Kings arena approved, Sacramento pols stare at skies awaiting manna

As expected, the Sacramento city council approved the final Kings arena plan last night, by the same 7-2 vote that they always do. The city will now go ahead with selling $298.4 million in bonds for the $477 million project, with about $226 million of that ultimately coming out of the public’s pocket.

For arguments why this is a terrible idea, see Eye on Sacramento’s lengthy report on the final arena deal. Meanwhile, everyone else is too busy celebrating:

Mayor Kevin Johnson declared “Long live the Kings” after the final vote, and the chamber erupted in cheers along with team owners…

“This is certainly bigger than basketball,” [Kings president Chris] Granger said. “But it doesn’t just end there. At the very core, this project is about community.”…

“It’s not just about a venue for entertainment and sports; it’s about the type of life that people get to have when they choose to live in our region,” Councilwoman Angelique Ashby said.

And then there’s this report, also from KCRA:

Developers are getting ready to drop millions of dollars to change nearly everything immediately around the site of a new arena, the Downtown Plaza shopping center.

Across the street from the shopping center on its west side and its east side — Third and Seventh streets – developers are hoping to turn empty store fronts and empty buildings into stores, restaurants or apartments.

Normally I would say “don’t hold your breath,” but — actually, let’s go ahead and say it, because there’s no reason to build stores, restaurants, and apartments just because there’s an arena nearby that will have activity, say, 100 or so nights a year. But moving the Kings from the outskirts of town to downtown will shift some spending, so if there have been developers licking their lips and waiting for a reason to put up some new buildings downtown, a couple nights a week of NBA and concert fans traipsing through is not the worst excuse, maybe?

The bigger question, if this development does materialize, is whether a Kings arena was the best way to jump-start construction downtown, and whether the overall benefits to the city end up being worth $226 million. Again, I wouldn’t go holding my breath, but we’re going to find out one way or another, because the Jiffy Pop Arena is now set to become reality.


43 comments on “Kings arena approved, Sacramento pols stare at skies awaiting manna

  1. Unfortunately manna will not pay the bills. With the city’s budget deficit projected to be $40 million in a few years without the added debt from the arena, the city will be teetering on the edge of bankruptcy very soon.

  2. Neil,

    Good question on the “best use” of the old mall property. I’m inclined to think that an arena is the best use. Though I believe the subsidy that the developers of the Best Buy/Target combo to build in West Hollywood near my office was a lot lower and it kick started a load of residential, retail and office development in a formerly woebegone area.

  3. The nice thing about a shopping mall is people are in it all the damn time, so it’s a nice reliable source of foot traffic (or auto traffic) for people wanting to open nearby developments. (The less nice thing is that it mostly just cannibalizes economic activity from other stores elsewhere, but that’s true of moving the Kings across town, too.)

  4. Elect a guy who dribbles a ball. Then he steals a $250,000,000.00 from taxpayers. Good job, Sacto.

  5. To paraphrase a comment from Councilperson Angelique Ashby..”We’re not giving away anything, we’re getting something great”. The Councilperson Steve Hansen says…”The Net Present Value of the city’s contribution is $40M and I think it’s worth it”. Also heard “defining moment”, “momentous”, “historic”. For Councilperson Steve Cohn it was all about how “felt” walking into the first Arco arena. Lots of feel good comments, even Councilperson Allen Warren brought up race relations. Two dissenters this should be viewed as a business deal. The others have suspended all critical thinking skills for political expediency.

    This was an elaborate con and the city got played bigtime. Here is the real total city “investment”…

    Bond debt – $325M
    Land parcels – $32M
    Billboards – $18M
    Naming Rights – $125M
    Total= $500M
    Plus value of parking spaces and collateral for reissuance of 1997 bonds.

  6. Really, the best use for the space would be to create housing, this creates a 24-hour footprint and can truly lead to more growth because the people living there now need all kinds of services. With this deal we just have the status quo of state workers in downtown from 9-5, and some additional people downtown about 100 nights a year, but their money goes to the arena concessionaires not to the area surrounding it. Nobody is shopping or eating dinner downtown during an arena event.

  7. Oh, and Neil you forgot the other headlines:
    1. A bond referendum is apparently going to be attempted. For that arena opponents will need to gather about 13,000 signatures in 60-days and then the bond sale will be put to a vote. After what happened last time I really hope they know what they are doing on this one.
    2. CEQA lawsuits have already been drafted and will be filed soon.

