From: Brian Doyle
To: Clerk; Manager
Subject: 12.10.2024 (Tonight"s) Agenda
Date: Tuesday, December 10, 2024 10:24:22 AM
Attachments: 12.10.202 Study Session Comments.pdf
Please include the attached comments in tonight's Stadium Authority Study Session Agenda Item.
Thank you,
Brian Doyle
12.10.2024StudySessionComments
Thisseriesofcommentswllfirstcitethestaffreportsection:commentsandquestionsinboldwillfollow:
Reportp.8
WhydidCitystaffacquiescetothehidingofinformationbyAlGuidowhowastheStadiumAuthority’sdesignatedconsultantundertheStadiumAuthority’sConflictofInterestCode? Doesn’tMr. Guidohaveadutytodeclareanyconflictsandnotparticipateindecisionsifhehasconflict? AsCEOofBAHC,aCalifornianon-profit,didn’tMrGuidohaveasimilardutytodeclareconflicts? Doesn’tBAHChaveadutytopubliclydiscloseitstaxreturnsandfinancialstatements? WhatauthoritydidtheBAHChavetoparticipateinthebid?
1 Reportp.14
WhendidtheStadiumAuthorityBoardagreethatbecauseAlGuidobookedamoney-losingnon-NFLeventinviolationofthestateconflictofinterestlawandinviolationofthetermsofhisagency, that“thebestapproachwouldbetoenterintoanassignmenttoBAHC? The2022SettlementAgreementrequirestheManagementCo.toprioritizetheprofitabilityofnon-NFLeventsoverthefinancialbenefitstoStadCo.ThisdealappearstoviolatethatprovisioninthatitisamoneylosingeventtotheStadiumAuthority, andprovidesfinancialbenefittoStadCoandtotheHostCommitteeattheStadiumAuthorityexpense.
AlGuidoisPresidentoftheFortyNinersStadiumManagementCompanyLLC(ManCo)whichmanagesLevi’sStadiumonbehalfoftheSantaClaraStadiumAuthority. Mr. Guidoisadesignated“Consultant”oftheSantaClaraStadiumAuthority, thejointpowersauthoritythatownsLevi’sStadium.Mr. GuidoisalsoanexecutivewhohasafinancialinterestinseveralforprofitandnonprofitentitiesthathavehadcontractualandfinancialdealingswitheachotherandwiththeSantaClaraStadiumAuthority. Mr. GuidohasbeenregularlyviolatingCaliforniaconflictofinterestlawsandregulations.
AsManCoPresident,Mr. GuidohasbeendesignatedasaconsultantundertheStadiumAuthority’sConflictofInterestCode.https://www.santaclaraca.gov/home/showpublisheddocument/72415/637522642489870000. In2022whenhenegotiatedandsignedthedealwithFIFAMr. Guidowas 2 alsoPresidentoftheBayAreaHostCommittee(BAHC),aCalifornianonprofitmutualbenefitcorporation.
Levi’sStadiumisownedbytheSantaClaraStadiumAuthoritywhichleasesittotheFORTYNINERSSCSTADIUMCOMPANYLLC(StadCo)whichinturnleasestheStadiumtotheSanFrancisco49erstoplayNFLgames.AcopyoftheLeasecanbefoundathttps://www.santaclaraca.gov/home/showpublisheddocument/46687/636071428735770000. UnderArticle13oftheLease,the(StadCo)receivesrevenuefromnon-NFLeventsintheformofSuiterevenueandotherrevenuesources.StadCoisasourceofincometoMr. GuidobywayofhispositionasPresident.
TheManagementAgreementwithManCocanbefoundathttps://www.santaclaraca.gov/home/showpublisheddocument/46731/636071429908830000. Undersection3.2.1theStadiumAuthoritydelegatedauthoritytobook“non-NFL”eventsatthestadiumtotheStadiumManager. insigningtheAddendumwithFIFAonJune13,2020,asboththePresidentofManCoandthePresidentoftheBayAreaHostCommittee 1 Mr. GuidoviolatedGovernmentCodeSection1090,renderingtheAddendumvoid,andconsequentlyrenderingtheconfidentialityprovisionsoftheAddendumvoid. 1 TheBayAreaHostCommittee(4097051)wasformedonJanuary8,2018asaCalifornianonprofitmutualbenefitcorporationwithAlGuidoasitsChiefExecutiveOfficeranditsbusinessaddressthesameasthatforthe49ersorganizationsincludingManCoandStadCo.Accordingto BAHC’s StatementofInformationfiledonMarch2,2022withtheCaliforniaSecretaryofState,AlGuidocontinuedinhisroleasCEO.
