Free luxury suite for Sacramento pols in Kings arena deal raises eyebrows

We’re starting another travel week for me, so expect posts to be somewhat sporadic and abbreviated — like this one:

As part of Sacramento’s deal to spend $226 million (or more, depending on how you count) on the new Kings arena, the Sacramento mayor’s office will be getting a luxury suite of its own to be used for “city business.” Some people are not happy:

“For me,  I didn’t feel it was appropriate,” said outgoing city councilman Darrell Fong.  “I think it’s a perk, and I saw this, and I’m definitely not going to use this. If the city has business there, that’s great. But how does the public benefit from that?”

Which was entirely predictable:

Roger Noll, a Stanford economics professor who has researched arena deals, told KCRA 3 that suites aren’t given to all cities during arena negotiations.

“Most cities don’t do that, but some do, because usually it’s a political hot potato. But if you can get away with it, you do,” he said.

It’s entirely possible that City Hall will end up deciding to give the suite to charity or something, as has happened in other cases. (Which I don’t have time to look up right now. Abbreviated, remember?) But for now just add it to the list of ways that City Officials Do Things That Make It Look Even More Like They’ve Been Bought Off Than It Did Already.


32 comments on “Free luxury suite for Sacramento pols in Kings arena deal raises eyebrows

  1. Well, if citizens are helping to pay for an arena there’s no reason why they shouldn’t get a few seats – preferably more than a few. But elected officials and city employees should never ever ever get to sit in them. Hold a lottery to distribute them. Or make them a reward for jury duty. Something, anything, other than giving them to city council and/or the mayor.

    But what are the odds that city officials would ever negotiate something like that?

  2. I read on the SCPF site that that on the consent calendar for the Santa Clara city council tomorrow is an item to approve to make free tickets received for the 49ers and other events non-reportable. for city council members and senior staff. Talk about being bought off!

    Sorry, the link for the agenda keeps getting moved by the city for some reason.

  3. “But how does the public benefit from that?”

    Hah! The public is not intended to benefit from stadium deals like this one – not now, not ever. The public is the teat, the pols are the open mouths at the end of the teat.

  4. It is interesting that the local media in Sacramento is suddenly noticing the terms of the contract the city entered five months ago. All they had to do was read the comments on their stories and they could have found out some of these details. This issue in particular was pointed out multiple times.

    Another issue that is also hitting the news is the promise that most of the companies and workers would be local. The reports indicate that the kings are working hard to hide who is actually getting hired. The Sacramento Business Journal and Fox 40 have both reported that they cannot get actual numbers. Fox 40 also reported that the highest paying jobs, the heavy equipment operators, are not local and do not belong to the local union.

  5. Not to mention that Article 16, Section 6 of the California Constitution has specific prohibitions against giving government-owned property to any other entity. For example, you cannot simply give a 3,900 spot parking lot to SBH.

    It’s not legal.

    I think they know this, and when a court rules that they can’t, the City will just say, “Well, we have to come up with $50M somehow or another” to replace that. I see a future bond resolution to “save” this deal.

    By the way, people are already ticked about Santa Clara. I bet their EIR also said, “No increase in traffic, ever!”.

    http://www.sfgate.com/49ers/article/The-race-to-Levi-s-Stadium-By-car-Caltrain-5694743.php

  6. By the way, 4,000 jobs means, on day 1, you hire 4,000 people, and on the last day of work, you lay them off.

    A job is not, “I performed these tasks, and they took 3 months” 4,000 times. That is not job-creation; that is unfathomably-expensive job-creation.

  7. And back to that original topic, yes, I believe I have complained about this aspect of the deal on this blog in the past. This was a horrible idea. Awful. I’d love to see the courts toss this as well. Make KJ and Michelle Rhee pay for their own damned tickets.

    And do not get me started on Michelle Rhee.

  8. MikeM,

    Actually, 4,000 jobs means that 4,000 people are permanently working full-time – not out of a job in less than two years. Two years is a temp assignment, not a job.

  9. This project will never create 4,000 jobs, the EIR says 2,000 jobs but that will only occur if the mixed use is built, if that is not built then it is basically a wash. Thus, you have the temporary construction jobs that will be gone in two-years once the journymen/journeywomen move on to the next major project and then you just move employees from Arco to the downtown arena and that’s it. $300,000,000/4,000/ = $150,000 per job created if you are lucky and $300,000,000/0 = I won’t do the math on that one. An awfully steep price to pay.

