Audit suggests Niners owe Santa Clara $424K
Team attorney, some city staff call report inaccurate, misleading
SANTA CLARA >> A draft of a city-commissioned audit claims the San Francisco 49ers’ Levi’s Stadium management owes taxpayers hundreds of thousands of dollars for city staff time spent on games and events and parking on a public golf course.
The 49ers have responded to the draft audit — which was leaked to reporters and obtained by this news organization — in a 10-page June 23 letter saying it is riddled with “erroneous information, is incomplete and has out-of-context half-truths and outright misrepresentations.” Niners’ attorney Hannah Gordon added that the report is a misleading “waste of public time and funds.”
Top city staffers also assailed the 169-page draft report, a final version of which will be released
in August, disputing a key finding by saying city staff time spent on the stadium events has already been reimbursed by the 49ers or its Levi’s Stadium management company.
But Fred Brousseau, a principal with the audit firm, Harvey M. Rose, said he stands by the work of his team, though he said there’s “room for change” in the final audit.
“It’s not unheard of to have different points of view at this stage,” Brousseau said. “We’ll see how it’s resolved when we get to the final draft.”
Mayor Lisa Gillmor, who has publicly feuded with the NFL team over stadium issues and pushed for the $200,000 audit, said it affirmed her belief that taxpayers are improperly subsidizing the $1.3 billion stadium.
Measure J, approved by Santa Clara voters in 2010, established the framework for construction and operation of Levi’s Stadium. One of its key provisions: No taxpayer money should be spent on stadium events — including staff time of police officers, firefighters and other city workers.
“The fact that we violated Measure J is disturbing,” Gillmor said. “We want to stop that and comply by the law and the will of the voters.”
The audit concluded that the team owes the city $424,349 for police and firefighter staff time for stadium events from October 2014 to June 2016. The team’s contract caps its public safety costs at $1.7 million per year, increasing 3 percent each year.
The Niners exceeded that amount every year, and the overage is paid by the city Stadium Authority’s “discretionary fund.” The Stadium Authority, composed of City Council members, owns Levi’s and has leased it to the NFL team. The discretionary fund is supported by half of a $4 charge on tickets to nonNFL events.
Auditors suggested the city renegotiate the cap and potentially raise it to cover public safety costs so the discretionary fund is picking up less.
The audit estimated $424,349 was the total unpaid staff time costs — but without documentation. Auditors took the average costs for 11 NFL and non-NFL games and multiplied it by all events during the two-year time period to come up with $424,349. The staff costs were related to stadium setup, planning meetings and activities after a game or concert, such as completing police reports. The audit also said that $64,716 was spent on one-time staff costs related to stadium events, such as training new police officers.
“The splashiest so-called finding of the report is the ‘extrapolated’ $424k figure for administrative public safety time that the consultants argue could theoretically exist — although they can’t be sure and certainly can’t document it as fact,” Gordon, the 49ers attorney, wrote.
Santa Clara’s acting finance director, Andrea Kraetsch, questioned why Harvey Rose used estimates and “not actual amounts” and said most of those staff costs were paid in June. She also said the auditors miscalculated the number of events by an extra 12 events.
“The sheer number of errors in the report demonstrated why any of the recommended CPA firms should have been selected,” said 49ers President Al Guido, referring to a controversy over whether to give the audit contract to Harvey Rose or a different firm. “Instead, the mayor handpicked a consultant against the city recommendation. We will continue to work with the city to manage the most successful public-private partnership in sports and entertainment.”
Auditors also found that $894,228 in public safety costs were paid by “construction fund” monies — left over because Levi’s construction costs were below budget — and that another $100 million was used for early debt payoff.
Gordon said in her letter that the $894,228 expenditure was approved by city leaders and that a city agreement required using the $100 million to pay down debt. Kraetsch said the construction fund was authorized to pay for staff time.
Gillmor would not comment further on the audit, other than to say “it’s still not the full picture” because the team has “refused to provide key financial documentation as required by the management agreement.”
“That has to be settled as well, and unfortunately it looks like that will be settled in court,” the mayor said.
Another finding of the audit: The Niners’ management company could owe Santa Clara $718,803 for allowing cars to park on a city golf course. The golf course was one of five city-owned sites used for stadium event parking.
Though the parking agreement was terminated in July 2016, the audit found outstanding fees for use of the golf course. The Niners said “the matter has been in dispute for months” and the team actually overpaid for the parking lot by a million dollars.
The auditors also claimed team officials were uncooperative in providing financial data for non-NFL events without a nondisclosure agreement. Gordon said the data was made available but that public disclosure of some of that information could put Levi’s Stadium at a disadvantage because competitors would know how much it’s charging for major events and concerts.
Overall, auditors recommended stronger reporting requirements on budget documents and financial status reports on non-NFL events, parking leases and transfers between various funds.