REPORT TO STADIUM AUTHORITY BOARD
SUBJECT
Title
Action on the Proposed Santa Clara Stadium Authority Fiscal Year 2024/25 Operating, Debt Service and Capital Budget, Stadium Authority Budget, Compliance and Management Policies, and 2024 Non-NFL Events Marketing Plan
Report
BOARD PILLAR
Ensure Compliance with Measure J and Manage Levi’s Stadium
BACKGROUND
The Stadium Management Agreement (Management Agreement) defines the Stadium Operation and Maintenance Plan (SOMP) as the plan designed to achieve a safe and well maintained Stadium and states that it should include the standards for management and operation of the Stadium, including the required security, staffing, and other required elements of hosting Stadium Events. The Forty Niners Stadium Management Company LLC (ManCo or Stadium Manager) is responsible for preparing the SOMP, which shall be presented annually to the Santa Clara Stadium Authority (Stadium Authority), which must include the:
1. Annual Shared Stadium Expense Budget,
2. Annual Public Safety Budget,
3. Capital Expenditure Plan,
4. Marketing Plan.
Each year, Stadium Authority staff prepares a proposed Santa Clara Stadium Authority Operating, Debt Service, and Capital Budget for the Stadium Authority’s twelve month Fiscal Year (FY), which begins on April 1 and runs through March 31 (in accordance with Article 4 - Records, Accounts, Budgets, and Reports of the Management Agreement).
Section 4.10 of the Management Agreement requires that the Marketing Plan set forth in reasonable detail the Stadium Manager’s plans to develop, implement and monitor marketing, booking, advertising, and promotion of the Non-NFL Events for Levi’s Stadium.
DISCUSSION
This report to the Stadium Authority Board transmits the Proposed FY 2024/25 Stadium Authority Operating, Debt Service, and Capital Budget (Attachment 1), Public Safety Budget (Attachment 2), and 2024 Levi’s Stadium Events Marketing Plan (Attachment 3). It should be noted that the Public Safety Budget is included in this report for Stadium Authority Board information only, as budget appropriations for the City’s public safety departments are approved by the City Council through the City’s annual budgeting process.
The budget document contains several key sections including the:
• Stadium Operating Budget which includes a breakdown of the Stadium Authority’s General and Administrative costs,
• Shared Stadium Manager Expenses including the total expenses and the Stadium Authority’s share of those expenses,
• Debt Service Budget; and
• Capital Budget.
In addition, staff has included glossaries of commonly used financial terms in this proposed budget to facilitate understanding the types of revenues, expenses, debt, and capital expenses.
In accordance with Sections 4.5 through 4.8 of the Management Agreement, ManCo prepared and submitted a proposed operating, capital, and debt budget for the FY 2024/25 Stadium Authority Budget. Staff followed the budget development process outlined in the Proposed Stadium Authority Board Budget Policy (Attachment 4) in preparing the Proposed FY 2024/25 Stadium Authority Budget. The Proposed Stadium Authority Board Compliance and Management Policy (Attachment 5) includes some minor edits.
The goal of the budget development process is to allow the Budget to be presented to the Board and the public at two meetings: (1) a February 27th Special Meeting/Study Session and (2) a March 12 Public Hearing as part of its final consideration for approval.
The following summarizes the timeline of the FY 2024/25 budget process:
• In November 2023, Stadium Authority worked with ManCo to develop the annual budget plan which included the dates that ManCo would provide all necessary documents as required by the Stadium Lease, Management Agreement, and Stadium Operations Agreement.
• In January 2024, ManCo provided annual documents as outlined in the Stadium Agreements, which were used in the Budget Development Process:
o Stadium Operations and Maintenance Plan
§ Annual Shared Expense Budget with Five Year Projection
§ Annual Stadium Authority Operations Budget
§ Annual Public Safety Budget
§ Capital Expenditure Plan with Five Year Projection
§ Levi’s Stadium Events Marketing Plan
o Public Safety Document Updates
o NFL and Non-NFL Events Parking Plans
• In February 2024, Stadium Authority staff analyzed ManCo’s budget submission including but not limited to the number of full-time equivalents (FTEs) recommended and related personnel costs as well as non-personnel costs and calculated the budget for Stadium Authority General and Administrative (G&A) costs (such as staff costs, consulting, audit, legal, and any reasonable and necessary expenses to uphold its support of the Board) as well as any necessary funding to be used for the Stadium Authority’s Discretionary Fund.