    Also, I want to just remind everyone again that there is no contract requiring SBH to actually build the mixed use property as promised. These types of projected projects are routinely not built for a variety reasons, e.g. given current occupancy rates there is no need for more hotels and offices downtown. That is why you get a community benefits agreement as part of the package approved by city council, that never happened here and the best we can hope is that the CEQA lawsuits force a CBA.

  10. Regarding the mixed use development – if it is not built, the $2 million of projected tax revenue from the “arena” project will reduce to approximately zero dollars.

  11. I do realize that 4,000 is not the actual number of jobs projected to be created by this project.

    However, the kings, the developers, KJ, the city, the media, pro-arena bloggers, man-on-the-street interviews, etc. all quote the 4,000 jobs mantra as if it will be the savior of the city.

  12. RA,
    I knew that you knew better, but you are correct, somebody invented 4,000 and it stuck, even the EIR says 3,700 jobs when you include the jobs that are just being transferred. That’s a lot of rounding to 4,000, but I guess that’s how politics work.

  13. Also, it’s been awhile since I looked but does anyone know what happens if the mixed use is not built? Do we end up with a net loss because they tore down half the mall which contained some stores? Plus the loss to Natomas, which probably isn’t great but there were likely at least few extra people stopping at the In ‘n Out Burger after Kings games, this will be gone.

  14. Team KJ seems to be very empowered these days. This comes at a time when revelations continue to surface that the Mayor’s office is very close to private interests, raking in big cash contributions that are funneled through various non profit orgs that have been set up.

    I figure that this luxury suite deal is intended for KJ’s corporate buddies. Perhaps just one of the many blatant kick backs for serving private interests.

  15. KevinS,

    There was no official analysis done to determine the affect of not having the ancillary development – just all of the rainbows and money falling from the skies that will occur when – I mean IF – it is ever completed. And, of course, nothing needs to be in writing because “they promised” they will build it.

    If you want to get down to brass tacks, there was really no analysis done for any part of the deal. The only justifications seem to be tied to all the bad things that would happen if the kings left town.

  16. My biggest fear is that SBH comes back to the Council and begs for a second huge bond issue to fund the ancillary development… And the Council agrees to it (there will probably already be huge shortfalls at that point, and they’ll reason that the only way to stop the bleeding is to do the outside development).

    Actually, what I just said is just about guaranteed to happen.

  17. I know that in one of the lawsuits (I think the Gianturco suit), the next hearing is scheduled for Oct 10. Is the City unable to sell bonds until these suits are resolved?

  18. There is also a hearing scheduled for August 29 for the gift of public funds suit (2013-80001489).

    As for selling the bonds, I did read something about having to have all of the CEQA suits settled before they can sell them. I can’t verify the accuracy of that, however.

  19. I think the timing of this demolition is meant to have maximum PR effect if a court rules some of the provisions in this deal are not legal. Imagine that about half the demolition is done, and a court rules against the deal; the SBH PR machine would be full-tilt on the “Ultra-conservative opponents of this project are hell-bent on destroying jobs.”-angle.

    It’s just theatrics.

  20. I fully expect an argument in court for all of the cases to include something like “but we already started, we can’t stop now.”

  21. RA, it will always be conveyed through the media in terms of economic development. Anything posing a threat, including legitimate economic and environmental concerns to the “project” will be sold as a hindrance to progress. Up to this point the courts have fully backed the development side and I don’t see that changing. Personally, this is one of the more disturbing aspects of this whole arena scheme, how the courts have completely sided with team KJ.

  22. MCG, Given the judge assigned to the cases, I am not surprised. He has a history of ruling for government officials against citizens.

  23. My gut read is that the “basketball-spending-crowd” is just not going to show up as anticipated by the arena fanatics. Then what? A slow-motion economic death spiral for property around the arena unless more $$ is kicked in by the city…but wait!, what about bonding capacity? That’s when the rats will have already left the ship…Treasurer Fehr, Cohn, Pannell, et al all adios and we, the local taxpayers, are anchored to the $295 million++ bond payments, with the General Fund severely impacted, leading to crumbs for parks because no more $$ can be borrowed…Not a pretty picture….time to chat with your local realtor? McMinnville, OR anyone? …….(just voted #2 in the country for best Main Street (Parade mag)…..

  24. Remember all of that talk about how the construction workers are going to boost business downtown? That their presence is going to be a spark that enlivens the city?

