REPORT TO STADIUM AUTHORITY BOARD
SUBJECT
Title
Action on the Santa Clara Stadium Authority Financial Status Report for Quarter Ending December 31, 2022 and Related Budget Amendments
Report
BOARD PILLARS
Ensure Compliance with Measure J and Manage Levi’s® Stadium
Enhance Community Engagement and Transparency
BACKGROUND
In Fiscal Year 2014/15 the Stadium Authority Board (“Board”) requested that staff prepare quarterly Santa Clara Stadium Authority (“Stadium Authority”) Financial Status Reports. These reports provide an update on the events held at Levi’s® Stadium, Stadium Authority finances, and the impact of Stadium Authority activity on the City of Santa Clara’s (“City”).
This report provides information covering the Stadium Authority’s third (October 1, 2022 - December 31, 2022) quarter of the 2022/23 (“FY”) fiscal year.
The Adopted Stadium Authority Budget incorporates the estimated revenues and expenses for all Stadium Authority funds. The attached Financial Status Reports provide the budget to actual revenue and expense summaries for the operating, debt service, and capital funds. Analysis of the financial activity through the fiscal year measures the adherence to the budget and allows the Stadium Authority to monitor and project revenues and expenses. Any significant variances are explained in the reports.
Certain operating expense payments were withheld based on Board direction for the partial suspension of payments at the March 27, 2019 Stadium Authority Board meeting, based on the concern that public funds would be used to pay for expenses that were not legally procured, or compliant with prevailing wage law or self-dealing/conflict of interest laws. At that meeting, the Board directed the Executive Director to only release public funds to Forty Niners Stadium Management Company, LLC (“Stadium Manager”) when supporting documents have been submitted to show the expenses adhere to applicable agreements and laws.
At the March 15, 2022 Stadium Authority Board meeting, the Executive Director was delegated authority to approve budget amendments of $5.1 million to move funds from the Legal Contingency line item to Shared Expenses after the review of adequate documentations for costs based on Board direction. Subsequent to that direction, Stadium Authority staff met with Stadium Manager on April 12, 2022 to review documentation for shared expenses. After follow-up meetings with the Stadium Manager, payments related to compensation were reviewed and approved for monthly payment; these totaled $5.1 million for the fiscal year.
On August 31, 2022, Stadium Authority, Forty Niners SC Stadium Company and Stadium Manager settled disputes regarding the partially suspended Shared Expenses and Operating and Management Expenses. As part of the settlement, the Stadium Authority agreed to pay for the budgeted expense for its share of Shared Stadium Manager Expenses and other expenses for the current fiscal year. As such, the payments were released in the third quarter.
DISCUSSION
The attached financial status reports provide information covering the Stadium Authority’s third quarter (October 1, 2022 - December 31, 2022) of FY 2022/23. The reports summarize National Football League (“NFL”) and Non-NFL event activity at Levi’s® Stadium and describes the financial impact of these events on the Stadium Authority and City since FY 2014/15. The report also provides the budget to actual revenue and expense summaries for the operating, debt service, and capital funds. Analysis of the financial activity through the fiscal year measures the adherence to the budget and allows the Stadium Authority to monitor and project revenues and expenses. Any significant variances are explained in the report.
NFL Event Revenue and Expenses
There were nine NFL games held thru the third quarter of FY 2022/23. Levi’s® Stadium hosted one pre-season NFL game and eight regular NFL season game of the 2022 season which are detailed in the report. This resulted in $10.4 million in NFL ticket surcharge for the Stadium Authority and $219,000 of Senior and Youth Program Fees for the City. Public safety costs for NFL games totaled an estimated $4.0 million which will be fully reimbursed to the City.
Non-NFL Event Revenue and Expenses
There were 7 ticketed Non-NFL events and 56 special events which are detailed in the report. The 7 ticketed Non-NFL events held in FY 2022/23 and generated an average net profit of $941,000 per event. Table 1 below summarizes revenues and expenditures for the 7 ticketed events.
Table 1
The Non-NFL event ticket sales generated $1.3 million in ticket surcharge revenue, half of which will fund the discretionary fund. Public safety costs for these events totaled an estimated $2.5 million which will be fully reimbursed to the City.
