In 2010, when Santa Clara voters approved creating a city-run stadium authority to build an NFL stadium to attract the San Francisco 49ers, politicians patted themselves on the back for getting things done and luring a storied franchise 45 miles south to Silicon Valley. The relocation took place

The contrast with Oakland and its inability to come up with a stadium proposal that would keep the Raiders from eyeing other metro areas was clear. Leaders in the cash-strapped city were unable to prevent the Raiders from committing in 2017 to moving to Las Vegas and working with the Nevada state government on a financing plan that should yield a 65,000-seat stadium for the team to begin using in the 2020 season.

But now the narrative has taken a dramatic shift, and it’s Santa Clara leaders who are facing grief in their community over the 49ers’ arrival in town and the impact of the $1.27 billion Levi’s Stadium (pictured), named after the San Francisco company which paid for marketing rights.

What was billed as a win-win situation by team and local officials now looks far more complex. The initial honeymoon has long since given away to a fractious relationship.

The biggest annual strain is over how much the team must pay per season. A complex agreement set the 49ers’ rent and operating fees at $24.5 million for the 2017 season. The 2018 assessment was fought over for months before an arbitrator recently said the amount should be set at $24.762 million for the coming season, an increase of just over 1 percent.

The ruling contradicted the team’s analysis of baseline rent, stadium operating expenses, debt service and capital reserves. The 49ers argued their total payment should be as little as $16.775 million – a 32 percent cut. The city asked for as much as $25.862 million – a 6 percent increase.

“We want to work with 49ers, not against them,” Mayor Lisa M. Gillmor said in a statement released after the arbitration decision. “Hopefully the team understands that Santa Clara will always put community interests first.”

There have also been squabbles over the city’s 10 p.m. weeknight curfew for events at the stadium, which has the potential to cause headaches for the team, given the regular season games the NFL holds each week on Monday and Thursday nights, as well as the preseason games that are regularly scheduled on weeknights. Some residents respond by citing quality-of-life issues created by team-related traffic.

Personal-seat license fees needed for revenue model

Both the city and the team share concerns over attendance. While the 68,500-seat stadium regularly sells out on paper, Pro Football Talk and other popular NFL websites took to mocking the 49ers last fall after an October game in which the stadium seemed less than half full, pushing ancillary revenues down. An unexpected problem has been the intense heat seen at Levi’s Stadium for several preseason and regular season games.

A five-game winning streak to end the 2017 season raised hopes that attendance will improve going forward. But as Pro Football Talk pointed out, the team and city have reason to be deeply worried about renewals for personal seat licenses, the expensive way that fans can guarantee themselves top seats at games.

The license fees are crucial to the revenue model being used to pay off construction and related debt. Many once-successful teams have struggled to sell PSLs after their fortunes took a turn for the worse.

Meanwhile, the long-shot hope that the Raiders would continue to have a presence in Northern California after their 2020 move to Las Vegas has been dashed. Nevada media outlets recently reported that the team is likely to move its preseason training camp from its longtime base in Napa to Reno that summer.

Los Angeles Mayor Eric Garcetti Thursday said NFL football is “highly likely” to return to Los Angeles 20 years after the Raiders scampered back to Oakland and the Rams defected from Anaheim to St. Louis. He said the recent $2 billion sale of the Clippers NBA team showed how profitable a new team would be for the NFL, whose owners would split a franchise fee for a new team; or a relocation fee, such as if the Rams return.

But the Times reported:

Previous L.A. mayors have predicted the imminent return of the NFL to the city. Though many in the NFL are optimistic that the league will soon return to the nation’s second-largest TV market, some team owners are skeptical about how much the ball has moved during the last several years.

Garcetti also said the deal could be done without taxpayer subsidies. But the NFL has preferred such subsidies as a way to get a deep commitment from local politicians. For example, the shining, new, high-tech Levi’s Stadium in Santa Clara for the 49ers cost $1.31 billion, of which $114 million was from taxpayers.

That was an exception to the general resistance of California taxpayers in recent decades to stadium tax subsidies.

I suspect the NFL will punt on the new team until the next recession, when some of the owners’ other businesses have tanked and they’ll need some quick cash. There are 30 owners. So if the league intercepts a $3 billion franchise fee, each owner would get $100 million.

