NBA, Cal Expo agree to move ahead on Kings arena

Negotiators for the National Basketball Association and Cal Expo on Friday announced they have agreed to move forward jointly on a plan to build a Kings arena in the state fairgrounds.

According to a letter of understanding, which still must be approved by the Cal Expo board of directors, the two sides will spend the next 180 days working on a development plan that would accommodate both an arena and a revamped fairgrounds.

They plan to ask developers to submit proposals for turning the 360-acre fairgrounds into a mixed-use and entertainment development.

Cal Expo's board is scheduled to consider the letter at its May 21 meeting. Both NBA Commissioner David Stern and former Gov. Pete Wilson, the lead negotiator for Cal Expo, plan to attend.

The board also will decide whether to retain Wilson's law firm, Bingham McCutchen, to continue working on its behalf.

The Maloofs, who own the Kings, are scheduled to be briefed by phone next week on the progress of talks, said spokeswoman Donna Lucas. "They continue to be very supportive and appreciative of the work the commissioner and the NBA have been doing on the issue," she said.

Stern said in a phone interview Friday that the Maloofs, while not involved in the talks, have paid for expenses incurred by the NBA for consultants and studies, and will continue to do so.

"They've said, 'Do what it takes; spend what you need. Let's give everything we can to make this work in Sacramento,'" Stern said. "They couldn't be better. They want this to work."

Stern took over the arena effort in December 2006 after earlier attempts involving the Maloofs and city and county officials collapsed in bitterness and recrimination.

The Kings owners walked away from the last serious proposal to build a new arena, in 2006. That effort would have involved raising the sales tax countywide to pay for an arena in the shuttered downtown railyard. Without the Maloofs' support, voters trounced the plan.

The agreement announced Friday is not legally binding, but representatives of both the NBA and Cal Expo said it represents a significant step forward. They also cautioned that major challenges lie ahead.

"We wouldn't be doing it if we didn't think there was a more than fair chance it could be done, but recognizing that it's not a slam dunk," Stern said.

Negotiators for both sides said they were confident enough that they could come up with a mutually acceptable development proposal to move to the next step: crafting an actual plan, and looking for a developer to design and build it.

Wilson said that negotiations have left him "optimistic that it may lead to something really important for the city, and the state and for basketball fans, and ultimately for the people who are the daily inhabitants … of this development."

The goal is to attract a developer that can take the existing space at Cal Expo, revamp the fairgrounds, add a 17,000- to 20,000-seat arena and squeeze in enough new commercial or residential development to pay for it all.

Based on past estimates, the price tag for a new arena and fairgrounds upgrade could easily top $650 million. The money for those improvements will be needed at the beginning of the development – long before all the stores, homes or restaurants materialize. A developer could provide the money up front, or Cal Expo conceivably could issue bonds that would be repaid through future profits.

"It's obviously a project that will take years to build out and years to pay off, but it is a tremendous opportunity, and we suspect several developers will think so as well," Wilson said.

Wilson acknowledged this isn't the best time to press forward with a major development, and doesn't know what impact the economy and credit crunch could have.

"The subprime debacle has stunned even the most sophisticated analysts, and it has created problems of liquidity that have affected even large commercial developers," he said.

In addition to finding a developer willing to shoulder such a financial challenge, Cal Expo and the NBA also have to tackle the issue of traffic. Cal Expo sits along a stretch of the Capital City Freeway that already backs up frequently.

Wilson said the parties have no definite answers at this point on how to handle increased traffic – a problem that could require state help.

Stern said Gov. Arnold Schwarzenegger has been "very supportive" of the NBA's effort.

Sacramento Mayor Heather Fargo, a veteran of failed attempts to build an arena, said she is leaving it up to the NBA and Cal Expo to come up with a plan.

Fargo has said numerous times she does not support raising taxes for an arena, because voters have strongly rejected the idea. She also has said she prefers the railyard site, with its light rail and Amtrak access.

"I think we need to give the NBA and Cal Expo a chance to see what they can work out," Fargo said Friday. "This is a good sign that they're making progress."

Her main rival in the mayor's race, former NBA player Kevin Johnson, has said the Cal Expo location could be a "win-win-win" if it produced a new arena without taxpayer money, a renovated fairgrounds and a new development that could create jobs.

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