  8. Just thinking big picture… what are seen as some of the cooler and vibrant places to live right now? Austin, Portland, Charleston…

    Granted there is nothing scientific about that list. Those were the first three places that popped into my head. But collectively they combine to have 1 pro sports team. And that’s an MLS soccer team (Okay, maybe UT football is quasi-’pro’… And there is, bizarrely, an F1 track in Austin but that was almost entirely privately financed (iirc)).

    Maybe all that money not going to arena subsidies goes to other things that actually make for good quality of life. I guess if you think having a basketball team means you’re ‘getting something great’ then you deserve the city you get.

  9. Normally I would make a joke here about the Trail Blazers apparently not counting as a pro team, but they were actually pretty good this year.

  10. Oops. Forgot about the Trail Blazers. They even won a playoff series. My bad. So the number doubles… to two.

    And the stadium where the Timbers play is decades old. The last refurb for the Timbers a couple of years ago was only about $30M.

  11. What truly amazed me is that there really was no debate at all. It was all just accolades. Zero analysis. A simple “What happens if we don’t really have 200 events?” was never heard.

    This was not an example of a good debate. Just the opposite, in fact.

    I’ve said this many times: If this should suffer a shortfall of revenues, and we’re asked to raise taxes “just a little” to cover that shortfall, I will vote no. I will choose to vote the way I would have voted in June.

  12. I want to keep an eye on this. Small NBA markets have been the lifeblood of the league. That’s true because it’s easier to force small cities, cities with low employment opportunities, lack of corporate dollars and limited TV appeal, to sacrifice their future to keep teams. Sacramento, like other small markets, have limited resources to support pro team demands. In California that issue is critical because the cities can’t get any money from a broke state government. Memphis is hailed as a success story by the NBA. But the team is still a borderline financial proposition. If the team starts losing, so does the city. It’s hard to believe that development will spur economic growth in a city burdened with huge debt and few corporate dollars. It’ll be great theater.

  13. I was also offended by the stone silence that greeted those who were speaking in opposition of the plan and the cheers and clapping from the city council that greeted those speaking in favor. If I had not seen the shites of their eyes, I would have thought most of the council were sleeping through the first half of the comments.

  14. Wasn’t able to view the entire meeting, what I did see that was interesting was Council member Hansen asking Treasure Fehr, paraphrasing “why was your worst case scenario last year $298M for the bonds, and now it is $325M?”. Not much of an answer from Fehr other than “in case interest rates inrease to 7.5% by the time we issue the bonds, or something…”, and apparently not really an issue for Hansen as it didn’t change his vote.

    Also, Hansen (I think) asking Fehr, again paraphrasing “can any part of the bond issuance be tax-exempt?, say for the plaza outside the arena?”. And Fehr’s response of essentially, “no, because this is strictly private enterprise economic activity”.

  15. Ashby’s rant regarding the comments regarding the council not representing the city was interesting as well. I did not hear all of the pro-arena speakers state their residence, but of those I did hear only two stating they live within the city limits – and one of those was Steinberg. I’d like to see stats on all of them and all those opposed to find out the ratio when just city residents are counted. Much has been made in the media about the fact there were 50 speakers for and 25 against.

  16. Wonder what the “water footprint” for the construction of this behemoth will be. We are in a drought, after all…perhaps not prudent to start tearing down and then re-building when the water that needs to flow through these projects just isn’t there. No one seems to be thinking about the big picture.

  17. The lawsuits have already started.

    http://www.sacbee.com/2014/05/21/6422509/arena-full-speed-ahead-while-opponents.html

    Experience THIS (imagine obscene gesture here), SBH.

  18. Here’s information about the lawsuit:

    http://www.capradio.org/articles/2014/05/21/new-lawsuit-filed-to-stop-arena-project/

  19. There is a tentative ruling supporting the city in the lawsuit regarding the gift of public funds, Case #2013-80001489.

  20. You know, thinking about the budget deficits Sacramento will have in a few years got me thinking… They’re saying $40M/year within a few years.

    I just think that gives the City the “opportunity” to say that the arena didn’t cause the deficit, but all those retirement benefits did. So really, we don’t propose a tax hike because of the arena, but because of the deficit we saw coming years ago.

