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The gulf between what the 49ers and the NFL were willing to fork over and Santa Clara’s contribution was largely filled with anticipated revenue from personal seat licenses and one of the highest dollar naming rights deals in the league. Both would be much smaller sources of money in San Diego.
Like the Chargers, the San Francisco 49ers once confronted a complex proposition to bankroll a new stadium without the tax hikes teams in other states have relied on.
California law requires a two-thirds vote for a tax hike – and that’s nearly impossible to win.
Yet the 49ers and Santa Clara, the team’s new home, have emerged with a deal that’s thus far required relatively little of taxpayers.
But the path the Bay Area franchise took is unlikely to work in San Diego, a reality both the Chargers and the mayor’s stadium task force have long since concluded.
The reason: San Diego’s a smaller market with a relative lack of big corporations and wealthy fans eager to shell out cash.
The gulf between what the 49ers and the NFL were willing to fork over and Santa Clara’s contribution was largely filled with anticipated revenue from personal seat licenses and one of the highest dollar naming rights deals in the league.
Neither would come as easily for San Diego, a smaller metro area with just two Fortune 500 companies and a lesser stock of highly paid workers with oodles of disposable income to unload. (And add the fact that Qualcomm, San Diego’s biggest Fortune 500 company and current stadium naming rights holder, isn’t too pleased with the city these days.)
Chargers stadium point man Mark Fabiani bluntly addressed all of this in a January interview with ESPN.
“San Diego is obviously not either the biggest or the most important city in California,” Fabiani told ESPN. “The number of corporate headquarters that exist in San Diego is relatively small. Our support is based on individual fans as opposed to major corporations that are willing to pay a lot of money up front for PSLs or for suites.”
The 49ers seem to have found that in Santa Clara.
Both the 49ers and the city set up separate entities to make the deal happen. A city agency populated by city officials, known as the Santa Clara Stadium Authority, took on about $600 million in construction loans and bonds that’ll be paid off over the next two decades.
The city created the agency to shield its day-to-day budget from stadium bills.
Large revenue streams from a naming rights deal and personal seat licenses will ostensibly help the city cover both operating costs and debt without reaching into city coffers.
The Santa Clara deal incorporates $220 million over 20 years from Levi’s, the San Francisco-based denim giant, and $531.5 million from personal seat licenses, which give buyers the rights to season tickets.
Those sums alone are the equivalent of about 80 percent of the reported cost of building the roughly $930 million stadium, which Santa Clara officials say came in under the earlier $1.3 billion estimate.
By comparison, a March study by the National University Institute for Policy Analysis estimated the Chargers could sell just $100 million to $150 million in seat licenses in San Diego.
The conclusion: A San Diego stadium will require a heftier public subsidy than the 49ers new home, and it’s likely to be hundreds of millions of dollars.
By comparison, the city Santa Clara has planned to throw a relatively paltry – at least by NFL stadium standards –$77 million at the project from its former redevelopment agency and a 2 percent tax hike for eight hotels near the stadium. (The city is also spending another $37 million on two projects it says would’ve been necessary without the stadium.)
A handful of banks also stepped up to provide up to a $950 million construction loan, though Santa Clara officials say lower-than-expected project costs and initially higher-than-expected revenues mean it didn’t have to draw the full amount.
But the fans who want to go 49ers games are paying more to make that deal pencil out.
Last fall, one national analysis declared the stadium the most expensive NFL venue to take a family. Many loyal middle-class 49ers fans have complained they can’t afford to purchase season tickets at Levi’s Stadium.
If middle-class fans are the losers, it’s too early to declare Santa Clara taxpayers the winners over the long haul.
Retired Stanford sports economist Roger Noll, who’s extensively studied the deal, is convinced only time will tell.
Noll said the city will need to collect even more seat license revenue plus cash from non-NFL events, a source that can be risky to rely on, to continue to pay off stadium bonds.
“Whether that will happen will not be clear for a couple of years,” Noll said.
If the deal works, Noll said it will show Californians the only way to pay for a stadium without massive government assistance.
“The only way you can finance a deal without subsidies is the PSLs and naming rights,” he said.
Both Noll and the Chargers believe those revenue streams could provide more cash to support a stadium in Carson, where both the Chargers and the Oakland Raiders have proposed teaming up. Developers have suggested personal seat licenses alone could cover half the cost of the new stadium.
That estimate could be a long shot but Noll emphasized that location matters: The Los Angeles market gives the teams access to more large corporations and high-paid executives who may be willing to throw more cash at a new stadium than San Diego.