Field of Schemes: Sheriff takes shot at Kings arena plan

November 18, 2004

Sheriff takes shot at Kings arena plan

So way back in September, someone alerted me to a story about a proposal being floated by Sacramento County Sheriff Lou Blanas, which would use a complicated set of rezoning initiatives and private land donations to fund a new arena for the Sacramento Kings. I thought about mentioning it here at the time, but ultimately decided against it because it just sounded so screwy - it was being pitched by the county sheriff, fer chrissakes, and from all accounts the financial model was never going to fly.

So, naturally, yesterday Kings owners Joe and Gavin Maloof officially endorsed Blanas' arena proposal, having apparently had their arms twisted by NBA commissioner David Stern.

The basics of the sheriff's plan: The city of Sacramento would annex 10,000 acres of neighboring North Natomas, which would open up the area, now mostly farmland, to development. Since this would presumably send property values in the area skyrocketing, local landholders would be asked to, in exchange, donate 20% of their land to a foundation, which would in turn sell it raise cash (an estimated $600 million) for a new arena.

Needless to say, the prospect of generating $600 million out of thin air - "It's not going to cost the taxpayers a dime," Blanas declared yesterday - sounds too good to be true, and there are plenty of questions remaining about Blanas' plan: What guarantee would the city have that the donated land would really fetch that much in sale price? What would be the environmental costs of allowing development in a floodplain that's home to endangered species? Would opening North Natomas to development just cannibalize development that otherwise would go to existing sections of Sacramento, thus depressing land values elsewhere? Nothing so far this week in Sacramento's one daily, the Bee, about any of these issues; with any luck, the alt-weekly News & Review will be more on the ball.

One question, at least, has been answered by the Bee: Why the heck is the county sheriff involved? Blanas, it turns out, is a "close friend" of local developer Angelo Tsakopoulos - who just happens to own about 14% of the land that would be opened to development. Ah, California - things never change.

COMMENTS

Supposedly the land for North Natomas was slated for eventual development but the plan calls for it to be developed on an accelerated schedule. Although its interesting to see if the current landowners actually believe it would be worth giving up 20% for quicker development. The new arena would not be built in the area but next to the current arena in the Natomas area. Supposedly if the land is allowed to be developed it will sell for $400,000 an acre. But that means the total area is worth $4 billion. I am not sure whether that is a realistic figure.
Posted by: Michael Kim at November 18, 2004 08:38 PM

Based on the growth of the Sacramento region and more directly North Natomas, this land can either be used for a stadium and retail complex now or it will become houses in the future. Trust me, the last thing Sacramento has to worry about is its land value becoming depressed due to the building in North Natomas.
Posted by: Jason Fitch at November 19, 2004 01:15 AM

Of course given the general economic ignorance of journalists about the concept of opportunity costs they will fail to mention that the City of Sacramento can accelerate the development ask for the 20% cut and use the money for other purposes, for example roads, schools, transit, etc.
Posted by: Michael Kim at November 19, 2004 01:16 PM

I would take issue with Mr. Kim's observations about the economic ignorance of journalists, which pales compared with the ignorance displayed by self-appointed media critics and the illiterate masses whom they claim to champion. The city can ask for whatever it wants, of course, and thus kill the stadium deal by raiding its revenue stream. That's not opportunity cost, that's opportunity lost.
Posted by: Michael Green at December 8, 2004 01:31 PM