OnJanuary3,2024,theCaliforniaAttorneyGeneraldeterminedthattheBAHCwasnotrequiredtoregisterasacharity“becauseitisorganizedandoperatedprimarilyasamutualbenefitcorporationthatdoesnotsolicitorholdassetsforcharitablepurposes.” OnFebruary22,2024,the49ersformedasecondnonprofitcalledtheBayAreaHostCommitteeFoundation(6097413).Thisnew501(c)(3)entitywasformedasaCalifornianonprofitpublicbenefitcorporationwithZaileenJanmohamedasitsChiefExecutiveOfficer.
OnMay1,2024,theoriginalBayAreaHostCommittee(4097051)replacedAlGuidowithZaileenJanmohamedasitsChiefExecutiveOfficer. 3 ItisimportanttonotethatStadCo’sLeaseofLevi’sStadiumcontainsnoprovisionsfortheassignmentofnon-NFLevents.Moreover, ManCo’sManagementAgreementwiththeStadiumAuthoritycontainsnoprovisionsauthorizingManCounilaterallytoapproveagreementswiththeBayAreaHostCommittee.Thus,Mr. GuidohadnolegalauthoritytoenterintotheAddendum;moreoversigningonbehalfofbothManCoandtheBAHCwasaviolationofbothGovernmentCodeSection1090andthePoliticalReformAct.
GovernmentCodeSection1090forbidsgovernmentofficialsfromenteringintocontractswithanotherpartyinwhichtheyhaveafinancialinterest.AsCEOoftheBayAreaHostCommittee,Mr. Guidohasapersefiduciarydutytothatnonprofitcorporation.RecognitionofthisconflictinginterestisembodiedintheprovisionsoftheGovernmentCodewhichdescriberemoteinterests(GovernmentCodeSection1091)andnon-interestsofmembersandofficersofnonprofitcorporations(GovernmentCodeSection1091.5).Ifstatusasanexecutiveofficerofanonprofitwerenotconsideredafinancialinterest,thentherewouldbenoneedtocircumscribeexceptions.ItisimportanttonotethatMr. Guidodoesnotfitwithintheexceptionofsection1091.5(a)(8):
That of a noncompensatedofficerof a nonprofit,tax-exemptcorporation,which,as oneof its primarypurposes,supportsthefunctionsofthebodyorboardortowhichthebodyorboardhasalegalobligationtogiveparticularconsideration,andprovidedfurtherthatthisinterestisnotedinitsofficialrecords.
TheBAHCdoesnothaveasitsprimarypurposethesupportofthefunctionsoftheStadiumAuthority, nordoestheAuthorityhavealegalobligationtogiveparticularconsiderationtotheBAHC.
AsidefromhisfinancialinterestinBAHCastheresultofhisfiduciarydutyasitsCEO,MrGuidohadafinancialinterestasa49erStadCoofficerintheStadiumsuitesrevenueandotherrevenuethatanon-NFLeventwouldproduceforStadCo.AlthoughundertheLeasenon-NFLeventrevenueandexpensesbelongtotheStadiumAuthority, revenuerelatedtotheStadiumsuitesfromnon-NFLeventsstillbelongstothe49ers.The49ersrecentlyannouncedthattheyhadreceivedaloanfromtheNFLtofinance$200MinsuiteimprovementsatLevi’sStadiuminanticipationoftheWorldCupandSuperBowl:SFChronicle.8.27.24 NodoubtStadCowilllooktothesuiterevenuegeneratedbyholdingtheseeventstorepaytheNFLloan.ThisanticipatedrevenuefromtheWorldCupmatchesis 4 clearlyatangiblefinancialinterestthatMr. GuidohadwhenhesignedonbehalfofbothManCoandBAHC, Asfurtherevidenceofhisculpability, Mr. Guidohasneverpubliclydeniedthatheviolatedthelaw. GovernmentCodeSection1094provides:
Everyofficerwhosedutyit is to auditandallowtheaccountsof otherstate,county, or cityofficersshall,beforeallowingsuchaccounts,requireeachof suchofficerstomakeandfilewithhimanaffidavitorcertificateunderpenaltyof perjurythathehasnotviolatedanyofthe provisionsof thisarticle,andanyindividualwhowilfullymakesandsubscribessuchcertificateto anaccountwhichheknowsto befalseasto anymaterialmattershallbe guiltyof a felonyanduponconvictionthereofshallbe subjectto thepenaltiesprescribedforperjurybythePenalCodeofthisState.