By contrast, in 1972, “Chicago industrialist Robert Irsay purchased the Rams for $19 million and then traded the franchise to Carroll Rosenbloom for his Baltimore Colts and cash.”

According to the CPI Inflation Calculator, $19 million in 1972 would be $108 million today, factoring inflation. So in 42 years, the value of an NFL team in L.A. has risen about 30-fold.

After a slow decade, the Niners are back in contention. They barely lost the Super Bowl in 2013 to the Baltimore Ravens. And they finished a game from the Super Bowl this year.

Last year the team inked the third-largest naming deal in American sports. Levi’s secured team naming rights for $220 million over 11 years.

With that kind of cash coming in, no expense is being spared in the stadium’s construction. “At the old cost of $1.2 billion, Levi’s Stadium was almost tied with Cowboys Stadium as the second most expensive NFL stadium ever, behind the New York Jets’ and Giants’ $1.6 billion MetLife Stadium,” reported the San Jose Mercury News. MetLife hosted the most recent Super Bowl in February.

But like a draw play in football — where a passing play is disguised as a running play — taxpayers were faked out. Reported the Mercury-News:

“After Santa Clara voters approved a $937 million plan in June 2010, the cost increased to $1.02 billion in 2011 and was set at $1.18 billion during the April 2012 groundbreaking. After adding another $96 million on Friday, the price tag is now $1.27 billion, or 36 percent more than the 2010 estimate.”

Super Bowl

As bait for taxpayers, the NFL holds out the promise of a new stadium hosting a Super Bowl. So Levi’s Stadium will host Super Bowl L (50) in 2017, with a good chance one of the teams will be the Niners.

Boasting its own jail and a hundred police officers, Levi’s Stadium will prohibit — and punish — conduct ranging from “boisterous” activity in the stands to noisemaking in the parking lot that’s audible from 50 feet.

Dealmakers expect revenues from naming rights, luxury boxes and “personal seat licenses” to speed the Stadium Authority’s $850 million loan payoff, according to the Mercury News. The PSLs, one-off fees imposed on season ticket buyers, are now a standard source of NFL cash. As Time detailed, most franchises use some form of PSLs, which will cost 49ers season ticket holders up to $80,000 each.

Los Angeles

Los Angeles is back on the field for a team. In 1995, the city lost the Rams to St. Louis on promises of a taxpayer-subsidized, top-tier stadium lasting two decades.

Now that 20 years is almost up and the Rams want St. Louis to spend $700 million on renovations to the Edward Jones Dome. But team owner Stan Kroenke purchased a stadium-sized lot in Inglewood — the better to pit L.A. and St. Louis against one another in a veritable bidding war for the team.

Also in 1995, the Raiders moved from Los Angeles back to Oakland. Just this week owner Mark Davis, reported the Los Angeles Times, “has acknowledged the possibility of moving the franchise back to Los Angeles if Oakland can’t get its act together on a new stadium.”

It’s an old NFL tactic: Get cities bidding against one another on taxpayer subsidies for stadiums.

Promises are made about the jobs and economic growth new stadiums will create. But as studies by Stanford economist Roger Noll and others have demonstrated, tax-funded stadiums really don’t create new wealth. Instead, consumers just shift spending to professional sports from other entertainment activities.

As Noll wrote in a study with Andrew Zimbalist for the Brookings Institution:

“But, in reality, sports has little effect on regional net exports.

“Sports facilities attract neither tourists nor new industry. …

“Sports teams do collect substantial revenues from national licensing and broadcasting, but these must be balanced against funds leaving the area. Most professional athletes do not live where they play, so their income is not spent locally. Moreover, players make inflated salaries for only a few years, so they have high savings, which they invest in national firms. Finally, though a new stadium increases attendance, ticket revenues are shared in both baseball and football, so that part of the revenue gain goes to other cities. On balance, these factors are largely offsetting, leaving little or no net local export gain to a community.” 

Non-profit

Despite scoring billions, the NFL actually is a non-profit organization, like a hospital or school. Congress enacted Public Law 89-800 in Nov. 1966, just before the NFL-AFL merger culminated in Super Bowl I on Jan. 16, 1967.

