Sacramento council approves Kings arena plan, now just needs to find money

As expected, the Sacramento city council voted last night to approve the city’s term sheet with the Kings on plans for a new $391 million arena. The final vote was 7-2, after which there was much rejoicing.

Yet while an NBA.com blogger declared that the Kings arena plan had “cleared its final major hurdle,” there’s actually an even bigger hurdle than the city council on the horizon: money. The term sheet, as discussed last week, doesn’t actually specify how the city will come up with its $255 million share — it’s expected to be some combination of either the leasing of future parking rights or bonds floated on future parking revenues, plus sale of city land, but nobody is exactly sure how much that will amount to. The most recent report was that “city staffers are still wrestling with exactly how to make the parking plan pencil out,” which isn’t exactly promising.

What last night’s vote does do is provide the arena plan with momentum: Now, if parking revenue shortfalls emerge weeks or months down the road, it’s going to be far more likely that the conversation becomes “How do we fill that hole?” rather than “Maybe we can’t do this after all.” Not that that’s necessarily a good thing for Sacramento — just look how things worked out for Washington, D.C. — but it does make it more likely that an arena will eventually get built in Sacramento, by hook or by crook.


14 comments on “Sacramento council approves Kings arena plan, now just needs to find money

  1. The political will to literally jam this thing in the railyards is stronger than I thought. I say jam because that’s what the conceptual drawings look like. What’s really surprising with all the business leaders in the room last night, that no one brought up the fact that the city was essentially walking into a business deal with the faintest idea of what the return on their investment would be. Worse, the City is now committed to work with one business partner whose ability to bring cash on the table is questionable. The last time that Sacramento was blinded this much by loans and real estate developers, we had a housing market crash. But this borrowing also includes those of us who didn’t invest in local real estate in the last decade.

  2. I’m thrilled about the new arena deal and amazed that Mayor Johnson was able to pull this rabbit out of his hat after it seemed so clear last spring that the Kings had their bags packed and one foot (or both) out the door. Mostly I’m happy because, as a diehard Kings fan, I didn’t want my team to leave town. But I’m also optimistic about the opportunity to revitalize our downtown by developing the rail yards, which have been an eyesore on our community for decades.

    Of course the big question is where do we get the $255 million? I’m a volunteer organizer with the California Millionaire’s Tax initiative, so it’s obvious where I would like the money to come from. But that option isn’t on the table. Apparently we’re either going to lease out our parking lots to private firms to raise the money or borrow against future parking proceeds through bonds. My inclination is to support the bonds option, based on what I’ve heard and read about what has happened in other cities that have privatized their parking. Neil, what’s your take? If those are the only two options being seriously discussed, does one protect the public interest significantly better than the other? Thanks.

  3. I’m thrilled about the new arena deal and amazed that Mayor Johnson was able to pull this rabbit out of his hat after it seemed so clear last spring that the Kings had their bags packed and one foot (or both) out the door. Mostly I’m happy because, as a diehard Kings fan, I didn’t want my team to leave town. But I’m also optimistic about the opportunity to revitalize our downtown by developing the rail yards, which have been an eyesore on our community for decades.

    Of course the big question is where do we get the $255 million? I’m a volunteer organizer with the California Millionaire’s Tax initiative, so it’s obvious where I would like the money to come from. But that option isn’t on the table. Apparently we’re either going to lease out our parking lots to private firms to raise the money or borrow against future parking proceeds through bonds. My inclination is to support the bonds option, based on what I’ve heard and read about what has happened in other cities that have privatized their parking. Neil, what’s your take? If those are the only two options being seriously discussed, does one protect the public interest significantly better than the other? Thanks.

  4. Paul, very good question about the $255 million. But as someone who is volunteering for the California Millionaire’s Tax Initiative, how could you support a financing model that puts the City at risk while ensuring profits and little risk for AEG and the Maloofs? Going to a game at PBP is already very expensive for a working class and middle class family and watching the Kings at home requires a cable subscription. Do you think all of this will be affordable to the middle class on top of more expensive parking for Downtown Sacramento?