TheredoesnotappeartobeanyevidencethatinpayingtheManagementFeetoManCothattheStadiumAuthority’sauditorsorfinancialofficerseverobtainedanaffidavitfromMr. Guidothathehadnotviolatedanyofthereferencedprovisions.
Finally, analysisofthecorporatechangestotheBAHC,asdescribedinfootnote1,evidencesatacitacknowledgementbyMr. Guidoandhisadvisorsatthe49ersentitiesthathisexecutivepositionwasapotentialliabilityunderstateconflictofinterestlaw.
BecausetheStadCo’srevenueisasourceofincometoMr. Guido,thePoliticalReformActandFPPCregulationsalsoprohibithimfromparticipatinginthemakingofadecisionregardingthebookingofnon-NFLevents,includingnegotiationstobringFIFAWorldCupeventstoLevi’sStadium.
FPPCRegulation18700(a)laysoutthebasicrule:
Apublicofficialatanylevelofstateorlocalgovernmenthasaprohibitedconflictofinterestandmaynotmake,participateinmaking,or in anywayuseor attemptto usetheofficial'spositiontoinfluenceagovernmentaldecisionwhentheofficialknowsorhasreasontoknowtheofficialhasa disqualifyingfinancialinterest.Apublicofficialhasa disqualifyingfinancial 5 interestif the decisionwillhavea reasonablyforeseeablematerialfinancialeffect,distinguishablefromtheeffectonthepublicgenerally, directlyon the official,or the official'simmediatefamily, or on anyfinancialinterestdescribedinsubdivision(c)(6)(A-F)herein.(Sections87100,87101,&87103.) Asa designatedconsultantMr. Guidoisclearlyconsideredapublicofficialwho has a disqualifyingfinancialinterestsunderseveralpossiblesubsectionsofsubdivision(c)(6) 2 :
(A)Anybusinessentity, asdefinedinSection82005,inwhichthepublicofficialhasa directorindirectinvestmentworthatleast$2,000(Section87103(a)).Fora “parent,subsidiaryorotherwiserelatedbusinessentity,”seeRegulation18700.2.… (C)Anysourceof income,includingcommissionincomeandincentiveincomeasdefinedin18700.1,amountingtoa totalofat least$500,providedor promisedto,andreceivedbythepublicofficialwithin12 monthsbeforethedecisionis made(Section87103(c)).Incomeis“promisedto”thepublicofficialifthe officialhasa legallyenforceablerightto thepromisedincome.Fora sourceofincomethatisabusinessentitythatisa “parent,subsidiary, orotherwiserelatedbusinessentity,”seeRegulation18700.2. (D)Anybusinessentity, asdefinedinSection82005,inwhichthe publicofficialis a director, officer, partner, trustee,employee,or holdsany positionof management(Section87103(d)).For a “parent,subsidiary, or otherwiserelatedbusinessentity,”seeRegulation18700.2. …
(F) Forpurposesof paragraph(c)(6),indirectinvestmentorinterestmeansanyinvestmentorinterestownedbythespouseordependentchildofa publicofficial,byanagentonbehalfof 2 Mr. Guidohasmultiplesourcesof incomeandinvestmentsinvarious49er entitiesasevidencedbyareviewof hisForm700’s, aswell asarisingfromhismultiplerolesasadirector, officer, partner andotherpositionsof management. Seesubdivision(c)(6)(d). 6 a publicofficial,orbya businessentityortrustinwhichtheofficial,theofficial'sagents,spouse,anddependentchildrenowndirectly, indirectly, or beneficiallyat leasta 10-percentinterest(Section87103(e)seealsoSections82033and82034).
UnderFPPCRegulation18700(d):To determinewhethera publicofficialhasa prohibitedconflictofinterestundertheAct,thefollowing4steptestisapplied:
(1)StepOne:Isitreasonablyforeseeablethatthegovernmentaldecisionwill havea financialeffecton anyof the publicofficial'sfinancialinterests?To determineif thefinancialeffectis reasonablyforeseeable,applyRegulation18701.If theanswerisno,thereisnoconflictofinterestundertheAct.Iftheanswerisyes,proceedtoStepTwo.
