Referendum threat could throw wrench into Sacramento’s efforts to keep Kings

The Sacramento Kings arena proposal may not even be written down yet, but that’s not stopping two Sacramento attorneys from saying they’ll launch a referendum campaign if it involves similar public subsidies to last year’s plan:

“If the proposed subsidy is similar to what the City Council approved (during arena efforts) last year, our coalition will likely file a referendum petition so that the voters will be able to decide the matter,” they wrote.

While this wouldn’t normally be considered big news — anybody can threaten to get signatures to force a referendum — it holds a risk for Sacramento that far outweighs the likelihood of a referendum passing: Since it would take months for a petition campaign to run its course, Sacramento wouldn’t be able to finalize a deal until the summer at best. (And yes, I know that any Kings arena plan is going to require an environmental review, but those almost never end up being major roadblocks.) Which would make it very hard for the NBA to turn down the Seattle bid in April, in exchange for a deal that could end up being overturned by voters. Or, more to the point, would make it very easy for the NBA to say, “Okay, this team is going to Seattle, but Sacramento, if you get an arena deal signed, sealed, and delivered at some point, we’ll get back to you.”

One big question about any referendum campaign, however: A public vote is only required if a local government is trying to raise taxes, and as of now, Sacramento isn’t proposing any tax hikes. Of course, it also still has a giant budget hole in the matter of what would be used to replace the future parking revenues that would be diverted to pay for the Kings arena. If Sacramento pulled a Minnesota-style “we’re going to pay for this with ticket taxes or something, and if that’s not enough, well, we’ll figure something out” plan, would that be enough to trigger a referendum requirement? Do I look like a California constitutional lawyer? Don’t answer that.

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48 comments on “Referendum threat could throw wrench into Sacramento’s efforts to keep Kings

  1. From what I’ve been led to believe, the NBA has “observers” in both cities to make sure that when each side makes its case to the BOG, they’re telling the truth. Think of them as being the Hans Brix of the NBA.

    I sort of think if the NBA was really serious about listening to Sacramento’s offer, and Hans Brix told them, “Look, they were so close until these two attorneys came along,” the NBA could decide to delay a vote. If Hans told them this, though, and the NBA went ahead to Seattle anyway, that means that’s what they meant to do all along anyway; the threat of a referendum will simply have given them a reason.

    However, between KCRA’s report about 37 parcels over 4 owners, plus all the leases that would need to be broken in that mall, plus the demolition, plus AEG’s now uncertain status as a private investor, yesterday seems to have been a real pivot point to me.

    We’re seeing indications in these various stories that the parking lease-out is not the approach they’ll take. It seems like they’re going to use the bonding approach instead; they’ll sell bonds that will be backed by future parking revenues. To me, that seems like the kind of plan that could backfire on downtown parkers, if revenues don’t reach projections (and to me, that’s a lock).

    Big meeting next Thursday. Shirey now saying that the public document may not be ready for preview before the meeting; we’ll all be going through the document page-by-page, in a 2 hour meeting, and then they’ll vote less than 5 days later. What could possibly go wrong?

    I like what these two attorneys are doing, but I admit, I’m not crazy about their letter. Some of the parallels they draw are real eye-rollers. They bring up global warming skeptics at one point. I am not a global warming skeptic; not even close. It just didn’t seem necessary to draw that parallel. Why not bring up Hamilton County and Louisville instead?

  2. Given that the lawyers referendum has no legs to stand on I don’t see how this is much of a threat. People can sue for anything they want, doesn’t mean the court will hear the case or rule in their favor. Nothing more than a distraction because as you say Neil, they can’t hold a referendum on this particular issue.

  3. This News10 link has information on what triggers a referendum.

    I don’t buy the City Attorney’s argument that the Council’s vote on the term sheet is a legislative action. If a Legislative body votes on language that says something, how can that not be challenged by a public vote. Maybe the attorneys calling for the referendum may ask to test the City Attorney’s argument in court.

