Santa Clara was ‘outplayed’ by the 49ers; council has ‘irreconcilable differences,’ according to new grand jury reports

Two new highly critical civil grand jury reports describe Santa Clara as “outmaneuvered” by the San Francisco 49ers in its original stadium negotiations and blast the current council as unable to “work together as a cohesive group,” effectively undermining the “governance of the city.”

The Santa Clara County reports, entitled “Outplayed” and “Irreconcilable Differences,” come nearly two years after another scathing civil grand jury report, “Unsportsmanlike Conduct,” criticized the 49ers for having an outsized political influence on the city.

In “Outplayed,” the grand jury examined Measure J — the 2010 ballot measure passed by Santa Clara voters that was meant to protect the city and its financial interest as the 49ers moved south to the Mission City and built Levi’s Stadium. While the report said that some aspects of Measure J have safeguarded the city, other contracts struck with the NFL team over the stadium’s management and operations “strongly favored the interests of the 49ers.”

“City leaders were excited to entice a major sports franchise with the prospect of a new world-class stadium, and they were impatient to finalize negotiations on contractual terms and conditions for the Stadium,” the report said. “The City appeared to be outmatched by the expertise of the 49ers’ negotiators.”

The grand jury lists the management agreement for Levi’s Stadium, which has the 49ers as both a tenant and the manger of non-NFL events, as a “glaring example of the Stadium contract provisions that heavily favor the 49ers’ interests.” The nature of the agreement poses “conflicts of interests” because the 49ers can earn revenue at the same non-NFL events that they negotiate the terms for, the report said.

In turn, the city — through a separate governing body called the Stadium Authority — has little to no input on booking and often finds out about non-NFL events at the stadium when the news is publicized, the grand jury alleges.

“ManCo (the 49ers management company) has all the power, but none of the risk if events are not profitable for the Stadium Authority,” the report said. “Conversely, the Stadium Authority has all the risks associated with ticketed non-NFL events but does not have any role in decision-making.”

Councilmember Karen Hardy, who at the time was a part of a residents’ group against bringing the team to Santa Clara, said she had concerns about a public entity going into business with a private one like the 49ers. Many of those concerns, she said, have come true.

“This is what I have to work with,” Hardy said of the agreements the previous council made with the team. “I’ve just had to take a very practical point of view.”

Councilmember Kevin Park said that the current council has worked to “close the holes” that a lot of the original negotiations created.

Last month, the city and the 49ers settled its last two legal disputes about public safety costs and reimbursements for food buffets. The city has said the deal will bring in $20 million in revenue from Levi’s Stadium into the city’s coffers over the next two years.

Park said that he believes the settlement remedied “a lot of the deficiencies” in the contract but disagrees with residents who were pushing for the city to go to arbitration or urging them to reopen contract negotiations completely — something Park said isn’t possible.

“Saying we want to remodel by burning the house down, that is not a way to move forward,” he said.

In a statement posted on social media, Mayor Lisa Gillmor said that “we negotiated agreements to protect Santa Clara’s general fund, which was a good thing. But we trusted the 49ers ownership to act legally and ethically which was a mistake.”

We negotiated agreements to protect Santa Clara’s general fund which was a good thing. But we trusted the 49ers ownership to act legally and ethically which was a mistake.

— Lisa Gillmor (@LisaGillmor) June 13, 2024

Starting in 2016, with a different City Council, assisted by a strong and independent City staff, 
we tried to fix the mistakes and had one major victory: stopping the team from lowering its own rent in 2017.

— Lisa Gillmor (@LisaGillmor) June 13, 2024

In a statement, Ellie Caple, the 49ers’ vice president of corporate communications and public affairs, said the “report reaffirms the success of Levi’s Stadium, and that new leadership at the Stadium Authority has improved transparency and driven additional profit to the Authority and city. We will follow up with staff on next steps, and remain immensely proud of the contributions the 49ers have made to this community, which include delivering $1 billion for the Stadium Authority and $2 billion for the regional economy.”

The second grand jury report, “Irreconcilable Differences,” outlines what is described as “deep divisions, rivalry and routine disrespect” between the mayor and councilmembers.

“Responsive and visionary leadership requires an ethical and well-informed City Council that will conduct the City’s business with transparency, openness, respect and civility,” the report said. “The City Council has not achieved these standards. Instead, some Councilmembers have participated in personal attacks from the dais against fellow elected officials, residents, and volunteers.”

Those “squabbles” have led to a loss in public trust, the report said. The grand jury is recommending that the entire council attend one-on-one conflict resolution training by October — including the mayor and Councilmember Kathy Watanabe, though the report said both have “shown appropriate meeting decorum.”

The grand jury also recommended that the city hire an independent ethics professional and adopt “robust ethics training strategies.”

Councilmember Raj Chahal said the grand jury “cherry picked” a lot of the examples used in the report.

“I know the council is not perfect, but that doesn’t mean five people are responsible for that,” he said. “The mayor and Councilmember Watanabe are equally or more responsible.”

Councilmember Suds Jain agreed and noted that other cities such as Cupertino and Milpitas have also had similar divides among councilmembers.

“The report was incredibly biased, basically calling Lisa and Kathy angels while saying the rest of us need therapy,” he said.

Gillmor, in a joint statement with Watanabe, called for the council to review the report at its next meeting and implement the recommendations in the next 60 days.

“The report’s findings confirm what many residents, including ourselves, have experienced at City Hall: unprofessional, unethical and abusive behavior by the city council majority,” Gillmor and Watanabe said. “It’s devastating for Santa Clara.”