So yesterday was a big day in Sacramento, with a community forum scheduled to discuss the latest Kings arena plan, which meant that a term sheet for the arena plan was actually set to be released, so that there’d be something to, you know, discuss. As the appointed late afternoon release time approached, anticipation mounted, until:
City says no term sheet today but talks continuing
— Dale Kasler (@dakasler) March 21, 2013
Well, then. The community forum, of course, still went on ahead, with city manager John Shirey presenting vague descriptions of what will be in the term sheet in place of actual details. Piecing together what we have from various news reports and Twitter feeds, we have:
- Instead of leasing out the city’s future parking revenues to a private operator and using the proceeds to pay for the arena, the city plans to form a non-profit corporation that will get the parking revenues, plus hotel tax money, and use that to pay the bonds.
- The lost parking revenues from the general fund would be paid off with excess parking revenues from the non-profit, plus ticket taxes.
- Video of what the arena “could look like.”
Anybody spot the problem here? (Other than that the rendering in the video is pretty horrible.) In order to help fund a basketball arena, the city will divert $9 million a year in future parking revenues to a non-profit, which will use the money to pay for the arena, then take whatever’s left over and repay the city for its $9 million in — wait just a cotton-pickin’ second here…
Unless the Sacramento city manager really thinks that you can make money magically multiply by shuffling it back and forth really fast between two cups, then, the only thing really new about this deal is the introduction of a non-profit shell corporation to actually sell the bonds and collect the parking revenues. And if “non-profit shell corporation” and “parking” rings some bells, you’re probably recalling this headline:
In the Yankees deal, a non-profit was created to receive future parking fees that would go to pay bonds on new garages, with the expressed goal of getting a lower interest rate (just like in Sacramento), but with the added bonus that, when the parking revenues turned out to be massively below projections, it would be the non-profit’s bondholders that took a bath, not the city or the team. Without seeing the term sheet, there’s no way of knowing whether Sacramento plans to attempt a similar dodge — though it seems inconceivable they’d get away with it, since if they don’t promise to backstop the parking money with city dollars, bond buyers won’t touch it with a 50-foot pole. And if they do make that promise, then the city will be ultimately on the hook for these expenses regardless.
We’ll know more, hopefully, once the actual term sheet is released, which could be in time for Tuesday’s council meeting, according to Shirey, or might be delayed until closer to the April 2 council meeting, the night before the bid has to be presented to the NBA. “I do not have that feeling that we’re not going to come together,” said Shirey yesterday of the arena talks, a statement that was as well-formed as his description of the funding plan.
Oh, right, and there’s a third whale who’ll be joining Sacramento’s proposed ownership group, something that hogged all of today’s headlines. No matter what’s going on, it can always get knocked off the front page to make room for a rich guy.