Reason #10 - Measure J commits the City to a 2-to-1 loss on our investment.

Will Kennedy speaks to Santa Clara Plays Fair (id SCvoter on
on Reason #10 of the top 10 reasons to Vote No on Santa Clara Measure J

The city is required to direct $114 million towards the stadium project ($106 million net present value). This is made up of Redevelopment money, utility money, and hotel tax money. In addition, we must provide the land for the stadium and lose more money by extending the 49ers sweetheart rent deal at the neighboring training center.

In return, the city receives well less than half of what it puts in - only $57 million in General Fund and redevelopment revenue over the 40 year lease. This is made up of rent ($8 million) projected profits from other events ($18 million) additional sale/property/hotel taxes collected ($29 million) and Senior/Youth Fee ($3 million). These values are in "net present value," or today's dollars. We don't see why the city should enter into a stadium deal which is projected to lose more than two dollars for every dollar taken in.

The 49ers' claim that they pay "fair market value" on the stadium land ignores the fact that in order to receive rent, the city must pay an amount at the beginning of the lease which is worth far more than all of the future rent combined. Also, the majority of what the 49ers call "rent" is not guaranteed, and is not really rent. It is only the possibility of earning money from other events.

You may wonder why the 49ers claim that they will pay $40 million in rent over the course of the lease, and we say it is only $8 million. The difference is that we use "net present value," which accounts for inflation, and the 49ers use nominal value, which does not. The city staff uses net present value. Because most of the rent will be paid many years from now, it will be greatly devalued by inflation. So the value of all of the rent which the 49ers will pay over the 40 year lease is only valued at $8 million by city staff.

The same is true of "performance based rent" (i.e. the city's share of profit from concerts, etc.) which the city values at $18 million, net present value, and the Senior/Youth fee which the city values at $3 million, net present value. The 49ers' campaign materials claim that these amounts are much higher because they use nominal values. Only by comparing the net present value of the costs and the revenues, can you determine whether the project will make, or lose money. That comparison shows that the stadium loses money.

Source: Slide 35 of City's 6/2/09 Powerpoint Presentation
Source: Slide 45 of City's 6/2/09 Powerpoint Presentation
Source: Slide 47 of City's 6/2/09 Powerpoint Presentation
Source: Preliminary Estimate of return after investment from Stadium Project