REPORT TO STADIUM AUTHORITY BOARD
SUBJECT
Title
Report from the Stadium Authority Regarding the Stadium Manager’s Request to Execute Amendment No.1 to Concessions Operating Agreement with Levy Premium Foodservice Limited Partnership
Report
BOARD PILLAR
Ensure Compliance with Measure J and Manage Levi’s Stadium
BACKGROUND
On October 8, 2019, the Stadium Authority Board (Board) approved Ordinance No. 2005 amending Chapter 17.30 of the City Code (Stadium Authority Procurement Policy), which rescinded the delegation to the Executive Director to enter into agreements without prior Board approval. As the Stadium Manager’s authority to enter into contracts was through delegated authority from the Executive Director, as a result of Ordinance No. 2005, the Stadium Manager is now also required to request Board approval before entering into agreements on behalf of the Stadium Authority. As of the effective date of the Ordinance (November 8, 2019), all Stadium Authority agreements for services, supplies, materials, and equipment require the approval of the Stadium Authority Board.
Through the existing Concessions Operating Agreement, Levy Premium Foodservice Limited Partnership (Levy) has rights to provide food, beverage, and catering services at Levi’s Stadium. The Stadium Manager is requesting authority to amend the agreement to extend the term by one year and modify several financial investment fee and fund amortization schedules so they align with the new term.
The existing agreement has a 12-year term and is effective until April 15, 2030. If Amendment No. 1 is approved, the Concessions Operations Agreement with Levy will be effective through April 15, 2031.
DISCUSSION
Below is Stadium Authority staff’s analysis of the proposed amendments:
1. Amending Section 3.3 to extend the term of the agreement by one year, until April 15, 2031.
Staff Analysis: The amendment is required by Section 3.3 in the Concessions Operations Agreement which states, “If fewer than eight (8) Home Games occur in any Fiscal Year, the Term shall be extended by one (1) year for each such season.” The 49ers played less than the required number of Home Games during Fiscal Year (FY) 2020/21 (April 1, 2020 - March 31, 2021) due to the COVID-19 pandemic and resulting regional and state Stay at Home Orders. Stadium Authority staff have no concerns with this proposed amendment.
2. Updating the Investment Use Fee Schedule outlined under Section 5.1(k) to 1) zero out the fee for Fiscal Year 3 (FY 2020/21), 2) include a Fiscal Year 13, and 3) adjust the fee amounts for the other Fiscal Years.
Staff Analysis: Section 5.1(k) states that the Investment Use Fee amounts shall be deducted from NFL Events and retained by Levy as the fee for the Stadium Manager’s use of the concepts developed and/or equipment purchased utilizing the Initial Capital Investment, Innovation Fund, and Refresh Investment. Through the agreement, Levy is obligated to provide different sources of financial contributions to the Stadium Manager which are used for capital investments and updates, including the following:
• Capital Investment Fund ($5M): To be utilized for the Food and Beverage Facilities.
• Innovation Fund ($12M over the span of 12 years): To be used to support the implementation of modern concepts and fan experiences at the Stadium.
• Refresh Investment Fund ($5M prior to sixth year of the Agreement): To be used for ROI-producing improvements to the Food and Beverage Facilities.
The original Investment Use Fee Schedule totals $22M over the span of 12 years while the proposed schedule totals the same but over the span of 13 years. The proposed amendments to the Investment Use Fee Schedule will not impact the Stadium Authority as the Stadium Manager is responsible for those fees. Stadium Authority staff have no concerns with this proposed amendment.
3. Pausing Levy’s annual $1M contribution to the Innovation Fund for FY 2020/21 (April 1, 2020 - March 31, 2021).
Staff Analysis: Through the agreement, Levy is obligated to contribute $1M every fiscal year to the Innovation Fund for a total of $12M. Stadium Authority staff have no concerns with pausing the contribution for one year so that the total $12M contribution aligns with the new term.
