Oh, man, not another Marcos Breton “the extremists on both sides are wrong” article about the Sacramento Kings arena deal! I don’t think any of us has the energy for a point-by-point analysis of all his points this time, so let’s just pick one representative one and see how it looks:
Meanwhile, Fehr’s financing plan has evolved to a point that some in the public may not fully appreciate.
The city will generate most of the $258 million by borrowing against city parking assets and issuing tax-exempt bonds.
So, issuing bonds doesn’t actually “generate” money, any more than taking out a mortgage is a way to pay off your house — both just delay your payments for a while. And, for that matter, borrowing against city parking assets doesn’t really generate money either, unless you think the parking revenues will rise as a result of the arena, which Breton makes clear isn’t the case.
So the sentence comes down to “Sacramento doesn’t have to worry, because it’s borrowing the money, and paying for it later.” And this is the guy the Sacramento Bee chose to keep around while laying off pretty much everybody else. Maybe it’s for the best if newspapers die after all.
So what is going to be used to pay off the bonds?
Existing parking revenue, hotel taxes, and handwaving:
https://www.fieldofschemes.com/2013/03/27/4795/sacramento-council-approves-kings-arena-term-sheet-as-watchdog-group-calls-it-horrible-deal-for-taxpayers/
Neil – Like the Bee, the San Jose Mercury News has downsized through time and made decisions about who to keep and who to lay off (as well as lost sections of the paper, and shrinking in length, width, and thickness.) But one of the most unfortunate decisions was to move a sports reporter to the editorial desk – the editorials written about politics/candidates are no longer focused on issues of concern to citizens, but rather on personalities (is this candidate a good team player with the rest of the players already on the team?)
Don’t forget the last point: Sacramento is way more passionate about its franchise than any other city is about theirs.
Well, that’s the clincher. Thanks for saving the best for last, Marcos. Sold!
Marcos failed to ask one question, because I know he wouldn’t like the answer to it: In the event that revenues fall short, who makes the bond payment, and where does that money come from?
And I passionately (there’s that word again) disagree that defaulting on those payments, or in any way coming up short, would not affect the city’s ability to borrow. It definitely would. It’s Wall Street that makes these rules, not the Council or the Legislature. If we tried to sell bonds to repair our levees after coming up short on these parking bonds, the interest rate on those levee bonds would be higher than normal. Marcos is a fool for believing the answer he got on that one.
MikeM, to be paid from non-specific sources/”taxes in general” the bonds issued would be General Obligation bonds. Everything I’ve read outlines the bonds as being paid by the specific sources (Revenue Bonds issued against) future parking revenues with hotel taxes as the backup source. Unless lack of parking/hotel taxes leads to Sacramento in financial dire straits, let’s not get carried away with thinking Wall Street is going to be too influenced about future GO bonds.
I think if Sacramento actually defaulted on these bonds, it absolutely would affect their bond rating. But I also don’t think there’s a chance in hell they’d default – city officials have already said publicly that the general fund is the backstop in case parking revenues and hotel taxes aren’t enough.
ChefJoe, you’re not really answering the question:
What happens if the revenues from the parking and the arena just aren’t enough to make the bond payment? Do we then just hit the TOT, and neglect the Convention Center?
Speaking of the Convention Center:
http://www.sacbee.com/2013/09/27/5775488/sacramento-tourism-officials-back.html
However, the bonds used to fund the 1996 expansion still have eight years of payments left to go – meaning those hotel tax funds would not be available until 2021. Hotel taxes have also been designated to act as reserve financing for a new downtown sports arena.
So if the parking revenue isn’t enough and the general fund is used as a backstop….where do we come up with the money to pay for all the stuff no longer funded by the general fund? How come no one is willing to see this?
I just wonder how they can legally use the TOT funds when those funds are already earmarked to those bond-holders. I owe Anastos $10, and I owe Neil $10. Well, it’s a good thing I have $10; you’re both covered.
But isn’t the amount of bonds needed ~$14 million a year ? If you’ve got ticket taxes, parking revenues, and TOT taxes ($15-20 million a year) all available, there’s a lot being pledged. If I recall correctly, when Seattle’s kingdome revenue bonds really did come up “short” then the payments just extended out.
It’s the general fund. It’s always the general fund.
And as justification, dimwit sleazoid councillors and administrators usually fall back on this: “If we default, our cost to borrow will be higher… which will affect the general fund. So we are using the general fund directly”.
New arena = potholes and closed schools, libraries and police stations more often than not.
If the goal of any project is to take what used to be public assets (be it land or cash) and funnel it into a billionaire’s pocket, what makes anyone think that there won’t be consequences to the kinds of things tax dollars are supposed to be used for?
Even when arena funding plans “work” (IE: the building actually manages to pay for itself, more or less) there are still tax implications. More discretionary spending is concentrated in one area (the arena/district, generally controlled by the team/ownership), thus cannibalizing discretionary spending in other areas. Unless thousands of people move to city A just because they love “our team” so much, there will be little or no “new” spending done.
