The plan to pay for the 49ers' new $1 billion home in Santa Clara will rely on the biggest loan to a public agency for any stadium in NFL history.

The revelation added a dose of reality Monday to the euphoria that the team and city had finally found the money to move the beloved football franchise to the South Bay.

Critics and some analysts fear the stadium next to the Great America theme park won't whip up enough profit to pay off $850 million that the city's stadium authority will borrow to propel the plan into reality. If the economic assumptions fall short, the 49ers' new home could wind up bleeding red ink for decades, with interest payments pushing the project's total debt well beyond $1 billion. That's about triple the debt that voters were told the city's stadium authority would take on when they approved the project 18 months ago.

The debt is "way beyond what we normally see. If I was Santa Clara I'd be very, very skeptical," said Robert Baade, a leading sports economist at Lake Forest College in Illinois. "There are lots and lots of unanswered questions."

But the deal, announced Friday, includes a fail-safe that experts say might be the first of its kind among NFL stadiums. Although the city's stadium authority is ultimately responsible for paying off the loans, the 49ers have vowed to make sure the debt is paid in case the stadium struggles.

"That's a big deal. I think Santa Clara comes out smelling like a rose here," said Smith College professor Andrew Zimbalist, one of the leading sports economists in the country. "If in fact the team is going to backstop the whole debt service, then it sounds like a pretty good deal to me."


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The city and team will lay out the plan at a pair of public meetings Tuesday and Thursday in Santa Clara, and the City Council is expected to approve the deal Dec. 13.

The team and the city's stadium authority -- the public agency that will build and operate the 68,500-seat stadium -- secured the loans from Goldman Sachs, Bank of America and U.S. Bank. Existing revenues such as advanced sales of luxury suites will fund the rest of the $1.02 billion home field, allowing construction to start as soon as next year with the first games in either 2014 or 2015.

City leaders say the deal is foolproof for them while team executives see no risk in taking out such a huge loan, to be paid off over about 25 years, with interest payments proportional to a home mortgage over that span. They also say the increase in debt for the stadium authority is offset by the higher rent payments from the team, from $5 million to $30 million a year.

"Although the stadium authority will have a greater amount of debt, it will also have a greater amount of revenue to pay off that debt," said Carol McCarthy, assistant city manager.

Not everyone is buying the 49ers' commitment as ironclad, however. What if the team eventually can't afford to pay off the stadium's leftover debt? What if new owners decide not to honor the deal?

"The stadium authority is going to have an IV in its arm for 40 years," said Bill Bailey, a spokesman for an anti-stadium group of residents. "This means really terrible stuff for taxpayers."

Stadium deals around the nation have varied wildly. Some football teams secure private funds for most or all of their projects, such as the new New York Giants and Jets stadium in New Jersey, while others like those in Cincinnati and Indianapolis have been bankrolled almost entirely by public funds.

Only two NFL stadiums have cost at least $1 billion -- MetLife Stadium in the Meadowlands, N.J., and Cowboys Stadium in Arlington, Texas -- but neither depended on a government entity borrowing as much as in the 49ers' plan.

Figuring out the likelihood that the stadium will pay for itself is tricky because NFL team finances are private.

It isn't clear what the annual debt on the stadium would be. But Zimbalist predicts the Santa Clara stadium will generate some $120 million in annual income before taxes, more than enough to pay back the loans and still turn a healthy profit. The team and city also hope to rely on funds from the NFL, a local hotel tax and the city's redevelopment agency to account for $225 million toward the debt.

Neil deMause, a New York-based writer who cowrote the "Field of Schemes" book about stadium deals, isn't as sure.

"It's certainly possible that the stadium will generate enough revenue to pay it all back, but it's not a slam dunk, which I assume is why we've been sitting around waiting for this deal for so many years," deMause said. "In general my sense is that stadiums don't pay their own way, so it's going to be tight."

Contact Mike Rosenberg at 408-920-5705.

  • Study session: Tuesday
  • Study session: Thursday
  • City Council vote: Dec. 13
    All meetings start at 7 p.m. at City Hall, 1500 Warburton Ave., and are simulcast at http://santaclaraca.gov.
    Source: Santa Clara