The Proposed Budget is presented on an accrual basis which provides increased transparency for projected revenues and expenses, with added detail about financial transfers. The Proposed Budget continues the past practice of including reserves for Public Safety Costs and NFL-Stadium Builder License (SBL) Buffet costs for current unresolved ongoing litigation. The total Revenues and Expenses in the Stadium Authority Operating Budget for FY 2024/25 is $62.8 million and $47.3 million respectively.
A summary of key changes and assumptions for the Proposed Budget include:
• Net Non-NFL Events revenue is budgeted significantly lower that the actuals for FY 2022/23 and FY 2023/24, which were $8.8 million and $7.8 million (projected actuals), respectively. ManCo provided a budget estimate of $4.5 million to $6.0 million for Net-Non-NFL Event revenue for the upcoming fiscal year.
• Revenue from SBLs decreased significantly (by $7.5 million) due to the completion of payments for a large number of financed SBL payment plans. SBL revenues are anticipated to continue to decrease over the years as SBL holders complete their payment plans.
• Renovation/Demolition Reserve is budgeted to have a balance of $35.5 million by the end of FY 2024/25. This reserve is over half of the required amount because of the contribution from excess revenues that have been generated in recent years.
• Proposed Capital Expenditures totaling $22.0 million including general building, security, furnishings and equipment, and public safety investments.
• Capital Reserve Fund Balance is budgeted to have a balance of $3.4 million by the end of FY2024/25. Due to the limited source of funds that are contributed to this reserve and as the stadium ages, it is anticipated that additional contributions for CapEx projects may be necessary to maintain the stadium. Stadium Authority will continue to review and work with ManCo to ensure the projects with the highest priority and needs are addressed within the five-year CapEx plan.
• Adjustments to the General and Administrative Budget funding 8.5 full-time equivalent positions totaling $2.9 million. This is a baseline level of support necessary for Stadium Authority operations.
• Two new positions in the City Manager’s Office (0.9 Management Analyst and 0.2 Development Project Manager) are partly offset by the elimination of 0.5 Staff Aide.
• Total estimated Debt Service payments of $19.7 million including debt related to the CFD ($2.8 million) and Term A Loan ($16.9 million). This reflects a decrease from prior year debt service payments because the Term A Loan principal payment schedule was structured to decrease in conjunction with the anticipated decrease in SBL revenue after the initial ten years of operations.
Key highlights for the Stadium Authority’s 2024/25 budget are as follows:
Operating Budget
Revenues
• FY 2024/25 total projected revenues of $62.8 million includes $24.8 million in facility rent, $5.1 million in SBL revenue, $13.7 million in NFL ticket surcharge, $7.8 million in Naming Rights revenue, $1.1 million in Non-NFL ticket surcharge, $6.0 million in Non-NFL events net revenue, $3.5 million in interest revenue, and $752,000 in miscellaneous other revenues.
• ManCo provided Net-Non-NFL Event Revenue to be between $4.5 million and $6.0 million for FY 2024/25. The Stadium Authority used the higher estimate of $6.0 million as the anticipated Net Non-NFL Event Revenue for FY 2024/25. This is based on seven major events (three concerts and four soccer events) and seventy (70) non-ticketed events.
Expenses
• The proposed Operating Budget equals $47.3 million and includes the Stadium Authority’s share of expenses covered under the Management Agreement in the amount of $13.6 million along with monies sufficient to fulfill the Stadium Authority’s administrative oversight of the Stadium in the amount of $4.2 million (of which $2.9 million is for staff support and Board stipends), SBL sales and services of $2.4 million, utilities of $1.5 million, ground rent of $1.0 million, and other expenses of $1.5 million. It also includes transfers out of $23.1 million as detailed below.
• Total transfers out of $23.1 million include a $5.6 million transfer to the Capital Fund for future Stadium capital improvements and $17.5 million to the Debt Service Fund.
Reserves
• Total operating reserves are expected to be $79.9 million at the end of FY 2024/25. This is composed of a Renovation/Demolition Reserve of $35.5 million, an Operating Reserve of $26.9 million, a Discretionary Fund Reserve of $2.8 million, Legal Contingency Reserve - Buffet Costs of $4.4 million, and Legal Contingency Reserve - Public Safety Costs of $10.3 million.
Debt Service Budget
• The proposed 2024/25 Debt Service Budget of $19.7 million (principal of $8.4 million and interest of $11.3 million) is based on the required debt service payments. Total outstanding debt is projected to decrease by $8.4 million from $228.8 million to $220.4 million.