When combining ticketed and non-ticketed Non-NFL revenues to date, Table 2 below shows approximately $4.0 million in net revenue (excluding surcharge revenue) through the end of the third quarter. It should be noted the financial information provided are a draft and subject to change as additional revenues and/or expenditures are recorded.
Table 2
Stadium Builder Licenses (“SBLs”)
SBLs account for 35% of the Stadium Authority’s annual budgeted revenue in FY 2022/23. As of December 31, 2022, there is a total of 62,311 currently active SBLs which is 94% of the 66,136 total sellable SBL seats. The value of the active SBLs amount to $543.8 million of which $506.2 million has already been collected.
Stadium Authority Budgets
The detailed analysis of Stadium Authority budget to actual financials is provided in the attached Financial Status Reports. In summary, total operating revenues were $54.2 million representing 79% of the overall budget for revenues and total operating expenses were $41.2 million or 60% of the budget. The debt service fund was able to pay down $15.9 million in debt, bringing total Stadium Authority debt down to $264.4 million. Capital expenses were $2.3 million representing 10% of the overall CIP budget.
FY 2022/23 Stadium Authority Budget Adjustments
From time to time, budget adjustments may be necessary to align revenues or expenditures to actual or unexpected activity during the course of a fiscal year, known after the adoption of the Stadium Authority Budget. On March 7, 2023, the Stadium Authority Board adopted the Santa Clara Stadium Authority FY 2023/24 Operating, Debt Service, and Capital Budget which also includes projected revenues, expenses, and transfers out for FY 2022/23. As of the timing of the publication of this report, additional information from FY 2022/23 has resulted in recommended budget adjustments as follows:
1) The San Francisco 49ers played one (1) pre-season, ten (10) regular season, and two (2) post-season NFL games in FY 2022/23 which resulted in higher than anticipated revenues from NFL Ticket Surcharge by $545,000. Senior and Youth Program Fees (based on $0.35 per NFL game ticket) are also projected to be higher than anticipated by $13,000. Budget adjustments are needed to reflect the increases in the payment to the City’s’ General Fund by $13,000 as well as the revenues from NFL Ticket Surcharge by $545,000 and Senior & Youth Program Fees by $13,000 to the Stadium Authority.
2) There were seven (7) ticketed Non-NFL events held at the Stadium in FY 2022/23 which resulted in higher than anticipated net revenues from Non-NFL Events by $7.0 million. Non-NFL Event Ticket Surcharge (based on $4.00 per Non-NFL event ticket) and the corresponding Transfers Out to Discretionary Fund Reserve (based on $2.00 per Non-NFL event ticket) are also projected to be higher than anticipated. Budget adjustments are needed to reflect the increases in the contribution to Discretionary Fund Reserve ($355,000) as well as Net Revenues from Non-NFL Events by $7.0 million and revenues from Non-NFL Event Ticket Surcharge by $710,000 to the Stadium Authority.
3) Due to improved economy and interest environment, an additional $130,000 from collection of SBL Proceeds and $1.0 million from interest income are projected for FY 2022/23. In addition, a portion of the FY 2021/22 Naming Rights revenue ($3.6 million) was collected in FY 2022/23. Budget adjustments are needed to align with the projected actuals.
4) Fund Expense is projected at $1.3 million for FY 2022/23 which includes distributions of $650,000 to the General Fund and Stadium Authority operations. A budget adjustment is needed to reflect these distributions.
5) Use of StadCo Tenant Improvements is projected to be higher than anticipated by $34,000 as more Non-NFL events were held in FY 2022/23. A budget adjustment is needed to reflect the increase in the payment to StadCo.
6) The calculation for FY 2022/23 performance-based rent is 50% of the Net Revenues from Non-NFL Events less the sum of performance-based rent credits. The performance-based rent credits include 50% of the current year’s base ground rent ($230,000) and credited public safety costs ($3.4 million). Public Safety Costs exceeding threshold are treated as credits towards performance-based rent which is part of an unsettlement claim, and a budget adjustment is needed to reflect the increase in Legal Contingency Reserve for Public Safety Costs by $3.4 million
7) Net of corresponding payments to the City’s General Fund and various reserve contributions, revenues related budget adjustments above are projected to increase total source of funds by $9.3 million. Disputes regarding the Operating and Management Expenses and Shared Expenses were settled on August 31, 2022, and $10.5 million of Contingency Reserve from FY 2021/22 are expected to the released as additional source of funds. Total projected increase of $19.8 million to source of funds will mainly be used for additional StadCo Subordinated Loan pre-payment ($5.4 million) and contributions to Operating Reserve ($7.3 million) and Renovation/Demolition Reserve ($7.0 million). Budget adjustments are needed to align with the projected actuals.