As Greg Easterbrook explained in the Atlantic, the law “saved the NFL uncounted millions in tax obligations, which means that ordinary people must pay higher taxes, public spending must decline, or the national debt must increase to make up for the shortfall.”

Finally, Harvard professor Judith Grant Long concluded in 2012 that, for all sports, taxpayers have been tackled for some $10 billion more than planned in stadium and arena funding for professional sports teams.

By Joseph Perkins

Elaine Alquist is not a member of the San Francisco 49ers’ Gold Rush gals, but the Santa Clara state senator is the NFL club’s biggest cheerleader.

With but a month left in the legislative session, Sen. Alquist, D-Santa Clara, has artfully crafted a measure that would gift the York family, which own the Niners, up to $30 million toward construction of the tricked-out new stadium they’ve always wanted.

So desperate is Alquist to please the Yorks, to presumably secure her place in the owner’s box during Niners home games, that she actually gutted a bill on teacher credentialing and amended it to free up local redevelopment dollars for the building project.

Alquist felt compelled to go to such extraordinary lengths after the Santa Clara County Board of Supervisors denied a request by the city of Santa Clara that the board turn over the $30 million or for the stadium’s construction.

A copy of Alquist’s bill, obtained by the Los Angeles Times, states that the board’s denial created “unique circumstances” — namely, that the York family wouldn’t get the taxpayer subsidy they were expecting to build their new stadium — and, therefore, “this special statute is necessary.”

If the Legislature passes Alquist’s special statute, it will hardly be the first time state lawmakers have bent over backwards to facilitate construction of a new stadium for a privately-owned sports franchise.

Just last year, in fact, the Legislature approved a special statute for a proposed stadium in downtown Los Angeles that granted a waiver from certain environmental laws. And in 2009, state lawmakers approved a special bill for a proposed stadium in the city ofIndustrythat waived environmental mandates.

The argument for the custom legislation clearing the way for the stadium projects in downtown L.A., City of Industry and, now, Santa Clara is that they will foment economic growth and stimulate job creation in the respective cities.

UBS study

But a growing body of evidence suggests that argument is a canard. Indeed, a recent report by UBS finds that “new stadiums and arenas have no measurable effect on the level of real income or employment in the metropolitan areas in which they are located.”

Sure, a new stadium in Santa Clara (or downtown L.A. or City of Industry) will attract sports fans. But, says the UBS report, “Individuals generally maintain a consistent level of entertainment spending, so money spent on sporting events typically comes at the expense of cash spent in restaurants, on travel, and at movie theaters.”

Defenders of publicly-funded sports facilities suggest that it is impossible to retain or attract a professional sports franchise without taxpayer handouts. But that is simply is untrue.

The San Francisco Giants built their $357 million ballpark in 2000 with no public funds. And the owner of the Golden State Warriors is moving the NBA franchise to San Francisco and building a new arena out of his own pocket.

That’s not to say that Alquist and her colleagues in Sacramento should do absolutely nothing to assist owners of professional sports franchises build new stadiums or arenas.

It’s perfectly acceptable for the state to relax onerous environmental and labor regulations that substantially increase construction costs for sports facilities. But it’s fiscally irresponsible to provide taxpayer subsidies to pay for those privately-owned facilities.

At a time when governments and citizens of California are bankrupt, the NFL could build at least one incredibly expensive stadium in the Bay Area: $735 million for the Oakland Raiders (formerly the L.A. Traitors). And $937 million for the San Francisco (gold-digging) 49ers.

The 49ers stadium would be paid with a lot of tax money. Tax dollars likely would be needed for an Oakland stadium, too. Even though Oakland still is paying off the debt on its existing stadium, the Coliseum!

Oh, and let’s remember that 20 years ago the Raiders ripped off the City of Irwindale for $10 million — just for considering moving to the city, which the team didn’t!

Here’s a better idea: Tell these teams to take a hike out of the state.

Southern California lost the Raiders and the Rams more than a decade ago. We don’t miss them. Who needs these tax-sucking parasites? If you want to watch the NFL, turn on the TV on Sunday and Monday.

Let the Raiders and 49ers go to another state. They’ve raided our tax dollars enough.