Capital Expense Budget
• The FY 2024/25 Capital Expense Budget totals $22.0 million. Of this total, $13.6 million of prior year appropriations are carried over into FY 2024/25. New capital improvement appropriations equal $8.4 million
Subsequent Revisions to the Stadium Authority’s FY 2024/25 Budget
A Study Session was held on February 27, 2024 to discuss the Proposed Santa Clara Stadium Authority Fiscal Year 2024/25 Operating, Debt Service, and Capital Budget and Stadium Authority Budget, Compliance and Management Policies. The following key items were discussed:
• Projected $5.5 million of Net Revenues from Non-NFL Events was low compared to the trend.
• The need for additional funding to the CapEx Reserve balance as it is budgeted to decrease significantly with all committed capital projects through Fiscal Year 2024/25.
• Funds in the Renovation/Demolition Reserve is contractually limited to investments with 90-day or shorter maturity.
• Ongoing reserves set aside in Legal Contingency Reserves for Public Safety Costs and Performance Rent.
• Efforts to negotiate agreements with the Bay Area Host Committee to ensure reimbursement of City and Stadium Authority costs for Super Bowl LX and FIFA World Cup 2026.
• SOMP is reviewed administratively by staff during the annual budget process.
• Efforts to work with ManCo on the 2024 Levi’s Stadium Events Marketing Plan.
Subsequent to finalizing the budget for the Study Session, ManCo informed the Stadium Authority that they had increased their budget forecast for Net Revenues from Non-NFL Events by $500,000. Therefore, the Net Revenues from Non-NFL Events line item has been increased from $5.5 million to $6.0 million. In conjunction with this change, the amount being held in the Legal Contingency Reserve for Public Safety Costs is being increased by $250,000 bringing the balance in that reserve from $10,056,000 to $10,306,000. The Proposed Santa Clara Stadium Authority Fiscal Year 2024/25 Operating, Debt Service and Capital Budget (Attachment 1) reflects both of these changes.
FY 2024/25 SOMP
In addition to the Annual Shared Stadium Expenses Budget, the Annual Public Safety Budget, the Capital Expense Plan, and the Marketing Plan, the SOMP contains a plan for the operation and maintenance of Levi’s Stadium. The Stadium Lease and Management Agreement requires the Stadium Manager to prepare the SOMP and present it annually to the Stadium Authority and StadCo for consideration and approval. At the time of writing this report, staff is in the process of reviewing this confidential document which contains sensitive public safety and building information and will share the City and Stadium Authority’s comments with the Stadium Manager directly. The SOMP document is approved administratively.
2024 Levi’s Stadium Events Marketing Plan
The Stadium Manager submitted a 2024 Levi’s Stadium Events Marketing Plan, which staff is transmitting to the Board through this report. Staff will work with the Stadium Manager in the upcoming year to continue to refine and implement the Marketing Plan in the following areas:
• Leveraging the Forty Niner’s strong season performance to build Levi’s Stadium and Santa Clara’s reputation to attract public and private Non-NFL Events.
• Developing integrated marketing plan with Discover Santa Clara to increase sales and improve organizational efficiency.
• Establishing key performance indicators (KPIs) and performance metrics specific to each marketing initiative.
Staff recommends approving the Marketing Plan.
ENVIRONMENTAL REVIEW
The action being considered does not constitute a “project” within the meaning of the California Environment Quality Act (“CEQA”) pursuant to CEQA Guidelines section 15378(a)(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
The Proposed FY 204/25 Budget includes $47.3 million for operating costs (includes transfers out to Debt Service and Capital Funds), $19.7 million for debt service, and $22.0 million for capital (includes a $13.6 million carryover from the prior year).
COORDINATION
This report has been coordinated with the Executive Director and Stadium Authority Counsel’s Offices.
PUBLIC CONTACT
On February 28, 2024, a notice of the public hearing was published in the Santa Clara Weekly and the Proposed Budget (Attachment 1) was available to the public on the City’s website and in the City Clerk’s Office.
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. Adopt the Santa Clara Stadium Authority Fiscal Year 2024/25 Operating, Debt Service, and Capital Budget;
2. Approve the 2024 Levi’s Stadium Events Marketing Plan;
3. Adopt the Stadium Authority Board Budget Policy; and
4. Adopt the Stadium Authority Board Compliance and Management Policy.
Staff
Reviewed by: Kenn Lee, Treasurer
Approved by: Jovan D. Grogan, Executive Director
ATTACHMENTS
1. Santa Clara Stadium Authority Proposed Fiscal Year 2024/25 Operating, Debt Service, and Capital Budget
2. Fiscal Year 2024/25 Annual Public Safety Budget
3. 2024 Levi’s Stadium Events Marketing Plan
4. Stadium Authority Board Budget Policy
5. Stadium Authority Board Compliance and Management Policy