REPORT TO STADIUM AUTHORITY BOARD
SUBJECT
Title
Introduction of an Ordinance to Amend Sections 17.30.080, 17.30.090 and 17.30.120 modifying the Stadium Authority Executive Director’s Authority to Execute Contracts
Report
BACKGROUND
On June 8, 2010, the voters of the City of Santa Clara approved Measure J, which authorized the City to move forward with the development of a stadium suitable for professional football and other events. The Stadium Authority, a joint exercise of powers entity created through Government Code section 6500 et seq., is a public entity formed to facilitate the development and operation of the Stadium Project and to fulfill the mandates of Measure J. The seven elected members of the City Council serve as the governing board for the Stadium Authority (Board). The City Manager is the Stadium Authority Executive Director (Executive Director) and serves as the chief executive officer of the Stadium Authority with responsibility to the Board for the proper and efficient administration of all affairs of the Stadium Authority.
Santa Clara Municipal Code (Code) Chapter 17.30, Stadium Authority Procurement Policy, sets forth the procurement policies and procedures for the Stadium Authority. The Code authorizes the Executive Director, or designee, to purchase professional, nonprofessional and personal services required by the Stadium Authority in contract amounts up to and including two hundred fifty thousand dollars ($250,000) per contract without prior Board approval subject to budgetary approval. Contracts with an amount above this dollar limit must be approved by the Board.
Section 17.30.010(c) of the Code further provides “Any of the Executive Director’s authority may be delegated to contractors with the Stadium Authority; provided, that the contract delegating such authority is approved by the Stadium Authority Board and the procurement performed by the contractor is within the limits of a budget approved by the Stadium Authority Board for the year in which the contract is awarded.”
Through the Stadium Management Agreement (Management Agreement), the Stadium Authority has engaged the Forty Niners Stadium Management Company, LLC (Stadium Manager) to provide management services for the Stadium, including overseeing the day-to-day operations and maintenance of the Stadium as well as the marketing and booking of Non-NFL Events. Through Board approval of the First Amendment to the Management Agreement, Section 2. Delegation of Contracting Authority, the Board delegated the Executive Director’s procurement authority to the Stadium Manager. Section 2 requires that the Stadium Manager provide the Stadium Authority with information, including the contracting party and the contract amount, regarding all Stadium Procurement Contracts entered into with contract amounts greater than $100,000 within thirty (30) days of entering into any such contract. The Stadium Manager accepted delegated procurement authority and attested to being “an organization whose principals have substantial experience and expertise in the management and operation of public assembly facilities”.
On March 27, 2019, Stadium Authority staff presented an informational report <https://santaclara.legistar.com/LegislationDetail.aspx?ID=3897765&GUID=DA167A09-40DF-49EF-8E2A-750FA9ECDA70&Options=&Search=> to the Board regarding a Notice of Breach of the Management Agreement related to the contract with NEx Systems for Stadium Floor Improvements and an audit of Stadium Manager Delegated Procurement Authority. Stadium Authority staff reported on the information and discussions that led to the March 21, 2019 Notice to the San Francisco Forty Niners President that the Stadium Manager is in breach of its obligations under the Management Agreement. As reported to the Board, the Stadium Authority issued the Notice due to Stadium Manager’s failure to comply with the California Labor Code and Department of Industrial Relations regulations for prevailing wage requirements for contracts paid for in whole or in part by public funds. The Notice of Breach also identified a failure to comply with the Stadium Authority Procurement Policy set forth in Santa Clara City Code Chapter 17.30.
Staff also reported that following the Notice, they advised the Stadium Manager on March 21, 2019 that the Stadium Authority will audit all contracts issued by the Stadium Manager, as the Stadium Authority’s agent, to determine compliance with all applicable legal requirements, including but not limited to California Prevailing Wage statutes (See California Labor Code Sections 1720 and 1771) and regulations of the California Department of Industrial Relations. As part of this audit, the Stadium Authority directed the Stadium Manager to produce copies of all Stadium Authority contracts issued by the Stadium Manager no later than April 12.
