Congratulations are in order to the 49ers and the City of Santa Clara for lining up all of the necessary financing for their now-$1.02 billion Santa Clara stadium. The Merc’s Mike Rosenberg reports that a consortium of lenders including Bank of America, US Bank, and Goldman Sachs will be providing the bulk of the financing, $850 million. The rest will come from the NFL and the City’s redevelopment funds.
It all sounds promising, but forgive me for being skeptical about this:
Essentially, the two sides are betting that the stadium will create so much profit that they will be able to pay off the loans over about 25 years. If that money doesn’t materialize, the 49ers are on the hook to pay the difference in higher rent payments to the city.
I’d have to thoroughly read the terms of the 75-page agreement to know how iron-clad that is. A rough read right now shows that the way it’s set up, the City-run, quasi-governmental Stadium Authority will lease the stadium to “Stadco”, an entity created by the 49ers to manage the stadium. Stadco will then sublease the stadium to the team itself. I suppose the point of this is to provide some amount of insulation for both the City and 49ers. Here’s some relevant language from Section 8.6:
The recourse of any lender of any construction or permanent financing obtained by Stadco shall be limited so that no City, Agency or Stadium Authority funds, assets, or operating revenues or City enterprise funds will be used as collateral. For other sources of Stadco funds described in the Final Financing Plan that are not loans, Stadco shall provide to the Stadium Authority for its review and approval, evidence, reasonably satisfactory to the Stadium Authority, that such funds shall be available as of the Close of Escrow to pay Development Costs.
This seems to be good for the City from the standpoint of protecting it upfront, as Stadco is responsible for rounding up the financing. As long as the 49ers can meet their revenue projections to pay off the $60 million or so in debt service annually, plus other stadium costs. Of course, that’s been my question from the beginning. At this point I don’t think Santa Clara will be stuck in a position like Oakland/Alameda County or Hamilton County in Ohio, simply because the broader Valley economy should remain strong. Nevertheless, Section 19 covers a default situation by either Stadco or the Stadium Authority. If the 49ers can’t come up with the dough, it’ll be a sign that the team is in such financial straits that the team would descend into bankruptcy, and in that case the team would have to be sold and the courts will decide what to do next (see: Frank McCourt).