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September 22, 2011

Kings arena costs uncertain, could steal funds from other projects

The Sacramento News and Review has a good rundown today of where things stand in the Sacramento Kings arena campaign, and it goes a little something like this:

  • The $387 million price tag is just a guess, and doesn't include land costs (the site was initially bought with money earmarked for transportation projects, so the transportation fund would "have to be reimbursed $10 million to $20 million, maybe more") or infrastructure costs (including building new streets and sewers). Also, whether a new freeway interchange will be needed, which won't be known until a traffic study is done — which can't be completed before the Kings' March 1 deadline to decide on building an arena.
  • The site of the Kings' current arena could require an "incentive package" to get new development there once the arena is gone. But "we don't have any money with which to incentivize anyone," according to Sacramento city council member Rob Fong, an arena proponent. One possibility: Giving extra city-owned land near the arena to a developer as an incentive for building there ... except that sale proceeds from that land are already being included as one way of paying for the arena. "Clearly, that land can't be sold to raise money, and also be given away to entice a developer," notes the News and Review. Oh, can't it?
  • If you're going to be selling off city land and investing in city infrastructure, it's worth considering whether doing other things with the money would be more effective than building an arena. "The city can always sell land, but it makes the most sense for a one-time expenditure that brings a stream of benefits into the future," Sacramento State University economist Rob Wassmer told the paper. An arena could fit that bill, he said, "but so would the building of a new public park or a bike trail." Adds California Budget Project director Jean Ross: "There are a number of options which could potentially touch the lives of a broader range of residents, and have a greater impact on Sacramento as a place to live, work and play You could build world-class science labs in all city schools. You could invest in endowments for pre-school programs and after-school programs. You could Wi-Fi all of downtown. You could improve parks and other facilities that far more people would actually use over time."

Or you could renovate a local community theater, which is what Sacramento has been planning to do with $50 million of the money that could now be redirected to a Kings arena. "The Community Center Theater needs a renovation to add more seating and make it A.D.A. complaint, without it, there will be no Broadway season," Broadway Sacramento director Richard Lewis told the local ABC affiliate. Question: Is that factored into the arena proponents' economic impact projections?


In regards to selling land to developers, there is some history with David Taylor, the Sheraton Hotel bailout, and K Street here in Sacramento if you are interested.

Posted by John Doe on September 22, 2011 11:46 AM

The question that has never been adequately addressed, I think, is the funding gap. As you noted, the $387M is just an estimate, but that estimate didn't include the 1,500-1,800 premium parking spots the City's technical review says the site will need. Logistically, those will have to be parking structures; shouldn't that cost around $40M?

The $2M/year Think Big had envisioned using from the hotel occupancy task is probably gone; since the City already promised it to the Community Center in 2006, I think they'd be setting themselves up for a lawsuit if they went with that idea.

Just add those two things, and we're at a $90M funding gap.

I've said all along that I thought March 1 was going to be a very difficult goal, but the question is, will the City go ahead and approve the project with this funding gap? They might. And with $7B rolling in over 30 years with a mere $500M invested, who wouldn't do that? That's the line I'm afraid they'll fall for.

Added to this: I don't think the City will be willing to sell those "unused" City properties and its parking lots to fund this arena. Just adding to the funding gap. And interest on the arena bonds; more adding.

March 1? I doubt it. My question: Will the NBA be willing to wait for a vote on a "small" general tax hike in June to help fill the gap? Don't be surprised if this gets proposed eventually.

Rob Fong was on our local NPR affiliate yesterday:

About halfway through the program.

Posted by MikeM on September 22, 2011 12:32 PM

MikeM -

"[T]he question is, will the City go ahead and approve the project with this funding gap? They might."

Would have to agree with you, they very well could go ahead with it even if there is a funding gap [Although in the theoretical you go going that $2 million a year is likely really around $30 million or so in terms of current value]. They sure seem to be grasping for every single dollar they can possibly get.

Posted by John Doe on September 22, 2011 01:03 PM

Well, technically the whole thing is a funding gap, since they haven't identified any specific revenue streams to pay for it yet. But yeah, lowballing the costs and then saying "Oops, did we forget to mention the parking garages?" once shovels are in the ground is certainly a tried-and-true tactic.

Posted by Neil deMause on September 22, 2011 01:24 PM

Watching that News10 piece on the $50M Think Big is trying to get control of, it occurs to me they might try for a "compromise": Run the Broadway shows in the new arena.