Following discussion regarding the Notice of Breach and the audit, the Board passed the following motion:
Direct the Executive Director and Stadium Authority Counsel to receive copies of all contracts since the opening of the stadium in 2014 let under the delegated procurement authority under the code and in the agreement as well as all contracts that the Stadium Manager has entered into for non-NFL events for both ticketed and nonticketed events by April 12, 2019.
Direct staff to stop payment of any additional invoices for services unless there is substantial documentation of services rendered which must also be in compliance with State law and City Code.
On April 30, 2019 Stadium Authority staff presented an informational report <https://santaclara.legistar.com/LegislationDetail.aspx?ID=3931992&GUID=4889A6BD-6D64-430C-B031-23944FC304E6&Options=&Search=> to the Board regarding the March 21, 2019 Notice of Breach and the audit of the Stadium Manager’s Delegated Procurement Authority. Following discussion regarding the Notice of Breach and the audit, the Board passed the following motion:
Direct Stadium Authority Counsel and Executive Director to return with appropriate actions that result in the revocation of the Stadium Manager's delegated procurement authority and any other actions relative to staff's review underway on this topic, review potential reduction of the management fee to cover the City's costs, and refer the prevailing wage matter to the State Authority.
DISCUSSION
This report responds to the Board’s direction regarding the delegation of procurement authority. Rather than revoking the delegation of the Executive Director’s authority to the Management Company, staff is proposing a complete elimination of the blanket delegation to the Executive Director. In order to restore the public’s trust that public funds are being spent properly, it is recommended that all contracts be presented to the Stadium Authority Board before execution by the Stadium Manager. The Stadium Manager will have to present credible evidence that the proposed procurement meets all legal requirements before contracting with third parties.
The Stadium Authority has made good faith efforts to achieve compliance, but the Stadium Manager has not complied with Board direction as well as state and local procurement laws. In addition to the actions summarized in Attachment 1, it is important to note that there are five years of stadium operations with unknown levels of compliance with local and state laws, such as prevailing wage and public procurement processes. The Stadium Manager has refused to provide the Stadium Authority with its records to determine level of compliance and required corrective action.
The Stadium Authority staff has very little contract activity for the Stadium Authority and has no issues with the removal of this delegated procurement authority. This action advances accountability and transparency for the Stadium Authority. Last, with the first reading of this ordinance taking place on September 17, 2019, the second reading will take place on Tuesday, October 8. If Council votes to adopt this ordinance on October 8, it shall become effective thirty days later, on November 8, 2019.
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 a governmental organizational or administrative activity that will not result in direct or indirect changes in the environment.
FISCAL IMPACT
There is no cost to the Stadium Authority other than administrative staff time and expense. The effectiveness of the Stadium Manager to manage Levi’s® Stadium has a direct impact on the amount of Stadium Authority revenue, and the amount paid to the City’s General Fund.
COORDINATION
This report has been coordinated with the City Attorney’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.
ALTERNATIVES
1. Introduce an Ordinance to Amend Development Code Chapter 17.30 Stadium Authority Procurement Policy to remove the Executive Director’s delegated procurement authority.
2. Do not introduce an Ordinance to Amend Development Code Chapter 17.30 Stadium Authority Procurement Policy to remove the Executive Director’s delegated procurement authority.
RECOMMENDATION
Recommendation
Alternative 1:
1. Introduce an Ordinance to Amend Development Code Chapter 17.30 Stadium Authority Procurement Policy to remove the Executive Director’s delegated procurement authority.
Staff
Reviewed by: Ruth Shikada, Assistant City Manager
Approved by: Deanna J. Santana, Executive Director
ATTACHMENTS
1. Summary of Stadium Authority Actions - Stadium Manager Response
2. Ordinance