REPORT TO STADIUM AUTHORITY BOARD
SUBJECT
Title
Informational Report on the Release of the Interim and Final Arbitration Awards in the Stadium Lease Arbitration
Report
BACKGROUND
In March 2012, the Santa Clara Stadium Authority (SCSA) and the Forty Niners SC Stadium Company, LLC (StadCo) entered into a lease for Levi's Stadium, subsequently amended and restated in June 2013 (Stadium Lease), that requires StadCo to pay a Facility Rent to the Stadium Authority in the amount of $24.5 million per year totaling $980 million over the 40 year lease term.
On March 22, 2016, at a meeting of the Santa Clara Stadium Authority (SCSA) Board, StadCo presented its request for a reduction in annual rent to $20.25 million annually. This amounted to a reduction in Facility Rent to SCSA of $4.25 million each year, or $170 million over the term of the lease. The Board rejected the request to reduce the rent, and unanimously passed a motion to allow the dispute resolution process outlined in Exhibit L to the Stadium Lease to proceed. In May 2016, StadCo filed a request for arbitration of the annual rent amount.
DISCUSSION
While the amount of the rental award itself is a public matter, the arbitration proceeding was conducted confidentially pursuant to the terms of the Lease. The Lease requires that confidentiality of arbitration be maintained “unless otherwise required by law.” The Arbitrator’s Award consists of an Interim Award containing the Arbitrator’s statement of decision that was issued on June 18, 2018 and an Order re the Parties’ Interim Award Responses date August 2, 2018 which essentially serves to make the Interim Award final. The Stadium Authority did not release these documents while it was determining whether or not its contractual obligations regarding confidentiality would prohibit a voluntary release of the full documents.
On August 14, 2018 the Stadium Authority Executive Director received a California Public Records Act request for the Arbitration Award documents described above. The City Attorney’s Office has determined that there are no exemptions from disclosure that would allow for the Stadium Authority to withhold the documents and the documents have now been released to the requestor. Copies are attached to this report for reference.
Due to the release of the Interim Award documents under the California Public Records Act, the issue of waiver of confidentiality is now moot.
As set forth on page 33 of the Interim Award, StadCo took three separate additional positions with respect to the amount of the rent reduction after the Board rejected their initial request of $20.25 million. Prior to the arbitration proceedings StadCo requested an annual rent figure of $19.125 million. Then in the course of the arbitration proceeding StadCo offered two proposed rent adjustment models: an adjusted Facility Rent of $16.775 million and a second model with an adjusted rent set at $12.2 million which the Arbitrator notes that StadCo was not proposing to be adopted.
As evidenced in the Interim Award statement of decision, the amounts at stake over the 40 year term of the Lease were in the hundreds of millions of dollars in reduced rent to the Stadium Authority.
Instead of a rent reduction, the Arbitration Award resulted in an increased Facility Rent amount of $24.762 million annually, retroactive to 2014. SCSA will receive an additional $262,000 annually in rent, or $10.48 million over the 40 year lease term. As compared with StadCo’s 2016 request for a $4.25 million/year rent reduction ($170 million over the 40 year lease term), the total impact of the arbitration exceeds $180 million in favor of the Stadium Authority. If the Arbitrator had adopted StadCo’s reduced Facility Rent of $16.775 million, the total loss in rental income to the Stadium Authority would have been $309 million.
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(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
There is no fiscal impact.
COORDINATION
This report has been coordinated with the City Manager’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
Not Applicable
RECOMMENDATION
Recommendation
Note and File Report
Staff
Reviewed and Approved by: Brian Doyle, City Attorney
ATTACHMENTS
1. Interim Award Statement of Decision
2. August 2, 2018 Order