REPORT TO STADIUM AUTHORITY BOARD
SUBJECT
Title
Action on the Stadium Manager and StadCo’s Request to Assign Stadium Builder’s Licenses to an Additional 24 Field Seats in the North and South End Zones of Levi’s Stadium
Report
BOARD PILLAR
Ensure Compliance with Measure J and Manage Levi’s Stadium
BACKGROUND
The Santa Clara Stadium Authority (Stadium Authority) has the sole and exclusive right to sell, license, or transfer Stadium Builder’s Licenses (SBLs) and similar instruments for all the seats located in Levi’s Stadium, with the exception of those seats located in, or accessible through, private “Suites.” Under the Stadium Management Agreement, the Forty Niners Stadium Management Company (Stadium Manager) is responsible for making recommendations to the Stadium Authority with respect to facilitation of a secondary market for SBLs, and marketing, monitoring, and managing any SBL Agreements of the Stadium Authority. By entering into an SBL Agreement, an SBL Holder has exclusive rights to purchase 49ers season tickets and priority access to other events at the Levi’s Stadium for the 30-year term of the agreement.
On June 21, 2022, the Stadium Authority Board considered a proposal from the Stadium Manager and Forty Niners SC Stadium Company LLC (StadCo) and approved the assignment of SBLs priced at $17,500 per seat for up to seventy (70) field seats in the North and South end zones of Levi’s Stadium with the following actions:
1. Approved the Stadium Manager and StadCo’s recommendation to add and sell SBLs priced at $17,500 per seat for the field seats located in the North and South end zones of Levi’s Stadium;
2. Authorized the Executive Director to negotiate and execute an agreement with StadCo regarding obligations related to the field seats consistent with the June 21, 2022 agenda report prior to the Stadium Manager selling SBLs for the field seats; and
3. Authorized the Executive Director to work with the Stadium Manager to make modifications and provide clarifications and clean up language to the SBL template form that is in compliance with the Stadium Lease.
A SBL Allocation Agreement (Attachment 1) was subsequently negotiated and executed between the Stadium Authority and StadCo with the following key terms and conditions:
1. Consistent with NFL requirements with respect to “field seats”, the NFL must approve the 70 field seats on an annual basis (Section 2.1).
2. The Stadium Authority will designate all 70 field seats to be subject to the form SBL Agreement attached to the SBL Allocation Agreement (Exhibit A) and priced and sold at a license fee of $17,500 per seat (Sections 2.2 and 2.3).
3. StadCo agrees that it or an affiliate of StadCo will be responsible for any costs and expenses for the provision of any complimentary food and beverage amenities offered or provided to the SBL Holders of any of the 70 field seats at Stadium events, or any amenities exclusively provided to these SBL Holders which are not budgeted or otherwise agreed upon. The Parties acknowledge that the field seat SBL Holders may be granted access to club space at the Stadium and that StadCo agrees that it or its affiliate will bear responsibility for the costs and expenses of any complimentary food and beverage services provided to the field seat SBL Holders in such club space (Section 2.4).
4. As an exception to Paragraph 13 in the Stadium Operations Agreement, StadCo agrees to extend the annual cutoff day to sell unencumbered tickets for any of the 70 field seats which do not have SBLs from May 31, 2022 to July 31, 2022 (Section 3.1).
5. StadCo will be solely responsible for any costs and expenses related to any design, construction, alteration, improvement, maintenance, repair, replacement, removal, and deconstruction of the 70 field seats (Section 4).
The Stadium Manager and StadCo have presented a proposal for the Stadium Authority Board’s consideration to assign SBLs priced at $17,500 per seat to an additional twenty-four (24) field seats in the North and South end zones of Levi’s Stadium. The proposed SBLs are projected to generate revenues totaling approximately $650,000 over the life of the SBLs, a significant portion of which will be used for debt repayment by the Stadium Authority. Should the Stadium Authority Board approve the assignment of SBLs for the 24 field seats, the Executive Director would also need to be authorized to execute an Amendment No. 1 to the SBL Allocation Agreement (Attachment 2) to document the parties’ obligations and commitments related to the seats.
