County Fights 49ers over RDA Money

Officials for Santa Clara County went back on the offensive regarding Redevelopment Agency funds this past week, deciding to direct $30 million in property taxes to schools rather than pay back a loan from the San Francisco 49ers.

The money, approved by Santa Clara voters in 2010 to go toward a new football stadium for the 49ers, can apparently be redirected by county officials if they feel it is “not in the best interest” to spend money on the stadium, the Mercury News reports. The 4-3 vote by the county oversight board to give the money to school districts instead of the Niners will likely lead to a costly court battle.

An interesting note in Mike Rosenberg’s article is the secrecy in which the matter came before the board: “City Attorney Ren Nosky protested the motion, saying the action was not put on the agenda, an alleged violation of the state’s open meeting law known as the Brown Act. Nosky said had the issue been mentioned ahead of time, scores of stadium supporters would have showed up in protest.”

County Assessor Larry Stone then compared the fight, expected to turn even uglier, to a “messy divorce.”

Official responses are expected this week. We can only hope for more shouting press releases.

Josh Koehn is a former managing editor for San Jose Inside and Metro Silicon Valley.

29 Comments

  1. The reality is the State of California appointed Santa Clara County, via leglislation, to provide oversight of the remaining RDA funds. The 49ers provided a loan to the Santa Clara Stadium Authority knowing there was risk involved in doing so. This being the case, the 49ers do not have a case against Santa Clara County. Their recourse will be against the Stadium Authority for breach of contract. If the Stadium Authority, aka Santa Clara City Council, misled the 49ers in any way, we will be culpable for their incompetence.

    • Some people believe the earth is 5000 years old. Let us all agree, 5 years from now when all the facts are in one of us will be proven right. I believe the city is going to score from this deal and you say they are going to loose money. One of us is right and one of us is wrong.

  2. Measure J says, “and a prohibition on the use of money from the City’s general fund and enterprise funds in the construction of the Stadium.”

    So if the City of Santa Clara spends money on behalf of the Stadium Authority or redevelopment agency seeking a legal remedy, would that be a violation of Measure J?

    I would think it would.  The Stadium Authority and redevelopment agency should not be allowed to use City legal resources or funds to fight the County’s decision.  I would think even asking the City Attorney for an opinion on this would be a violation.

  3. The 49ers won’t want to take the lead on fighting this.  They’ll let their minions on the Santa Clara City Council take the lead on this.

    It’s simply going to look bad if the 49ers demand that money.  $20 million of that money will be taken away from Santa Clara Unified.  As good as the stadium was supposed to be for education, I guess not having it would have been even better.

    Bring it on.  It’s going to be a PR quagmire for the 49ers.

  4. Both this article and the Merc’s refer to this decision as being made by the County or by County officials.  It’s misleading.  The oversight board is not a County board, does not act for th County, and has members from multiple jurisdictions.

  5. Watch the video of the oversight committee meeting on the city of Santa Clara website.

    Measure J says that the voters approved ‘up to’ $40 million in redevelopment funds, not exactly $40 million.  The city already spent $10 million in RDA funds on the stadium.  Anything from zero to $40 million falls within the category of ‘up to $40 million.’ 

    The city agency which accepted the $30 million loan from the 49ers is the Stadium Authority.  Measure J approved by the voters says that neither the city nor the redevelopment agency are liable for the debts of the Stadium Authority.

    County Counsel said at the oversight committee meeting that the Stadium Authority was set up in a ‘funky’ way as a joint powers agency between the city and the redevelopment agency in order to ‘wash’ funds between the redevelopment agency and the 49ers, because the redevelopment agency could not legally give money to the 49ers.

    AFTER Gov Brown announced that RDAs were going to be wiped out (in Jan 2011) the city council created an agreement (the cooperation agreement of Feb 2011) between the Stadium Authority (SA) and the RDA to transfer funds from the RDA to the SA.  The SA has no income on its own, and no taxing authority – the 49ers were relying on the transfer of public funds from the RDA to the SA to pay off the loan.

