REPORT TO STADIUM AUTHORITY BOARD
SUBJECT
Title
Action on the Stadium Manager’s Request for Approval of an Agreement with Jones Sign Co. Inc. to Replace the Naming Rights Signage at Levi’s Stadium (Levi's Naming Rights Signage Refurbishment/Replacement CapEx Project) and Approve Related Budget Amendment
Report
BOARD PILLAR
Ensure Compliance with Measure J and Manage Levi’s Stadium
BACKGROUND
On May 9, 2013, the Santa Clara Stadium Authority (Stadium Authority) and Levi Strauss & Co. (Levi’s) entered into a Naming Rights Agreement (Attachment 1). Under the agreement, Levi’s provides an annual payment to the Stadium Authority that increases at a rate of 3% per year in exchange for exclusive naming rights and branding at the Stadium. The payments total approximately $154 million over the initial agreement term of twenty (20) years. These payments go into the Stadium Authority’s “operating fund” and are used for the reduction of the Stadium Authority’s debt from the initial stadium construction, and to support stadium operations and maintenance.
The Naming Rights Agreement provides Levi’s naming rights entitlements that include various exclusive privileges such as signage, media, and tickets to stadium events, in addition to naming the Stadium. The signage includes two Exterior Stadium and two Interior Stadium signs (Naming Rights signage). Under the Naming Rights Agreement, the Stadium Authority is responsible, at its sole cost, for cleaning, repairing, and maintaining the Naming Rights signage.
On January 30, 2024, a multi-component proposal related to the Naming Rights extension was presented to the City Council/Stadium Authority Board for consideration. The proposal included extending the term of the Naming Rights Agreement for an additional ten (10) years to terminate on February 29, 2044. During the extension period, Levi’s will continue paying the annual fee to the Stadium Authority, increasing at a rate of 3% per year. The total anticipated revenue over the 10-year extension period is approximately $119 million, bringing the total anticipated revenue over the Naming Rights Agreement’s thirty (30) year term to approximately $273 million.
As part of the Naming Rights extension, the Stadium Authority would provide a one-time enhancement of the Naming Rights signage (Enhanced Signage Project) that includes the stadium Name Letters on the east and west exteriors of the Stadium and the two signs above the Stadium scoreboards in the interior of the Stadium. Concurrent with the First Amendment to the Naming Rights Agreement, the Stadium Authority and Forty Niners SC Stadium Company LLC (StadCo) would enter into a Levi’s Stadium Naming Rights Extension and Enhanced Signage Project Implementation Agreement (Implementation Agreement) to coordinate the Enhanced Sign Project and share in the costs for the design, construction, and installation of the signage which needs to be completed no later than December 31, 2025.
The Implementation Agreement outlines the following cost allocation to share the costs of the Enhanced Signage Project: Stadium Authority will fund the first $2 million of total project costs and any costs over the initial $2 million will be shared 70% Stadium Authority and 30% StadCo. Total project costs include demolition and disposal of the existing signage, third-party design and construction of the Enhanced Signage, City permitting fees for the initial installation of the Enhanced Signage, and the initial 3-year warranty for the Enhanced Signage. At the time of the proposal, StadCo provided a preliminary cost estimate of approximately $3 million for the project, including the removal of the existing signs and the design and installation of the Naming Rights Signage.
The Implementation Agreement also requires StadCo to solely fund a project to enlarge the stadium video display screens attached to portions of the Enhanced Signage at the north and south ends of the Stadium (StadCo’s Video Display Project) that will happen concurrently with the Enhanced Signage Project. Additional terms for the implementation of the Enhanced Signage Project include (a) project design, procurement, and construction to maximize project value to meet industry standards while minimizing project construction and long-term maintenance costs; (b) project implementation to minimize impacts on NFL and Non-NFL events at the Stadium; (c) accounting that separates StadCo’s Video Display Project costs from Enhanced Signage Project costs; and (d) a 3-year sign warranty (with coverage consistent with industry standards), with the cost of any extended warranty to be borne by the Stadium Authority.
