It seems improbable: Little Santa Clara, the town that would be among the NFL’s tiniest stadium owners, helps the San Francisco 49ers bankroll one of the most expensive stadiums ever built in the United States.
With no new taxes. And no impact on Santa Clara’s general fund.
The city has limited options to finance a stadium, city officials say, but ultimately, that may not matter. If a pro football stadium is built in Santa Clara, it would be corporations, the NFL, the 49ers’ owners, developers, and especially The Fan who pull the financial weight – not taxpayers. Given the Bay Area’s affluent economy, financial experts who have helped assemble some of the complicated deals behind the wave of NFL stadium construction during the past
The 49ers and city are just starting to work out the details before they start serious negotiating, but here’s how a stadium deal might work:
A Silicon Valley corporation buys the stadium’s name. Potential value: $150 million to $250 million over 20 years.
High rollers and corporations lease expensive luxury suites and club seats. Potential value: at least $40 million a year.
49ers fans are charged a permanent license fee to buy season tickets to 49ers games. Potential value: $50 million to $100 million.
Fans pay a ticket fee that allows Santa Clara to repay stadium bonds.
Both the 49ers and the city would borrow against those revenues, just as homeowners borrow against their paychecks to get a mortgage. Add it all together, and the picture of how to finance an $800 million stadium comes into focus.
“A stadium of the type that’s being discussed there is an extraordinary revenue generator,” said Hamp Howell, president of Sports Facilities Marketing Group. The Cleveland company has helped the Browns and pro sports teams finance stadiums through the sale of naming rights, seat licenses and luxury seating.
The revenue estimates provided by sports industry experts may not reflect how the 49ers and Santa Clara decide to structure a deal, and the 49ers declined to comment on the numbers. But Howell said a new stadium like the one the 49ers want to build, with 150 luxury suites and about 7,000 premium club seats, could generate more than $70 million a year from naming rights, corporate sponsorships and luxury seating revenue alone.
Other potential sources of financing are the York family, which owns the team, and the NFL. But the big financial wave the 49ers could ride is a crop of record stadium naming rights deals.
Big corporate bucks
This fall, the New York Mets announced a 20-year deal to christen its new ballpark “Citi Field” in a record $400 million deal with Citigroup. Last week, Barclays, a British bank trying to break into the U.S. market, also agreed to pay $400 million over 20 years to name a new arena in Brooklyn for basketball’s New Jersey Nets “Barclays Center.” Naming rights for the new $1 billion Dallas Cowboys stadium are expected to eclipse the $300 million NFL record deal between the Houston Texans and Reliant Energy.
“Given how liquid the funding market is, the fantastic demographics of the San Francisco area, the fact that the 49ers are one of the premier franchises in all of sport, I think you’d have many, many financial institutions stepping forward to finance this,” said Sal Galatioto, president of Galatioto Sports Partners, a New York investment bank, agreeing the 49ers could receive up to $250 million for naming rights over 20 years.
That deal would dwarf the $1.1 million a year that the city of San Francisco gets from Monster Cable to put the company’s name on the 49ers’ current home. The team gets nothing from that deal, which could have been more lucrative had the 49ers brand been part of the stadium marketing.
Tapping revenue streams
Santa Clara officials expect it will be a few weeks before they get a specific proposal from the 49ers. Any deal that emerges would be a complicated public-private venture in which the 49ers or the city would borrow money against the revenue streams that would flow from a stadium that could host a Super Bowl. Santa Clara would offer the potential ability to sell tax-exempt municipal bonds, slashing about 20 percent, or tens of millions of dollars, from the cost of borrowing.
Land may be Santa Clara’s most valuable asset.
City officials are eyeing several parcels of city-owned land on Tasman Drive close to the stadium site that could be converted into a mixed-use development or a multistory condominium complex, the proceeds of which could help finance the stadium. The 49ers could partner with a private developer, as the team had planned to partner with Lennar Corp. at Candlestick Point in San Francisco.
Such a deal would be controversial, because Santa Clara has a policy against converting tax-generating industrial land in the redevelopment area to housing.
But Mayor Patricia Mahan and city politicians say they are hearing strong support for a stadium among residents. From the American Legion hall to the Miss Santa Clara pageant, Mahan hears the same refrain from residents: “Are you going to get the 49ers?”
Short of a tax increase, “I think there’s a lot of things people would support,” Mahan said.
Santa Clara’s stadium prospects may well be tied to the 49ers’ ability to find a corporation that wants to use the stadium and the 49ers brand to sell its products.
“There might be someone in Silicon Valley who wants to create a big splash,” said David M. Carter, executive director of the Sports Business Institute at the University of Southern California. “For them it might be about branding, and creating a sense of arrival, and communicating globally that they’re on the scene.”
Corporations increasingly want to use a stadium marketing deal to use the game as a platform for their products, Howell said. Silicon Valley already has one example in the Oakland A’s proposed move to Fremont through a partnership with Cisco Systems. The ballpark would be called Cisco Field, but its high-tech wireless systems also would allow Cisco to demonstrate a high-speed Internet platform built by the company.
Say Apple wanted to do something similar with the 49ers, Howell said. Apple and the 49ers could create a platform where fans could gain access to exclusive content, such as downloading exclusive 49ers video to their iPods.
“What you really want is something that only your brand and your customers can get as a result of your relationship with the team,” Howell said. Apple has not said it would be interested in any sort of sponsorship deal with the 49ers.
PSLs a possibility
Industry experts expect the 49ers to use “Permanent Seat Licenses,” or PSLs, to help finance the stadium, in which fans pay a fee of perhaps $1,000 each for the permanent right to buy a season ticket. Howell said the 49ers could harvest $65 million toward stadium construction; other experts say the team could make more than $100 million on PSLs.
“The 49ers have a strong following, always had, so you would say if they wanted to do it, they could do it,” Howell said. “But it’s not a popular thing. Nobody wants to do that if you don’t have to.”
PSLs were a bust in Oakland, but were a crucial part of the San Francisco Giants’ private financing of AT&T Park.
The huge question in Santa Clara is what share of the stadium the 49ers would ask the city to finance.
Financing one-quarter of the estimated maximum stadium cost – $200 million – would require annual debt service payments of between $11.8 million and $13.5 million at current interest rates, depending on whether the bonds qualified for tax-exempt status.
Santa Clara could sell bonds backed by a fee charged to stadium users, such as a ticket tax or a parking fee, said Assistant City Manager Ron Garratt.
“That’s been done in other places,” he said. But it’s unclear whether such user fees would produce sufficient revenue.
But Garratt said the city staff would oppose allowing housing to be built on industrial land in the redevelopment area. Such a change, he said, would eliminate tax-generating commercial development, and could prompt other developers to demand the same thing.
Still, Councilman Dom Caserta said the city needs to keep that possibility open. “Not studying it,” he said, “would be a huge mistake.”
Contact Mike Swift at mswift@mercurynews.com or (408) 271-3648.
