Last week, I saw an article in the San Francisco Chronicle that the Giants will likely need to open their wallets to the taxman due to their property, Oracle Park, being undervalued from 2015-2017 by a local assessment board. To keep it elementary, sports teams/owners want their property to be valued at a low level so that their property taxes are also lower. But we aren’t talking a few dollars here or there. According to the First District Court of Appeals, the San Francisco Assessment Appeals Board allowed numerous deductions that lowered the property value “by more than $180 million” each year.
How on earth did this happen? Apparently, the Appeals Board based their number on what a future buyer would need to pay for Oracle Park. This meant the Board lowered the property value based on what the team would need to pay for future upgrades and maintenance so that the ballpark would avoid becoming “functional obsolescence”. The unanimous Court of Appeals wrote that the way that the Appeals Board came to their property value frankly made no sense, since the current ballpark is up-to-date. If a new ballpark were built starting today, it would look like what is found right now in Oracle Park. Therefore, any talk of “functional obsolescence” makes no sense.
This is not the Giants first time fighting the city on local tax assessments. Way back in 2006, the Giants appealed the local assessor’s valuing of the ballpark property for tax years 2001-2003. The Giants won, and the city had to pay back $3.6 million for paid property taxes. The Giants also had the nice advantage of keeping their financial documents secret during the appeal, unlike anyone else who goes through this process. The deputy city attorney noted at the time that it was odd how the Giants have gotten taxpayer help in the past and the ballpark was built on public land, yet the public could not see the Giants’ tax documents.
But don’t think that just the Giants are fighting tax assessors in California. The 49ers fight just about anyone in California who dares make them pay any money that the team deems to be too much. Even after taxpayers gave the 49ers over $100 million to help fund the construction of the new stadium, the city allowed additional costs of the stadium to be put onto a new public entity called the Stadium Authority. Even so, in 2016, the 49ers asked the city to lower their yearly rent payments from $24.5 million per year to $20 million. Why? Because they finished construction of the new stadium on time? Or something like that? Meanwhile, as the 49ers were asking for this reduction in rent, they were also continuing to withhold basic financial documents to the Stadium Authority. The city said no thanks to the rent reduction and both sides went to arbitration where the city was given an “additional $10 million over the term of a 40-year lease”.
In 2019, the San Francisco 49ers had their property taxes CUT IN HALF by the county assessor. That meant the 49ers were owed $37 million right then and $6 million for future years. Not to worry, though, as the local taxpayers would not be hurt by this tax modification. Except those damn kids again….
“The greatest share of the loss will be borne by the Santa Clara Unified School District at $13.1 million, which was budgeted to receive $232 million in property taxes this fiscal year, followed by a $5.3 million hit to the county’s $7 billion general fund.”
– BizJournals, 01/23/19
When the 49ers new stadium was built in 2014, big things were expected. But pretty much everyone hates Levi Stadium:
- The Los Angeles Times called Levi Stadium a “bust, big time.”
- The 49ers FanSided website wrote a blog discussing how the stadium “became a bust”.
- The Ringer wrote about “San Francisco’s — Er, Santa Clara’s Billion-Dollar Blunder” and how “no one likes (it)”.
Indeed, maybe the decline in property value was justified? No, the reason that this assessment was done is frankly crazy. Let me try to explain this as simply as possible. Levi’s Stadium is operated by the team and the city. The 49ers run the stadium during football season (six months) while the city runs it during the other six months. Essentially, the tax assessor found that the 49ers “get no business benefit from Levi’s Stadium outside the football season”. But this just isn’t correct. The lease itself states that the 49ers have “sole and exclusive right to market and license the Suites in the Stadium, including all non-NFL events”. Essentially, the 49ers make money off ticket purchases, parking passes to all stadium events at any point in the year. The city is correct when they argue that almost all benefits flow to the team since they control who can book events at Levi’s year round. I say almost because the little money that the city gets is from ticket revenues for non-football events
Yet, the appeals board claimed that the “value was equal between the football and non-football season”.
If you are a Golden State Warriors fan, let us throw the team into this story. They have been winning NBA Titles and were named Forbes most valuable franchise in 2022 thanks in part to their rather new $2.2 billion arena. Everything is roses on and off the court. If you want to see the Warriors in person, it is time to open your wallet, as tickets are the most expensive in the entire NBA. Even when the Warriors are either not playing or are away, the Chase Center website talks about hosting close to 200 events a year. The site also talks about how this arena “will generate more than $14 million each year in new tax revenues for San Francisco”. Last year, Sportico reported that the Warriors made $800 million in revenue. That is 50% higher than ANY OTHER NBA TEAM.
So, it came as a bit of a surprise to find out that the Warriors are asking the city of San Francisco to lower their property taxes for tax year 2022. The city assessed the property value where the arena was built along with surrounding developments at $1.7 billion for tax purposes. The Warriors are asking the city to lower that assessment by just a little…..a billion dollars, that is. The Warriors believe the property value is at $706 million for 2022, which is $1 billion less than the city’s value and would save the team over $11 million in property taxes for 2022.
There isn’t anything wrong with anyone asking for a reassessment of property value. The Warriors have been asking San Francisco to lower their property value for almost 3 years now.