Lastly, as part of the proposed extension, the Implementation Agreement includes StadCo’s commitment, beginning in 2024, to provide $4 million ($200,000/annually over the next 20 years) for grants to non-profits or community projects serving the Santa Clara community.
The City Council/Stadium Authority Board took the following actions as part of the January 30, 2024, Naming Rights extension proposal:
1. Approved the First Amendment to the Naming Rights Agreement with Levi’s that will provide a 10-year extension and additional Naming Rights revenue to the Stadium Authority on the terms presented, in a final form approved by Authority Counsel (Attachment 2);
2. Approved the Levi’s Stadium Naming Rights Extension and Enhanced Signage Project Implementation Agreement with StadCo to coordinate the Enhanced Sign Project and the share in the costs for the design, construction, and installation of the signage, and memorialize StadCo’s $4 million charitable commitment over 20 years, on the terms presented, in a final form approved by Authority Counsel (Attachment 3); and
3. Authorized the City Manager to negotiate and execute a grants agreement and take other actions as may be required to implement StadCo’s charitable commitment, in final form(s) approved by the City Attorney.
As result of the Board’s January 30, 2024 action and the related Implementation Agreement, a line item for the Levi’s Naming Rights Enhanced Signage Project (also referred as the Levi's Naming Rights Signage Refurbishment/Replacement CapEx Project) in the amount of $2.7 million plus a 5% contingency (a total of $2,835,000) was included in the FY 2024/25 Capital Expense (CapEx) Budget. The line item covers the Stadium Authority’s anticipated share of the Enhanced Signage Project, which had a preliminary cost estimate of $3.0 million.
As the Stadium Manager, Forty Niners Stadium Management Company, LLC is responsible for maintaining “the Stadium in the Required Condition and operate the Stadium as a quality NFL and multi-purpose public sports, public assembly, exhibit and entertainment facility” as required by the Stadium Management Agreement between the Stadium Authority, StadCo, and Stadium Manager. The Implementation Agreement provides that the Stadium Manager is responsible for managing and implementing both the Enhanced Signage Project and StadCo’s Video Display Project.
The Stadium Manager completed a competitive solicitation process for the project and is now requesting approval for the following actions related to the Levi's Naming Rights Signage Refurbishment/Replacement CapEx Project:
1. Award a one-time agreement to Jones Sign Co. Inc., in the amount of $3,978,555.87 to replace the four Naming Rights signs at Levi’s Stadium;
2. Approve a budget amendment to increase the total budget amount for this CapEx project by $1,026,082, from $2,835,000 to $3,861,082;
3. Authorize the Stadium Manager to execute any and all documents associated with, and necessary for the award, completion, and acceptance of the project; and
4. Authorize the Stadium Manager to execute change orders up to $397,855.59 for a total not to exceed construction agreement amount of $4,376,411.46.
If approved, the amended line item will cover the Stadium Authority’s share of costs related to the CapEx Project, which includes a one-time agreement ($3,978,555.87), a 10% contingency for change orders ($397,855.59), newspaper publication fees ($1,216.78), estimated permit fees ($67,059.10), and design services through a Stadium Authority Board approved agreement with Populous Design ($214,000.00). It should be noted that the agreement covers one (1) year warranty from the prime contractor for all work on the Enhanced Signage Project and extended five (5) year extended warranty for the flex face (one of the major weak points of large-scale sign), which is described in greater detail below. A separate request to fulfill the Implementation Agreement’s initial 3-year warranty requirement and consideration of an extended warranty will be presented to the Stadium Authority Board for approval at a later time.
A Recommendation for Award Memo was submitted by the Stadium Manager describing the project, solicitation process, and the request (Attachment 4).
