SANTA CLARA, Calif. (Diya TV) – The San Francisco 49ers filed for arbitration Tuesday with the city of Santa Clara after attempts to negotiate lower rent for Levi’s Stadium failed.
The 49ers and Santa Clara city officials have been negotiating lower rent since last November for the remainder of the team’s 40-year lease agreement at the stadium. The team has argued that it is entitled to a $4 million rent decrease under the terms of the lease agreement because of better-than-expected financial performance.
It appears that the documentation involved was not clear, or else both the 49ers and the city officials would be able to agree on the terms of the agreement. This is why so many landlords, for both commercial and residential properties, get their legal forms (like a lease agreement, for instance) from somewhere like he American Apartment Owners Association. That way, future arguments can be avoided as the documentation will be clear and thorough.
“We’re disappointed that this has to be the next step but unfortunately it’s the only option we have left,” 49ers President Al Guido said in an interview Tuesday. “It’s not the greatest use of time, money and energy.”
In 2013, the Niners agreed to pay $24.5 million in rent per year, however, the team’s contract allows for a one-time “rent reset” after the first year of operation – this essentially adjusts the rent amount based on changes in revenue, updated costs and developments. Last year, the 49ers withheld more than $5 million in rent payments as the team pushed for lower payments.
The 49ers proposed lowering the rent amount to $19 million per year, under the “rent reset” clause. The proposal was made due to the stadium being built for $136 million under budget and an $8 million increase in revenue.
City officials worry the amount won’t be enough to cover future debt obligations.
“We weren’t comfortable with the numbers that were presented and I’m not sure all the expenses were included, including police and fire expenses,” said Mayor Lisa Gillmor. “Our council was concerned about the transparency and how we were asked to reset the rent at the 11th hour.”
The team offered an increase from the $19 million offer to $20.25 million, according to Niners’ management, to “avoid the expense and distraction of arbitration.” But city leaders wanted to lock in $24.5 million again.
The initial $24.5 million rent was based on a 40-year projection of revenues and expenses. Guido said it’s “too much” based on the lease’s mathematical formula.
Gillmor, in her first term as mayor, has been notoriously known for questioning the contract between the team and city during her tenure as a council member. She won’t allow this to turn into the city versus the 49ers, and agreed arbitration was the best route for both sides to take.
“I knew this was coming,” she said. “I think it will probably improve our relationship because it gets the process of evaluating these numbers out of our hands and into the hands of a third party.”
How long the arbitration process will last remains to be seen. However, it is estimated the steps will cost both sides six-figures in legal fees, with the losing party usually ordered to pay the others fees.
