July 27, 2006
Kings deal could violate law, math
The biggest problem facing the Sacramento Kings arena vote this November might not even be the fact that two-thirds of local voters oppose the project - rather, it's that the way the public vote is taking place could be illegal.
To get around a requirement that sales-tax hikes to fund specific projects be approved by two-thirds of voters, arena backers have proposed a pair of conjoined ballot measures: one to raise the Sacramento County sales tax, and the other to devote the resulting money to a Kings arena. But while a 1998 state court ruling allowed this sleight-of-hand, a state measure (passed before the court ruling, but subsequent to the case being ruled on), Proposition 218, significantly tightened up the vote requirements - and since this would be the first attempt to challenge that proposition, notes the Sacramento Bee, anti-tax groups are waiting to pounce with lawsuits should the arena measure pass.
In related news, Sacramento Bee columnist Daniel Weintraub has done the math that we discussed here previously (actually, it was Weintraub who helped tip me off to this present-value problem in an e-mail last week) and found that the Kings owners would only be putting up about 13% of the arena costs, not the 25-30% they claimed. The problem, writes Weintraub: "The deal's sponsors are comparing two very different kinds of numbers. One is the upfront cost of building the arena, which will fall entirely on the taxpayers. The other is the Kings' contribution to the project, which will be spread over 30 years."
The upshot: The Kings' $122 million contribution to the $470 million (or so) project would only be worth about $61 million, since so much of it would be paid decades from now, when it would be worth less, in present-value terms. Or to look at it the other way around, the Kings would spend $122 million over 30 years, but the public's costs, including interest payments, would add up to more than $900 million over that span of time.
Either way, it's the same answer: The team would only be on the hook for about half what its owners claims, while receiving all revenue from the arena. As Weintraub concludes, "That's not a very good way to start a campaign to persuade the voters to raise their taxes and give the money to millionaires in shorts."
I'm not sure the deal leaves the Maloofs on the hook for even a dime, once you subtract out the property tax savings the plans generate for them. The signage rights of $2-$3 million/year ought to more than cover the $61 million they're going to be out; add in the property tax savings, and I think the Maloofs might actually get a free building AND cash.
And you wondered why they looked so happy on TV following the 4-1 vote.
They probably won't look that happy after the courts toss out this illegal tactic. This is clearly a special tax, and thus requires a 2/3 vote.
I'd rather see them leave.
Posted by: MikeM on July 29, 2006 06:31 PM
If Sacramento has $ for new arena, why don't they have $ for new levees to keep city from flooding. they need federal $ for levees.
Posted by: Steve on August 20, 2006 11:52 AM