DISCUSSION
As discussed in more detail in the Stadium Manager’s Recommendation for Award memo, the Request for Bids (RFB) process for this project began on August 27, 2024, when the Stadium Manager issued an initial RFB that resulted in three bids, two of which were deemed non-responsive and non-responsible. The third bid was determined to be cost prohibitive. As result, the Stadium Manager cancelled the bid.
On September 28, 2024, the Stadium Manager reissued the RFB with changes to the bid documents (e.g., revised licensing requirements, allowed for an extension to complete two of the four signs, expanded the schedule of value with detailed definition of what was to be included in the lump sum, and revised the plans and specifications). This second bid resulted in six bids, five of which were deemed non-responsive and non-responsible, and the highest bid was deemed cost prohibitive. The Stadium Manager cancelled the bid for the second time. In both RFBs, the Stadium Manager included language reserving the right to reject any and all bids.
After cancelling the second bid, the Stadium Manager’s Director of Procurement reached out to City/Stadium Authority staff to provide an update and discuss potential next steps. The Stadium Manager was advised that the RFB could be reissued for 10 days. Additionally, the Stadium Manager contacted each of the non-responsive bidders to provide feedback on their submissions and scheduled specific training for their staff responsible for preparing the bid responses prior to reissuing the bid.
On October 17, 2024, the Stadium Manager issued a new RFB and subsequently two addendums. This third RFB resulted in four bid responses, and the Stadium Manager is now recommending award to the apparent low bidder, Jones Signs Co. Inc., whose bid includes construction of new signage, demolition and disposal of the existing signage, and warranty.
Stadium Authority staff reviewed the Stadium Manager’s Recommendation for Award memo, supporting documentation, and draft agreement (Attachment 5) for consistency against the City’s public works bidding practices (City Charter Section 1310) and the requirements outlined the First Amendment to the Naming Rights Agreement and Implementation Agreement.
Under the Implementation Agreement, the Stadium Authority is responsible for funding the first $2 million of total project costs and any costs over the initial $2 million will be shared between the Stadium Authority (70%) and StadCo (30%). Below is a breakdown of the current project costs:
|
Description |
Cost |
|
Design Services |
$214,000.00 |
|
City of Santa Clara Permits |
$67,059.10 |
|
Newspaper Publications |
$1,216.78 |
|
Jones Signs Co. Inc. Bid Amount |
$3,978,555.87 |
|
Contingency for Construction Contract (10%) |
$397,855.59 |
|
Total |
$4,658,687.34 |
|
Stadium Authority’s Obligation |
$3,861,081.14 |
|
StadCo’s Obligation |
$797,606.20 |
The Implementation Agreement defines total project costs for the Enhanced Signage Project as demolition and disposal of the existing signage, third-party design and construction of the Enhanced Signage, City permitting fees for the initial installation of the Enhanced Signage, and the initial 3-year warranty for the Enhanced Signage. Any costs for a warranty longer than 3 years would be at Stadium Authority’s sole cost and expense.
During the Stadium Authority’s review of the agreement and supporting documentation, it was noticed that the warranty provided under the bid/agreement only partially fulfilled the 3-year warranty required under the Implementation Agreement. The warranty includes 1-year warranty from the prime contractor for all work on the Enhanced Signage Project and 5-year extended warranty for the flex face (one of the major weak points of any large-scale sign). Stadium Authority staff reached out to the Stadium Manager for clarification.
As described in the Stadium Manager’s Recommendation for Award Memo, the baseline project bid included a warranty on all Work that may prove to be defective in its workmanship, materials furnished, methods of installation or fail to conform to the Contract Document requirements together with any other Work which may be damaged or displaced by such defect(s) within a period of one (1) year from the date of the Notice of Completion of the Project without any expense whatever to the Stadium Manager, ordinary wear and tear and unusual abuse and neglect excepted. All costs associated with such corrective actions shall be the sole responsibility of the Contractor. The Contractor shall obtain for Stadium Manager all warranties that would be given in normal commercial practice and assign to Stadium Manager any and all manufacturer’s or installer’s warranties for equipment or materials not manufactured by Contractor and provided as part of the Work, to the extent that such third-party warranties are assignable and extend beyond the warranty period. The baseline bid also includes extended warranty on specific materials such as a five (5) year written warranty on flexible (panaflex) sign faces for defects in material and workmanship from the date of installation, including provisions for repair or replacement of flexible sign faces showing premature wear or failure.