  4. Correction. The City Attorney argues that the council’s vote on this is NOT a legislative action. I would like to see this argument tested in court.

  5. “CALIFORNIA CONSTITUTION ARTICLE 2 VOTING, INITIATIVE AND REFERENDUM, AND RECALL SEC. 9. (a) The referendum is the power of the electors to approve or reject statutes or parts of statutes except urgency statutes, statutes calling elections, and statutes providing for tax levies or appropriations for usual current expenses of the State.”

    So, anyone have the legal definition of a “statute” in California?

  6. I’m not a lawyer but the Council may look to pass a resolution supporting and committing funds. I’m guessing a resolution is not subject to referendum.

  7. Dan, I really don’t think that’s right.

    Leasing out the parking and then using that money to give to a private developer sure seems like a public gift to me. I actually think they have more than one leg to stand on here.

    Just because I didn’t like the letter doesn’t mean I think the letter has no point.

  8. Jason, that’s what I’m gathering, too. An MOU isn’t legislation. A petition to overturn legislation could come only after legislation is passed.

    I just think they’ve had too many setbacks recently to get to an MOU, that’s all. If they put together an MOU that has too many holes in it, the NBA will tell them they made a nice attempt, note the uncertainties, and then move the team to Seattle.

    Betcha a dollar Shirey understands all this.

  9. Yeah, it doesn’t really matter whether a referendum drive happens before or after the NBA meetings, so long as the NBA knows it could happen. It’s uncertainty that is Sacramento’s enemy in trying to convince the NBA to reject the Seattle move, and unless they can establish that an arena can get built with no referendum challenge at all, this has uncertainty written all over it.

  10. I don’t see how Sacramento fixes the uncertainty problem in the next few weeks. But I think the greater threat to Sacramento’s bid than a referendum is finding the $255M in public $$$.

  11. They don’t have a few weeks to fix the uncertainty problem. They have less than 6 days. The NBA will definitely be paying attention to how these meetings go.

    Anyway, every article now notes that the City’s largest contribution will come from bonds to be repaid from parking revenues. That can’t work. They run into some structural problems at that point.

    I don’t know why they wouldn’t sell bonds to be repaid from ARENA revenues. It’s just not logical. Using parking revenues to pay for the arena may get a negative response from Wall Street.

  12. Because selling bonds that are repaid from arena revenues will eat into the owner’s profits and that will “complicate” the negotiations with Burklestrov. Since Burklestrov doesn’t commute to downtown Sacramento every day, they won’t be paying extra to park their cars and neither will Mayor KJ’s chaufferred SUV which I once saw parked illegally outside of Students First on K Street.

  13. Neil, they have announced that the one public meeting they scheduled on 3/21 won’t be enough; they’ve added a second one on 3/22 and a third on 3/23.

    I might be able to get to the one on 3/23, but I don’t think it’s a huge priority in my life to get there. I never speak at these events; not my niche.

    You can come! Consider this your personal invitation, Neil!

  14. Those meetings will be dog and pony shows with people in white t-shirts and no background in business, economics, and public policy getting bussed in and shown off as “arena supporters.”

  15. In a couple of thousand years, when people are talking about the Ancient Americans, is it going to matter if Sacramento had a basketball team or not? Why don’t they worry about their real problems, and they are many if you have ever been to Sacramento, instead of keeping a sorry basketball team, that will never win a championship? The year they would have won, they got screwed by the league, now they are getting screwed by the league again. I don’t think anymore that anything that happens in the NBA is an accident, but the product of plans that were laid years and years ago.

  16. Mike, how is the NBA screwing Sac? 1) No decision on the Kings-to-Seattle package has been made, 2) Hansen/Ballmer/Nordstrom are more than qualified to be NBA owners, 3) If anyone is responsible for screwing Sac, it’s the Maloofs.

