Santa Clara Co. Files Legal Challenge On SF 49ers Assessed Tax

SANTA CLARA, CA — Santa Clara Assessor Larry Stone brought a legal challenge Monday to a property tax decision by an independent assessment appeals board, asking the court to reverse the board’s unprecedented, 50 percent reduction of the San Francisco 49ers’ property taxes for Levi’s Stadium spanning over a million feet.

“This decision must not be allowed to stand,” Stone said. “As assessor, I have always been committed to ensuring the property tax roll accurately reflects the value of the property being assessed. Here, the board failed to perform its core responsibility to carefully calculate the full value of the 49ers’ rights in the Stadium.”

The accurate tax assessment is about $1 billion, the petition states.

But the 49ers argued that "it should be taxed on only 40 percent of the value of the stadium," the petition cites from court record.

The 49ers attorney declined to comment.

"We are aware of the assessor’s decision to appeal the independent appeals board’s decision regarding possessory interest tax," 49ers Vice President of Public Affairs & Strategic Communications Rahul Chandhok said in a statement.

The San Francisco 49ers’ operating company, “Stadco,” rents the stadium from a public entity, the Santa Clara Stadium Authority, and the 49ers are required by law to pay taxes on the full value of its interest in the property. As part of a unique public-private partnership, the stadium was custom built for professional football, but also hosts other events, such as corporate events and concerts, when it is not needed by the 49ers.

The board’s decision "incorrectly finds" that the parties intended to split the valuable rights in the stadium 50-50 between public and private entities—despite the fact that the lion’s share of the stadium’s value lies in professional football uses for which it was custom-designed, the county Assessor's Office contends.

“This decision sets a troubling precedent that is legally incorrect and must be reversed,” said Santa Clara County Counsel James R. Williams, who filed the litigation on behalf of Stone. “Communities spend hundreds of millions of dollars to build stadiums to attract professional sports teams. But when the owners of these teams fail to pay their fair share of property taxes, they are taking away money from local schools, police and firefighters, and other valuable services that our communities need.”

The Assessment Appeals Board decision on the 49ers tax responsibility in a one-time refund of over $36 million and an estimated ongoing annual property tax reduction of $6 million.

With that, the Santa Clara Unified School District absorbed the greatest reduction of $13 million-plus taken away, the county assessor cites. The agencies affected also include the West Valley Community College in the amount of more than $3 million; the city of Santa Clara for about $3 million; and the Santa Clara County general fund amounting to more than $5 million.

Stone also points out that the decision fails to assign monetary value to the 49ers’ year-round, exclusive rights to valuable portions of the facility, including a large restaurant complex, state-of-the-art team museum, team store, private clubs and audio-visual hub. The public authority retains no comparable rights or control over the events hosted at the stadium.

“The board’s decision ignores many of the 49ers’ valuable rights and instead simply splits the value of the stadium exactly in half between the 49ers and the public authority—a position for which neither side argued, that no data supported and that no lawful valuation method can justify,” Stone explained.

Private property rights in otherwise tax-exempt public property are known as "taxable possessory interests." Taxation of these interests places the possessor on equal footing with tenants who pay a pro-rata share of the private property owners’ taxes.

The petition filed in Santa Clara County Superior Court by the counsel on behalf of the assessor in the matter of Lawrence E. Stone asks the court to send the matter back to the board with instructions to use a method reasonably calculated to capture the full value of the 49ers’ possessory interest. Both Stone and the board are required by California’s constitution to tax all properties at their full value.

“The assessment appeals board members do not always agree with my staff on the assessments, but most of the time when they disagree, we are close. During the past 24 years, over 90 percent of the contested assessed value or value at risk has been sustained. Last year, it was 97 percent. A 50 percent reduction for a single appeal is completely out of the ordinary. In my opinion, the administrative body reached the wrong conclusion,” Stone said.