Following a sudden $30 million loss of tax funds, the San Francisco 49ers and Santa Clara leaders said Monday they would not slow stadium construction even as they scrambled to figure out how the cut could affect the rest of the money needed to build the project.
An oversight board consisting of officials from around Santa Clara County on Friday used a new state law to claim the redevelopment funds, which voters had earmarked for the stadium, should be used on things like education and not a pro sports stadium.
While the money is a tiny fraction of what's needed for the $1.2 billion stadium, it served as the initial building block to fund the rest of the project, similar to a down payment on a home mortgage. The tax funds were used to secure up to $950 million in bank loans, which capped the team's decade-long saga to finance a new home field.
If the loans disappear or shrink, it could delay the project -- or worse -- just months after a festive groundbreaking in April. But officials first are preparing their legal strategy, starting with an appeal to the state and negotiations with the county.
Both lead lender Goldman Sachs and the 49ers declined to say Monday how the tax loss could affect the rest of the money earmarked for the stadium. The NFL said it was too soon to know whether the move would impact the league's $200 million financial commitment. Mayor Jamie Matthews called the fate of the funding "unclear." But officials promised to continue construction.
"This is not going to stop the stadium project. It's going to get built," said 49ers CFO Larry MacNeil.
Matthews added: "We will still be playing football in 2014."
The new dilemma caught the city and the team off-guard late last week and resurrected a financing discussion that was supposed to be long over.
At a Friday meeting at Santa Clara City Hall, the new oversight board voted to withhold $30 million in redevelopment funds that city voters in 2010 approved for the stadium.
After the state scrapped redevelopment agencies, it created new county "trust funds" in which county oversight boards control the tax funds from former redevelopment zones, setting up battles around the state over which local agencies get the money.
City officials said they would appeal the oversight board's decision to the state Department of Finance. If they fail there, the issue would wind up in court. MacNeil said the 49ers were also "reaching out to the county to discuss what they did and how they plan to address the commitment" made by voters, though he declined to elaborate.
Meanwhile, Jeff Smith, the county's top executive, defended Friday's vote and argued that $10 million in redevelopment funds that have already been doled out for the project are also in question, bringing the total funds in debate to $40 million.
Smith said leaders in Sacramento are also working on a last-minute bill this week that could change the way the redevelopment funds are controlled, adding yet another wrinkle to what has become an extremely complicated issue.
The city and Niners say they deserve to keep the funds because they made the deal years ago, before the new laws affecting redevelopment were even under consideration. But the county disagrees.
"The city's arguments are really just red herrings designed to get political attention but not based on any reality," said Smith, who supports the stadium project and doesn't think the loss of funds would impact construction. "I don't mean this in any malicious way, but I think they sort of stepped over the bounds."
The City Council is set to hold a closed session Tuesday night to discuss what to do next. A lawsuit or other court action is possible, as City Attorney Ren Nosky said an appeal to the state might not be enough.
"We're not sure how we want to do it," Nosky said, "but we are certain that we need to do something relatively quickly."
Contact Mike Rosenberg at 408-920-5705. Follow him at twitter.com/rosenberg17.
Paying for the 49ers Stadium
Up to $950 million: Bank loans
$200 million: NFL
$40 million: Santa Clara redevelopment funds
$35 million: Local hotel taxes
Source: City of Santa Clara. Naming rights and sales of seats and luxury suites would pay back the loan.