DISCUSSION
In October 2023, the Stadium Manager and StadCo notified the Stadium Authority that they planned to add additional field seats in the end zones of Levi’s Stadium. Through subsequent discussions, the Stadium Manager confirmed they are planning to add an additional 24 fields seats to the existing 70 field seats for which the Stadium Authority Board previously approved SBLs priced at $17,500 per seat on June 21, 2022. Of the 24 field seats, twenty-one (21) seats are planned for the South end zone and three (3) seats are planned for the North end zone. The additional seats will bring the total number of Levi’s Stadium field seats to ninety-four (94).
Stadium Manager and StadCo’s Proposal
The Stadium Manager and StadCo’s proposal to assign SBLs priced at $17,500 per seat to the additional 24 field seats in the North and South end zones of Levi’s Stadium is expected to generate approximately $650,000 in new revenue to the Stadium Authority. The revenue is made up of $385,000 in SBL Principal, $128,000 in SBL interest from SBLs that are financed over time, and $137,000 in NFL Ticket Surcharge, and is based on the following key assumptions:
• South End Zone Field Seats
o Current Number of Seats: 26 seats including 4 ADA/ADA Companion seats
o Proposal: Increase by 21 seats, including 4 ADA/ADA Companion seats
o Total Number of Seats: 47 seats including 8 ADA/ADA Companion seats
• North End Zone Field Seats
o Current Number of Seats: 44 seats including 4 ADA/ADA Companion seats
o Proposal: Increase by 3 seats (no ADA/ADA Companion seats)
o Total Number of Seats: 47 seats including 4 ADA/ADA Companion seats
• Total Incremental SBLs Available: 22 (with no SBLs expected to be sold for 2 of the 4 new ADA/ADA Companion seats)
• SBL Seat Price: $17,500 per seat
• Total SBL Seats Sold: 22
o Projected sales for 17 SBLs on or prior to June 30, 2024
o Projected sales for 5 remaining seats after June 30, 2024 and SBL revenue will be collected in 2025 or subsequent years
o 20 SBLs would be financed over the term of 10 years with an 8.5% interest rate
o 2 SBLs would be paid in full at the time of purchase
• Ticket prices for the field seats would grow at 5% annually; however, Stadium Authority’s collection of NFL Ticket Surcharge ends in 2039
Similar to their June 2022 proposal, the Stadium Manager advised that they do not expect to sell SBLs for every ADA/ADA Companion seat so the financial projections above do not forecast any SBL revenue for 2 of the 4 new ADA/ADA Companion seats; however, they will be marketed for sale. The financial projections include NFL Ticket Surcharge from tickets that will be sold for all the new ADA/ADA Companion seats.
Some of the assumptions are also tied to terms and provisions outlined in multiple agreements, including the timing of projected SBLs sales and when the Stadium Authority’s collection of NFL Ticket Surcharge ends, as documented in the “Relevant Agreement Provisions” attachment (Attachment 3) and described in more detail under this “Stadium Manager and StadCo Proposal” subsection and the “Staff Analysis and Recommendation” section.
The Amended and Restated Non-Relocation Agreement between the Stadium Authority and Forty Niners Football Company LLC defines “NFL Ticket Surcharge” as a surcharge on the price of admission to all NFL Surcharge Games that is ten percent (10%) of the Ticket Receipts from such NFL Surcharge Games, which is payable to the Stadium Authority. Ticket Receipts do not include any of StadCo’s revenues that are described in Article IV of the Team Sublease. As defined under Section 4.1.2 in the Team Sublease, StadCo’s revenues are the following: All StadCo’s Concession Revenues, Premium Seating Premiums, StadCo’s Advertising Revenue, parking revenues from Forty Niners Events and other Forty-Niners related activities, and any other revenues of the operations of the Stadium which are not expressly included in Forty Niners Revenues. 2039 is the end of a 25-year “Surcharge Term” that is defined in the Non-Relocation Agreement, and the Stadium Authority is not entitled to collect NFL Ticket Surcharge after the Surcharge Term ends.
