SEP 2 2 2016 The Center of What's Possible Davidh. Yamasaki Superior Court of CA Court The Honorable Rise Jones Pinchon*

R1a

The Santa Clara Stadium Authority should specify that the compliance audit cover the time period beginning with the passage of Measure J through March 31, 2016, the end of the Stadium Authority fiscal year. Response 1a The Measure J Compliance Audit Request for Proposals was issued on May 13, 2016. The scope of the audit was based on specific audit requirements provided to staff by the Stadium Authority Board. The scope includes a comprehensive Measure J compliance audit of Stadium Authority finances dating back to April 1, 2014 (i.e., the period of the fiscal year of the first year of operations) through March 31, 2016. The Board has already selected an auditor based on this scope, and a contract with Harvey M. Rose, the selected auditor, has been executed. The Respondent is reviewing options to expand the auditing scope as suggested by the Civil Grand Jury. It should be noted that the activities undertaken related to the Stadium during the time period between the passage of Measure J and March 31, 2014 were primarily construction related. A separate cost allocation review of construction expenditures was completed by KPMG on November 17, 2015. 1500 Warburton Avenue • Santa Clara, CA 95050 • Phone: (408) 615-2210 • Fax: (408) 241-6771 • www.santaclaraca.gov Honorable Rise Jones Pichon August 24, 2016

R1b

The Santa Clara Stadium Authority should specify that the scope of the compliance audit include whether City of Santa Clara general funds have been used for the operation or maintenance of Levi's Stadium in violation of Measure J. Response 1b The Respondent agrees with this recommendation and this was included in the scope of services for the Measure J Audit discussed above. .

R1c

The Santa Clara Stadium Authority should specify that a Measure J compliance audit include a review of the billing and tracking procedures used when City employees perform Stadium business and how and when the City is reimbursed. Response 1c The Respondent agrees with this recommendation and it was included in the scope of services for the Measure J audit.

R1d

Once the audit is complete, the Santa Clara Stadium Authority should release the results to the public. Response 1d The Respondent agrees with this recommendation. All Stadium Authority and City audits are publicly posted as part of meeting agenda packets. In addition, audits are also posted on the City of Santa Clara Finance Department web page. The completed audit will also be posted on the Santa Clara Stadium Authority web page.

R2

If the public safety cost overage continues through the 2016 NFL season, the City of Santa Clara should seek an adjustment of the public safety cost threshold in accordance with clause 7.5.4(b) of the Amended and Restated Stadium Lease Agreement by and between the Santa Clara Stadium Authority and Forty Niners Santa Clara Stadium Company LLC dated March 28, 2012, As Amended and Restated as of June 19, 2013. Honorable Rise Jones Pichon August 24, 2016 Response 2 The Respondent agrees with this recommendation. It should be noted that the Respondent initiated discussions with the Forty Niners SC Stadium Company LLC (StadCo) on public safety costs in 2015 and requested the commencement of negotiations following the end of the second NFL season (February 2016) - one full year in advance of the lease provision. While the parties previously agreed to enter into early negotiations, these discussions are currently on hold pending resolution of the arbitration process.

R3

The Santa Clara Stadium Authority should adopt the same structure as the City of Santa Clara, where the auditor position is separate and independent from that of the finance director. Response 3 The Respondent agrees with this recommendation. While there is no evidence that an actual conflict exists and there are already established internal controls within the Finance Department (e.g., multiple signatures are required to initiate transactions) and the Stadium Authority is audited annually by an independent third party, the Respondent agrees that having these functions all under one position could create the appearance of a conflict of interest. The Joint Powers Agreement that created the Santa Clara Stadium Authority defined Board and staff positions and assigned the title of Finance Director/Treasurer/Auditor for Stadium Authority to the City's Director of Finance. The Respondent will bring forward a recommendation to the Joint Powers Authority (JPA) partners to change the JPA Agreement to reassign the Auditor title. If there are any questions in regard to the City's response to the Grand Jury's findings and recommendations, please contact me at (408) 615-2210. Thank you for the opportunity to comment on the report. Sincerely, Rajeev Batra Acting City Manager Mayor and City Council cc: