San Francisco Chronicle - (Sunday)
49ers’ Santa Clara offer worth a fraction of claim
The total value of the San Francisco 49ers’ offer to the city of Santa Clara to settle multimillion-dollar lawsuits over the management of Levi’s Stadium is about 10% of what the team has claimed, a Chronicle analysis shows.
The team said its package to the city is worth approximately $13 million, according to a review of city records, the team’s advertising and its public statements. The 49ers described this as their “best and final offer” ahead of Tuesday’s City Council meeting, when the matter may be decided. But the analysis shows the 49ers have offered only $1.35 million in cash. The rest of the offer is based on presumed benefits from settling the lawsuits and from other sources, including some funds the city already controls.
The settlement offer seems to be “funny money,” said Thomas Shanks, former executive director of Santa Clara University’s Markkula Center for Applied Ethics.
“The public has no reason to trust these numbers, and neither does the council,” said Shanks, who is working on a study of the ethical aspects of the city’s relations with the team. “What they need to do is have objective and independent analysis” of the 49ers’ settlement proposal, he said. “Who trusts only one side of the story?”
Team spokesperson Rahul Chandhok called The Chronicle’s analysis “wildly inaccurate” without elaborating.
The 49ers created an organization, Santa Clara Now, which opened a Facebook account to offer “news and coverage of important events.” Santa Clara Now then placed ads on Facebook touting the settlement offer. In one ad, the team stated the settlement would “put $3.3 million into the city’s general fund for policemen, firefighters, roads, and more.” In another ad, the 49ers said the proposed deal will “save Santa Clara taxpayers $8.35 million.”
On Wednesday, in an email to the city, the team added $700,000 to its previous offer. The rest of the proposal consists of a $650,000 transfer from the city Stadium Authority’s discretionary fund and waiving $350,000 in default interest.
City officials haven’t released details of the offer, saying it’s confidential. But The Chronicle review found the team’s proposal includes a potentially questionable $8 million estimate of the city’s spending on the overlapping legal conflicts; forgiveness of $2.3 million in debts to the 49ers that the city disputes owing; and $1.3 million in taxpayer funds the team suggests could be put to better use if these lawsuits went away, according to its proposal.
“If this was a good deal for the Stadium Authority, I’d be the first to jump at it,” Santa Clara Mayor Lisa Gillmor said. “But it’s not anywhere near close.”
Chandhok wrote in an email Friday: “Mayor Gillmor refuses to acknowledge the millions of dollars she has wasted litigating her political disputes, so she will always oppose settlement.”
Since 2019, Santa Clara has sought to replace the 49ers as managers of the $1.3 billion, publicly owned Levi’s Stadium, alleging the team diverted millions of dollars of game and concert revenue that should have been shared with taxpayers.
The city also accused 49ers executives of violating state contracting and conflict-ofinterest laws. The team has denied wrongdoing and accused the city of illegally meddling in stadium affairs. It sued to keep the management contract, and the city countersued.
When the dispute began, the City Council was controlled by a majority ready to carefully scrutinize the city’s relationship with the 49ers. But in 2020, team CEO Jed York spent $2.9 million to help elect a more 49ers-friendly majority to the council. That new majority fired City Attorney Brian Doyle and then City Manager Deanna Santana, both 49ers critics, and now has turned its attention to the lawsuits.
Lawsuit settlement talks typically are private. But the 49ers have been publicly lobbying for the settlement on Facebook, urging voters to tell the City Council that “wasting money on legal fees for hopeless lawsuits doesn’t serve our residents.”
Here’s how the settlement offer breaks down:
In Facebook ads and public statements this month, the 49ers initially described their offer to the city as a $3.3 million deal. That figure includes the city achieving a $2 million benefit from the team dropping its claim that it had overpaid its share of police costs at the stadium. The city and team have wrangled for years over police costs: In an arbitration, the city has contended the team hasn’t paid its fair share for police. If the city won the arbitration, it would owe the 49ers nothing.
The rest of the offer consisted of a cash payment of $650,000 to the city’s general fund and an additional “benefit” gained by taking $650,000 from a discretionary fund held by the city’s Stadium Authority and spending it on city services, according to the proposal. But the Stadium Authority is a public agency and the discretionary fund is taxpayers’ money. By law, the 49ers have no control over it. On Wednesday, the team raised the cash offer to $1.35 million, according to an email sent to interim City Manager Rajeev Batra, bringing the total promised value to $4 million.
“When you dig into this, the only thing coming out of their pocket is the $1.35 million,” Gillmor said. “And it doesn’t even begin to talk about our lost revenues in the future, by giving them complete and utter control with no accountability to the Stadium Authority.”
The 49ers said the Stadium Authority would get a $1 million boost by taking another $650,000 from its discretionary fund and using it on stadium operating expenses, and by the team dropping a $350,000 claim in a 2020 dispute.
In that dispute, the city accused the 49ers of failing to document stadium expenditures properly and began holding up payments. The 49ers denied wrongdoing. As the dispute played out, the 49ers paid stadium invoices out of team funds and charged the city interest on the withheld funds. The city said it owed nothing, and the issue is in arbitration. If the city wins, it would pay nothing. The 49ers have said the city will save at least $8 million by settling the lawsuits, but the claim is imprecise and appears exaggerated, The Chronicle analysis found.
In initial Facebook ads, the 49ers said a settlement would save the city $8.35 million; the team knocked the predicted savings down to $8 million in its proposal. That money would come from the city saving $2 million annually in future litigation costs for four more years by settling the lawsuits, the 49ers said.
Later, in interviews with San Jose Spotlight and the San Jose Mercury News, Chandhok offered a different explanation, saying $8 million is actually the amount the city has already spent — or “wasted,” as he put it.
The city doesn’t publicize the amount it spends on specific lawsuits. But in the past four years, records show the Stadium Authority budgeted a little less than $6 million for all its outside legal work combined. During that time, the Stadium Authority was in state and federal court on eight other lawsuits that had nothing to do with the 49ers, records show.
Meanwhile, the team’s claim the city will save $8 million assumes the lawsuit would go on for another four years, but that might not happen: The case already has been in the courts in some form since 2017. That’s far longer than average.
The claim also assumes the city would lose the lawsuit. But city officials have been optimistic about the case, and if the city won, the 49ers could be saddled with the city’s legal costs.
That’s what happened in 2017, when the team sought a stadium rent reduction. The dispute went to arbitration, the 49ers lost, and the team was ordered to pay the city’s lawyers.