An agreement between San José and Sharks Sports & Entertainment promises to keep the NHL franchise in the city until 2051 while investing hundreds of millions of dollars to upgrade and modernize the SAP Center.

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The agreement — scheduled for City Council approval later this month — would commit the city to providing $325 million of the overall $425 million investment and impose stiff penalties on the Sharks should they leave the city.

“For more than 30 years, Sharks Sports & Entertainment has proudly represented the City of San José and its residents, bringing world-class sports and diverse entertainment events to SAP Center at San José, one of the City of San José’s greatest economic generators,” Sharks Sports & Entertainment President Jonathan Becher said in a statement.

“On August 26, the San José City Council will have the opportunity to cement the legacy of the Sharks in San José by voting to approve a new partnership between SSE and the City of San José to reinvest in SAP Center, keeping the Sharks in San José through the 2050-51 season. Over the last decade, Sharks owner Hasso Plattner has invested well over $100 million into the city-owned venue and is committed to invest at least an additional $100 million to modernize the facility, in conjunction with the City’s efforts to tackle years of deferred infrastructure maintenance in the arena. We are excited about this opportunity and are looking forward to a continued partnership with the City of San José for many years to come.”

The finalized lease agreement between San José and the major sports franchise has been anticipated for a few months after San José Mayor Matt Mahan announced that both sides had struck a tentative deal during his state of the city address in May.

The Sharks have called San José home since 1993, playing at the city-owned SAP Center, which the team has helped upgrade over the years. The current lease agreement — signed in 2015 — had ensured the team would play at the arena until July 1, 2025, with the lease renewing annually through 2040. However, the team had hoped the city would commit more investments in the facility.

An economic study commissioned by the team in 2023 found that Sharks-related activities brought in $235 million in annual visitor spending and created 2,740 jobs. The study also estimated that the franchise brought in $4 million in annual sales tax revenue.

With downtown’s recovery more heavily tied to the success of the experience economy, as the office market continues to struggle, public officials have acknowledged the importance of keeping the Sharks in the city as they have looked to create a downtown sports and entertainment district.

As the city looks to create a more cohesive and walkable downtown, the areas surrounding the SAP Center are also set to receive facelifts as part of a separate beautification project to improve crosswalks, add more murals, including on the bridge connecting San Pedro and Little Italy, and cleanups stretching down to Arena Green.

The investments at the SAP Center include, but are not limited to, renovations to keep the area up to NHL requirements, architectural and entertainment enhancements, and code upgrades.

The city will also be required to improve the parking around the arena, including demonstrating the availability of 3,175 spaces on the streets and in lots within a third of a mile and an additional 6,350 spaces within a half mile.

Should the city fail to live up to its investment obligations, the agreement imposes a $200 million penalty in 2026-2027, with the fee dropping to $70 million in 2030-2031.

The Sharks face potentially harsher penalties if San José is no longer their home base. Early termination of the agreement would start at $100 million in 2025-2026 before increasing up to $549 million in 2030-2031. The fee would then decrease by $10 million up until 2047-2048.

The agreement also defines terms for identifying and reserving a site, spanning at least 12 acres, for a new city-owned arena.

“The average lifespan of a shark is 20-30 years — and our Sharks are devoting at least one more lifetime to San José,” Mahan said. “Our world-class team deserves a world-class arena, and South Bay fans deserve a modern, smooth, and memorable game-time experience. That’s what this deal is all about – serving this generation of San Joséans and the next.”