Downtown Sacramento traffic, already getting F grade, to get super-double-F once Kings arena built

The new downtown arena for the Sacramento Kings is going to cause lots of traffic in downtown Sacramento. I know, duh, but there are, like, official traffic guys saying this, so:

Jim Calkins, the head of freeway operations for the Sacramento area, wrote in one email, “I think the minimum number of vehicles would be 8,000 — not 3,600.”

In another email, a transportation planner for Caltrans wrote, “There was no feasible way to mitigate those impacts.”…

The Kings, as the developers of the new arena, are required to pay impact fees to mitigate the costs of traffic projects.

The initial calculations based on the building size required a $310,000 fee.

The Kings have agreed to pay more: $500,000.

But Caltrans officials said that’s a drop in the bucket compared to what any other transportation project would cost.

There are plans for a new streetcar line and expanded highway ramps, but neither will be in place by the time the new arena opens in 2016, so there are likely to be some decent-sized traffic nightmares, at least at the start. Think this is maybe something that Cobb County should be paying attention to as well?

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.

Kings say new arena will be bigger, smaller, more expensive, not more expensive

According to the Sacramento Bee, the new $477 million Kings arena, being built with about $226 million in public subsidies after years of bitter fighting, is needed to replace the “outmoded and inadequate” Sleep Train Arena that had among the fewest seats in the NBA, even though the new arena will also have among the fewest seats in the NBA, but that won’t matter because it will have more luxury suites, but only 34 instead of 30 because NBA teams have learned it’s not good to have too many luxury suites especially in a city like Sacramento with no major corporations, but there will be more high-priced seats anyway but there won’t be a “massive” price increase but listen it will make more money it just will that’s the whole point don’t ask questions okay?

Anyway, Kings President Chris Granger promises that the lower seating bowl at the new arena will hold 10,000 fans instead of 7,800 at the old one, which will bring fans closer to the action because being at the back of a larger lower bowl is somehow better than being at the front of a closer upper bowl? It must be some kind of non-Euclidian geometry thing. I hear modern architects are doing great things with toroidal space.

Sacramento crafted Kings arena plan to be immune to public referendum

I hope you weren’t excitedly looking forward to Sacramento Kings Arena Referendum Part 3, because it turns out there won’t be one, since the deal was structured not to be subject to a public vote:

Sacramento Taxpayers Opposed to Pork (STOP) determined that the City Council’s approval of the financing plan is not subject to voter referendum because of the form of joint-powers authority the city created to issue the revenue bonds backing the project, said Jim Cathcart, one of the leaders of STOP.

So that’s … probably not it, because I’m sure there are some other legal challenges floating around. But at this point, it doesn’t seem there’s much that can stop the Kings arena from going ahead, except maybe the arrival of an atmospheric river.

Read more here: http://www.sacbee.com/2014/06/01/6448901/group-wont-seek-referendum-on.html#storylink=cpy

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.

When TIFs go bad: the Reno Aces story

The Reno Aces, the Arizona Diamondbacks‘ Triple-A affiliate, are getting about a million dollars a year from the city of Reno to pay off their stadium construction debt, and it turns out every single person running for mayor of Reno thinks it’s a bad idea to keep making those payments. Or at least wouldn’t raise their hand at a candidate forum to commit to making the payments, which isn’t quite the same thing, but still.

So what would happen if Reno were actually to default on its stadium commitment? As it turns out, the original stadium deal was to pay off the stadium with the resulting rise in property tax receipts — so-called tax increment financing, or TIF — except that, as is so often the case, property tax receipts didn’t actually go up, leaving the city to fund the stadium debt out of its general fund. That means the city council must vote on making the payments every year, and there’s nothing stopping them from voting “no.”

If that were to happen, we’d enter uncharted waters: As the Reno Gazette-Journal puts it, “Well, baseball could leave. Baseball could also take the city to court.”

