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August 19, 2011
'Preliminary' Kings arena funding plan floats ticket fees, parking money, anything else lying around
Think Big Sacramento, the confusingly unpunctuated task force assigned by Sacramento Mayor Kevin Johnson to come up with a way to build a new arena for the Kings, issued its "highly preliminary" report yesterday — no, really, it says "highly preliminary" in big red letters on the top of each page — on how to pay for a $387 million arena.
The main focus of the report is what it calls "user fees," which it defines to include ticket surcharges, concessions surcharges, parking fees — and, more weirdly, business improvement district revenues and naming rights revenues. Local businesses and naming-rights sponsors aren't usually considered arena "users," but given that the report declares that "public support for users fees is strong" (apparently Think Big isn't any better at grammar than punctuation), there could be some attempted spin at work here: Look! We're going to raise all the money with user fees! User fees good!
Except, of course, that things like ticket and concessions surcharges mean that the Kings wouldn't be able to charge as high a price for tickets and hot dogs — since presumably they'd already be charging the most the market will bear, so a surcharge would drive fans away unless the base price were lowered. So this is really a revenue-sharing deal, which, while potentially promising from the city's perspective, isn't likely to make the Kings owners the Maloof brothers too happy, since if they wanted to build an arena with their own money they would have done so already.
And also except that the Think Big report also specifies that the "finance plan will require support from three areas: private investment, user fees and public participation" — so there would almost certainly need to be more public money involved. (The report does some quick back-of-the-envelope math to come up with annual revenue of between $5 million and $20 million, which is to say somewhere between "nowhere near enough" and "not quite enough" to pay for arena construction itself.) Other public funding, as laid out in a cursory flow chart, could include the sale of public land or "revenues from assets directly enhanced by" the arena, which sounds an awful lot like a TIF.
Initial reaction to the proposal from all corners could probably best be described as "wait and see." A less preliminary plan is slated to be revealed on September 8.
I just don't see how these guys get their work completed by March 1. Seems to me we're inching back toward it being a move to Anaheim situation for the Kings again just one year removed.Posted by Dan on August 19, 2011 02:18 PM
You can't be serious. Their work is done. They know the numbers don't work. Now it's all about dribbling out the clock with shameful propaganda only meant to soften up the public and create a sense of urgency. The Bee headlines prove they are in the tank with KJ. They manipulate the numbers to create the false impression this vague financing plan can work. There is so much fraud, deceit and lack of any honest reporting that it must be fought at every opportunity. Team KJ isn't fooling most of us, but it's the useful idiots I worry about.Posted by Cal on August 19, 2011 04:08 PM
Well the clock really is running out. Misinformation and rushed reports are the best they can do to get it passed in time or the team will be the Anaheim Royals for 2012-13. It's not like they're dealing with the nebulous idle "move threats" that most cities get to deal with. This time the destination is certain, the money for the move is there, the potential new owner is ready and waiting in Anaheim... KJ has to work fast or risk being they mayor who lost the city's only sports team. Which for a former NBA star would be unthinkable to him personally. So nothing they've done is shocking.Posted by Dan on August 19, 2011 05:28 PM
This whole process has been shameful. Sacramento has laid off City employees. The city garbage pickup is pretty bad in some neighborhoods. The city's large governmental workforce has been hit with layoff, pay cuts, and various calls for "pension reform" and Mayor Johnson and his wealthy cronies want to subsidize bread and circuses at taxpayer expense. How about selling city land to pay for current needs? Or how about NOT selling city land in a down real estate market. I hope the New Arena (or Entertainment and Sports Facility as the Mayor and his propoganda machine call it) go away.Posted by JJO916 on August 19, 2011 06:39 PM
This whole process has been shameful. Sacramento has laid off City employees. The city garbage pickup is pretty bad in some neighborhoods. The city's large governmental workforce has been hit with layoff, pay cuts, and various calls for "pension reform" and Mayor Johnson and his wealthy cronies want to subsidize bread and circuses at taxpayer expense. How about selling city land to pay for current needs? Or how about NOT selling city land in a down real estate market. I hope the New Arena (or Entertainment and Sports Facility as the Mayor and his propoganda machine call it) go away.Posted by JJO916 on August 19, 2011 06:44 PM
Really? You guys don't know the first thing about this issue, do you? Seriously. Do you think that fire, police, etc, will be better off if there is no arena? Nope. They will not get one more cent. However, they will lose money over the lost tax revenue if the team leaves. This type of logic makes your site irrelevant.Posted by Chuchue on August 20, 2011 12:59 PM
Big problem with adding surcharges is the wealth of the fan base is a large factor in whether or not it will succeed in providing the #s.
In the Bay Area I could see these surcharges working and financing a new arena very nicely. It works because the Bay Area is a wealthy region and the fans have disposable income.
In Sacramento though? I have a hard believing it would work to the levels they are stating.
Sacramento/Stockton was one of the hardest hit areas in housing bust and people there just are not back to where they where pre-2008.
Disposable income is not nearly as high in that region.
Privately financing an arena in the Sac region is impossible. A public subsidy is needed as when you compare Sacramento to other US cities it is easy to see the parallels.
The Kings are gone....They are just going through the motions one last time.
Posted by Sid on August 20, 2011 05:25 PM
"So this is really a revenue-sharing deal, which, while potentially promising from the city's perspective, isn't likely to make the Kings owners the Maloof brothers too happy, since if they wanted to build an arena with their own money they would have done so already."