In order to fill the gap between the baseline project bid warranty requirements and the Implementation Agreement, the Stadium Manager worked with the Stadium Authority staff and bidder to provide additional warranty options. The bidder is willing and able to provide a full three-year parts and labor warranty for the signs at an additional cost of $48,794.88. This warranty will extend coverage of all manufacturers and installer warranties for a full three years and meet the requirements of the Implementation Agreement.
The bidder is also willing to provide a full ten-year stand-alone parts warranty for signage materials at the additional cost of $229,840.87. Items covered in the ten-year warranty include LED lighting, power supplies, flex face, vinyl, and paint. However, the bidder’s requirement is to select the full three-year parts and labor warranty or the ten-year stand-alone parts warranty. This requires further discussion and alignment on the options provided by bidder. Any costs for a warranty longer than 3 years would be at Stadium Authority’s sole cost and expense per the terms agreed upon in the Levi’s Stadium Naming Rights Extension and Enhanced Signage Project Implementation Agreement.
The Request for Bids, a method of formal solicitation utilized to receive the bids, precludes the Stadium Manager and Stadium Authority from unanimously including new requirements after the bid has been closed and before an award. Therefore, Stadium Manager’s recommendation is for the Stadium Authority Board to review and approve the recommended actions first. Subsequently, Stadium Manager will submit a recommendation to issue a change order to the contract to include the additional warranties at a later time. Staff agrees with this approach and will review the additional warranty with subject matter experts before the subsequent request is presented to the Stadium Authority Board.
In the months leading up to the procurement, City/Stadium Authority staff met regularly with the Stadium Manager’s Stadium Operations team to ensure the project design, procurement, and permit approvals remained on schedule for project completion no later than December 31, 2025. Both Stadium Authority and StadCo staff will continue to coordinate efforts to minimize impacts on NFL and Non-NFL events while ensuring that project implementation complies with the sign visibility and functionality requirements outlined in the Naming Rights Agreement. City/Stadium Authority staff also reviewed the project scope to confirm that all aspects belonging to the Levi’s Naming Rights signage were separate from StadCo’s Video Display Project which sit directly below the north and south interior signs. Pending the Stadium Authority Board’s approval, all work associated with the north and south interior signage is scheduled to be completed by June 2025 and all work associated with the east and west exterior signage is scheduled to be complete in December of 2025.
As the FY 2024/25 CapEx Budget only includes $2,835,000 for the Levi's Naming Rights Signage Refurbishment/Replacement CapEx Project, a budget amendment in the amount of $1,026,082 is requested. While the project cost at $4,658,687 is higher than the preliminary cost estimate of $3 million, and therefore the Stadium Authority’s share of costs is higher than budgeted, the Stadium Authority is receiving an additional $119 million in anticipated revenue over the 10-year extension with Levi’s, which included the Enhanced Signage Project as part of the extension package. In the current year (2024-25), Levi’s annual payment to the Stadium Authority is $7.8 million. Additionally, the Stadium Authority was able to successfully negotiate a 70/30 cost sharing of the Enhanced Signage Project for which StadCo will contribute $797,606. Both Stadium Authority and Stadium Manager have approached the Enhanced Signage Project with a mutual interest to minimize construction and maintenance costs.
