Things are getting crazy with the Kings and the arena. They mayor and his buddies are concocting desperate schemes behind closed doors, the public has little idea what’s being given away and the purported watchdogs are cheering on the spectacle.
With the stakes for the city’s financial future so high and local irresponsibility so extreme, one can only hope that the NBA itself finds Sacramento’s resources insufficient to feed its insatiable greed.
Last week, Mayor Kevin Johnson, whose political career is riding on keeping the Kings, released this statement to the Sacramento Bee:
“We know that there is a breadth and depth of support for a public-private partnership to build a downtown-based arena that will create thousands of jobs and transform the downtown, all while putting the taxpayers first and protecting the general fund.”
Virtually everything in that statement is baseless, but it was mindlessly printed in the Sacramento Bee. Voters made it perfectly clear in 2006 that they want no part of subsidzing NBA millionaires; academic studies have demolished the idea that arenas are economic generators; and the mayor himself has concocted a parking privatization financing scheme that sidesteps taxpayer approval while jeopardizing the general fund.
City manager John Shirey, who is dancing as fast as he can to the NBA’s tune, refused to release details of his negotiations with billionaire Ron Burkle, one of the mayor’s “whales.” Shirey insisted the negotiations were private and said many details have not been nailed down.
“Details” include the location of a new arena, its cost, the amount of a public subsidy, the value of the city’s parking concession and how the general fund, which finances basic city services, would be replenished.
Nevertheless, Shirey claims he’ll have a plan ready for a public forum this Thursday and a City Council vote March 26. The rush, of course, is to meet NBA commissioner David Stern’s April 3 deadline. Stern has kindly warned Sacramento to come up with more money if it wants to be taken seriously.
The absurdity and the danger of rushing into such a major financial undertaking are clear, but don’t expect the mayor and his developer buddies, who have the most to gain, to stop the train. I doubt the council will have the gumption to stand up to the mayor.
I thought the Bee might, at long last, rise to the watchdog role it should play as the city’s only daily newspaper. I thought it might want atone for its long abdication of responsibility and its incredible burying of John Kehriotis’ alternative arena plan. Thank goodness for Jim Crandell and Fox 40 for keeping on top of the story. I even hoped the Bee might take an editorial stand saying: Enough of this craziness.
Instead, the newspaper’s editorial writers Thursday called for a forum on March 26 instead of a council meeting to “let the public have its say on arena proposal,” as the headline put it. At that stage of the process, calling for public input is nothing but an empty, cynical gesture.
And so the craziness goes. It looks as though local lawyers will have to be called upon to stop the runaway train.
My prediction that the Downtown Plaza site would cost less was wrong but the City is still on the hook for more than half of the estimated cost and I have still seen nothing reasonable (meaning quantitiative) that shows that the city will get a positive return on its investment- a realistic plan to backfill the general fund and when the $1B investment in downtown will occur and how much will go back to the city in exchange for its $255 M investment.
What is Mayor KJ’s agenda ? to sacrifice the future of the city with this basketball
arena plan, just so ha can feel better in reminding himself about his basketball past
glory.
As a mayor his focus should be on the growth and progression of the city in which
he is in charge of ?
Is this really the answer to our future growth, if the answer is no then, people needs
to speak out and voice their opinion.
I just hope that the city council members does not get bamboozled, hoodwink,
by Mayor KJ’s delusional mind frame.
I lived in Sacramento for over 17 years, and when I left the people of Sacramento voted not to fund the Arena, people this arena is not just for the Kings, do you know how many concerts, or NCAA events that can be played there? Or how about all the conventions that can be held bringing in more money into the city. Or if you don’t care about that, what about all the jobs people will lose because the Kings will leave, that cleaner’s that cleans their uniforms, or those people who work at the Arena. People see the big picture, not the small one. It’s just not about the Kings it’s about Sacramento.
Here’s the big picture. Will Sacramento get a positive return on its $255 million investment? Haven’t heard a single, objective analysis that makes this case.
Don’t hold your breath, Jason.