  17. The NBA has watched the Maloofs dog and pony the Kings around to so many markets, all while extending hefty loans to the owners from the head office. If the league has the ability to use the “best interest of the league” clause to seize teams or determine where a team must be located (New Orleans, Vancouver for example) they’ve been complicit in the Maloofs’ “dance of the seven arena proposals”.

  18. It’s now official, AEG is out of the mix in Sacramento:

    That doesn’t kill the deal if they can find a new arena partner, but they better move fast. The camel isn’t going to take many more straws.

  19. AEG was supposed to be the arena manager, though, and chip in some cash up front in exchange for arena revenues down the road, a la what they did in Kansas City. It’s not impossible for Sacramento to either find somebody else to do the same thing, or to simply do it themselves (bond out the money and pay themselves back over time with revenues), but it does make things more complicated.

    The problem is still that there really isn’t enough money in a new arena to pay one off, whether it’s the city, Burkle, or whoever fronting the money in the first place. Sacramento is simply going to have to come up with some way of paying for part of it out of tax revenues if they want the numbers to add up — but even if that can pass the council, it’s almost certainly going to allow a refeendum campaign. So unless the NBA is willing to wait out a referendum — I guess possible, but not likely when they have the option of giving Seattle the team and making Sacramento wait for the next one — the Sacramento bid looks to be in even bigger trouble than a couple of days ago.

  20. It’s possible for the arena to go to a referendum in Seattle as well. The ordinance from the City Council authorizing the mayor to start the MOU has hit the 30 day mark, but there will be subsequent approvals that will have their own 30 day limit. If the I-91 case gets tossed out I wouldn’t be surprised to see referenda start to circulate (and the signatures can be gathered before the whole thing gets publicly filed).

  21. That’s right, Jeff S. I did say some b.s., because this time it is almost entirely on the owners, with a small percentage of the blame on the city. But, it’s not like the league isn’t perfectly capable of doing plenty of screwing of its own. But in this case, you’re right, I’m wrong. Whoever gets the blame, it is looking worse for Sac by the minute. But, that’s just preaching to the choir. Get it over with already.

  22. Pyramid Brewery (famous with the women for their Apricot Beer) out of the State of Washington and with a very fine large trendy establishment in Berkeley but more important with another eatery/brewery across from the Mariner’s Field, Sea Hawk Stadium in SODO south of downtown Seattle…

    Pyramid opened one of the their establishments in downtown Sacramento on K Street (used to be downtown before Sac trashed it and therefore there is NO downtown in Sac anymore) some ten years ago…Pyramid closed their Sacramento establishment just the other day…it was just down the street from where “SUPPOSEDLY” build another arena will be built with those Never Never Land Funds….

    That’s the state of affairs in Sacramento…KAPUT…only thing that made downtown Sacramento go was government funding since scratched to basically zero by Jerry Brown…Brown saw the WASTE of spending millions if not billions on Mermaid Bars in Sac and golf courses near Palm Springs with Redevelopment Money and then siphoning off the top tax dollars for the Crony Capitalists who depended on the Government Dole…KAPUT

    Sacramento Government Officials would start putting up Slave Auctions if it were still legal to raise money for their hair brained schemes…

  23. Uh, Oh….looks like Sacramento has been talking to the Santa Clara City Government, & the Yorks…smh…

  24. Wait, all it takes is threatening a referendum? What about threatening an initiative, or Charter Amendment in Seattle? A Charter Amendment has no time limit for gathering signatures; so what if a press release went out stating tha a Charter Amendment petition drive had begun in Seattle?

  25. If you think you can come up with one that will actually give the NBA second thoughts that the Hansen arena will happen, go for it.

  26. David Stern said that there’s not much that Hansen/Ballmer could do to improve their proposal but he didn’t say that it couldn’t be “worsened” by arena opponents in Seattle using the courts or direct democracy. Here in Sacramento, I’m predicting that a term sheet will be released on Thursday- with all kinds of holes and I’m predicting a higher city contribution than last year. There will be a little more skepticism in the City Council next week than what we’ve previously seen but this’ll still have enough votes to pass. My prediction stands: KJ will take a half-baked plan to NYC, will be given a pat on the back, and then be told by the NBA BOG to keep working on those plans in case of expansion or relocation.