    I think they’re learning from Stockton.

    This is one of those “five years into the future” predictions, so it’ll take a while to play out. But I think this is just what they’ll do — and, just like Stockton’s voters, Sacramento’s voters will fall for it as well.

  21. MikeM, I noted some time ago that I didn’t understand why on earth labor would support the arena, as the very first thing Shirey and Fehr would look at when the budget went out of balance was pension and retiree medical payments. Perhaps labor thought that supporting the arena would protect them, but if they believed that, I have this bridge…

  22. Construction unions always support big development projects (for obvious reasons) and other unions tend to support the construction unions (for solidarity reasons). It’s a problem.

  23. Trailblazers have absolutely nothing, nada, zip,zero to do with urban Portland…the Arenas, both of them are across the river, Willamette, from downtown…

    One stays near the Park Blocks at the Heathman or Benson or the other trendy spots and WALKS through downtown across Burnside to what some call the Pearl District…

    Trailblazers have nothing to do with Portland being a trendy city…shopping, restaurants and the other tourist stuff is across the river and the museum are either on the Park Blocks across the river or up river from the Arenas, both of them.

    Multnomah Stadium is downtown and is associated with the downtown athletic club…HISTORIC…now used, not by college football or the Portland Beavers but by some soccer deal…

    development of Portland Oregon and it’s example of urban refinement has more to do with HISTORY, the river (Willamette), the port, and the Columbia…nothing whatever to do with sports

  24. http://www.sacbee.com/2014/05/25/6430470/marcos-breton-arena-detractors.html

    I only bring up this article because in the print edition, it says that arena opponents are “loony.”

    That’s real professional there, Marcos.

    I don’t know who’s loonier; opponents, or those who are expecting $11.5B in new revenue from this arena. Okay, I actually do know who’s loonier.

  25. Maybe he’s right. The old, retired, naysayer loonies volunteered hours and hours of their free time and money to an effort to be responsible citizens and protect the financial future of the city. All of the pro arena folks were paid real money including Think Big, Regions Builders and all of the consultants, lawyers and others that stood to gain from this boondoggle scam. When you do something out of honesty, principle and for the good of the community, that’s not being loony, that’s being mature, wise and displays integrity.

    Marcos Breton became unhinged a long time ago. He couldn’t help himself but to stomp on the opposition one last time. Remember the saying “it’s difficult for a man to understand the truth when his job demands that he doesn’t understand the truth”. That about says it all for Marcos. Just ignore his stupid rants. He’s part of the problem in this town.

  26. What’s interesting is that Breton is now talking about risk, which given that the Bee had a front page article noting the risk a couple of weeks ago, makes me wonder whether they’re protecting themselves in case the project ends up being a loser. i’m wondering what the interest rate will be–it was 1% lower a year ago. And at what point is the rate just too damn high?

  27. PIC, the interest rates are part of the reason this whole deal is so crazy. They plan to issue temporary bonds, then replace them with permanent bonds in November or so. The interest rate prediction is irrelevant, as is the debt-service prediction of $21.9M; by the time they sell the permanent bonds, they won’t be able to turn back. It wouldn’t structurally be possible.

    This was an interesting post at sactownroyalty:

    http://www.sactownroyalty.com/2014/5/22/5741788/sacramento-kings-arena-economics

  28. Reading through the comments on the article on sactownroyalty is sure eye-opening. People think that the city is issuing tax-free bonds that the kings will be paying back. They are stating that the kings are using the city to finance the arena because they can get a better interest rate than in the private market.

    This is the kind of misinformation being propagated by those who see the world through purple glasses and people believe it.

  29. There’s a reason why stadium financing plans have so many moving parts, and it’s not because it’s any cheaper to do it that way.

  30. The Bee has repeatedly said in articles, very recently, that the arena bonds are backed by parking revenues.

    I’ve pointed out their error several times, and they continue to repeat it. I think it’s a willful error.

    These bonds will be backed by the general fund, period. I think they know the interest rate will be higher than they’re claiming, but since they don’t sell the “real” bonds until November, the interest rates won’t even matter. I think they’ll push 8%.