Thebookingof theWorldCupeventsat Levi’s Stadiumwillhavea reasonablyforeseeablefinancialeffectontherevenueearnedbyStadCothroughthebookingoftheluxurysuitesforthematches.EvidenceofthisreasonablyforeseeableeffectistheStadiumLeasewhichallocatesnon-NFLsuiterevenuetoStadCoaswellasthe$200MillionloanfromtheNFLforsuiteupgradesin anticipationof theSuperBowlandWorldCupevents.TheNFLwouldnothavemadetheloanunlesstherewouldberevenuetopaytheloanback. (2) StepTwo:Will the reasonablyforeseeablefinancialeffectbematerial?To determineif thereasonablyforeseeablefinancialeffectismaterial,applyRegulation18702.If theanswerisno,thereisnoconflictofinterestundertheAct.Iftheanswerisyes,proceedtoStepThree.
Giventhe$200Millionloan,materialityisevident.
(3)StepThree:Canthepublicofficialdemonstratethatthematerialfinancialeffect on the publicofficial'sfinancialinterestisindistinguishablefromitseffectonthepublicgenerally?Todetermineif thematerialfinancialeffectonanyofthepublicofficial'sfinancialinterestis indistinguishablefromitseffectonthepublicgenerally, 7 applyRegulation18703.If theanswerisyes,thereisnoconflictofinterestundertheAct.Iftheanswerisno,proceedtoStepFour.
ThefinancialeffectoftheWorldCupdealonthepublicappearstobenegative;theeffectonMr. Guidoappearstobepositive. (4)StepFour:Ifafterapplyingthethreestepanalysisanddeterminingthepublicofficialhasa conflictofinterest,absentanexception,theofficialmaynotmake,participateinmaking,orinanywayattempttousetheofficial'spositiontoinfluencethegovernmentaldecision.Todetermineif thepublicofficialis“making,participatinginmaking,orin anywayattemptingto usetheofficial'spositionto influenceagovernmentaldecision,”applyRegulation18704.If thepublicofficialwillbe calleduponto make,participatein themaking,orusetheofficial'spositiontoinfluencea governmentaldecisioninwhichtheofficialhasa financialinterestasdeterminedunderStepOnethroughStepThree,theofficialwillhaveaprohibitedconflictofinterest.
Mr Guidosignedthe contract;he clearlyparticipatedin aprohibitedconflictofinterest.
Mr. GuidoappearstohaveviolatedGovernmentCodeSection87100:
A publicofficialatanylevelofstateorlocalgovernmentshallnotmake,participateinmaking,orinanywayattempttousethepublicofficial'sofficialpositiontoinfluenceagovernmentaldecisioninwhichtheofficialknowsorhasreasontoknowtheofficialhasafinancialinterest.
WhatlegalauthoritydoestheStadiumAuthorityhavetoviolateGovernmentCodeSection1090andtheGovernmentCodeSection87100? 8 9
Reportpp.15-16
IftheCityisprojectingthatBAHCwillhavetopayit$12,160,187andtherentisexpectedtobe$13.5Million,whywouldwehandtherentovertoBAHCandthenhavetoinvoicethemtogetitbackthroughaconvolutedapprovalprocesssubjecttoathirdpartydecision-making? WhynotputtherentintoanEscrowAccountthattheCitycandrawontodirectlyreimburseitselfforexpensesthatitdeemsinitssolediscretiontobenecessarytoavoidviolationofMeasureJ? WhyaretheCity’scostsbeinglimitedtojustpublicsafetycosts? Wherearetheadministrativeandoverheadcosts?
WhyhasstaffnotcompliedwithCouncildirection(andMeasureJ)toreimbursementforalloftheirtimeforworkontheWorldCupandSuperBowl? Doesn’tfailuretorecapturetheseexpendituresconstituteasubsidybytheStadiumAuthoritytothe49ers? Whydidstaffcontinuetoworkontheprojectswithoutreceivingfullreimbursement? WherewillBAHCgettherestofthe$45- $50Million?
10 IsStaffaskingtheBoardtoapprovetheexpenditureofStadiumfunds,pastorfuture,towardanyoftheseevents?Why? WhatistheStadiumAuthority’sexpectedReturnonInvestment(ROI)ontheseexpenditures? Reportp.11
Whatdoestheterm“notdirectlybinding”mean?
