49ers Offer $4M to City in “Final and Best” Deal

In what they say is their “best and final” offer, on Thursday the San Francisco 49ers offered Santa Clara an additional $700,000 to settle nearly six years of litigation over the management of Levi’s Stadium. The additional money would boost general fund benefit from the deal to $4 million.

The 49ers have offered to increase their one-time payment offer to the City to $1.3 million from $650,000.

The rest of the proposed settlement is identical to the original offer. This includes $650,000 to Santa Clara’s general fund from the Stadium Authority’s discretionary fund, $650,000 from the 49ers to pay down construction debt, $2.2 million in disputed public safety costs and forgiveness of $350,000 in interest charges on late payments owed by the Stadium Authority. In addition, the cessation of litigation would make another $1 million available annually to pay down stadium debt (currently $250 million).

The Santa Clara City Council will consider the offer at its next meeting on Aug. 30. The 49ers’ proposal would reduce Santa Clara’s $19.6 million operating deficit by 20%.

City’s Proposal to Help Itself to Stadium Authority Funds Turned Down

The increased offer is a response to a counter offer from Santa Clara, according to an Aug. 24 letter the 49ers sent to City Manager/Stadium Authority Director Rajeev Batra.

The Stadium Authority asked for:

• A $450,000 refund on previous interest costs;
• $250,000 for the Authority’s new accounting system;
• Transfer of $13 million from the Authority’s litigation fund to the City’s general fund;
• The 49ers taking on the entire cost of seat builder license buffets (the Stadium Authority receives all the revenue from seat license sales);
• More transparency on ticket surcharges;
• A delay in litigation settlement pending further mediation.

The 49ers offered the additional $700,000 payment in lieu of the first two items.

“This solution aligns better with your Board’s goal of delivering immediate revenue to the City’s General Fund,” wrote 49ers Chief Communications and Public Affairs Officer Rahul Chandhok.

The 49ers also agreed to provide more information about ticket surcharges. But Chandhok pointed out that prior to 2017 “there was a higher level of open communication and collaboration between staff” and that in recent years communication was “complicated” by “the fact that litigators have become involved in even the most routine Stadium operations.”

However, the 49ers objected to the City’s additional requests and signaled that this was the best offer the City would likely get.

First, they turned down the City’s request for the $13 million Stadium Authority litigation reserve because this would violate the Stadium Lease, which was approved by Mayor Lisa Gillmor in 2012. The lease limits distribution of Stadium Authority money to the City’s general fund.* The litigation reserve account was established around 2018 and is funded entirely by Authority revenues. Prior to that year, the Authority apparently didn’t anticipate significant legal spending.

The seat builders license buffet is likewise not a proper subject of this settlement “in this round of negotiations” because contractually, this is a responsibility of the Authority, which receives 100% of seat license revenues.

Regarding the buffet, “There are already promising proposals on the table, such as ‘guardrails’ on buffet expense, or some form of cost-sharing,” Chandhok continued, but it wasn’t possible to condense the discussions into next week.

As far as delaying the settlement of ligation, Chandhok wrote that “Our preference is to spend money settling these disputes, not litigating them,” and they hoped to resolve the main disputes next week and “stop the wasteful legal expenses by both parties.” These expenses include not only lawyers but $1,000/hour mediators.

“We believe that there is a settlement proposal that is ready…and delaying that settlement — which will necessitate continued litigation…and a likely reduction of the settlement offer — will negatively affect both parties,” Chandhok warned.

“A measured approach to resolving our differences has been successful to date and has created momentum to resolve the main dispute today,” he continued. “Our settlement offer immediately eliminates…70% of the litigation spending and resolves the uncertainty on the future of the stadium management, making it easier to book stadium events.”

Chandhok concluded his letter saying that “having spent the past three months working on this settlement, with multiple proposals back and forth, please accept this as our final and best offer.”

*Sticking its hand into the Stadium Authority financial cookie jar would be contrary to the City’s historical policy of running its enterprises as independent operations — e.g., Silicon Valley Power — that make specified “in lieu” payments to the City. This separation ensures that money needed for proper operation and capital investment isn’t siphoned off by City officials for pet projects or to avoid politically unpopular actions.