  31. And we’re all-in in Sacramento now.

    http://www.sacbee.com/2014/05/28/6439029/plan-circulating-to-raise-sacramento.html

  32. http://thedissnba.com/2014/05/21/public-subsidies-for-arenas-are-a-farce-sacramento-kings-edition/

  33. You know, this plan to raise Sacramento County taxes to the tune of $23.5M/year… I’m afraid I have to assume a portion of it will end up going to pay arena debt. Right now, the largest piece is earmarked for the Republic, but that’s capped at $3M/year. Other parts of it will go towards arts and cultural organizations. But then other groups will be able to apply for it.

    I think this will work out to be a sneaky way to raise County taxes for this arena.

  34. Welp, two billion bucks for the Clippers.

    Congratulations, Seattle. I have zero doubt about there the Clippers will play after next season. No, Ballmer didn’t buy this team for LA. You’re dreaming if you think this was for LA.

    I doubt they’ll be there in time for next season, but… It could happen

  35. Did you see today’s editorial in the Bee?

    http://www.sacbee.com/2014/05/30/6442928/editorial-sales-tax-hike-for-civic.html

    “One hurdle is whether voters would look favorably on another grant of tax money to a sports facility so soon after the deal for the planned downtown arena, which calls for a taxpayer subsidy of at least $255 million.”

    Now it is a subsidy, not an investment, and there is that little phrase “at least.” You mean it is no longer capped?

  36. MikeM, the County refused to give more than a token amount for the arena, and I don’t think the arena is the focus. Some years ago, Oakland proposed a similar tax (I worked to pass it), but it provided funds for a wider variety of groups, including the Oakland Museum, the library and so on. It barely passed–it needed a 2/3 vote–but Oaklanders had, by them, gotten really tired of crappy services.

    What is more likely to happen in Sacramento is that the city will ask to extend Measure U because without that money, even a small downturn will send the budget seriously out of balance. Will people vote to extend it? I don’t know, but will we be able to vote against police, fire and city pools when all of the politicians who supported the arena are no longer in office?

  37. http://www.sacbee.com/2014/06/01/6448901/group-wont-seek-referendum-on.html

    “Most of the city’s contribution will come from revenue bonds backed by city-owned parking.”

    Continuing willful error by the Sac Bee, indeed. As MikeM stated, the bonds are not backed by city-owned parking, rather are backed solely by the general fund.

  38. The Bee and all of the other media in town (with the exception of the News and Review) will only regurgitate the propaganda released by city officials. The city states that the parking revenue will magically increase enough to cover the bond payments, therefore it shall. They see a chart showing that the payments will be made from parking revenue and they do not read the text accompanying the chart which includes:

    “This is not a forecast of the expected performance of the Parking System in relation to the new debt-service payments; it is, rather, a presentation of the multiple sources to be used to fund the new debt service over time, and how the new debt may be paid with resources not included in the current General Fund budget.”

    They will not analyse the documents and find such key phrases such as “The financing will be structured as lease-revenue bonds supported by the City’s General Fund” and “The City hereby agrees that it will include the CUSIPs for the Series 2014 Bonds in any continuing disclosure filing by the City that relates to bonds or other forms of indebtedness that are primarily payable from the General Fund of the City.”

  39. I’ve more-or-less come to terms with one issue with these bonds: The City’s parking revenues will rise exactly $0. Yeah, they’ll have more people downtown on event-nights, but they won’t find space in City-owned spots. It’s already hard to find parking pretty much any night, Wednesday-Sunday. So if we reduce the number of City-controlled spots, people will just park their cars in private lots, which will expand their hours of operation.

    Businesses will just get tired of people not going to their business on event-nights — there will no longer be a reason for restaurants to stay open after about 7, like there is now, so they’ll just close up shop and get away from the arena.

    Essentially, what they did is create a TIF zone, and businesses will do their best to move out of that zone. These businesses can’t just lose 200 nights/year of business; they’ll move to the suburbs where they’ll get 300+ days of business. The only businesses that will love the arena are huge chain restaurants and parking companies.

    Sadly, I think the net result on the City’s budget may be less tax revenue from anything within 2 miles of the arena, not more tax revenues. I can definitely see a way through to that result. So yeah, they increased expenses AND reduced revenues.

    This could end up being really bad; much worse than doing nothing.

  40. I think it might actually make sense to move a restaurant near to Raley Field. People will just walk from that location to the new arena. It’s just not very far.

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