Clawback, Part I
As redevelopment agencies were threatened with extinction last year, the 49ers and the City of Santa Clara made a structural change to the stadium financing plan. Instead of using $30 million of redevelopment money set aside for the project, the 49ers loaned the funds to the City to get construction moving. The idea was that once the redevelopment situation was resolved and the money given back to the project, the 49ers would be paid back.
Of course, the best laid plans often go to waste. Santa Clara County, which has a board overseeing all redevelopment work and funding countywide, decided yesterday to take that $30 million and use it for various county services, including education. The county has every right to do this, as City officials admit. The 49ers also have the right to sue to get the money back, though that money is anything but guaranteed. The team could say that the funds were “under contract” before last year’s June cutoff, which from looking at previous news, appears to be the case. They could also say that the County’s clawback move creates a breach of contract situation. I’m not clearing on what the best criteria would be, but if the 49ers wanted to, they could make it get messy. Perhaps they should call San Jose City Attorney Rick Doyle for some advice on dealing with the County.
A comment from the team’s front office indicates that the 49ers could also simply eat the loss. If the clawback happened last year, it could’ve jeopardized the deal. Now that the financing package is complete and construction is underway, there’s no way to stop the stadium from being built. It all goes back to the fundamental change in the deal last year which created the loan. Both the City and the 49ers knew that any redevelopment money could be subject to clawback and was subject to the discretion of the County. $30 million down the drain? Nonsense. Better the 49ers than the City or County.