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January 18, 2010
NBA choo-choo-chooses railyard land swap as best Kings plan
The city of Sacramento may be kicking around seven proposals for a new Kings arena, but the NBA has already declared its favorite — and it's not the one from downtown developer Thomas Enterprises that seemed to be the safe choice of local pundits. Rather, the league is backing something called the Sacramento Convergence, a complicated land-swap deal that would build an arena on city-controlled land at the downtown railyards, transfer the Arco Arena site and adjacent property to the state for a new state fairgrounds, and sell the current Cal Expo site to developer Gerry Kamilos for redevelopment.
As if that weren't confusing enough, the financial details of the project as reported are still murky: The Sacramento Business Journal says that the "initial phase" would cost up to $700 million, and that the Kings owners "would commit $300 million to the financing of the project, paying $10 million a year for 30 years" — though as anyone who's taken out a mortgage should know, that's not actually the same thing. (Depending on the interest rate, it would at most pay off $150 million in up-front costs.) Also not reported: how much money would be brought in by selling the Cal Expo site, which as we've seen is key to this kind of land-swap deal.
For their part, both Mayor Kevin Johnson and the head of his arena task force say they're still exploring all options, and aren't going to back a plan just because the NBA likes it. Which raises the question: Why the heck did the NBA even pick a favorite at this point, when on the face of it they shouldn't care who builds an arena, so long as it gets done without money their (or the Kings') money? John Moag, the former Maryland Stadium Authority chief who's been named the league's point man on the Sacramento arena push, told the Sacramento Bee that he liked the Convergence project because it included private partners "who are going to show me the money" — but if they're going to put up capital, they're going to want revenue back as well, so it doesn't actually help the project's bottom line.
Of course, maybe they're just hoping to steer clear of some of the more fanciful proposals, like the one for a riverfront arena whose restaurateur mastermind told the Bee, "Our river would literally come alive." Yikes!
"Choo-choo-choose"....NO! I come here for the snarkiness, not the pop culture references!
Oh internet, you betrayed me again.
There are a number of wild-cards in play here...
1) Why would the legislature consider moving Cal Expo from its 350 acre site in a much nicer location to a 105 acre site in a flood plain?
2) What if a higher bid comes along for the Cal Expo property?
3) The "Arco Arena is Dead!"-crowd is now saying Arco Arena is just fine for the State Fair. Which is it, dead (in which case it's not much of a gift), or perfectly fine (in which case, why are they moving)?
4) How do the residents of Natomas feel about this? My guess: Perfectly fine.
5) Timing and its effects on finances. First thing: Build the new arena; second thing: Build the new Cal Expo; third thing: Demolish Cal Expo so it can produce income; fourth thing: Derive profits from the new Cal Expo, which pays for the FIRST thing... A decade later. So how do you pay for the First Thing when you're not generating income yet? My guess: Municipal bonds, which the proponents will say is not a tax hike. But I think they should look to Indy, Glendale, Houston and Cincy if they really believe that. Past performance indicates that's not really true.
6) Why not just a simpler 2-way land-swap? 105 acres in Natomas for 20 acres in the Railyards? Doesn't that reduce the degree of difficulty by about 500%? I still can't figure out what'd motivate the State to move from 350 nice acres to 105 crappy acres. I see why the Maloofs would want it; the railyards are a better piece of land. All these trades, and the Maloofs, of course, end up with the best piece of real estate. Of course they like it.
7) The Maloofs also love the part about paying $10M in annual rent for a $600M arena. Hmm, just $300M for a $600M arena they'll control 100% of the time (I'm speculating, but it's going to work out that way, I'd bet). What's in it for the Australian bank? Why would they settle for $300M for their $700M arena -- and that's ignoring FVM. Include FVM, and it's far, far worse.
No, there's something they're not telling the public yet. Bait-and-switch, I'd bet. And we'll see a PILOT or a TIF mentioned eventually.
If you want a peek at what really smells about this "land swap" deal and what you're not being told, please read our editorial on the matter at
and read the rest of our site for a look at what is really at stake. Also note, once again, that the creative-fiction writing team, ERA (a.k.a. AECOM, etc.) and their swell 'impact' adventure stories also figure prominently in the mix. Its a deal being made in plain sight with nobody watching (well, we are...) red slider, www.ceav.us
Well, this morning, there was a public meeting, in which it was disclosed that Goldman Sachs will analyze the financial aspect of this deal.
Yes, that Goldman Sachs.
The PUBLIC got 90 minutes notice of this "public meeting."