Based on the documentation provided by the Stadium Manager and the analysis above, staff recommends approval of the Stadium Manager’s request related to the Levi's Naming Rights Signage Refurbishment/Replacement CapEx Project. A separate request to fulfill the Implementation Agreement’s initial 3-year warranty requirement and consideration of extended warranty beyond the initial 3-years will be presented to the Stadium Authority Board a later time.
The Stadium Authority reserves all rights to confirm and dispute charges by and payments to the Stadium Manager during a fiscal year-end reconciliation/true-up, including but not limited to changes based on improper allocation, calculation, lack of support, or failure to comply with the Parties’ contracts or California law. The Stadium Authority may raise related questions before the fiscal year-end reconciliation/true-up, which the Stadium Manager agrees to assess and respond to in good faith.
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(a) as it has no potential for resulting in either a direct physical change in the environment, or a reasonably foreseeable indirect physical change in the environment.
FISCAL IMPACT
The Implementation Agreement outlines the following cost allocation to share the costs of Enhanced Signage Project: Stadium Authority will fund the first $2 million of total project costs and any costs over the initial $2 million will be shared 70% Stadium Authority and 30% StadCo.
The FY 2024/25 CapEx Budget contains $2,835,000 for the Stadium Authority’s anticipated cost share of the Levi's Naming Rights Signage Refurbishment/Replacement CapEx Project.
Approval of the Stadium Manager’s request will require a budget amendment to increase the line item by $1,026,082 to a total budget amount of $3,861,082. The original budget estimate was based on conceptual drawings and assumptions. As the design progressed and more detailed drawings were developed, it became clear that additional structural support was necessary to accommodate the larger signage. Additionally, material and labor costs have risen over the past year, leading to an increase in overall project costs.
The table below summarizes the budget amendment as discussed above:
CapEx Budget
|
Description |
Current |
Increase/ Decrease |
Revised |
|
Construction Expense |
$14,537,872 |
$1,026,082 |
$15,563,954 |
|
Ending Fund Balance - Capital Expenditure Reserve |
$2,473,460 |
($1,026,082) |
$1,447,378 |
COORDINATION
This report has been coordinated with the City’s Purchasing Manager and the Stadium Authority Treasurer’s and Stadium Authority Counsel’s Offices.
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.
RECOMMENDATION
Recommendation:
1. Approve a budget amendment for the Levi's Naming Rights Signage Refurbishment/Replacement line item in the Stadium Authority FY 2024/25 CapEx Budget to increase the budget by $1,026,082 from the Capital Budget Ending Fund Balance, for a total budget amount of $3,861,082;
2. Approve the Stadium Manager’s request to award a one-time agreement to Jones Sign Co. Inc. in the amount of $3,978,555.87 to replace the four (4) Naming Rights signs at Levi’s Stadium (Levi's Naming Rights Signage Refurbishment/Replacement CapEx Project), pursuant to the First Amendment to the Naming Rights Agreement with Levi Strauss & Co. and Levi’s Stadium Naming Rights Extension and Enhanced Signage Project Implementation Agreement with Forty Niners SC Stadium Company LLC;
3. Authorize the Stadium Manager to execute any and all documents associated with, and necessary for the award, completion, and acceptance of the project, in a form substantially similar to Attachment 5; and
4. Authorize the Stadium Manager to execute change orders for the agreement up to $397,855.59, for a total not to exceed amount of $4,376,411.46.
5. Authorize the Stadium Manager to select an additional extended warranty period and execute up to a full ten-year stand-alone parts warranty for signage materials at the additional cost of $229,840.87.
Staff
Reviewed by: Chuck Baker, Assistant Executive Director
Approved by: Jovan D. Grogan, Executive Director
ATTACHMENTS
1. Naming Rights Agreement with Levi’s
2. First Amendment to the Naming Rights Agreement with Levi’s
3. Levi’s Stadium Naming Rights Extension and Enhanced Signage Project Implementation Agreement with StadCo
4. Stadium Manager’s Recommendation Memo
5. Draft Agreement with Jones Sign Co. Inc.