REPORT TO STADIUM AUTHORITY BOARD
SUBJECT
Title
Authorization to Award a Purchase Order for Stadium Builder Licenses Digitization Services [Board Pillar: Ensure Compliance with Measure J and Manage Levi’s Stadium]
Report
BACKGROUND
The Stadium Lease Agreement between the Stadium Authority and Forty Niners SC Stadium Company LLC (StadCo) provides that the Stadium Authority has the sole and exclusive right to sell, license, or transfer Stadium Builder Licenses (SBLs) and similar instruments for the seats located in Levi’s Stadium, with the exception of those seats located in, or accessible through, the Suites. Specifically, the relevant Agreement provision reads:
STADIUM LEASE AGREEMENT 4.6.1 STADIUM BUILDER'S LICENSES.
As owner of the Stadium, the Stadium Authority possesses the sole and exclusive right to sell, license, or otherwise transfer SBLs and similar instruments and rights with respect to any and all of the manifested seats located in the Stadium (i.e., seats available and intended for sale to the general public), but excluding seats located in, or accessible through, the Suites. Prior to the Effective Date of this Lease, the Stadium Authority commenced marketing of SBLs and has entered into various SBL Agreements. The Stadium Authority specifically reserves the right to enter into SBL Agreements over the Term of this Lease with respect to any and all seats located in the Stadium, including the right to resell any SBLs that are terminated in accordance with the provisions of the SBL Agreement. Tenant agrees that, in the marketing and sale of Tickets to NFL Games and, following the Tenant Season Expansion Date, Non-NFL Events, Tenant will offer such Tickets to the SBL Holders, as and to the extent provided in the SBL Agreement…
The monitoring, marketing and sales of the SBLs are managed by the Forty Niners Stadium Management Company LLC (Stadium Manager) as required by the Management Agreement between the Stadium Authority and Stadium Manager. Specifically, the relevant Agreement section reads:
STADIUM MANAGEMENT AGREEMENT 2.6.18
On behalf of the Stadium Authority and not on behalf of StadCo, make recommendations to the Stadium Authority with respect to facilitation of a secondary market for SBLs, monitor and manage any agreements entered into by the Stadium Authority with respect thereto, and coordinate with Legends to transition responsibility from Legends to the Stadium Manager for managing both sold and unsold SBLs upon termination of the SBL Sales Agreement.
There are concerns that the Stadium Manager has not been properly managing the SBLs as calculation errors and duplicative SBLs have surfaced in recent months, which may potentially impact the Stadium Authority’s revenue. On July 2, 2020, the Stadium Authority sent a letter to the Stadium Manager regarding SBLs with calculation errors and requested the Stadium Manager provide quality control procedures to prevent these types of reoccurring errors (Attachment 1). The Stadium Authority had already previously notified the Stadium Manager of other erroneous SBLs on February 19 and May 11, 2020. In the July 2, 2020 letter, the Stadium Authority also notified the Stadium Manager to refrain from submitting any new SBLs for signature until their quality control procedures have been reviewed and approved. It is important to note that the Stadium Authority pays the Stadium Manager $202,000 per month in Fiscal Year 2020/21 for SBL administration and it is reasonable to expect a higher level of performance.
As referenced, the Stadium Authority has made several requests to the Stadium Manager over the course of several months to access copies of the executed SBLs and corresponding tracking documents. In March 2020, the Stadium Manager responded to the requests by stating that there are over 24,000 individual agreements, roughly seventeen pages each, resulting in over 400,000 pages of records that require copying or digitization at the expense of the Stadium Authority. The response did not include any information about the Stadium Manager’s SBL record keeping.
In June 2020, the Stadium Manager’s counsel agreed to deliver the physical records. The Stadium Authority was also informed that the Stadium Manager may occasionally need to request a file from the Stadium Authority to refer to information. As such, the SBLs require digitization and archiving in a document management/repository system to allow for functional record searches.
On September 17, 2019, the Stadium Authority Board (Board) approved the introduction of Ordinance No. 2005, which would rescind the Executive Director’s delegated purchasing authority by amending Chapter 17.30 of the City of Santa Clara City Code. This action would in turn also impact the Stadium Manager’s authority to purchase on behalf of the Stadium Authority. On October 8, 2019, the Board adopted Ordinance No. 2005, which became effective on November 8, 2019. As of November 8, 2019, all Stadium Authority contracts and agreements for services, supplies, materials, and equipment require approval of the Stadium Authority Board.
The Executive Director is requesting authorization to award a Purchase Order for the above described digitization services for the SBLs once a Request for Quotation (RFQ) process is completed.
DISCUSSION
On June 29, the Stadium Authority issued a RFQ for the purpose of obtaining budgetary estimates to digitize approximately 20,000 SBLs totaling approximately 400,000 pages. Four vendors responded to the RFQ, with price estimates ranging from $42,900 to $60,900. In order to provide accurate firm fixed pricing, vendors have asked to physically inspect the files to determine the record count and quality of the files. At the time of writing this report, the files had not been delivered to the Stadium Authority. The cost estimates may change after vendors’ inspection of the physical SBLs.
Once the Stadium Authority receives the files enabling Stadium Authority staff to prepare a complete specification, a new RFQ will be issued pursuant to the City’s purchasing rules. Staff will follow the City Code for consistency and to ensure that best practices in public sector procurement are being followed. The basis of award will be price determinative (awarded to the lowest bidder), or best value, with cost weighted at not less than 50%. Additional criteria that may be considered in addition to cost are ability to meet timelines, client references, and quality of past work for the City. It is anticipated that this process will take place from July 15 through August 13, 2020 during the Board recess.
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 are existing appropriations totaling $100,000 in the Stadium Authority FY 2020/21 Adopted Budget under the Operating Budget to cover the costs of Executive Director and Board directives.
COORDINATION
This report has been coordinated with the Treasurer, Stadium Authority Counsel, and the City’s Finance Department.
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>.
ALTERNATIVES
1. Authorize the Executive Director to award a Purchase Order pursuant to the appropriate Purchasing Sections under 2.105 of the Santa Clara City Code.
2. Do not authorize the Executive Director to award a Purchase Order pursuant to the appropriate Purchasing Sections under 2.105 of the Santa Clara City Code.
3. Note and file the July 2, 2020 letter to the Stadium Manager regarding SBLs with Calculation Errors and the Stadium Authority’s request for their plan to address errors.
4. Do not note and file the July 2, 2020 letter to the Stadium Manager regarding SBLs with Calculation Errors and the Stadium Authority’s request for their plan to address errors.
RECOMMENDATION
Recommendation
Alternatives 1 and 3.
1. Authorize the Executive Director to award a Purchase Order pursuant to the appropriate Purchasing Sections under 2.105 of the Santa Clara City Code; and
3. Note and file the July 2, 2020 letter to the Stadium Manager regarding SBLs with Calculation Errors and the Stadium Authority’s request for their plan to address errors.
Staff
Prepared by: Christine Jung, Assistant to the City Manager (Executive Director)
Approved by: Deanna J. Santana, Executive Director
ATTACHMENTS
1. July 2, 2020 Letter to Stadium Manager Regarding SBLs with Calculation Errors