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.

8 thoughts on “Clawback, Part I

  1. It appears that Lew Wolff was on target when he complained about the problems involved with building a stadium in California – that guy is looking smarter every day.

  2. The regrettable part is that probably every damn last cent of that $30M will be sunk into “improving” bus service for VTA, or some other similarly useless Guvmintal gesture.

  3. Considering the money is less than 3% of the total stadium cost it hardly seems like this will be more than a forgotten hiccup unless the Niners choose to rake the county over the coals about it.

  4. I agree with Dan. Considering the scope of the project, this is small potatoes. If the 49ers can sell out seats and all but sell out the luxury boxes, this is almost a non issue. Life will be good in 49er land/SC. York will be lighting his cigars with 100 dollar bills and while sipping Chateau Lafit Rothschild. If sales are flat (a la the Raiders return to Oakland), the issue becomes larger but still will be a smaller slice of a much bigger contentious pie.
    On the larger issue of building stadia in Cali with no RDAs, no doubt this has made the process a bit harder. Maybe I am missing something in the equation but it certainly seems building a stadium now will always require a public vote. This is why I have stated several times that Oakland still has a good shot at the W’s…..and Oakland should be doing its homework to come up with a real plan the W’s will buy off on…..imho.

  5. Can someone help me with this one.

    If this 30 mil is RDA money earmarked for this project then how can SCC redirect the money? If not used for the intended purpose doesn’t the county risk the state just reclaiming the unspent 30 mil?

    • @MrSteve5150 – The County was able to take control of any unused redevelopment funds this spring thanks to the passage AB1X26 last year. The 49ers had spent $12 million of $42 million raised for the stadium project. Under the law’s terms, any money that was not tied to an “enforceable obligation” did not have to be paid back. In the county’s view, the remaining $30 million was not considered an enforceable obligation.

  6. In response to Lowell Cohn’s blog re: this issue…

    The 49ers should just turn around and let themselves get screwed over by an illegal seizure of designated funds? Ridiculous.

    For the record, if it was the other way around I would feel the same way. If it was money that had been promised to school funding and the board suddenly decided to loan it to a private company it would be just as ethically incorrect.

    The County has an obligation to follow the law. Period. Otherwise we might as well hand over our voting privileges, carry residency papers, and stand in bread lines.

    “[The 49ers] should have seen this coming and prepared for it.” This is moronic and the equivalent of saying that one should expect government to back out of deals illegally and blindside people they’ve worked with in good faith. So, basically, when government screws you over, it’s the fault of the person/entity being screwed for believing they wouldn’t be. This is so backwards as to defy basic tenets of moral action. “Hey man, you shoulda known I was about to punch you in the face. The fact that I’m a known face-puncher is enough for the blame to be transferred from me to you.”

    So, it’s bad to sue your hosts, but your hosts can spit in your face all they like as long as they have power trips? What kind of terrible reasoning is this, Lowell?

    All I read in your article is that the 49ers and Joe Public should be “good citizens” by allowing their government to walk over them. What about criticizing the County for blindsiding the 49ers and doing this without any warning? What about them blatantly disregarding the will of the voters? What about the continued theft of the American public by the politicians who are supposed to adhere to the will of the people they represent but then back-out of that commitment and then get praised for it because they cushion the blow with promises of “thinking of the children!”?

    I’m sorry, but this is simply a high profile example of the continued political corruption and backhanded tricks that this country is drowning in. I hope the 49ers sue the hell out of the County, win + with damages, and the County residents decline to re-elect these representatives that refuse to follow the will of the people for their own whims of do-goodery that are almost always public showboating.

    And by the way, I agree that the redevelopment programs that were for blight had run their course and should have been discontinued, but that doesn’t mean you back out of commitments already agreed to. At the absolutely very least the County needed to approach the 49ers about working out a more amiable resolution if they were that desperate for the money, but they didn’t, instead just kicking their “good citizens” in the shin without warning after they already moved into the neighborhood.

  7. There was NEVER a commitment of $40 million to the 49ers!

    Measure J (which BTW – the 49ers WROTE!) specifically stated that “The Agency investment will not exceed a total of $40M” [the “Agency” refers to the City of Santa Clara’s Redevelopment Agency. That Agency was already GONE when the 49ers created ‘advanced’ the funds to the Stadium Authority (again, NOT the City, nor County of Santa Clara).

    The 49ers KNEW the RDA money was always:
    1) based on possible FUTURE incremental tax money (NO ONE has the money available today);
    2) and that is was GONE because ALL RDA agencies were dissolved! The documents are not worth the paper they are written on! This is an end run by the 49ers to make claim on something that they KNEW was gone already.
    There are NO ENFORCEABLE commitments that anyone is libel for … there was no promise that the money would even be available. It was a calculated risk on the part of the 49ers and the lenders …

    * The 49ers do not have a valid claim against the CITY of Santa Clara.
    * They do not have a valid claim against the COUNTY of Santa Clara.
    * They do not have a valid claim against the STATE of California either … the State Supreme Court has already upheld that RDAs can be dissolved just as they were created.

    If this is an example of the ‘good corporate partners’ the 49ers are … GO AWAY and stay in San Francisco. Get over it — you KNOW you do not have a leg to stand on. Kiss the money goodbye – your HAIL MARY failed.

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