Mayor's panel focuses on 'user fees' to fund new Sacramento arena

Published: Thursday, Jul. 28, 2011 - 12:00 am | Page 1A
Last Modified: Wednesday, Sep. 5, 2012 - 3:26 pm

Five years ago, Sacramento tried to finance a downtown sports and entertainment arena by asking voters to tax themselves. The result: an overwhelming "No way!"

With just weeks to go before a Sept. 8 deadline to reveal a new arena financing plan, the mayor's brain trust is taking a new approach they say will be more palatable.

New taxes are unlikely. Instead, it's pay to play.

Aides to Mayor Kevin Johnson say they're focused on user fees such as ticket surcharges for people who attend arena events. That revenue could be coupled with event-night parking fees at downtown garages, new corporate sponsorships, and up-front money from private companies that could build and operate the arena for the city.

Another idea: The city could sell up to a dozen parcels that it owns to developers, raising $30 million to $60 million, according to a financing update that will be discussed today at a meeting of Johnson's 70-person regional arena committee. The report does not indicate which parcels those are.

Officials say they're even considering renting the arena's rooftop to telecommunications companies for cell towers.

The committee's core working group – including former Sacramento city Treasurer Tom Friery, stadium financing consultant Dan Barrett and communications specialist Chris Lehane – does not yet have a firm plan in place, Lehane said, but is progressing in identifying revenue to meet the projected $387 million price tag.

"We feel really good about the directions we are going, and the conversations we are having with the private sector," Lehane said Wednesday.

An element of the proposal is likely to be a ticket surcharge at the arena – possibly in the $2 or $3 range – and surcharges on merchandise bought there.

Johnson's advisers estimate arena events could generate between $1 million and $5 million annually in parking revenue at city garages.

That revenue, however, is likely to be in dispute for some arena events. Kings owners recently said they expect to continue to control parking revenue during games.

Lehane said his group also is exploring business arrangements with private companies for corporate sponsorships, advertising rights and arena naming rights. Those also likely would have to be negotiated with the Kings, who collect that money at the Natomas arena.

The mayor's group also has approached local hotels about finding a way for them to contribute to the new arena, since they'll likely see a boost in business. One financing expert said the group would have to be careful not to just seek a traditional room tax, which could trigger a public vote.

The city would have to set up a special district and ask hotel operators to vote to tax themselves, said Marco Li Mandri, president of San Diego consulting firm New City America Inc.

The mayor's group also may suggest the city erect electronic billboards for lease or sale at the arena and elsewhere.

"Literally every penny counts," Lehane said. "Not one of these ( sources) is going to do the trick by itself."

Lehane declined to say whether the mayor's group has come to an arrangement with the Kings on how much rent the team would pay. Kings officials have not offered any specifics, but co-owner George Maloof has said the team doesn't have a big pocketbook. NBA Commissioner David Stern, however, has said NBA teams typically make a substantial commitment.

Mayor Johnson this week again downplayed the chances of a tax proposal but said his group hasn't eliminated it yet.

"We haven't said no to this, but there is absolutely no way the public is going to go for a broad-based sales tax," Johnson told reporters. "We haven't taken it off the table yet, but at some point we will."

This arena effort, one of many over the years, appears to be Sacramento's last-gasp effort to keep the Kings. Dissatisfied with its Natomas arena, the team nearly signed a lease this spring to move to Anaheim but backed out at the last minute under pressure from the NBA, agreeing to give Sacramento until March 1 to come up with an arena financing deal.

George Maloof this month rekindled concerns here by attending a dinner with Anaheim leaders and donating $25,000 to a city councilwoman's charity, saying he's fond of Anaheim from years spent working there in his dad's hotel.

Another change in the family's position, however, has raised hopes that, this time, an arena may finally get built in Sacramento. The difference: The Maloofs have said they are willing to be tenants in the new building rather than owner-operators.

Johnson's advisers say that allows them to pitch the project to arena operating companies and developers who might be willing to kick in millions of dollars.

Lehane said the mayor's group has had talks with some companies, including AEG, the company that operates the Staples Center in Los Angeles and the Sprint Center in Kansas City, Mo.

"If they can do it in Kansas City, there is no question we can do it in Sacramento," Lehane said. AEG officials weren't available for comment Wednesday.

© Copyright The Sacramento Bee. All rights reserved.



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