    AFTER the Supreme Court of CA ruled in Gov Brown’s favor in wiping out the RDAs (Dec 2011/Jan 2012 timeframe) the 49ers decided to go ahead and loan $30 million to the SA – an agency without any assets or income and which they knew might not be able to tap into RDA funds to pay back the loan.  But they went ahead and took a calculated risk and stared construction anyway, knowing that all of the RDA money could go away (including the government’s right to claw back the $10 million that has already been spent.)  Perhaps the 49ers thought if they pre-spent the money they loaned the SA, that public agencies in line for a share of redevelopment dollars would joyfully give up the money to the 49ers.

    Anyone who thinks that the county/schools wouldn’t vote to keep the RDA property tax dollars didn’t pay attention to the Supreme Court case over the RDAs.  The City of Santa Clara/its RDA joined in a lawsuit with other cities/RDAs to sue the state to try to prevent the state from wiping out RDAs. The County of Santa Clara together with school districts in the County sided with Gov Brown and Att General Kamala Harris to in favor of dissolving RDAs. Why? The County and school districts lose tens of millions of dollars every year to redevelopment agencies, which siphon off property tax dollars, leaving public agencies struggling to fill budget deficits, making cuts, having furlough days, etc.

    At last Friday’s meeting, the oversight board severed the cooperation agreement between the redevelopment agency and the Stadium Authority, essentially stopping the flow of any public dollars to the SA.  This is not a contract that the 49ers are a party to.  The 49ers contract is with the Stadium Authority, not with the city of SC or with the redevelopment agency (which no longer exists.)
    County Counsel said that absolutely the oversight board has the right to terminate any agreement between the redevelopment agency and another city agency.  What they did was legal.  The fact that the 49ers and pro-stadium SC city council members/staff didn’t like the outcome of the vote is just too bad.

    The $30 million in debt belongs to the Stadium Authority alone.
    The oversight board cannot be sued (so said County Counsel last Friday.)  The city and RDA are not liable for the debts of the SA as voted into law by Santa Clara voters.  The SA has no assets and no income.  Who will the 49ers sue?

    The fact that the 49ers and SC’s pro-stadium council members and staff didn’t see this coming is because for the past 6 years, the pro-stadium council members have bent over backwards to please the 49ers and vote yes on everything the 49ers want – including letting the 49ers put forth the ballot language and through Mayor Matthews, a ballot question worded in favor of the stadium that didn’t disclose costs and read like an advertisement for the stadium.

    And I’m really embarrassed as a SC taxpayer to be paying into the salaries of our two city attorneys who spoke at Friday’s meeting and our city’s finance director. At a time when we’re furloughing city employees once/month and shutting down library hours, it’s appalling that they’d rather give money to a private party than to our city’s general fund and schools.

    Oh, and a careful read of today’s SJ Merc article shows that the $950 million in loans haven’t yet funded and the $200 million from the NFL hasn’t yet funded either.

  6. Oh, there are lots of legal issues here—both contract and tort.  There are also other avenues for redress. 

    This conundrum is a hypothetical that belongs on a BAR exam.  Normally, based on precedent and judicial make-up, I can predict outcome.  This is brand new territory.

    We will all have to wait and see what happens.  But if I had to bet, I’d go with the 49er’s lawyers.  They haven’t lost yet.

    • Who are the 49ers going to sue? Their issue is with the Stadium Authority. That’s the only entity they have recourse against. They didn’t have a contract with the RDA Oversight Committee nor the County of Santa Clara. If they sue Santa Clara County the matter will be thrown out by a judge.

      • The City can sue the County—it’s been done before.  The 49ers might be able to sue the County for tortious interference with a business contract.  The real quesion will come down to whether the County can legally over-ride the City’s decison regarding their RDA funds after the fact and before the State took the funds.

        The legality of the actions of the County Committee are also in question, their authority is in question and their process in in question.  The County committee could reconsider the matter at their next meeting, the dept of Finance at the State could rescind the decision (as was done in Vallejo). 

        There are a host of issues and potential remedies.  All the 49ers have to do to sue the County is find a nexus.

        • Anybody can sue anybody, the issue is whether the County is a proper party.  It is not.  Once again, the RDA oversight boards are not acting for the County.  Suggesting that the Board’s action was a County action is like saying the City of San Jose is a proper party in a personal injury suit against VTA because San Jose council members sit on the VTA board.  This is fairly basic civil procedure.