8) Due to improved economy, an additional $199,000 in Contribution from CFD is projected for FY 2022/23. A budget adjustment of $199,000 million is needed to reflect the projected increase in both special hotel tax revenues and CFD Advance payment.
9) Net of corresponding payments to the City’s General Fund and various reserve contributions, revenues related budget adjustments requested under the Operating Budget above are projected to increase total source of funds by $9.3 million. Of the additional $9.3 million in source of funds, an additional $5.4 million are projected to be transferred to the Debt Service Fund for StadCo Subordinated Loan pre-payment. A budget adjustment is needed to align with the projected actuals.
10) Enclosed Trailer CapEx Project - The Police Department received approved budget of $15,283 to purchase an enclosed trailer that will better protect existing mules from the elements. The opening of the original trailer design had incorrect size and dimensions, and an alternative trailer design was subsequently tested and selected. A budget adjustment is needed to increase this line item by $1,139 to $16,422.
11) Crestron Control & Building Operating System Upgrades CapEx Project - In FY 2021/22, ManCo received approved budget of $10,000 to upgrade system for monitoring HVAC, lighting, electrical, and fire alarms. A portion of the upgrades were anticipated to complete in FY2021/22, and only $4,001 were carried over to FY 2022/23 budget. This project experienced delays and some of the upgrades anticipated to complete in FY 2021/22 were completed during FY 2022/23. A budget adjustment is needed to increase this line item by $2,519 to $6,520.
Responses to Questions Raised at the March 7, 2023 Budget Hearing
At the public hearing for the FY 2023/24 Stadium Authority Budget, several questions were raised and are addressed here, as part of this report. Details regarding Non-NFL Event revenue and expenses by ticked event are provided in this report. The figures are not tied to the name of the specific event in order to protect negotiations of future Non-NFL Events. Several questions were also raised regarding the Stadium Manager’s recent restructuring and the potential FY 2023/34 Budget Amendments that may result from such a change. Following the March 7th meeting, Stadium Authority staff discussed these information requests. The Stadium Manager recently hired Francine Hughes, a nationally recognized leader in venue management, as Executive Vice President and General Manager of Levi’s Stadium. This restructuring did not impact the level of resources supporting the Stadium Manager. The restructuring effort is not currently expected to provide significant cost savings, and therefore, no FY 2023/24 Budget Amendment is included in this document. Nonetheless, if it is determined in the future that a budget amendment is necessary, the Stadium Manager and City Staff will work to bring one to the Board at a later date.
ENVIRONMENTAL REVIEW
The action being considered does not constitute a “project” within the meaning of the California Environmental Quality Act (“CEQA”) pursuant to CEQA Guidelines section 15378(b)(5) in that it is an administrative activity that will not result in direct or indirect physical changes in the environment.
