October 01, 2007
Cal Expo mulls Kings arena
The Sacramento Kings arena plans are back from the dead. On Friday, the board of the California Exposition & State Fair voted to open negotiations with the NBA on building a new arena at the state fairgrounds on its land northeast of downtown.
To fund the arena, explains the Sacramento Bee:
The idea is to lease some of state-owned Cal Expo's 360-acre gold mine of underused land to a developer for building stores, offices and homes. NBA and Cal Expo officials hope such a development could produce enough money to both fund an arena as well as refurbish the fairgrounds. The price tag could easily top $650 million.
Of course, if the Cal Expo land is a "gold mine," one would think it would be so even, or especially, if a large chunk of it didn't need to be devoted to a basketball arena. (Despite what the Newark Star-Ledger misquoted me as saying this morning, there is little evidence that sports facilities make good catalysts for local development.) According to the Bee, state assemblymember Dave Jones, an arena funding critic who serves as an ex officio member of the Cal Expo board, "tried unsuccessfully to get the board to direct staff to specifically look at redevelopment proposals that didn't include an arena, and compare them with one that did."
Yes, you're right, that land could be a goldmine. But according to the new State law that allows this, each of the venues that resides on this last must be self-supporting.
Text of the enabling legislation can be found here:
http://info.sen.ca.gov/pub/07-08/bill/sen/sb_0251-0300/sb_282_cfa_20070710_131424_asm_comm.html
The "offending" text:
Provides that the authority may enter into binding and enforceable rights to payment, which constitute a lien and security interest attached to the property so pledged. Cal Expo shall provide security against any indebtedness incurred pursuant to a lease or agreement, and the master plan. Any bond issued shall bear the statement "Neither the full faith and credit not the taxing power of the State of California is pledged to the payment of the principal of, or interest in, this bond."
I am also extremely skeptical of advancing this without the Maloofs being involved. What if they simply say, "We do not like these aspects of the arena and its location", and leave anyway? This is a question our locals may want to ask Kansas City.
Oh, but they wouldn't negotiate in bad faith, now would they?
Posted by: MikeM on October 1, 2007 05:01 PM
That clause doesn't mean the arena has to be self-supporting. It means that the bonds can't be based on general revenues of the state of California.
There are two ways CalExpo could get around this: Find a specific revenue stream to support the bonds (say, rent from the other development on the site), or buy bond insurance. Neither would preclude using public subsidies.
Posted by: Neil on October 1, 2007 08:01 PM
More explanation from the Bee on Saturday:
http://www.sacbee.com/101/story/418021.html
So, it looks like the plan is, in essence, a PILOT; allow development near the arena, then use revenues from that development to fund the arena.
My guess it this won't fly with the voters. That's more than just a hunch, really; the 80-20 vote last year makes it so, really, no local politician will endorse such a plan. No one will see this as "visionary"; they'll see it as "thwarting the will of the people."
Nice to see the Bee stop talking about the traffic (which, while it is important, is secondary to the finances) and start hinting at how the project may be funded. To me, talking about traffic, transit, parking, etc. before discussing funding is putting the cart before the horse.
I think the Bee finally gets it.
Posted by: MikeM on October 10, 2007 02:07 AM
Not a PILOT, because that'd be a payment in lieu of taxes, and this is a payment in lieu of rent. A PILOR?
The principle is the same, though: Do a development project, and take the money it would normally generate for the public and give it to the sports team instead.
Posted by: Neil on October 10, 2007 07:58 AM
Encouraging news to report:
Last Friday, FEMA imposed, in effect, a moratorium on building in Sacramento's North Natomas area. The land on which Arco Arena sits is almost exactly in the center of the area in which FEMA imposed that ban. This ban will remain in effect for what some speculate will be a very long time, perhaps as much as a decade (that's how long it will take to improve levees and build and expand dams).
This land was central to the funding scheme the arena backers wanted to use to fund the arena. They speculated 185 acres was worth $70 million or so, but many were skeptical of that (I don't know how you get $1.2 billion in income from land worth $70 million; I don't know how you fund infrastructure for 185 acres of development when that income is instead diverted to arena construction).
Anyway, the Cal Expo board was scheduled to meet with the NBA today, but on Friday, following FEMA's announcement, Cal Expo cancelled today's meeting, without comment. You have to read between the lines a bit here; yes, I am speculating. But I think the bottom-line is that the 185 acres in mind are now practically worthless. No, not entirely worthless, but the land moved from "lukewarm" to "pure speculation" on the part of companies who may have wanted to do business there (FEMA moratoriums have this kind of effect).
The next move may take a long time to get to, but it's extremely difficult for me to see how you get income from that 185 acres now, and the entire funding scheme apparently hinged on that income.
Posted by: MikeM on October 16, 2007 01:30 PM