        • First, in order to sue for tortious interference the 49ers will have to prove there was intent on the part of the RDA Oversight Committee to disrupt the contract between the parties involved. That didn’t happen.

          Second, RDA’s were established by the State of California who also had the legal authority of disbanding them, which they did. Thus, the state had the power to establish oversight committees, via passed legislation, to decide what to do with the remaining redevelopment funds.

          The 49ers can attempt to sue the county. Any clear thinking judge, who applies and follows the law, will throw their lawsuit out of court.

        • Maybe I am unclear, who created this entitiy and whom does it report?  If it is an independent government entity—on what basis was it created?  Who appointed the members and who are they responsible to?  Like I said, lots of issues.

    • I’m inclined to go with Taxpayer’s explanation above.

      It shouldn’t matter a whit though.  The deep pocket 49ers will build the stadium, and it will be glorious.  Anyone that’s anyone will be there, and you’ll all retire to Birk’s after the game to rub elbows with each other.

      The hoi polloi can take some comfort in knowing that the taxpayers will get some of their money back.  That’s what you call a win-win isn’t it?

  7. You’re forgetting that the Oversight Board is NOT the County, despite what the SJ Merc wrote and what SJ Inside has picked up (by the way, why is SJ Inside just duplicating stuff from the Merc? The author here should not get credit for an article that really was written by Mike Rosenberg of the Merc.  Please watch the video of the meeting and write your own article.)

    The Oversight Board is composed of people representing the many public agencies which receive property tax dollars:
    2 members from the City of Santa Clara (Mayor Matthews and Finance Director Gary Amerling)
    1 member representing Santa Clara Unified (appointed by the County Board of Ed)
    1 member representing the community college district
    (Mahaly)
    1 member representing the Water District (Don Gage)
    2 members representing the county, as appointed by the County Board of Supes (one of them on Friday was from the County Tax Collector’s office, George Petris)

    Out of 7 votes, the County only has 2.  Both the School District (which has lost $35 million to $42 million per year each year to the combined Santa Clara and San Jose Redevelopment Agencies)and the Water District representatives voted in accordance with the law to give redevelopment property tax dollars to public agencies which are being starved of funds.  The water district rep noted that any loss of money for the water district means increases in water users’ rates.

    Yes, a County representative made the motion, but he’s allowed to do that.  The motion passed.  If the 49ers sue it will just show that they will be willing to sue gov’t agencies at the drop of a hat any time things don’t go their way.  Just as the Al Davis/Raiders have sued Alameda Co, and cost boatloads of taxpayer dollars on legal fees, over issues related to their stadium. 

    The contract that was severed was between the RDA and the Stadium Authority. The oversight board has the authority to do that.  No contracts with the 49ers were touched (although the County Counsel said that the Oversight Board has the authority to terminate contracts with private parties too.)

    IF this does go to a lawsuit, I’d expect all the shenanigans that have gone on in SC with respect to our pro-stadium council’s behavior to be fair game in court.  Including County Counsel’s assessment of the Stadium Authority being set up to ‘wash’ funds between the RDA and the 49ers.  This won’t be good publicity for the 49ers owners.  It will show that they really don’t support our schools and really don’t care about not having a negative impact on our city’s General Fund.

  8. Rich Robinson had his butt handed to him on a platter in a couple of forums by SC Taxpayer. I hope he’s honest enough to realize it. Please don’t offer to make more bets Rich, it’s really childish.

    • The important thing here is to realize what a great deal for the city and county the stadium deal is. Imagine all that money that was going to be spent in San Francisco that is now going to be spent in Santa Clara County/City. I’m sure we’ll all agree, God bless the 49ers.

    • Sigh.  It would be really helpful if people would actually read the legislation, understand the issues, and watch the oversight board meeting/read the pre and post meeting material before commenting. Clearly, people cannot count on the SJ Merc to get the details right, and many news sources just picked up on the Merc article without fact checking. 

      The Governor’s legislation AB1x26, which wiped out RDAs, called for oversight boards of seven members composed of people who are from the city that owned the RDA plus people from public entities which receive property tax dollars – in other words, people from the public agencies which have been bled by the RDAs in the past.  RDAs siphon off property tax dollars which would otherwise go to cities/counties/schools/other public agencies like the water district.