  27. I think what Jason’s saying is more-or-less correct, with one addition: Stern’s speech about how tough the decision was, and how these two great basketball towns really should each have a team, and how both arena plans still need a little work but that one has a very clear lead, but… Sacramento’s plan just wasn’t certain enough.

    They’ll never be specific on the difference, and we’ll never find out for sure, but if he says something like this, it means the differences are very large.

    Between the 37 parcels, AEG going away, the reduced value of the remaining parking, the leases they’d have to buy out, compensation to Macy’s, demolition of existing structures, and so forth, I don’t think the gap has fallen since last April. Just the opposite; I think it’s way larger.

    I just find something satisfying about Stern’s twisted comments at times like these.

    Our half-baked proposal will pass in Council, 6-3 or 5-4. KJ has a couple lapdogs that vote with him every single time. I just don’t see Ashby, the two new Council members and Schenirer voting against KJ. There’s five…

  28. The folk at STOP (Sacramento Taxpayers Opposed to Pork) are back:

  29. On the other side, Carmichael Dave, he of the garage-based radio show, will be touring the country in an RV “fighting for our city, our fans, and our Sacramento Kings.” And Neil, if you’re interested Dave will take his RV to Manhattan.

  30. As usual, Jason beat me to it.

    “Sorry, sir, there’s no RV parking in the arena parking lot. You’ll have to park in the remote lot and shuttle in.”

  31. Say what you will about STOP but at least they are calling in the lawyers and not leaving it all in the NBA BOG’s hands.

  32. It looks like City Manager Shirey and Burklestrov may not make Thursday’s deadline. Is Shirey setting the bar low and doing a little CYA?

  33. Will or won’t, Jason?

  34. Well, here it is, deadline day in Sac, and

    1) We have no term sheets, but
    2) We do have a new investor!!

    Wow. Turn out the lights, Neil (and Jason, and jhande, and ChefJoe…).

  35. Oh, and I forgot to mention, they’re having the community forum in 30 minutes anyway. With no term sheets. And a new investor.

    I did not expect the wheels to come off yet. Yeah, they were pretty loose, but Hansen is still first-and-goal at the 1. Turns out, he always was.

  36. What do you mean, MikeM? Coming out with the term sheet *after* the public meeting is even better, because then you don’t have to answer questions about it!

  37. Well, Neil, I think now what they’ll do is stretch the Brown Act to the max.

    Some people think 3 days means 3 working days (that’s the standard Sacramento has always used; Council agendas come out on Thursday afternoons, always), while others think it means 72 hours (which makes the deadline Saturday afternoon).

    So, incredibly, there could still be time. Deadlines are never final, are they.

  38. I tried to find a live feed of the forum, but could not find one anywhere. So I’ve been reading Ryan Lillis’ tweets.

    I’m sure his article tomorrow will start with the words, “Rah! Rah!”.

  39. Neil- 1st time poster Love your work . So what does this all mean? At the open house the city manager alluded to the fact that the county would have to contribute. Wouldn’t the county have to vote themselves on anything they would include? It sounded like they are making a non profit for the parking revenues so they can get a better interest rate (5.5% to 5.75%). They seemed to allude to the fact that they needed to backfill the 9 million lost from the general fund and said that would come from ticket surcharges and maybe even property taxes and sales taxes. Would that affect the general population as a whole or just the consumers of the venue?

    Do this honestly think that the NBA is going to go for this term sheet and overthrow the Hansen Ballmer purchase? The city manager also said that JMA would have to acquire the properties that are privately owned at the Downtown Plaza. How do they plan on making that happen in two weeks? Or do they honestly assume that once they announce the term sheet that they are equal to as far as Hansen and Ballmer are with their arena proposal that is almost halfway through its EIS?