This is essentially the same scenario that Columbus was considering with the Blue Jackets last year, except that there it was a good-government group with a broken website that was pushing it, whereas here it’s actual people running for actual office who are threatening to play the default card. I’m kind of hoping they do, not because I have a particular interest in the fate of either the Aces or Reno’s budget, but because it would be extremely interesting to see how a court would rule on the legality of a city stopping payments on an already-built stadium. I suspect you’d see a lot of city attorneys — and good-government groups — poring over a hypothetical Aces v. Reno ruling for years to come. Though in the meantime, it’s still at least a good cautionary tale about the risky nature of TIFs, if anyone is listening.

Final Kings arena plan: Sacramento would take roughly $226m loss to keep team in town

So that’s what the city of Sacramento was waiting for: a Friday afternoon on which to release its revamped Kings arena deal, ensuring that most of the media (and readers) wouldn’t be around to take notice. (Okay, Fridays are also the last day on which they can meet the legally mandated 10-day preview period before Tuesday city council meetings, but the media vacuum has to be a happy side effect.) The final agreement is super-long, but looks in line with the maybe-not-quite-as-bad-as-the-original-but-maybe-just-as-bad-after-all reports that were leaked last month. Some highlights:

  • The city will issue $298.4 million in 36-year bonds, at an estimated 6.7% interest, for an annual bond payment of $21.9 million.
  • The Kings will pay $6.5 million a year rent, rising by 3% a year (except for years 2-5, when it will remain at $6.5 million before jumping up by 16% in year 6).
  • The rest of the bond payments will be made by 1) siphoning off any future rise in city parking revenue and redirecting it to the arena debt; 2) kicking in $5.9 million a year in city money currently going to pay off parking garage debt, starting in 2020; 3) kicking back $1.3 million a year (and rising over time) in property, sales, and utility taxes paid by the team that would otherwise go into the general fund; 4) $2 million a year in hotel-tax money over the first three years, before there’s any parking money to tap; and 5) if all else fails and the parking revenues don’t materialize … I have no idea what the backstop is, but the bond report is 335 freaking pages long, so maybe it’s hidden in there somewhere. Or maybe there is no last-ditch backup funding measure specified, which would help explain that crazy 6.7% interest rate.
  • The Kings will pay all arena repair and operations costs, and will keep all arena revenues.
  • The Kings owners promise not to relocate the team for the first 28 years of the 35-year term of the lease. After 2044, though, all bets are off. I also can’t find any indication of what the penalties would be if the Kings were to violate this clause, which seems like a pretty important omission.
  • The city agrees not to impose any ticket taxes or otherwise tax arena events, meaning no getting out of city debts by trying to take it out of the team’s pocket.
  • There’s a really involved clause (section 7.3(B), for those playing along at home) that under certain circumstances (way too many sections to list here, or even to easily reference across multiple PDFs) appears to allow the Kings owners to back out of this agreement and substitute one where they pay off all remaining debts but cut their rent to $1 a year, if they so choose.

In really really short: The city will spend $22 million a year on the arena, and the team will kick in about 50% of that over time via rent payments (the combination of rising payments and decreasing present value gets tricky, but the Kings’ rent should eventually end up covering close to half of the bond costs), with the city cobbling together whatever money it can to cover the rest. And the Kings get to keep all revenue from the arena, while paying operating costs.

It’s not the worst deal ever, but that still doesn’t make it a good one. Basically, the Sacramento city council will be voting next Tuesday on whether to throw about $150 million at an arena that it won’t get back (plus about $76 million in free parking spaces, billboards, and other goodies) in order to keep the Kings in town through 2044. At least we’ve established what this transaction is about.

 

Sacramento delays Kings arena vote “indefinitely” while deal is finalized

So that “huge pile” of documents detailing the final Sacramento Kings arena deal really wasn’t ready last week: City officials have now postponed next week’s vote on the plan “indefinitely” while they finalize just what exactly the heck they’ll be voting on:

Nonetheless, officials said they remained confident the deal is moving forward, the delay will be brief and the project’s October 2016 scheduled opening isn’t in peril.