4. Modifying the following amortization schedules through the following actions outlined under Section 4 of Amendment No. 1:
• Stopping the amortization for the Capital Investment and Innovation Funds from April 1, 2020 through March 31, 2021. The amortization for these two funds will resume on April 1, 2021 on a straight-line basis through the extended Term;
• Requiring the Refresh Investment Fund to amortize on a straight-line basis through the extended Term; and
• Requiring the amortization of the Hub for Next Generation Sports Entertainment Fund to re-spread and continue on a straight-line basis through the end of the extended Term.
Staff Analysis: There are four funds that are impacted by the proposed amendment above: (1) Capital Investment Fund; (2) Innovation Fund; (3) Refresh Investment Fund, and 4) Hub for Next Generation Sports Entertainment Fund. In addition to the three funds defined in the section above, Levy is also obligated to contribute $2M to a Hub for Next Generation Sports Entertainment Fund to be used by the Stadium Manager.
In August 2020, Stadium Authority staff began requesting for the remaining balances for the different funds and the projects that they funded. The Stadium Manager provided the requested report in January 2020, which showed that the Capital Investment, Innovation and Refresh Investment Funds had funded the Concourse Line Project, kallpods, pizza ovens, griddle, dessert carts, Concessions Refresh Project, and Stadium Terrace Project. No projects had been funded by the Hub for Next Generation Sports Entertainment Fund yet. Additionally, the report showed that the Stadium Manager received the full $5M from Levy for the Initial Capital Investment Fund, which was spent on dessert carts, Stadium Terrace, and Concessions Refresh Project.
Straight line amortization is a method of recognizing the cost of assets or loans equally throughout their life or the contract term. While only the Hub for Next Generation Sports Entertainment Fund amortizes on a straight-line basis in the existing agreement, there are no concerns with the proposed changes to the Capital Investment and Innovation, Refresh Investment, and Hub for Next Generation Sports Entertainment Funds’ amortization schedules as they are needed to align with the proposed term extension. Stadium Authority staff have no concerns with this proposed amendment.
For the reasons outlined above, staff recommends Board approval of the Stadium Manager’s request to execute the Amendment No.1 to the Concessions Operating Agreement with Levy.
ENVIRONMENTAL REVIEW
The actions being considered do 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 or pursuant to CEQA Guidelines section 15378(b)(4) in that it is a fiscal activity that does not involve any commitment to any specific project which may result in a potential significant impact on the environment.
FISCAL IMPACT
There are no direct financial impacts to the Stadium Authority. However, this agreement continues to be of interest to the Stadium Authority as the quality of Levy’ concessions services and their capital investments are important to Levi’s Stadium’s operations and standard of care.
COORDINATION
This report has been coordinated with the Stadium Authority Counsel and Treasurer’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.
ALTERNATIVES
1. Approve the Stadium Manager’s request for authority to execute Amendment No. 1, with the redlined changes outlined in Attachment 3, to the Concessions Operating Agreement with Levy which will extend the term of the agreement by one year and modify the Investment Use Fee Schedule and the amortization schedules for the Capital Investment, Innovation, Refresh Investment, and Hub for Next Generation Sports Entertainment Funds to align with the new agreement term, at no cost to the Stadium Authority;
2. Do not approve the Stadium Manager’s request for authority to execute Amendment No. 1 to the Concessions Operating Agreement with Levy; or,
3. Any other direction from the Board.
RECOMMENDATION
Recommendation: Alternative 1
1. Approve the Stadium Manager’s request for authority to execute Amendment No. 1, with the redlined changes outlined in Attachment 3, to the Concessions Operating Agreement with Levy which will extend the term of the agreement by one year and modify the Investment Use Fee Schedule and the amortization schedules for the Capital Investment, Innovation, Refresh Investment, and Hub for Next Generation Sports Entertainment Funds to align with the new agreement term, at no cost to the Stadium Authority;
Staff
Prepared by: Christine Jung, Assistant to the Executive Director
Reviewed by: Deanna J. Santana, Executive Director
ATTACHMENTS
1. Original Concessions Operating Agreement with Levy
2. Amendment No.1 to Concessions Operating Agreement with Levy
3. Redlined Amendment No. 1 to Concessions Operating Agreement with Levy