StadCo has committed to the following obligations to the additional 24 field seats, as reflected in the proposed Amendment No. 1 to the SBL Allocation Agreement:
1. StadCo or an affiliate of StadCo will be responsible for any costs and expenses for the provision of any complimentary food and beverage amenities offered or provided to the SBL Holders of any of the field seats at Stadium events, or any amenities exclusively provided to these SBL Holders which are not budgeted or otherwise agreed upon. The field seat SBL Holders may be granted access to club space at the Stadium and StadCo agrees that it or its affiliate will bear responsibility for the costs and expenses of any complimentary food and beverage services provided to the field seat SBL Holders in such club space.
Staff Analysis: There are significant costs associated with providing complimentary buffet to SBL Holders who have such amenity outlined in their SBL Agreement. Without this guarantee that StadCo or its affiliate would be responsible, food and beverage amenity costs to the Stadium Authority could outweigh the projected revenue that would be generated by assigning SBLs to the 24 field seats. StadCo’s agreement to be responsible for any costs and expenses related to food and beverage amenities provided to field seat SBL Holders resolves this concern.
2. StadCo agrees to extend the May 31, 2024 cutoff date to June 30, 2024 to sell tickets for the 2024 NFL Season for any of the 24 field seats that do not have SBLs.
Staff Analysis: Under Paragraph 13 of the Stadium Operations Agreement, StadCo has the right to sell tickets for seats that do not have SBLs by May 31 of each calendar year for the immediately following NFL Season. Any SBL Agreement applicable to such seats entered into after May 31 of any calendar year is effective only for Non-NFL Events and, unless the Parties otherwise agree, subsequent NFL Seasons. StadCo’s agreement to extend the annual SBL cutoff date from May 31 to June 30, 2024 for the 24 field seats provided the Stadium Authority, Stadium Manager, and StadCo additional time to discuss the proposal in more detail, come to agreement about the various commitments associated with the 24 field seats, and prepare this agenda item for the Stadium Authority Board’s consideration. The extended cutoff date also provides the Stadium Manager’s SBL team additional time to sell SBLs. The SBL team will have over a month to sell SBLs for the 24 field seats for the 2024 NFL Season if the Stadium Authority Board approves staff’s recommendation.
3. StadCo will be responsible for any costs and expenses related to any design, construction, alteration, improvement, maintenance, repair, replacement, removal, and deconstruction of the 24 field seats.
Staff Analysis: Capital construction and improvements, maintenance, repairs, and replacement can have significant costs to the Stadium Authority as the owner of the Stadium. Additionally, future Non-NFL Events may require the temporary removal of the field seats and reinstallation, at a cost of approximately $8,000 per event. These costs have not been charged to the Stadium Authority. StadCo’s obligation to cover costs and expenses associated with field seat construction, improvements, and deconstruction now and over time relieves the Stadium Authority of these financial responsibilities, which otherwise could outweigh the projected revenue that would be generated by assigning SBLs to the field seats.
It is important to highlight that the revenue amounts provided by the Stadium Manager and StadCo are only projections and are not guaranteed. Additionally, any changes to the assumptions and StadCo’s obligations outlined above may impact the Stadium Manager and StadCo’s current projection that the SBLs corresponding with the additional 24 field seats will generate approximately $650,000 in revenue over the 30-year life of the SBLs for the Stadium Authority.
Existing Field Seat SBLs
As of March 31, 2024, the Stadium Manager sold SBLs for 66 out of the 70 seats that were approved on June 21, 2022, for which the Stadium Authority has collected $635,523 in SBL principal and SBL interest revenue to date to use for debt repayment as required by Section 2.14(d) of the Stadium Authority Credit Agreement. Separately, the existing field seats have generated $27,388.60 in NFL Ticket Surcharge revenue for the Stadium Authority since June 2022, which the Stadium Authority has used for operating expenses. As described above, the NFL Ticket Surcharge is 10% of the Ticket Receipts from NFL Surcharge Games, which does not include StadCo’s revenues (i.e., the 10% is not applied to the full ticket price of a NFL game ticket).
As part of the proposal that went to the Stadium Authority Board for action on June 21, 2022, the Stadium Manager and StadCo projected that the 70 field seats, not inclusive of the ADA/ADA Companion seats, would generate $1,651,953 in revenue over the 30-year life of the SBLs, of which $304,246 would be attributable to NFL Ticket Surcharge.
