Sacramento officials must testify on alleged hidden land subsidies

A Sacramento judge has ordered that city councilmember Kevin McCarty can be subpoenaed to testify in a lawsuit charging that — you know what, I have to go on the radio on half an hour, let’s let the Sacramento Bee explain:

In a statement filed in court, attorney Patrick Soluri said McCarty told him the city gave the Kings a secret subsidy intended to reimburse the Kings investors for the fact that they were “overpaying” for the franchise. The new owners bought the team in a deal valued at an NBA-record $535 million.

Also, Soluri said McCarty told him [city economic development director Jim] Rinehart felt the city had seriously undervalued city land that is being given to the Kings as part of the deal. Soluri’s clients, a group of citizens fighting the deal, believe the true value of the subsidy is well above $258 million.

McCarty, who opposes the subsidy, said Tuesday by email, “I certainly have no problem answering tough questions during these legal proceedings.”

I’m not sure what makes this part of the Kings deal any more “secret” than the rest of it, given that what’s been announced already doesn’t really add up, but if the city allegedly knew it was cooking the books but didn’t say so, I guess that’s news. McCarty and Rinehart now both have 20 days to be deposed in the case; if nothing else, it should provide some entertainment right about the time that Cemeterygate starts to die down.


8 comments on “Sacramento officials must testify on alleged hidden land subsidies

  1. I almost think this suit is a no-brainer, because the City assigned a value of $0 to the 3,700 parking spots they’re donating to the Kings ownership group. One of the big things the Kings owners may have lost by moving downtown is parking revenue, and I don’t think they’d have agreed to reducing their parking revenues to $0; the team would be in Seattle today, instead… But the City could not come out and say they’re actually providing a subsidy of $325M.

    I don’t know how anyone can say 3,700 spots has a value of $0, but the parking the City is keeping (also about 3,700 spots) has a value of $212M. Which is it: $0, or $212M? They have to explain this discrepancy.

    It’s the same logic as the digital signs; it’s not the 1/8 acre of land, it’s the steady revenue stream that could have gone to the City instead of to the Kings.

    Arena proponents had better have some excellent responses on these points, or they’re going to lose this suit.

    It’s also illegal to use parking meter funds for anything but specific purposes:

    http://www.qcode.us/codes/sacramento/view.php?topic=10-10_40-10_40_130&frames=on

    I actually think that could turn into a last-minute suit right before the bonds are about to be issued; is it legal to use parking meters as a source of funds to repay those bonds? I don’t think it is.

  2. Mike,
    Don’t forget that the city established that each sign has a value of at least $15,000 per month or 2.5% of the net revenue from the advertising, whichever is greater, thereby foregoing an income of at least $37.8 million or $48.6 million if the kings stay for the two 5-year extensions. (See http://sacramento.granicus.com/MetaViewer.php?view_id=8&clip_id=2292&meta_id=198506 for the information.)

  3. Either members of the City Council knew about this stuff and committed fraud, or they didn’t understand this stuff because they are unfathomably stupid. I don’t see a third option.

    “Financing the financing” is one that really didn’t register with them. We’re actually borrowing $304M, not $212M. Oh, and interest-only payments for 6 years. Isn’t this the kind of thing that investment bankers analyze? I can’t wait to see the bond rating.

    If we’re borrowing $304M, it’s still impossible to see how this can be considered a $258M subsidy.

  4. Just a heads up: Counting the signatures is just about done. It’s a no-brainer that enough people signed. Expect some sort of announcement on Friday, January 16.

    Next up will be a drawn-out batter over the validity of the forms.

    Fewer than 10% of the rescission forms are valid; around 67% of the signatures on the STOP petition are valid.

  5. This isnt really surprising with all the stuff I heard while the whole Seattle-Sac saga was going on. Some council members will plead ignorance because of the fast pace of everything. They cooked it and they know it. Whether the truth will actually come to light- who knows. They are doing all they can politically to not stop this thing. The next set of elections will be HEATED with people tearing the active council members to shreds. Lets see how deep the rabbit hole goes. Ive been told pretty deep

  6. Press release from the City:

    http://portal.cityofsacramento.org/City-Manager/Media-Releases/CityClerkPetition

  7. There are enough signatures. Now the mayor is promising to take a “hard look at the petitions and consider all of the available options to protect the public.” He would be better served being honest and giving an accounting of what the city will lose when this is built.

  8. Someone (probably very easy to guess who) is blanketing Sacramento with an incredibly detailed telephone “push poll” where every single stupid pro arena talking point is mentioned and one is continually asked if they support public funding of the arena.

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