    Pretty much this is all charade right unless something happens with the Hansen Ballmer arena plan in the next couple weeks. This is over right?

  40. If you think it’s confusing to you, try following it via Twitter. I can’t say I understand the new plan at all, but maybe more will become clear once some people start reporting on the details in the morning. I’d still rather see the term sheet, though, as anything said tonight is just going to be spin.

    As for this being a charade: As I’ve said again and again, the NBA doesn’t have to make a decision based on who got there first, or on whose arena plan is more equal than the other guy’s, or anything else in particular — they can make Hansen and KJ play rock-paper-scissors for the team if they feel like it. Their ball, their rules. I’d be surprised if they rejected the Seattle bid for what looks like a big tangle of spaghetti that Sacramento is about to drop on the table — but I wouldn’t be shocked.

  41. Thanks Neil. It just seems that they may be having this go until April 2nd and even Michael McCann, who has no skin in this game, seems to think that April 3rd is the real pitch and end game and the rest of the time will be to get all the owners in a row for a clear vote either way with Hansen or against him.

    Shirey made it clear that he will not be surprised if the city council vote isnt until the 2nd as he will not ask the council or expect the council to vote on a deal that they dont get at least the requisite amount of time, per the Brown Act.

    You think that the NBA would agree to something if it was voted on the night before and having minimal time to get a look at the financing in its totality.

    I think that this is all for future endeavors because I don’t believe the rhetoric that Sacramento will never have another chance at a team. I just don’t believe that; if they got their ducks in a row I bet they could become the new Seattle even without the strong economic factors that Seattle has going for them. I just remember Seattle fans saying they wouldnt get another team in at east the next twenty years yet here we are. I think this is done and I think you do too.

  42. I don’t think it’s done by any means, but I think your assessment of Sacramento’s strategy is a fair one: They’re trying a shot in the dark, and if it doesn’t work, hey, at least they’ve got a leg up on getting the next team.

    I could totally see the NBA voting for a plan that was just released the day before. *Way* crazier things than that have happened with sports team owners. Go read John Helyar’s “Lords of the Realm” about how the 1994 baseball strike was set up by internecine squabbles among the owners that ended with George W. Bush having to run messages back and forth between two warring factions at a campsite…

  43. My stance on it is I highly doubt that Hansen walks away from this without a team in hand be it the Kings, future deal, or expansion. My thinking on that is that the NBA knows how hard the landscape is in Seattle with funding arenas or anything along those lines. Theoretically the council that approved the 5 year MOU will look a whole lot different by next year and that a new mayor may undermine the deal. Hansen also could end up walking away and cutting his losses. He has mitigated 40 million for traffic infrastructure, he has paid for all the costs and paid for the acquisition of the land. You start tallying the money already invested and that is close to 100 million dollars or roughly 30 % of the purchase price of the Kings just to line this up. I doubt the NBA scoffs at that. Expansion is not being thought of by the league, publically, because it would lessen the leverage of the league in this situation. Expansion does not become an issue until it does if you get my meaning.

    Also a point that people have missed in my opinion is that if the Hansen Ballmer bid is denied then part of the value of the Kings is gone and that is the ability to relocate the team. All of sudden Mastrov, Burkle, and Radavine know that the team will not be moved an lessen their bid with Hansen and Ballmer out of the way. I just think that Hansen will get his team and we will know very soon, within the month.

  44. My thinking is that if the BOG buys this utter bullshit plan Shirey has dreamed up, Hansen will sue. Forget this nonsense that suing would burn every bridge.

    You have a pretty solid plan vs a “My God, Rube Goldberg would have thought these Sacramento guys are insane!” plan.

    Non-profit… Transfer the parking to them… They borrow a boatload of money, repaid partially through a tax hike THE VOTERS JUST APPROVED TO PAY FOR FIREFIGHTER PENSIONS, for God’s sake. What could possibly go wrong?

    Do I seem pissed? How sweet of you to notice!

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