Staff Analysis and Recommendation
In addition to the analysis provided above regarding the obligations that StadCo has committed to, the following items should also be considered associated with the assignment of SBLs to the 24 field seats: 1) Annual NFL approval / Temporary nature of field seat SBLs, 2) SBL proceeds must be spent on debt repayment, and 3) SBL price point.
Annual NFL Approval / Temporary Nature of Field Seat SBLs
As previously shared with the Stadium Authority Board as part of previous field seat agenda reports, the NFL holds full authority to annually review and approve the seating structures prior to each season. The SBL Allocation Agreement provides that the NFL must approve, on an annual basis of the existing 70 field seats (Section 2.1). Any changes to the field seat locations and set up, including the addition of the 24 seats, will require additional NFL approval. The field seat configuration will provide a total of 94 field seats, equivalent to 47 seats in each end zone. At the time of writing this report, StadCo has received the NFL’s conditional approval of the field seats for the 2024 NFL Season.
The temporary nature of the field seats is important to consider as SBL Agreements with SBL Holders require the Stadium Authority to assign a “Comparable Seat” (in terms of field vantage point and access to amenities) or refund the unamortized portion of the SBL, each of which have a life of thirty (30) years, should a SBL Holder’s seat(s) becomes unavailable. If the field seats are removed for any reason, it is unlikely that there will be a relocation option that will be acceptable to the field seat SBL Holders. Accordingly, the Stadium Authority will carry the obligation of refunding the unamortized portion of the SBL to the customer in the event the seats are removed.
The SBL Allocation Agreement’s Exhibit A contains a form SBL Agreement for the field seats, which includes language stating that the seats are subject to the annual approval of the NFL and that the NFL may direct the move, removal, or alteration of the seats without prior warning (Exhibit A, Stadium Builders License Agreement - Sections 2 &11).
The Stadium Authority’s potential SBL refund obligation for the additional field seats will change over time. The potential refund amount adjusts per year if the seats are not available due to 1) the requirement that only the unamortized portion needs to be refunded if there are no Comparable Seats available and 2) the timing of the receipt of payment. Most importantly, since the Stadium Authority is not responsible for paying any costs and expenses related to food and beverage amenities and design, construction, maintenance, and deconstruction for the field seats, the Stadium Authority will always be in a net positive revenue position even if it has to refund unamortized portions of the SBLs to field seat SBL Holders at any point in the future.
SBL Proceeds Must Be Spent on Debt Repayment
As noted above, Section 2.14(d) of the Stadium Authority Credit Agreement requires SBL proceeds to be used for debt repayment upon date of receipt. As such, the Stadium Authority cannot hold on to any SBL revenue from these field seats to be used for any potential refunds if no Comparable Seats are available and would need to find alternative funds (e.g., operational revenues or reserves) to refund the unamortized portion of the SBLs.
SBL Price Point
Staff reviewed and analyzed the Stadium Manager’s proposed SBL price point of $17,500 per seat for the 24 field seats against the following:
1. Existing SBL price point of $17,500 per seat for the original 70 field seat SBLs which are located in the same location (North and South end zones) as the new field seats;
2. Reports provided by the Stadium Authority’s third-party SBL website marketplace, STR Marketplace, LLC, and confirmed that no field seat SBLs have been resold in the third-party marketplace;
3. Pricing of SBLs throughout the Stadium
a. Currently, there are SBLs priced at $6,000 in each end zone directly behind the field seats (e.g. Sections 101-105), and there are SBLs priced at $6,000 to $12,000 in the lower level along the yard lines (at Sections 111, 112, 118 and 119). Those sections do not have Club access.
b. Staff compared the face value of non-field seat SBLs to sales on the STR secondary market reports, over the past two years (April 2022 through February of 2024), and verified that non-field seat SBLs throughout the Stadium are selling at a 5% to 77% discount, with a blended average of approximately a 39% discount to Face Value. This is due in part to the annual depreciating value of the SBL term life.
