SANTA CLARA — City leaders say the San Francisco 49ers have withheld more than $5 million in rent for Levi’s Stadium since December as the NFL team pushes for lower payments as part of its deal with the city, touching off a feud within City Hall.
That deal called for a “rent reset” allowing the team’s rent be adjusted based on outstanding debt, revenue and changes in operating costs, city administrators say. City Manager Julio Fuentes said the Niners have met their contractual obligations. Team officials say they’ve since paid up while talks continue.
But Mayor Lisa Gillmor, who took office last month and just learned about the missed payments, said she’s not buying that explanation.
“I’m going to ask the city is made whole for their contractual obligations,” Gillmor said Friday. “It needs to be paid.”
The City Council is set to discuss the rent reset process Tuesday.
The dispute comes after months of heated negotiations between city leaders and the Niners’ management over what the team should pay in rent next year. The Niners agreed to $24.5 million per year for the first two years, but its contract provides a one-time “rent reset” — adjusting the rent based on changes in revenue, updated development costs and expenses.
But the two sides aren’t agreeing on a new rent amount. The team wants to pay $20.25 million. City leaders say they’re still figuring out if that’s enough and are asking for $24.5 million again just to pass a fiscal budget and continue negotiations.
The city, which owns the stadium land, has collected $19 million from the Niners this year.
But the Niners weren’t sent a delinquent notice, and weren’t charged interest on the outstanding payments, either.
Fuentes says the contract has language that ties the rent payments to the Stadium Authority’s revenue needs. Put another way, the rent is driven by how much money is in the bank and whether it’s enough to pay the bills.
And in the last three months, there was enough cash flow to cover costs, Fuentes said.
That’s because operating expenses weren’t as high as expected and people paid off their Stadium Builder’s Licenses — which give people exclusive right to purchase 49ers season tickets — earlier than anticipated.
“We had more than enough money to pay our expenditures and make our debt payments and still have something in the bank,” Fuentes said.
City Attorney Ren Nosky said the Niners have agreed to make two payments this month — $1.25 million and $4.25 million — to catch up to the total owed this year.
Bob Lange, the 49ers vice president of communications, said a payment was made Wednesday and the team has “made all required lease payments.”
“Even after adjustment, the 49ers will pay rent that is more than two times higher than the next highest rent paid by any of the other 31 NFL teams,” Lange said.
Sources close to the negotiations say the team expected its new rent to be decided by a formula agreed to by both sides, and didn’t expect there to be “drama” over setting next year’s rent.
If the two sides can’t come to a mutually agreed number, they may go through an arbitration process.
Gillmor says she’ll push to ensure any changes to the Niners’ rent or contract are discussed in open session because it’s “public money.”
“It was mentioned they had apparently reset their own rent without our approval,” she said. “But I want every penny accounted for and delivered as per the contract.”
Contact Ramona Giwargis at 408-920-5705. Follow her at Twitter.com/ramonagiwargis.