FISCAL IMPACT
As discussed, staff recommends several budget amendments as detailed in the table below:
|
|
Current |
Increase/ (Decrease) |
Revised |
|
Operating Fund |
|
|
|
|
Revenues |
|
|
|
|
NFL Ticket Surcharge |
$10,822,000 |
$545,000 |
$11,367,000 |
|
SBL Proceeds |
$24,398,000 |
$130,000 |
$24,528,000 |
|
Interest |
$15,000 |
$1,022,000 |
$1,037,000 |
|
Net Revenues from Non-NFL Events |
$250,000 |
$7,012,000 |
$7,262,000 |
|
Naming Rights |
$7,380,000 |
$3,636,000 |
$11,016,000 |
|
Senior & Youth Program Fees |
$237,000 |
$13,000 |
$250,000 |
|
Non-NFL Event Ticket Surcharge |
$574,000 |
$710,000 |
$1,284,000 |
|
Total Revenue Adjustments |
|
$13,068,000 |
|
|
|
|
|
|
|
Expenses |
|
|
|
|
Senior & Youth Fees (paid to City) |
$237,000 |
$13,000 |
$250,000 |
|
Discretionary Fund Expense |
$250,000 |
$1,050,000 |
$1,300,000 |
|
Use of StadCo Tenant Improvements |
$48,000 |
$34,000 |
$82,000 |
|
Legal Contingency |
$1,262,000 |
($1,172,989) |
$89,011 |
|
Total Expense Adjustments |
|
($75,989) |
|
|
|
|
|
|
|
Transfers Out |
|
|
|
|
Debt Service |
$40,984,580 |
$5,357,000 |
$46,341,580 |
|
Discretionary Fund Reserve |
$287,000 |
$355,000 |
$642,000 |
|
Operating Reserve |
$369,000 |
$7,333,000 |
$7,702,000 |
|
Renovation/Demolition Reserve |
$0 |
$7,031,000 |
$7,031,000 |
|
Total Transfers Out Adjustments |
|
$20,076,000 |
|
|
|
|
|
|
|
Reserves |
|
|
|
|
Increase in Operations and Maintenance Reserve |
|
$8,459 |
|
|
Decrease in Contingency Reserve |
|
($11,366,540) |
|
|
Decrease in Discretionary Fund Reserve |
|
($1,050,000) |
|
|
Increase in Legal Contingency Reserve - Buffet Costs |
|
$2,075,070 |
|
|
Increase in Legal Contingency Reserve - Public Safety Costs |
|
$3,401,000 |
|
|
Total Reserve Adjustments |
|
($6,932,011) |
|
|
|
Current |
Increase/ (Decrease) |
Revised |
|
Debt Service Fund |
|
|
|
|
Sources |
|
|
|
|
Contribution from CFD |
$2,124,000 |
$199,000 |
$2,323,000 |
|
Transfers in from Operating |
$40,984,580 |
$5,357,000 |
$46,341,580 |
|
Total Source Adjustments |
|
$5,556,000 |
|
|
|
|
|
|
|
Expenses |
|
|
|
|
CFD Advance |
$2,042,000 |
$199,000 |
$2,241,000 |
|
StadCo Subordinated Loan |
$15,490,580 |
$5,357,000 |
$20,847,580 |
|
Total Expense Adjustments |
|
$5,556,000 |
|
|
|
Current |
Increase/ (Decrease) |
Revised |
|
CIP Fund |
|
|
|
|
Expenses |
|
|
|
|
Enclosed Trailer CapEx Project |
$15,283 |
$1,139 |
$16,422 |
|
Crestron Control & Building Operating System Upgrades |
$4,001 |
$2,519 |
$6,520 |
|
Total Expense Adjustments |
|
$3,658 |
|
|
|
|
|
|
|
Reserves |
|
|
|
|
Capital Expense Reserve |
$2,891,145 |
($3,658) |
$2,887,487 |
|
Total Reserve Adjustments |
|
($3,658) |
|
COORDINATION
This report was coordinated with the Stadium Manager per section 4.6 of the Management Agreement as well as the Stadium Authority Counsel’s Office.
PUBLIC CONTACT
Public contact was made by posting the Council agenda on the City’s official-notice bulletin board outside City Hall Council Chambers. A complete agenda packet is available on the City’s website and in the City Clerk’s Office at least 72 hours prior to a Regular Meeting and 24 hours prior to a Special Meeting. A hard copy of any agenda report may be requested by contacting the City Clerk’s Office at (408) 615-2220, email clerk@santaclaraca.gov <mailto:clerk@santaclaraca.gov> or at the public information desk at any City of Santa Clara public library.
RECOMMENDATION
Recommendation
1. Note and file the Santa Clara Stadium Authority Financial Status Report for the Quarter Ending December 31, 2022; and
2. Approve various FY 2022/23 Santa Clara Stadium Authority budget adjustments based on projected year-end performance in the Operating Fund from reserves and recognizing additional revenues; and
3. Approve various FY 2022/23 Santa Clara Stadium Authority budget adjustments based on projected year-end performance in the Debt Service Fund; and
4. Approve various FY 2022/23 Santa Clara Stadium Authority budget adjustments based on projected year-end performance in the CIP Fund from reserves.
Staff
Reviewed by: Kenn Lee, Treasurer
Approved by: Office of the Executive Director
ATTACHMENTS
1. SCSA Financial Status Report for the Quarter Ending December 31, 2022