresses, which could mean additional communications have circumvented the public’s ability to monitor interactions with the club.
It should come as little surprise then, that a few members of the Stadium Authority board (the mayor and council) have raised doubts that they’re receiving a clear picture from staff on how the stadium is operating, and where the money is moving.
“I have concerns,” said Teresa O’Neill, a Santa Clara councilwoman who, along with colleagues Lisa Gillmor and Debi Davis, spent last fall requesting special study sessions on Stadium Authority financials. Those meetings with the CFO were called off after the second installment.
“Ultimately, we got to have meetings,” O’Neill said, “and we realized there was no point, because they didn’t bring back the information we requested from the first meeting.”
What Women Want
Lisa Gillmor has played on both sides of the 49ers fence, and she says the grass isn’t greener where the underdogs reside. She admits that saying as much could spell the end of her time on the Santa Clara City Council. A thrice-elected councilwoman whose roots run deep at City Hall—her developer father, Gary, served as mayor for the better part of the ’70s—Gillmor was for the 49ers until she wasn’t.
Terming off the part-time council in 2000, Gillmor focused on her real estate business for 10 years before being recruited by the team to serve as spokesperson for Measure J, the $937 million ballot initiative to build Levi’s Stadium. Voters passed the measure in 2010 with 58 percent of the vote, and Gillmor was granted an appointment back to the council in 2011. City Hall watchers viewed the homecoming as a bonus for leading the successful stadium effort.
Gillmor’s support for the club slowly eroded after rejoining the council, with the breaking point coming in the spring of 2014—around the same time 49ers CEO and owner Jed York started the swift descent from boy wonder to fan base pariah. Of all the groups he had to go and upset, he foolishly meddled with soccer moms.
In a letter from 2012, York promised to locate alternate soccer fields for the Santa Clara Youth Soccer League, which plays its games on fields adjacent to Levi’s. But two years after penning a letter expressing the team’s “commitment” to the league, York shrugged and said talks had broken off. The soccer league didn’t even know it had been ghosted.
“After the election and during the negotiations, [the 49ers] started pulling back from the community,” Gillmor said. “They had built up a lot of goodwill before that point. I figured that maybe it was temporary, and then they made a move for the soccer park.”
For the last year, Gillmor has pushed for more transparency in how the 49ers deal with the city. To date, a sampling of the reports she said the Stadium Authority board has yet to receive include: updates on tenant alterations to the stadium; a marketing plan for non-NFL events; quarterly reports on non-NFL events in which attendance exceeds 25,000 in attendance (say WrestleMania, or a Taylor Swift concert); a shared expense budget between the 49ers and the city; and an annual capital expenditure plan, which the city CFO has argued would be premature even though the 49ers have completed two seasons at Levi’s.
“There’s no way we can get a handle on the specific financial expenditures and revenues from the stadium, because we don’t have detailed reports given to the Stadium Authority,” Gillmor said. “Many of the revenues and expenditures are lumped together, so it’s impossible to know where they came from.”
A particularly worrisome lack of information concerns stadium security and related costs attributed to Santa Clara police and the city’s general fund. Public safety costs for NFL events in the 49ers’ first season exceeded the $1.7 million projection by roughly $600,000, according to the CFO, who admitted to only spending 10 percent of his work week on stadium operations.
The excess security costs are covered by a reserve fund, but there are misgivings that city administrators are cutting the 49ers a special deal that violates the terms of Measure J, which forbid general fund money from going toward stadium operations.
In a public council meeting last year, Fire Department inspector Steve Silva raised the issue of engines “going dark”—cutting off communications to eliminate records of activity—as they transport equipment from stations to the stadium on game days. The undocumented overhead expenses, city manager Fuentes responded, isn’t a big deal because it doesn’t take much time to move the trucks.
Such casual indifference to disbursing public funds contrary to voter mandates may be part of the gender-biased culture surrounding major league sports. In the lead-up to the three council members’ special study sessions with the CFO on Stadium Authority operations, Councilwoman O’Neill recalls one of her four male colleagues on the council scoffing as she walked by, “Just wait till they find out they’re not entitled to get any of this information.”
There are also concerns that some costs are being pushed from 49ers activities to non-NFL events, of which all revenue is split evenly between the city and team after expenses.
“I understand confidentiality requirements,” O’Neill said, “but I’m not talking about how many bottles of Perrier did Taylor Swift want in her dressing room. I think we’re going to have to get much more sophisticated as a local government.”
A Slice of Santa Clara
Kirk Vartan’s pizza passes the fold test. It collapses easily in the hand, and, when held over a paper plate, drips bright orange grease. It’s a classic slice of New York pizza, which is probably why Vartan named his joint A Slice of New York.
A former digital content director for NBC in New York, Vartan moved to San Jose in 1998 to work for Cisco before opening the pizzeria eight-and-a-half years ago. Hard pressed to pack more than five people inside at a time, we sit on the patio looking out over Stevens Creek Boulevard as evening commuters make their way home, the occasional street bike popping a wheelie.
Five years into making a home in the South Bay, Vartan got involved in the 2003 land dispute to preserve Santa Clara’s Bay Area Research and Extension Center (BAREC), a public farmland formerly owned by the University of California. His group lost the fight, but the land-use junkie gained invaluable experience in monitoring the city, whose border is at his business’ backdoor. He’s now coordinating community efforts to oversee an “agrihood,” or urban farm, on the last six acres of the original BAREC property.