  5. Paul, I see several very large risks with this outline:

    1) We don’t raise $256M through the parking concession and land sale, so as almost an afterthought, the majority on the Council decides to raise more by selling bonds. For example, if the concession only raises $150M and there simply is no buyer for 1-2 pieces of property, KJ says, “Oh, we’re so close! What’s wrong with a $90M bond issue?”, and 4 other Council members agree.

    2) The EIR has unexpected costs in it. The freeway onramps there really do seem inadequate for this. Once in a while, when there are large events, it gets very jammed on I-5. With 7,000 cars leaving that area in a compressed time frame, I don’t think the existing ramps can handle it 200 times a year. Just compare the current freeway PBP has with the ramps on I and J Streets. It’s one lane to I-5 South.

    3) I think this surcharge might violate both Prop 218 and 26. I generally vote against things like 26 — and in fact, I did vote against 26. I’m in the minority. It passed. Read the language for this.

    4) If it gets built with the terms specified, get used to hearing “Attendance is not meeting projections.” Oh, it probably will for 3-4 years, but beyond that, things do slow down. What are the City’s protections against that?

  6. If the city were to form a Parking Authority and then borrow based on future revenues, would they be borrowing through revenue bonds?

  7. John, I don’t see any other way. From KJ’s perspective, I think that would be considered risky, because as I understand it, revenue bonds are easier to challenge through a referendum. I have inadequate knowledge of this to really say that for sure, though.

  8. One of the two Council members who voted against approving the term sheets explains his position here:

    www.sacramentopress.com/headline/64692/McCarty_Why_I_voted_no_on_the_arena_deal

  9. Neil, I have a question.

    On our local NPR affiliate this morning, there was an interview with the editor from Sacramento Business Journal, where he referred to a “mess” in Philadelphia where Turner provided a guaranteed price, but that deal turned sour at the end.

    I don’t know anything about it, but thought you might. Can you give me a reference to what happened there?

    Thanks.

  10. Doesn’t ring any bells. Did he say which sport it was for?

    Also, looks like he wrote about it in today’s paper, but the full article is paywalled:

    bizjournals.com/sacramento/print-edition/2012/03/09/risk-is-part-of-arena-deal.html

    Any subscribers out there who can provide the answer?

  11. Neil, he was talking about the Eagles. I think Turner may have built that stadium.

  12. Sacramento is basically a nowheresville located between the mountains and the Bay Area…without any sort of identity therefore the local yokels will do anything to compete (?) with Portland and Seattle…

    Take a look around Sacramento and the environs and without the trees and old buildings in a small stretch downtown the place is basically a slum…therefore the loyal yahoos and politicians turn to any snake oil salesmen who promotes turning their insipid squalor into a seemingly world class statement…

    Giveaways to the creepy developers and lowclass NBA clowns is not surprising for a place like Sacramento which FOREVER lives in the shadow of one of the world’s premier cities…

    and that’s the way it is and why Sacramento can not and will not look at the Arena in any sort of rational way…

  13. Speaking of Washington, DC, this is amazing:

    www.sacbee.com/2012/03/11/4326493/editorial-dont-build-a-big-barrier.html

    They haven’t designed the building yet, and don’t have a clear idea of how the thing will even be situated (I’ve been past the site myself at least 1,000 times, so I know first-hand just how much of a shoe-horn this will require), and now a member of Congress is weighing in?

    What could possibly go wrong here, Neil?

  14. The Sacramento Kings and their backers have just re-established fools’ gold as the region’s most spectacular success. Shame on this “city” and its lack of spine or vision.
    One final hope to block this bread-and-circus distraction would be through repeated legal appeals to the actual environmental impact the arena would inflict on the entire area. Another, riskier but worth considering, may be some sustainable form of nonviolent civil disobedience.

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