4. Field seats provide a unique, premier fan experience with close proximity to players on the field compared to other seats in the stadium bowl; however the sightlines from the seats are often considered less attractive than other seating options for two reasons: they are not elevated above the field so the views are often obstructed by camera crews/event staff, and their position in the end zone (rather than along the yard lines) limits the view of the action on the rest of the field; and
5. The additional SBLs would provide additional revenue for debt repayment (SBL principal and interest) and the additional ticket sales associated with the new seats would generate additional operating expenses (NFL Ticket Surcharge).
Based on the review and analysis described above, staff recommends Stadium Authority Board approval of the $17,500 pricing option for the additional 24 field seats and authorizing the Executive Director to execute an Amendment No. to the SBL Allocation Agreement with StadCo to document the parties’ obligations and commitments related to the seats.
ENVIRONMENTAL REVIEW
The potential environmental impacts of the project are addressed within an Environmental Impact Report (EIR) prepared for the development and operation of the stadium and related approvals (“49ers Proposed Stadium, 4900 Centennial Boulevard”) in accordance with the California Environmental Quality Act (CEQA). The EIR analyzes project-level impacts of the stadium including the potential for up to 75,000 seats.
FISCAL IMPACT
The Stadium Manager and StadCo’s proposal to add SBLs priced at $17,500 per seat to 24 field seats based on the assumptions described above projects generating approximately $650,000 in revenue for the Stadium Authority over the life of the SBLs. The $650,000 is made up of $385,000 in SBL Principal, $128,000 in SBL interest from SBLs that are financed over time, and $137,000 in NFL Ticket Surcharge.
As noted above, the Stadium Authority’s obligation for potential SBL refunds for the 24 seats will change over time. The potential refund amount if the seats are not available adjusts per year due to 1) the requirement that only the unamortized portion needs to be refunded if there are no comparable seats available, and 2) the timing of the receipt of the SBL payment. Since the Stadium Authority is not responsible for paying any costs and expenses related to food and beverage amenities and design, construction, maintenance, and deconstruction for the field seats, the Stadium Authority will always be in a net positive revenue position even if it has to refund unamortized portions of the SBLs to field seat SBL Holders at any point in the future. However, as SBL proceeds must be spent on debt payment, the Stadium Authority will need to identify alternative funds (e.g., operational revenues or reserves) to refund the unamortized portion of the field seat SBLs.
If the Stadium Authority Board decides to not assign SBLs (at any price point) to the 24 field seats, the Stadium Authority anticipates receiving approximately $137,000 in NFL Ticket Surcharge from the 24 field seats between 2024 through 2039.
There is a 4% commission associated with the sale of SBLs, which is accounted for in the overall SBL Sales and Services portion of the Stadium Authority FY 2024/25 Operating Budget.
COORDINATION
This report has been coordinated with the Treasurer and Stadium Authority Counsel’s Offices.
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. Approve the Stadium Manager and StadCo’s recommendation to assign and sell SBLs priced at $17,500 per seat for the proposed additional 24 field seats located in the North and South end zones of Levi’s Stadium;
2. Authorize the Executive Director to execute an Amendment No. 1 to the SBL Allocation Agreement to include the 24 field seats and to extend the annual SBL cutoff date from May 31, 2024 to June 30, 2024 for the corresponding SBLs; or
3. Provide any other direction to staff regarding the potential assignment of SBLs for the additional 24 field seats and authorize the Executive Director, as needed, to negotiate and execute an Amendment No. 1 to the SBL Allocation Agreement that reflects the Stadium Authority Board’s direction, approved as to form by the Stadium Authority Counsel.
RECOMMENDATION
Recommendation
1. Approve the Stadium Manager and StadCo’s recommendation to assign and sell SBLs priced at $17,500 per seat for the proposed additional 24 field seats located in the North and South end zones of Levi’s Stadium; and
2. Authorize the Executive Director to execute an Amendment No. 1 to the SBL Allocation Agreement to include the 24 field seats and to extend the annual SBL cutoff date from May 31, 2024 to June 30, 2024 for the corresponding SBLs.
Staff
Reviewed by: Chuck Baker, Assistant City Manager
Approved by: Jovan D. Grogan, Executive Director
ATTACHMENTS
1. SBL Allocation Agreement
2. Proposed Amendment No. 1 to the SBL Allocation Agreement
3. Relevant Agreement Provisions