SAN FRANCISCO — The Santa Clara, Calif., City Council this week gave the go-ahead for continued negotiations that could lead to a new stadium — with a significant bond-financing component — for the National Football League’s San Francisco 49ers.
The formal action taken by the council Tuesday, by a 6-to-1 vote, was to accept the results of a feasibility study prepared by the city and its consultants, which determined that construction of a stadium is indeed feasible.
“But there remain many outstanding issues that require resolution in a negotiation phase,” deputy city manager Carol McCarthy said Wednesday.
Those issues include the city’s insistence that it can contribute about $51 million less to the project than the roughly $222 million the football team requested.
The team Wednesday issued a one-sentence statement applauding the City Council’s action “to take a significant step forward toward our goal of building a world-class stadium for our fans.”
For the last year, the 49ers have been pursuing the Santa Clara location as their primary strategy for replacing their current home, Monster Park in San Francisco. The 48-year-old stadium, known through most of its history as Candlestick Park, has been home to the team since 1971.
Since 1997, 15 NFL teams have moved into new stadiums that typically give them more revenue-generating potential by maximizing such features as luxury suites.
Santa Clara is 37 miles south of San Francisco, though the city has long hosted the 49ers headquarters and practice field.
It’s still far from certain whether 49ers’ games will move to Santa Clara, particularly by the team’s 2012 target.
The team must still persuade city officials, and ultimately voters in the city of 102,000, that the plan makes sense, and overcome the objections of the amusement park owner that controls the parking lot where the team wants to build the stadium.
The parking lot property is owned by the city and leased to the operator of the Great America park.
Last week, park owner Cedar Fair Entertainment Co. sent a letter to the city restating its complete opposition to placing the stadium on the amusement park’s current main parking lot, while saying it would consider locating the facility on the overflow parking lot under certain conditions.
San Francisco city officials also say they haven’t given up on keeping the team in town, pitching a stadium site in the former Hunters Point naval shipyard.
There are several bond-financing components to the 49ers proposal.
One is the creation of a new, public stadium authority to construct, own, and operate the stadium.
A public stadium authority would generate tax efficiencies for the project, including the use of tax-exempt financing, according to a report prepared by Santa Clara’s consultant, Keyser Marston Associates Inc.
Keyser Marston put the cost of the team’s request for city funding at higher than $200 million, including $160 million for stadium construction, plus $62 million for the estimated cost of building a parking garage and relocating a substation of the city-owned electric utility.
In April, the team estimated stadium construction costs at $854 million, not including the parking garage or utility relocation.
According the team, the 49ers and the NFL would contribute $363 million, while $330 million would be generated through the stadium authority, plus $160 million from the city. It didn’t include the cost of the parking garage or substation.
The $330 million stadium authority contribution would include bonds backed by a ticket tax and the naming rights to the stadium, according to a city staff report prepared in December, plus other revenues, such as seat licenses.
The staff report projected $185 million in stadium construction loans that would be taken out with separate ticket tax and naming rights bond financings in 2012, when the stadium opens.
“Both bond issues are presently intended to be taxable, thus the 6.7% assumed interest rate, which would be higher than tax-exempt bonds,” the report said.
“Preliminary discussions with the 49ers adviser and the city’s advisers lead the staff to believe the bond issues could be rated ‘investment grade’ or BBB,” the staff report said. “It is still too early to make that determination.”
Santa Clara’s guiding principles, adopted before the feasibility study began, include no use or obligation of general fund money, no use of utility or other enterprise funds, and no tax or rate increases for city residents, businesses, or ratepayers.
The feasibility study concluded that the $20 million cost of the utility substation could reasonably come from the city electric utility, and the $42 million parking garage could be financed with proceeds of a 1999 redevelopment bond issue.
Santa Clara’s redevelopment agency has the capacity to provide $74 million of funding, which would include $65 million of new bonds.
Other sources, the staff report said, include $5 million that would be made available by converting reserve funds from a 2003 redevelopment bond issue to a surety bond, and $2 million that would be generated by refunding an outstanding 1999 redevelopment bond issue, according to an estimate by the city’s financial adviser, KNN Public Finance.
To achieve those goals, the city would have to reduce the percentage of redevelopment revenue it sets aside for affordable housing to 26% from 30%, according to city staff reports.
The ultimate result would be a $5 million net reduction in housing funds, according to city staff, or the loss of 53 to 74 low-and-moderate-income housing units.
It would be reasonable to ask eight hotels near the stadium site — because they stand to benefit from the stadium — to create a community facilities district to levy a new hotel tax, which would generate about $35 million in bond capacity, the feasibility study found.
In all, Santa Clara’s capacity to fund the stadium falls $51 million short of what the 49ers are asking for, the report concluded.
The City Council’s actions Tuesday directed the city manager to continue negotiations with the team, but not to exceed the financing limits recommended by the staff report — namely $136 million in city and redevelopment funding, plus $35 million of possible hotel community facility district funds.
The city manager’s negotiating goal is to develop a term sheet with the 49ers, McCarthy said.
“It would not be binding but would be used for council to decide to go further in negotiating a lease,” she said. The city manager was also directed to bring a possible date for a city referendum on the project back to council.