That would completely suck as a solution, but just watch, our Council will consider it.

Losing the Broadway shows would be a big deal. They consistently sell out those shows.

(Caution: The web page has an autoplay video. I hate autoplay...)

Posted by MikeM on September 22, 2011 03:58 PM

"Added to this: I don't think the City will be willing to sell those "unused" City properties and its parking lots to fund this arena. Just adding to the funding gap."

In regards to the selling or leaseing of parking lots, according to Randy Youngman's reporting:

"Lehane also pointed out that the privatization of parking � leasing city-owned parking spaces to a private operator for a huge up-front fee � wasn't calculated into the report's figures."

Posted by John Doe on September 22, 2011 04:03 PM

Well, this is nice:

This needs to end NOW.

Posted by MikeM on September 23, 2011 12:09 AM

Just a warning for those who actually live in Sacramento in case this is put to a vote:

CA law requires both an impartial analysis and a fiscal analysis for state propositions.

CA law also requires both an impartial analysis and a fiscal analysis for county-wide ballot measures.

CA law does NOT require a fiscal analysis for city-wide ballot measures. Only an impartial analysis is required, and as we learned when our city was taken to court, the impartial analysis written by the city attorney does not need to disclose costs.

In a nutshell, this is what happened in Santa Clara: So a city-wide ballot measure for a stadium can be written to not disclose costs. That's legal (that doesn't make it right or ethical). A stadium ballot measure can also go to the voters without a binding contract to vote on,and without a final financial plan. What Santa Clarans voted on in June 2010 was a non-binding Term Sheet, and since then, the terms have been negotiated to be even more favorable to the 49ers. Couple the favorable wording of a ballot measure with a lack of cost disclosure, and deep pockets to pay for campaign advertising that not only does not disclose costs, but outright mis-represents costs (No cost to Santa Clara's General Fund! No cost to taxpayers! No new taxes! A stadium for free!), and you, too, can see your community swayed from 62% against a stadium to only 42% against at the final tally.

Posted by SantaClaraTaxpayer on September 23, 2011 01:04 AM

There will be no vote honey. This arena scam will happen and I won't know what to do next with my life.

Posted by bbbbmer on September 23, 2011 03:04 AM

Sacramento already owns an Arena that has not been paid off, yet.

It needs renovation both inside and outside but currently it is fine for all major rock concerts and for NCAA Basketball (they said so).

While well intentioned to get downtown Sacramento rebuilt (for the 14th time because it is a real dump) this entire deal is a cooked up scam to fund that redevelopment (now hopefully killed by Gov Moonbeam).

Without public support (try the previous vote by the PEOPLE) this thing is giant circle jerk by those on the government dole downtown.

Posted by sergio on September 23, 2011 11:24 AM

Thanks to MikeM for the insightful commentary and links on the squandering of public money for Maloofalent purposes.

No doubt you've got a harder job of it in our State's capital than we had down here in Santa Clara. But our guess is that your public purse is probably going to get ripped off for a bit less for a basketball arena that we will on an NFL stadium for the San Francisco 49ers (Total cost: ONE BILLION DOLLARS.)

Still, though, I was struck by the fact that anyone would take funds intended for a city's **General Fund** and that - in this economy - they would actually blow them on sports arena consultants.

Now, in Santa Clara, we've "only" blown $3,200,000 in Redevelopment Agency money on a similar cast of consultants --- but we've deluded ourselves that we're being "frugal" not to have used General Fund money to do it (!!):

Mayor Kevin Johnson thinks that kind of expenditure's just great - he gets to blow $550,000 of your money for consultants who are going to tell him exactly what he wants to hear.

Let's be clear: The immediate benefit to politicians isn't the grease upfront - it's the prospect of rubbing elbows with State Legislators in a luxury suite in some new arena which has been paid for with taxpayer dollars.

Maybe a new subsidized arena for the Maloofs, then, may simply be seen as a playpen for blossoming political careers.

If those aren't your tax dollars at work - they're your tax dollars at play.

Bill Bailey, Treasurer,


Posted by Bill Bailey on September 24, 2011 01:33 AM

Now AEG is involved. Oh, joy!

Posted by MikeM on September 24, 2011 11:33 AM

Of all th'....luck.

Best source of info on your new business partners is probably Ron Kaye L.A. Sample:

Bill Bailey, Treasurer,


Posted by Bill Bailey on September 24, 2011 02:42 PM

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