- An actual lease will be written up by April 15, but many of the terms are already in place: The Kings get all basketball revenue, including concessions during Kings games; arena operators AEG get all naming rights money and ad signage revenue, plus all revenue from non-Kings events except for 12 “city events” per year. (The city will get a cut of AEG revenues, as discussed yesterday.)
- The Kings pay operating costs for their games, AEG pays operating costs for everything else.
- AEG gets to tack on its own “capital repair fee” of $1 per ticket to pay for future capital expenses.
- The Kings get all parking revenue from city-owned lots the nights of Kings games. If that number falls short of $2,640,000 a year, the team can withhold ticket-surcharge money to make up the difference, assuming that there’s at least $1,100,000 in the ticket surcharge pot that year.
- The city will build (or more likely, get a private developer to build) a VIP parking facility for, you know, VIPs.
- The city will refinance the Kings’ existing debt, but it’s not clear on what terms or with what collateral, though there’s mention of a “lockbox mechanism to capture revenues to pay annual debt service,” which would imply that the city would get first dibs on arena revenues to repay its loan.
- The city gets a free suite to use for “any official City purpose.”
- The 5% ticket surcharge won’t apply to luxury suites for Kings games, but will apply to suites for non-Kings events when there’s a separate ticket fee.
- The Kings would make a binding commitment to remain in Sacramento for the next 30 years.
- Power Balance Pavilion would be required to be demolished so as not to compete with the new arena. (It would already pretty much have to be demolished so the land under it could be sold to help pay for the arena, but the tem sheet requires it to be shut down regardless.)
- The city council will need to vote by April 3 to spend $6.5 million on “engineering, environmental and other costs,” according to the Sacramento Bee, with the Kings and AEG kicking in an equal amount.
Nothing that I can see, though, on precisely how the $9 million in future lost city parking revenues would be made up (the Bee helpfully suggests “ticket surcharges, taxes generated by the arena, the city’s anticipated share of arena profits and” — wait for it — “other sources”), or, for that matter, how the city expects to get $230 million from selling parking revenues that won’t include anything on Kings game nights (since the Kings will get those) and will be reduced on other arena event nights (since the city is counting on a cut of that to help repay the $9 million a year). “City staffers are still wrestling with exactly how to make the parking plan pencil out,” writes the Bee.
In all, the term sheet reads like exactly what it is: a half-finished framework for a deal that was cobbled together in order to make an arbitrary deadline, with the hopes that all the blanks can get filled in later. The biggest question mark, really, is those parking revenues: If the city can really find a buyer (or a bank willing to loan with the parking money as collateral) who’ll pay top dollar for lots with arena event nights carved out, then the deal should work — not necessarily work in a way that’s good for Sacramento’s treasury overall, but at least the numbers will match up. If not, we could see this thing explode spectacularly over the next few months, with the requisite resulting scramble for dollars to fill in the gap, and probably renewed threats of moving to Seattle and such. It’s never over until it’s over.