REPORT TO STADIUM AUTHORITY BOARD
SUBJECT
Title
Action on Amendment No. 1 to the Agreement with KPMG LLP for Auditing and Consulting Services for the Santa Clara Stadium Authority
Report
COUNCIL PILLAR
Ensure Compliance with Measure J and Manage Levi’s Stadium
BACKGROUND
The Credit Agreement, entered into between the Santa Clara Stadium Authority (Stadium Authority), Stadium Funding Trust (FinanceCo), and Goldman Sachs Bank USA on March 28, 2012, requires that the Stadium Authority file audited annual financial statements within 180 days after the end of each fiscal year. It further requires that the financial statements be audited by a nationally recognized independent certified public accounting (CPA) firm (also known as the "Big Four") selected by the Stadium Authority.
Section 8.3.3 of the Amended and Restated Stadium Lease Agreement (Stadium Lease) between the Stadium Authority and Forty Niners SC Stadium Company LLC (StadCo or Tenant) dated June 19, 2013, requires the Stadium Authority to furnish (or cause the Forty Niners Stadium Management Company LLC to furnish) to the Tenant a Statement of Operations within 90 days following each lease year. The Statement of Operations shall be prepared by a qualified, third party independent certified public accountant selected by Landlord and approved by Tenant, of the following: Stadium Authority Revenue, Tenant's Proportionate Share, Shared Stadium Expenses, the amount of Tenant's payments for Estimated Shared Stadium Expenses, Stadium Authority Expenses, Capital Expenditures, Net Income from Non-NFL Events, and distributions to and from the Operating Expense Reserve, Stadium Capital Expenditure Reserve and Renovation/Demolition Reserve. This reporting requirement was also noted in the Harvey Rose Measure J Audit under audit finding item 1.I.
In addition, Section 8.6.3 of the Stadium Lease allows for the Stadium Authority to conduct an audit of the Stadium Records within 180 days following the Stadium Authority's receipt of any Annual Statement of Stadium from the Tenant. The Stadium Authority desires to have an independent CPA review of the Shared Stadium Expenses between the Stadium Authority and StadCo.
DISCUSSION
On June 25, 2021, the Stadium Authority entered into an agreement with KPMG to provide audit services. The current agreement with KPMG has a term of five years through March 31, 2026 and includes annual financial audit and agreed upon procedure services on the Shared Stadium Expenses. The agreement’s maximum compensation of $754,554 covers these services. Since the execution of this agreement, other finance-related ad hoc projects have been identified which require KPMG’s expertise and services. Therefore, staff is seeking authorization to execute Amendment No. 1 to the Agreement to increase the compensation by $100,000 for a revised not-to-exceed amount of $854,554. The additional funding will cover for these new ad hoc projects identified.
ENVIRONMENTAL REVIEW
The action being considered does not constitute a "project" within the meaning of a California Environmental Quality Act ("CEQA") pursuant to the 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 proposed Amendment No. 1 to the Agreement with KPMG will increase the not-to-exceed compensation by $100,000 to a total of $854,554. The cost of the fiscal year 2023/24 audit and services are budgeted in fiscal year 2024/25 Stadium Authority Operating Budget. Appropriations in future year will be requested and approved through the annual budget process.
COORDINATION
This report has been coordinated with the Stadium Authority Counsel and Executive Director.
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.
RECOMMENDATION
Recommendation
Authorize the Executive Director or designee to execute an Amendment No. 1 to the Agreement with KPMG LLP for audit and consulting services to increase the compensation by $100,000 from $754,554 to $854,554 in a final form approved by the City Attorney.
Staff
Reviewed by: Kenn Lee, Treasurer
Approved by: Jovan D. Grogan, Executive Director
ATTACHMENTS
1. Original Professional Services Agreement with KPMG LLP
2. Amendment No. 1 to the Professional Services Agreement with KPMG LLP