      There are rules in the legislation for who gets to serve on the RDA oversight boards.  In Santa Clara’s case, it’s one person appointed from the city (mayor), one from the former RDA (also a city staff person), one from the school district (appointed by the County Board of Ed), two from the County Supes, and two from other public entities which are affected by the RDAs (in SC’s case, the water district and the college district.) So its a combination of people who hold elected office (Matthews, Gage) and people who are on staff at various taxing entities.

      County counsel said that under the Gov’s legislation, oversight boards have the power to terminate contracts between the RDA and other public agencies, also between the RDA and private parties. They have the authority to decide which of a former RDAs obligations are enforceable (i.e. payable) obligations and which are not. They also have the power to consider the effects on the public taxing entities which would receive RDA dollars that are not used to pay off enforceable obligations.

      Also, the oversight board cannot be sued. That’s in the legislation too(so said the County Counsel.)

      In Santa Clara’s case, if you read all of the documents on the city’s website attached to the oversight board agendas, you’ll see that there are many millions of dollars in contracts that the oversight board has ruled are not enforceable obligations. It’s not just the money that the Stadium Authority wants from the RDA. There’s much more that has been disallowed as enforceable obligations in Santa Clara.

      So the oversight board for each RDA operates under the authority of Governor Brown and the state legislature, which passed AB1X26. And the Supreme Court upheld AB1X26 last Dec or Jan, siding with the state against the cities/RDAs which had sued to remain in existence.

      So the 49ers decided to take a gamble and loan money to an agency which has no income and no taxing authority (the Stadium Authority) hoping that somehow RDA dollars would still be allowed to flow from the RDA to the SA.  The 49ers did all of this after the legislation passed and was upheld by the Supreme Court.  Gov Brown warned RDAS way back in early 2011 that any deals entered into after that point were subject to being clawed back.  According to County Executive Jeff Smith in yesterday’s sj merc article, the $10 million in RDA money that SC has already spent may be clawed back. 

      The Gov. put forth this legislation because RDAs were gobbling up so much property tax revenue in CA and the state was having to backfill dollars to public agencies because they were being financially bled by the RDAs.

      So good luck petitioning the state to give tens of millions of dollars to a private company owned by a billionaire rather than allowing those funds to flow to public agencies which are starved of funds.  That move will come across as extraordinarily selfish.

    • I forgot to say that Gov Brown, in a speech in which he talked about doing away with the RDAs and how they were supposed to be used to fight blight – but RDA dollars were being put to other uses – used the SC stadium as an example of how RDA dollars are being used in an area without blight.  Lowell Cohn of the Santa Rosa Press Democrat just wrote about this, essentially asking the 49ers to show him the blight. There is none.

      Bottom line – good luck to the 49ers appealing to the state.  They work for Gov Brown, and he used the 49ers stadium as an example for why RDAs need to be wiped out.

    • My guess is the State of California

      California Health & Safety Code Section:

      34181.  The oversight board shall direct the successor agency to do
      all of the following:
        (a) Dispose of all assets and properties of the former
      redevelopment agency that were funded by tax increment revenues of
      the dissolved redevelopment agency; provided, however, that the
      oversight board may instead direct the successor agency to transfer
      ownership of those assets that were constructed and used for a
      governmental purpose, such as roads, school buildings, parks, and
      fire stations, to the appropriate public jurisdiction pursuant to any
      existing agreements relating to the construction or use of such an
      asset. Any compensation to be provided to the successor agency for
      the transfer of the asset shall be governed by the agreements
      relating to the construction or use of that asset. Disposal shall be
      done expeditiously and in a manner aimed at maximizing value.
        (b) Cease performance in connection with and terminate all
      existing agreements that do not qualify as enforceable obligations.
        (c) Transfer housing responsibilities and all rights, powers,
      duties, and obligations along with any amounts on deposit in the Low
      and Moderate Income Housing Fund to the appropriate entity pursuant
      to Section 34176.
        (d) Terminate any agreement, between the dissolved redevelopment
      agency and any public entity located in the same county, obligating
      the redevelopment agency to provide funding for any debt service
      obligations of the public entity or for the construction, or
      operation of facilities owned or operated by such public entity, in
      any instance where the oversight board has found that early
      termination would be in the best interests of the taxing entities.
        (e) Determine whether any contracts, agreements, or other
      arrangements between the dissolved redevelopment agency and any
      private parties should be terminated or renegotiated to reduce
      liabilities and increase net revenues to the taxing entities, and
      present proposed termination or amendment agreements to the oversight
      board for its approval. The board may approve any amendments to or
      early termination of such agreements where it finds that amendments
      or early termination would be in the best interests of the taxing
      entities.

