Blog note: this article references a grand jury investigation.
Santa Clara officials Tuesday night voted to remove the San Francisco 49ers as managers of Levi’s Stadium and to effectively strip the NFL team of its ability to sign contracts or buy items for the stadium.
The 49ers are currently the manager and operator of the stadium and have the ability to sign contracts or buy goods valued at less than $250,000. But that could soon change as city leaders look to get a tighter grasp on the management and spending for contracts or supplies at the $1 billion stadium. Elected officials voted unanimously in two votes to terminate the NFL team as manager of the facility and also to ensure all purchases of any value go through the Stadium Authority board, made up of city councilmembers.
“This is not about stripping and the ability for the 49ers or the management company to sign contracts,” City Manager Deanna Santana told councilmembers. “This is about compliance and accountability and transparency.”
Vice Mayor Patricia Mahan was not present for the votes Tuesday.
It’s unclear what comes next in terms of the city’s decision to terminate the agreement for the 49ers to manage Levi’s Stadium. Officials have promised more information on Wednesday. Meanwhile, city officials clarified that the vote to terminate the NFL team as manager of Levi’s Stadium would apply only to events that are not NFL events or home games for the football team. That vote happened during closed session but was announced when elected officials convened its public meeting.
A spokesperson for the team said the decision to remove the 49ers as the stadium manager was “purely retaliatory,” following a report that the Rolling Stones blamed the city for dysfunction at its recent concert at the stadium.
“We are not surprised that (Santana) has commenced yet another legal battle,” team spokesman Rahul Chandhok said in a statement to San José Spotlight. “She is abdicating her fiduciary duty by destroying a city asset for petty, political vendettas.”
The second vote effectively disallowed the team to sign contracts or purchase items for the stadium, instead mandating the organization to get permission from the Stadium Authority. It’s a complex maneuver: Santana has been delegating her authority to sign for such contracts to the football team. The vote Tuesday was a step toward taking away her power to sign those contracts, meaning she would no longer have the authority to delegate to the 49ers.
The votes come after city officials raised concerns that the 49ers have not been transparent in its procurement procedures and the team did not pay the appropriate hourly rates — known as prevailing wages — to employees of contractors at the stadium, resulting in $85,000 in unpaid wages on a recent contract. The 49ers have since paid those wages to the contractor in question, who is in the process of distributing the money to employees, according to a team spokesperson.
Meanwhile, the NFL team is crying foul, saying the city doesn’t have the authority to take away its power to sign such contracts, even if elected officials change Santana’s authority.
“Undermining (the) Stadium Manager’s ability to obtain goods and services timely and efficiently would constitute a contractual breach, and would seriously destabilize Stadium operations,” states a letter sent from the 49ers to the city on Tuesday.
City Attorney Brian Doyle pushed back on that assertion Tuesday night.
“You’re not saying you can’t spend any money, you’re just saying ‘show me the contract first,'” he said. “You’re not in any way depriving them of their right to sign contracts, they simply have to get your approval ahead of time.”
Santana told councilmembers the change is necessary for transparency purposes.
“In order to restore the public’s trust that public funds are being spent properly, it is recommended that all contracts be presented to the Stadium Authority Board before execution by the Stadium Manager,” the city’s report states. “The Stadium Manager will have to present credible evidence that the proposed procurement meets all legal requirements before contracting with third parties.”
49ers officials on Tuesday urged lawmakers not to pass the new ordinance, telling policymakers the change wouldn’t have the intended outcome and instead would make the stadium less safe and more expensive to maintain.
“Being required to prepare requests for approval, months in advance, for even the most insignificant purchases on SCSA’s behalf, those staff expenses will be charged to SCSA,” Chandhok said. “One could easily imagine that a purchase of $100 of goods from the local retail outlet could cost hundreds, or thousands, of dollars of staff time seeking the Board’s approval for that purchase.”
That argument was somewhat convincing to Councilmember Raj Chahal, who asked if it would be better to allow the 49ers a smaller dollar amount, such as $50,000, for emergencies or other unexpected items the team may need to run events at the stadium.
“I’m just trying to manage it to an extent that this does not become another hindrance,” Chahal told Santana. “I”m not asking to give (the 49ers) the authority, they would come to you to get that amount.”
But Santana and Doyle said they wouldn’t be comfortable with that scenario.
“With proper planning, there’s no reason they couldn’t maintain operations,” Doyle pushed back. “I certainly would not feel comfortable allowing them any authority until they’ve shown a track record that they can procure contracts correctly.”
The meeting Tuesday was a “first reading” of the new ordinance to redistribute power over the stadium contracts. The second reading will happen Oct. 8 and if councilmembers approve the new ordinance, it will become law on Nov. 8.
The 49ers play 10 games at the stadium annually and more than 100 other events happened at Levi’s Stadium during the last fiscal year, from major concerts to smaller affairs, according to a recent financial report. That report, presented Tuesday, outlined profits from non-NFL events at the stadium, which Doyle said fell far short of promises made by the 49ers. The city and team have had an embattled history that includes lawsuits and counter suits, fights over curfews, rent and transparency.
Meanwhile, the news comes as an independent San José Spotlight investigation found that Santa Clara officials violated some rules and best practices while soliciting and executing contracts for public relations services early last year. Officials are also set to respond to San Jose Spotlight’s findings in an informational report to councilmembers Tuesday night.
San José Spotlight’s reporting was spurred by a Santa Clara Civil Grand Jury investigation that was left incomplete regarding a set of wide-ranging communications contracts for both the city and the Stadium Authority. Officials have denied any wrongdoing in the matter.
But this news organization’s investigation found officials posted a bid for proposal online and left it open for 19 fewer days than typical for contracts of its size in the city. Officials also doubled the value of the contracts between asking for bids and signing the agreements with the lone bidder, public relations firm Singer Associates.
Doubling the size of the contracts is not against the city’s written code, but is not a best-practice when it comes to transparency or soliciting the most competitive bids, industry experts told San José Spotlight.
The city also allowed public relations work to start without all signatures in place, despite that being a violation of the city’s code. City leaders said the work posed little risk to the city because the contracts had already been signed by Singer Associates representatives.
September 17, 2019
San Jose Spotlight
By Janice Bitters
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