    Well – it ain’t happening. All of the restaurants in and around the construction zone have seen their business plummet. It is so slow, they are worried about being able to stay open.

  25. Several thoughts:

    I don’t think they are not allowed to sell bonds until the suits are cleared up, instead I think nobody will sell them bonds until the suit is cleared up, too much uncertainty.

    But I also think there is no way to stop this project, even if the CEQA suits are successful the court will just tell SBH/the City to throw some more money toward whatever issue has merit and that will be the end of it. The other suit will end similarly.

    Regarding the restaurants around the construction site not doing well . Of course they aren’t, I work very close to the construction site and it is nearly impossible to get from K Street to the rest of the mall that is open and I imagine that most people that have just a cursory understanding of the project think the entire mall is closed and being torn down, not just a portion of it. Again none of this is a surprise, if the media spent 10 minutes on the internet looking up arenas and economic impact they would know it always turns out this way.

  26. The one thing I always thought would happen is this:

    Suppose Think Big’s wildest dreams come true, and the arena actually hosts 200 events/year. Just accept that as a given here. Why would Macy’s stay open under those circumstances? If parking there is $25 during events, along with crowds, Macy’s customers will simply give up and go to the one at Arden instead, where the parking is free. It’s also just outside city limits. It’s also only about 4 miles from the one downtown.

    Eventually, Macy’s will see that they’re only busy 165 nights/year, and realize that’s not enough business to keep it open. So, boom, they’ll close, and the 500 part-time jobs the arena will have will displace the 200 full-time or nearly-full-time jobs the Macy’s had. Just that single employer makes it close to a wash.

    I use Macy’s as an example, but this is already happening. AT&T closed its store in the Downtown Plaza. They were offered different digs at a different price, and opted to close instead. I think they realized that they were going to be dead 200 nights/year, and just said forget it.

    200 nights is a pipe-dream, but the exact same decisions would be made at 100 nights/year. AT&T and Macy’s would still close those locations.

    As far as this judge saying, “Keep going”, I think it’s clear that the gift of public funds aspect of this is an issue. That’s a point they’re going to lose. They could win everything else, but the judge could say, “Nope, you can’t include that land and garage.” At that point, SBH could realize that they’re suddenly down $50M, and the economics suddenly doom them. They could decide to stop right there. But they’d still blame “racist right-wingers” for killing the deal. Or, my favorite, “Activist judges.”

  27. Grebitus & Sons have closed their downtown location and consolidated to a location that is outside the city limits. Was it the arena or the city’s higher sales tax that prompted that decision?

  28. I can’t believe that a jeweler would have a difficult time with sales taxes, although you would think that they would be getting some decent business from the Capitol and upper management office worker crowd. On the other hand I would suspect that they have seen a loss in business because of the arena construction as has been the case with all the businesses in the area. I also don’t think that a type of business like this would do well period around the vicinity of the arena. I see a bunch of sports bars and corporate retail establishments becoming the norm.

  29. MikeM,
    I was thinking the same thing about the 24-Hour Fitness and CalFit near the arena. Where are their patrons (that have no interest in basketball) going to park on game nights? Validating seems difficult because saving $40-$60 on parking would be too easy. I suppose they could have a separate section just for 24-hour customers that is continuously monitored by a guard. But even with that, the traffic will be enough to drive many people away. The same can be said for the movie theater and any other business remaining in DP. This is why these areas become dead zones after an arena is built. Arenas only attract certain kinds of businesses and they drive away other types. Think about the dream of having a grocery store downtown, never going to happen now, where are you going park?

    What did the court say on the lawsuit? I didn’t see anything about it, I am also not willing to pay to see documents on the court website. But the thing is SBH can never be doomed economically, they have so much money they could have paid for the arena themselves, if they have to pay a little extra it is still well worth it to the them given the amount of money they are taking from the public.

  30. KevinS:

    The lawsuits are still pending. Searching by case number is free and you can get a sense of what is happening from the titles of the documents that are posted and what you can see through the grey lines they add when you preview. The cases are:

    2013-80001489 – Use of Public Funds
    2014-00156358 – Emminent Domain
    2014-80001840 – First CEQA Lawsuit
    2014-80001879 – Second CEQA Lawsuit

    The next scheduled hearing for any of these is on August 29 for the use of public fund case.

  31. There is a tentative ruling for the use of public fund suit, case number 2013-80001489. It is a split decision.

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