Actually yes. They’ll have a state-of-the-art entertainment complex that will house not only a major league franchise, but a world-class venue that will host numerous events for the forseeable future. That type of investment into the future of our city’s entertainment venue is priceless. Take off the NIMBY galsses for once and recognize the benefits of this extraordinary opportunity. Or, just sulk and whine like the author of this hugely subjective, so-called article.
It’s not the NIMBY glasses that see the problem. It’s the accountant’s green eye-shade. So, could an entrepreneur go to the bank and get a loan for a business by telling them that the return is “priceless”? Forget the bank, does anyone think the NBA’s accountants will go for “priceless” too? Sadly, it seems that only the Sacramento City Council is ok with “priceless” and seeing everything from a hugely subjective, not objective standpoint.
Let’s say they don’t get a positive return. Let’s say the City loses 10% on the deal. Better yet, let’s say they lose 15%. Fifteen percent of $258 million is about $38 million.
I think we can all agree that a new ESC at 7th and K is going to significantly change the area around it. Right now, the blocks between 7th and 9th and K are about half empty shops and/or holes in the ground.
I think we can all agree that the ESC will pull in at least 1 million people per year. (The Kings pulled in nearly 1 million by themselves when they were a playoff team).
The blocks around 7th and K won’t stay the way they are with a million-plus people coming in and out all year.
Let’s go back to losing 15% on the deal, or $38 million. That section of K Street has been some degree of derelict for going on 40 years. The existing arena term sheet has the new owners committing to 35 years. The question is, is it worth spending (losing) a little more than $1 million per year to completely change that area of K Street?
Given that K Street from 10th through 13th has already been rehabilitated pretty well, I’m going to say yes. Putting an ESC at 7th and K makes it very likely that the entire stretch of K Street from 7th to 13th will become a vibrant and interesting destination for the city.
Will it make money for the city? I don’t know. But I think it’s a no-brainer, even if you assume a 15% loss that will cost the city something like $1 million per year.
I expect you’ll disagree, probably including various insults and lots of hyperbole, without even addressing my argument.
No good real estate developer would borrow money (only to repay principal plus interest) to develop a project even with a “minimal” loss of 15%, as in the example above. Additionally no bank or lender would go for such a pessimistic scenario either. If Sacramento wants to sell these bonds, they will have to show that there’s a realistic plan to pay off bondholders. Sacramento is indicating that paying off these bonds will hit the general fund from two sides- parking revenues and possibly dipping into hotel taxes. A very generous estimate of new parking revenues that the city did not disclose how it calculated those numbers. So, we’re already looking at borrowing a lot of money for a project that so far, has a flimsy repayment plan and may if Joe is correct, take a “minimal” loss.
The opposition is reorganizing again: http://www.stoparenasubsidy.com/stoparenasubsidy.com/main.html
The craziness will only escalate as we get closer to the Mayor and City Manager’s announcement of the Term Sheet between Sacramento and the “whales.” I predict a higher city contribution that last year (AEG is out this year), loan forgiveness or restructuring for the Kings, a lowball cost estimate (Downtown Plaza is an existing site- it’ll be cheaper- wink wink), and lot’s of fanfare since KJ likes the PR. Politically, the economic absurdity of what’s been proposed in the last year or so has been its greatest political strength. What I mean is that there are likely to be city council members that vote to “move forward” because when the real number crunching begins (where do we find enough parking revenue without triggering further budget cuts and a tax increaseand do the NBA’s accountants think this is realistic), this plan will die on its own. But leadership means making things happen, rather than letting them happen. And so far, the City Council has chosen the latter.
Just to address some of these points:
* The city’s contribution is not increased over the previous plan. It’s actually a little less, but effectively the same.
* Loan restructuring is part of the term sheet.
* The Downtown Plaza site is slated to cost $57 million more than the railyard site.
I would also point out that the current plan includes a $57 million greater private contribution with a longer time commitment than last year’s plan.
No bother trying to convince Jason. He’s as narrowminded as they come; as evidence by his mundane arguments above.
New investors contribution
$ 190 million
City of Sacramento contribution
$ 258 million
The new investors are the equivalent of
the modern day Robin Hood, the wealthy
steals from the poor, and the poor goes
bankrupt.