Except they can't, because the Maloofs are now dead-ass broke. They've sold their beer distributorship, their previous main source of "wealth" is now owned by a consortium of Vegas hoteliers with the Maloofs retaining a 2% stake as figureheads, and their Wells Fargo stock is, well, stock. Short and sweet, they ain't got the cash flow to come up with an arena on their own, so they need to play the "tenant" part rather than continue to act as the operator at Arco.
If (and I repeat, IF) this works out as TBS has put forth, this could be a winner for the city of Sacramento and the entire MetroSac region.
The alternative that some here propose - just folding up shop and letting the Kings move to Anaheim without making the attempt to keep the team - leaves the city with an undersized, decrepit and failing entertainment venue with no anchor tenant and no hope of returning to the NBA.
Here's how I seen this Railyards arena scam playing out.
The arena PR machine will attempt to sell it as a 'jobs' issue, but if the project doesn't sail with PLA's and union scale wages, it won't fly...
But even if it does, and even if the Maloof's fly south in March, KJ and his suckups are pushing this as an 'entertainment' facility, even without a prime tenant.
Heck, even WITH a prime tenant, the Maloof's are now pushing for a deal paying only $1 million per year, just as is done in Orlando, so there won't be much revenue contribution from them in any event.
So, even if this white elephant is built, financed on the spurious promise of travel tax and user fee revenues, the prospectus of which would have to be the 'greatest story ever told', when these revenues fail to materialize to sufficient levels necessary to pay for the deliberately lowballed cost estimate by David Taylor, omitting utility and parking infrastructure, a decent budget contingency, and even site prep #if you saw the Railyards you'd KNOW it NEEDS site prep#, and now the with the ULI's recommendations of subterranean construction and additional land to plop this big dig gig onto, the city will be compelled to pony up a REAL tax to be imposed on the people, and that will probably be the broad based sales tax sought in 2006...
...all in the name of this scandalous project which has never been vetted by a needs analysis or strategic plan or any other business conventions, but rather, merely emerged as a foot stomping demand of the Maloof's for a class A arena paid for by the public, most of whom will never be able to afford to attend....Posted by bbbbmer on August 21, 2011 05:11 PM
I'm sure Chuchue is gone, but I'll address him anyway.
Chuchue, you seriously need to review the track record of these arena deals. I'll give you an easy, recent one: Orlando. The bonds have been downgraded to junk, and they're not sure how they'll service the debt starting in Fall of 2012.
These things have a consistent track record of saying they'll stimulate local economies, then doing the opposite. Of the last 4 or 5 of these built, I don't think there have been any exceptions.
I believe that the benefits have been vastly overstated, and the costs vastly understated in Sacramento's case. I think they also faked it on their lousy poll.
Here's the poll:
Others, what do you think of it? Where are all the technical notes we usually see in well-done polls?Posted by MikeM on August 22, 2011 12:20 AM
Mike - organizations usually don't reveal the crosstabs in a preliminary press release. Instead, they usually punch up the high points of what they're trying to sell, while at the same time minimizing the low points. Thus, when the actual methodology of the poll is released, the mindset of the general public at large is already molded to believe the one interpretation of the poll that the organization is trying to sell.
We have a name for this sort of thing in our society - "Politics."
The numbers for any kind of public financing just don't work for Sacto right now. Absent a major contribution from the Maloofs, or an otherwordly contribution via naming rights, the only way to finance this sucker is either user fees or public input. Because of that, the only way they'll ever get to shovels in the ground is via "Politics."
Do keep in mind, also, that even when they put shovels in the ground, projects sometimes run into money problems and are not finished. There's still a hole in the ground across Capitol Mall from the Wells Fargo building that stands as warning to what can happen when financing isn't solid.Posted by SierraSpartan on August 22, 2011 10:37 AM
/\ /\ /\ And there's a foundation for a minor league baseball stadium across the parking lot from Arco Arena.Posted by Brian on August 22, 2011 11:39 AM
I thought they demolished that foundation?Posted by Dan on August 22, 2011 01:15 PM
This all sounds eerily familiar to what just happened thousands of miles away on the east coast on Long Island. The arguments above are almost a carbon-copy of what was said there.
There was a referendum put up to public vote that failed. It was a revenue sharing deal, however the minimum guaranteed payment by the prime tenant (New York Islanders) was to be $14 million a year on a predicted yearly debt service of $26 million a year.
It failed 42-58%Posted by JV on August 23, 2011 12:02 PM
This is the kind of thing KJ should work on preventing:
A major employer, ironically located within 2 blocks of the proposed arena site, with 1,500 employees, moves to a different town. I bet it wouldn't have cost $387M to keep that employer in that location.
KJ cannot see the forest for the trees.Posted by MikeM on August 24, 2011 01:07 AM
Only a disgusting place like Sacramento would fight over putrid franchise called the Kings.Posted by 49ers Superiority on August 24, 2011 02:28 PM
Does this say what I think it does -- that they may want to rely on businesses making voluntary contributions to pay for a new Sacramento arena?
What bond rating agency worth half a darn would be willing to accept that? Well, I guess if they can find out a way to completely shield the taxpayers, maybe it'd work. For a while, anyway.
Nah. I didn't really say that.Posted by MikeM on August 25, 2011 01:51 AM