Mike: Good example. But if applied to arenas, you’d need to owe about 20 people $10 and only have the one fund…
It does appear the “Kings Bill” would streamline the EIR process (in terms of blunting frivolous lawsuits based on traffic levels and aesthetics) for projects in urban areas and near priority transit lines. So again, IF Diridon fell through or IF MLB said no to SJ, a hypothical ballpark EIR/project at (say) Airport West or Warm Springs would benefit greatly against NIMBY “concerns” about traffic or looks.
The A’s (should), be the heart and soul of Oakland. If the A’s were the heart and soul of Oakland, the fans are not showing it. The Raiders had 20 straight years of sale outs (before they left for LA), and the Warriors, who have had some of the worst NBA teams over the last 38 years (championship in 75), have had a legendry fan base in supporting a (mostly) losing the team. The A’s, where are all the fans that support the heart and soul of Oakland?
I am as Pro-Oakland as they come, but I think we have to be honest here, all of the other five Bay Area sports franchises, have either played in, or considered playing in deferent locations within the Bay Area, with not nearly the outcry, you see in the A’s situation.
The Raiders have played in Oakland, San Francisco, and Berkeley (outside the Bay Area LA)
The Warriors have played in San Francisco, Oakland, and San Jose.
The Sharks have played in San Jose, and San Francisco.
The 49ers have played in San Francisco, and will soon play in Santa Clara.
The Giants have played in San Francisco, and made the attempt to play in San Jose.
The A’s have only played in Oakland (Los Vegas because of the Raiders)
The A’s would like the same consideration the Giants had back in the 90’s, the Pro/only-Oakland folks are going to have to be a lot more then vocal, if they want the A’s to remain in Oakland.
ChefJoe, we really don’t know how much revenue the arena and parking will produce, nor how much the annual bond payment will be.
It’s a crapshoot. They can make forecasts and guesses, but there are no concrete answers. When you have a situation like Yum!, where things are missing by just enough, it can sink a city. Heck, it has sunk cities.
In Sac’s case, it’s easy for me to see a likely point of failure: People will park for free, and walk the last 10 blocks. It won’t be hard to do that. And since you can only raise parking rates in response to increased parking expenses, I don’t see how to address that. Charge more for parking? Yeah, I’m sure businesses on Broadway will like that.
George/Berry: What do the A’s have to do with the Sacramento arena funding plan?
BTW, from 1990-1996 (your chosen period), the Giants drew an average of 1.7m fans (heavily skewed by 1993, in which they drew 2.6m) at Candlestick. In the last seven years (2006-2012), the A’s have averaged 1.5m. How are they getting “less” consideration than the Giants got?
Mike:
That’s a major issue with “district” related financing, whether through parking levees, TIF/CRL zones or other attempts at “usage” financing. People can come to the games and not eat in nearby restaurants, for example. In fact, the greater the disincentive to do so, the fewer people will actually do it.
Then the host city is back to raiding the general fund again… because, you know, what else can you do (besides tell the team owner that they will have to be responsible for any crl related revenue shortfall as part of the funding agreement). If the rosy projections stadium proponents offer are true, why would any owner have a problem with accepting such a condition? After all, stadia make money rain like manna from heaven, right?
Wolff tried to invest in Oakland with his North-of-the-Coliseum project. He received no assistance from the city and ended up giving up on that project. Apparently, Wolff is expected by some to “invest in Oakland” even if it means losing piles of money. I’m still waiting to hear from these other parties eager to build a ballpark privately in Oakland, as per “If Wolff won’t build in Oakland, he should sell to someone who will.” (crickets keep chirping) Wolff was brought in by Selig to get a new ballpark done in the A’s current territory, not to come in and challenge the Giants’ “territorial rights.” We’ve all been waiting nearly 5 years now for MLB to refute Wolff’s assertion that there are no options left in the A’s current territory. support is weak
John, I assume you don’t know Sacramento that well.
There’s a real opportunity here for at least 20% of those attending events at the ESC to avoid paying even a dime for parking. As I understand it, a similar problem is one of the problems that plagues Orlando — why pay $20 to park when you can park a block further away, for free?
The City of Sacramento controls only 20-25% of the parking in Downtown Sacramento. If I owned one of the 75% of the remaining lots, I’d look at this an an opportunity to make a few hundred extra dollars on event nights. As soon as enough “other” lots are operating at $10/event night, the City is just doomed.
And that doesn’t even count the free stuff south R Street and east of about 12th Street. Yes, people really will walk 7 blocks in order to park for free.
If the City attempts to raise the rates at these currently-free spots, they have to show that their parking expenses have increased. I think that’ll be tough to prove.
Does anyone know how we got to Oakland in this thread?
I-80.
Well, I-80 goes to SF, not Oakland.
It goes *through* Oakland. But fine, if you want to belabor the joke: I-80 to the Nimitz.
Marcos seems angry. https://twitter.com/MarcosBreton/statuses/392347578177576960