“The definitive agreements are in the last stages of completion and will be finalized soon,” the city said in its announcement.

Soon. Just not any particular time soon.

It’s still pretty likely that all the t’s will get crossed and this will get rubber-stamped by the council in due course, but there’s a reason why final votes are called final votes. You do have to wonder if somebody on the Sacramento city council is looking at that interest rate on the arena loans and blanching.

Kings delay release of arena funding details, as city’s interest costs go through roof

Sacramento officials and the owners of the Kings yesterday announced that they were postponing the release of a huge pile of documents — seriously, that’s what the Sacramento Bee article says, a “huge pile” — on the team’s final arena deal, so that they can “spend more time to perfect the provisions and details.” I.e., it’s not ready yet, it’ll be ready when it’s ready. This is a little bit of a problem, since the Sacramento city council is set to vote on the deal on May 13, and proposals are legally required to be made public 10 days before a vote, meaning the huge pile will need to emerge by no later than tomorrow if the Kings don’t want to risk a delay in the council decision.

Cosmo Garvin of the Sacramento News & Review, meanwhile, has taken a look at the bits of the deal that have been released so far, and contrary to initial reports that it would be slightly better for the city than the original deal since the Kings would pay more rent, he says it could actually be even worse than the initial plan. His reasoning goes as follows:

  • The city would have to pay $21.9 million a year in debt service, compared to $17 million a year in the original plan, because projected interest rates have risen from 5.75% to 6.75%.
  • The team’s rent would rise only from $4.7 million a year to $6.5 million a year, though that latter figure would increase further starting in 2020. And the team would no longer share profits with the city, meaning that $4.7 million could have turned out to be more in time.
  • The city’s added cost of $4.9 million a year is more than the team’s added annual contribution of $1.8 million. By a huge pile of money.

I’m not entirely sold on Garvin’s argument — I’d like to see a present-value comparison of the old and new rent payments over time, for starters, and you know what I think of profit-sharing deals and the machinations that teams can use to avoid paying out on them. Still, that interest-rate hike is a huge hit, and is definitely going to make it harder for Sacramento to cobble together enough money to pay its arena bills each year. Maybe the council should identify a hospital it can sell, just to be safe.

Revised Kings arena deal would cut Sacramento’s losses to $173 million

The Sacramento Kings have announced that they’ve revised their arena deal with the city of Sacramento, and there are more new details than you can shake a stick at:

  • The total construction cost has gone up from $447 million to $477 million, thanks mostly to the increased costs of developing the area around the arena site.
  • The city’s share of the costs will actually go down slightly, from $258 million to $255 million (though with the value of free parking spaces, billboards, and other infrastructure, the actual public cost is probably more like $331 million).
  • Instead of the Kings paying $4.7 million in annual rent (mostly from ticket tax money), the team will now be committing to a rent starting at $6.5 million a year, and rising over time.

Sacramento assistant city manager John Dangberg calls this a “significant enhancement to our financing package,” and it certainly looks like a better deal for the city, even if it still won’t come close to repaying the $9 million a year (and rising over time) in future parking revenues that the city will be siphoning off towards arena cost, let alone the city’s $13-14 million a year total bond cost for the arena. (Figure on the high side of that estimate, since interest rates have gone up, and the city has acknowledged the Kings will be putting in too much money to allow for the use of tax-exempt bonds.)

There’s a new city council report that spells out the latest agreement — I haven’t made my way through all of it yet, but it does estimate the present value of the Kings’ future rent payments at $157,555,183, which if you take the total public cost as $331 million, would mean that Sacramento taxpayers would only be taking a $173 million bath on this project. That’s better than the old deal, and possibly better than a poke in the eye with a sharp stick, though I’d want to read all the fine print before saying for sure. Not to mention test the sharpness of the stick.