The Sacramento city council is set to vote tomorrow on a plan to loan $27 million to Ron Burkle, owner of the new Sacramento Republic F.C. MLS franchise, for roads and other traffic and transit upgrades around his new stadium, and “repay” it using Burkle’s own property taxes on development surrounding the stadium. Said Sacramento Mayor Darrell Steinberg, who is proposing the loan:
“For me as mayor, there is one overriding question: Is an infrastructure loan that clinched the deal to get Major League Soccer and help reverse decades of little progress in the railyards good for the city? I have no doubt the answer is yes.”
That seems to imply that any size public loan to a private entity would be good enough for Steinberg — who can put a price on reversing decades of little progress? — but whatever, it’s best not to think to hard about what politicians say when politicianing.
This is, of course, tax increment financing, which we’ve covered to death here previously. (Tl;dr version: No, it’s not “new money.”) On the bright side, sort of, the tax increment cash was already set to go to Burkle under his previous agreement to get $33 million in city funding for his stadium; now instead of having to wait to get it year by year, the city would loan him the money up front and he’d pay it back by letting the city have the taxes they would normally collect anyway. The only added risk, really, is that Burkle defaults on the loan, which seems unlikely, since presumably he’ll put up as collateral—
The investor group will be required to put up a yet-to-be determined collateral.
Sigh. Well, it’s not too much worse than the original deal. Probably. Feel free to read the amendment being voted on tomorrow yourself and see if you can find any more potential pitfalls.
“…. by taking advantage of new state infrastructure law that would permit the use of future increased property tax revenues from the site for the loan repayment.”
What new law? Who does it apply to? Corporations? Homeowners? Where does it apply to? Railroad yards? Inglewood? No worries. Sure SI is on it.
I believe the state passed authorizing legislation for the TIF. Sacramento will be voting to then set up the actual loan.
Man, I wish the real world worked this way… I mean for non-billionaires, obviously.
How’s this for collateral to protect Sacramento taxpayers from a default: 27 million dollars worth of physical gold divided up in time locked vaults in Switzerland that sequentially unlock annually to release estimated yearly TIF property tax receipts.
…..Or else, pitfall: Soccer is a bust. The stadium demands valuation markdown and the property tax rebates never cover amortization of loan.