      Hey, Rich Robinson! We’re not worried about a thing over here in the city of Santa Clara. You see, we got that great City Attorney Rich Nosky looking out for us. After all, the last city he advised just voted to file for largest municipal bankruptcy in our nation’s history. We’re gonna be just fine.

    • How about this?

      34181(d) Terminate any agreement, between the dissolved redevelopment agency and any public entity located in the same county, obligating the redevelopment agency to provide funding for any debt service obligations of the public entity or for the construction, or operation of facilities owned or operated by such public entity, in any instance where the oversight board has found that early termination would be in the best interests of the taxing entities.

      http://www.leginfo.ca.gov/pub/11-12/bill/asm/ab_0001-0050/abx1_26_bill_20110629_chaptered.html

      I’m no lawyer, but I suppose seizure without just compensation doesn’t apply to public entities.

      • I think you’re right. It’s the Stadium Authority’s problem (the $30 million loan that now cannot be paid back)and the SA is a public entity.  The County Auditor brought up the question (in his letter which is on the city’s website) of the RDA, City Council, and Stadium Authority all being the same people (SC City Council.)  The County Counsel said the SA was created to get around RDA laws which prohibit the RDA from directly giving money to the 49ers.  She used the word ‘wash’ with respect to the SA being used to ‘wash’ funds between the RDA and the 49ers. What’s another word for ‘wash’?  Money Laundering.  It sounds like that’s what she was hinting at.
        Expect that if this goes to court, all of those issues will be brought up, and it won’t be pretty for the 49ers or for the pro-stadium majority of Santa Clara’s City Council, which set up the whole scheme.  The whole lot of shenanigans that’s gone on with the stadium project will then finally be publicly exposed.

        • I was goaded into actually reading the bill.  santaclarawillnotbenefit beat me to the post, but I’m sure a lot of you had already gone through this.

          As I read the bill, it seemed to me that the justification referenced by committee members was for purposes of PR.  They seem to have been given pretty broad powers.

          I think the 49ers have nothing other than putative Brown Act violations.  If they’re smart, they’ll fold and say something about being “all about schools and the community”, wanting to be good neighbors and blah, blah, blah.  Rich Robinson can help them with the press release.

        • The County Counsel said at the meeting that the committee was just fine with the Brown Act and that the meeting/agenda item had been property noticed.  They were going to decide whether the request from the city/Stadium Authority to have $30 million from the RDA was an enforceable obligation.  In order to decide on whether it is an enforceable obligation the committee has to decide if the contract between the RDA and SA is legitimate or should be terminated.  They decided that the contract should be terminated, thus making the $30 million an unenforceable obligation, which was what the County Auditor had already recommended.

          As was pointed out during the meeting, just because some people (city/49ers) don’t like the outcome of a vote doesn’t mean that the decision/vote was a violation of the Brown Act.  They were caught off guard because of 6 years of ‘yes’ votes from Santa Clara’s pro-stadium Council majority.

          If you saw Santa Clara Council Member Kevin Moore on ABC7 last weekend, you’d have seen him express puzzlement on why the schools representative would vote in favor of giving $$ to the schools instead of to the 49ers.  The vote came as a surprise, apparently, to the Santa Clara representatives and the 49ers. Why? The 49ers have had everything their way in Santa Clara for 6 years. 

          Santa Clara isn’t Burger King. The 49ers can no longer have everything their way since Gov Brown wiped out the RDAs.

          The DA’s office would be make the decision about a Brown Act violation.  County Counsel already said that the meeting/agenda item were properly noticed, so that there isn’t a Brown Act violation.  Unlike the 49ers attorney and Santa Clara’s attorneys, the County Counsel and DA aren’t biased in favor of what the 49ers want.

          And I don’t think that filling council chambers with people dressed up in 49ers gear would have swayed the members of the committee who voted to give money to education etc.