An admitted numbers guy, Vartan knows the numbers because he knows the minutes. He’s attended every single City Council meeting in Santa Clara for the last year-and-a-half, and he usually stays to the end. By memory, he can recall the expansive growth proposals for nearby shopping malls Santana Row and Valley Fair, the latter of which straddles the border of San Jose and Santa Clara and plans to expand into a 2.2 million-square-foot “retail powerhouse” by 2017.
He reels off statistics regarding the Related Companies’ 7.9 million-square-foot expansion plans by Levi’s Stadium and the leverage it’ll hold over the city with 1,400-plus high-end housing units, expansive retail options and a 700-room hotel. And then the Irvine Company, which is likely to pump in an additional few billion dollars of development over the years as it builds the city’s Whole Foods, multiple other housing and business park developments and bids on the 10-property liquidation package that includes Great America and Irvine’s own office park.
“These are massive, massive investments that are going to make the development community a lot of money,” Vartan says, in between slices. “The city is changing so rapidly, people are freaking out.”
Santa Clara Plays Fair is the most rabid of anti-stadium groups in Santa Clara, but while Vartan rarely shies away from offering his opinion, he’s taken pains to position himself not as a NIMBY or council adversary but a partner to the city. As a businessman—he owns a second pizzeria by the same name in Sunnyvale—he forgoes opposition to encourage smarter growth, focusing more on traffic and infrastructure, such as suggesting a ratio cap similar to San Francisco’s for vehicles to new housing units.
He also has concerns that large development projects are being considered absent a real dialogue on transportation, as many land-use restrictions were put in place so infrastructure would have time to develop.
In regards to oversight of operations at Levi’s Stadium, few Santa Clarans have witnessed as closely as Vartan the unusual manner in which council members Gillmor, O’Neill and Davis have been brushed off.
“They’re asking for very specific accounting records, and still to this day I’ve never seen them provided,” he said. “It hasn’t happened.
“We’re seeing a lot of dirty laundry in the council chambers, which is good, because it’s being transparent, but it’s not good because we’re seeing our city break down in its effectiveness to work together.”
Goodbye, Great America?
We pull over to the side of the road throughout our tour of Santa Clara, and Mayor Matthews tells me why his city has little reason to worry about losing its soul to billionaire developers, or its theme park, Great America, for that matter.
First of all, he says, the 49ers will have a hell of a time trying to buy land surrounding its stadium that isn’t already spoken for, because other suitors will come calling. Second, the property just doesn’t create much revenue by operating six months out of the year. And third, and most important, the theme park has a 40-year lease that would require the council to approve any change to its land use.
“There are lot of rumors out there,” Matthews says, “but the Niners would have a lot of competition, because they got the Irvine Company, Related Companies; you gotta think of these big companies coming in. The [49ers] aren’t the only one interested in it.”
This statement was made before I learned the mayor took part in a private meeting with executives of the Irvine Company and Councilwoman Gillmor, in which he led a presentation that included a model of the Great America theme park grounds being replaced with high-density housing, retail and office space.
City officials are often hesitant to discuss such a scenario, due to the fallout from community members, but that doesn't mean it can't happen.
“I don’t think that’s beyond the realm of possibility—at all,” Councilwoman O’Neill said. “I think that’s a credible scenario.”
The longer the mayor and I discuss the fate of Great America, and the resistance to losing Santa Clara’s best known landmark beyond a football stadium, the more he admits the developers will win. What are the chances Great America will exist in 10 years?
“I think it’s gotta be at least 80 percent,” he says.
Matthews remains adamant that Levi’s Stadium has been an unprecedented success, noting that $500 million of the stadium’s billion dollar debt created by Measure J has already been paid. He also argues there is only upside to be found in the neighboring development projects.
“It is going to transform (the city) in lots of ways,” he says, “not the least being it’s going to generate $28 million a year between the ground lease and sales tax to the city.”
The stakes of the November 2016 election couldn’t be higher in Santa Clara, but it’s not even about what’s to come.
“It’s what is happening,” Gillmor said. “Not what’s about to happen.”
More than $10 billion in development will easily take place over the next five years in Santa Clara, and the only gatekeepers currently in place are: a city staff that has been stretched to the limits by a stadium worth 1/10th of that operating scale; a city manager who doesn’t keep notes and appears to have one foot out the door; and a part-time council whose future composition is unknown.
All three women on the council—Davis, Gillmor and O’Neill—are up for re-election, as is Councilman Jerry Marsalli, who is not expected to run again. Santa Clara has a history of elected officials coming back for more, and with Mayor Matthews avoiding terming out when he moved from the council to mayor, he’ll remain in place the next three years with retread councilmen Pat Kolstad and Dominic Caserta, who previously served terms on the council before taking time off and successfully running again in 2014.
Four council votes make a majority in Santa Clara, and sources say the 49ers have been actively recruiting challengers to the councilwomen to remove any opposition to their increasing hold on the city. Joe Sweeney, president of the city’s Chamber of Commerce, is one expected candidate, as is Steve Lodge, whose work history is itself a conflict of interest. A former city police chief, Lodge went to work for the Niners shortly after leaving the department.
In the meantime, city manager Fuentes has been directed by the council to recruit and hire a real estate assets manager to keep a close watch on city properties and the stadium authority. That goal was set a year ago, but a rubric of timelines recently given to the council suggests the hire could wait until June 30, 2017.
“By then,” Vartan says, “everything will already be decided.”
Or perhaps, it already has been.
Correction: The ground lease for Great America runs until 2074, not 40 years as previously reported. San Jose Inside regrets the error.