Reportpp.11-12
IftheonlyauthorityforManCotoenterintothisnon-NFLeventwasastheStadiumAuthority’sagent,whyisitnotapartytotheagreement? 11 IfitwascreatingalegalobligationonbehalfoftheStadiumAuthoritywhyistheagreementa“privateagreement”andwhydidn’tstaffdemandacopyofit,beforeitevenbegantonegotiatethisdeal? Whatdoesthephrase“notdirectlybinding”mean?IftheagreementwasenteredintoinviolationofstatelawandinbreachoftheManagementAgreement,whyisitbindingontheStadiumAuthorityatall? Reportp.11Whereisthedraft?
Thereportcompletelyignorestheeffectofholdingthis“assigned”eventontheStadiumAuthority’sabilitytogeneratenetrevenueinordertomeetitsobligationsunderMeasureJtopayfairmarketvaluetotheCity’sGeneralFundastheperformancerentportionofgroundrent.
WhyshouldtheStadiumAuthoritybepayingsharedexpenses,managementfees,insurancepremiumsandotherstafftimeoneventsthatitwillnotbenefitbyduetotheassignment? 12 Reportp.13
Justbecausestaffatthetimemadethemistakeofnotcollectingcostsfromtheeventholders,i.e.theNFLandtheBAHC,doesnotmeanitshouldmakethismistakeagain.AssignmentoftheCollegeFootballChampionshipeventwasnevermeanttoincludesubsidizingtheBAHCinholdingalosingevent.IftheauditdidnotrecapturetheseStadiumAuthorityexpenses,thenitwasamistakeandneverintendedasalegaldetermination.
WhywouldtheCityagreetofollowanymodelofaSuperBowlaboutwhichmanyquestionedwhetherithadlosttheCitymoney?Aneventwhichresultedinthemayorresigningthedayafterwith3yearsleftinhistermnevertobeheardfromagain?AndwhichsawtheCityManagerleaveseveralmonthslaterafterhidingfromtheCouncilthathehadtoldthe49erstostoppayingFacilityRent? HowwillholdingtheWorldCupaffecttheabilityoftheCitytocollectPerformanceRentfromnon-NFLevents? MeasureJ(SantaClaraCityCodeSection17.20.020provides:
(g)Inadditiontothefixedbaserent,thegroundleaseshallrequirepaymentby theStadiumAuthorityintotheCity’s generalfundof 13 performance-basedrentwhich,togetherwiththefixedbaserent,theCityCouncilhasdeterminedisprojectedtoprovidefairmarketrentto theCity. Performance-basedrentshallbepursuanttoa formulathatprovidesforsharingoftherevenueslessexpensesofnon-NFLeventsat the stadium.As usedherein,the term “non-NFLevents”meanseventssuchasconcertsandsportingeventsthatareapprovedbytheStadiumAuthorityandtheprivatetenant,excludingNFLevents.Thefixedbaserentandperformance-basedrentpayableby theStadiumAuthorityto theCityunderthegroundlease,asprovidedin thissubsectionandsubsection(f)of thissection,arereferredtointhischapteras“groundrent.” BecauseManCobookedtheeventataloss,theyareprohibitingtheCityfromreceivingFairMarketValuerentinviolationofMeasureJ.ManCoshouldreimbursetheCityforthislosstopreventtheviolation.
Reportp.18
Howwasthesurchargecalculated?Whyshouldn’ttheentireamountgotowardsneteventrevenuetoresultinPerformanceRentPayabletotheCity?Howdoesthesurchargecomparetotheexpectedticketprice? 14 Reportp.19
WhatinHeaven’snamedoesthisgibberishmean?Asdiscussedabove,itappearsthatMr. GuidohasinfactparticipatedonbehalfofBAHCinconnectionwithBAHC’snegotiations,approvalorimplementationofitsobligationstoStadiumAuthority. Also,if,astheresultoftheStadiumAuthority’srightsitreceivestofundraiseorhas“independentobligations”thatwouldotherwisebeseenasaconflictofinterest,whyshouldtheStadiumAuthoritywaiveitsrightstodetermineifthereisaconflictofinterestinthesetransactions? HastheCityrequestedanyadvicefromtheFPPCtodetermineifanyofsection11gcomplieswithStateconflictofinterestrequirements?WhatevidencehasCitystaffreviewedtodeterminethetruthofthisstatement? ThesedocumentssaythattheyaretobeinterpretedunderSwisslaw?HasstaffconsultedanySwisslawyerswithrespecttotheirinterpretationasyouexplainthemtothepublic? WilltheproposedassignmentagreementreleasefromFIFAbegovernedbySwisslawandsubjecttoarbitrationinGeneva?Whataretherisksinvolvedinnotthinkingthroughsigninganagreementlikethis? 15