Paul Kitagaki Jr. / Bee file, 2011

Sacramento Mayor Kevin Johnson holds up a report detailing his arena financing plan at an event Sept. 8. His task force cited limited debt as critical to keeping interest rates low in any arena deal.

Marcos Breton: Sacramento arena effort out of mayor's hands

Published: Sunday, Nov. 20, 2011 - 12:00 am | Page 1B
Last Modified: Thursday, Apr. 18, 2013 - 7:45 pm

If Mayor Kevin Johnson had succeeded in changing the rules to give him power above all others at City Hall, he would have unparalleled control over the effort to build a new downtown arena to save the Kings.

But because Johnson's "strong mayor" proposal was blocked in the courts, he has limited authority over top city bureaucrats who now hold the fate of the arena and the Kings in their hands.

City Treasurer Russ Fehr is presiding over an exhaustive analysis of city parking revenues to see whether they could be used to fund a sizable portion of a $387 million price tag for an arena in the abandoned downtown railyard.

City Attorney Eileen Teichert is responsible for a thicket of legal questions surrounding the proposed arena.

City Manager John Shirey's staff is representing Sacramento's interests in negotiations with the NBA and private developers to build the arena. According to city rules, all three act independently of one another and are not beholden to the mayor. They independently report to all nine members of the Sacramento City Council.

It's a system of checks and balances based on the idea that the mayor shouldn't have too much authority. But with the future of the Kings hanging in the balance, a massive city project with major financial implications is being molded by people who are not elected officials but have their own power bases and tricky relations with KJ.

The mayor has had a contentious relationship with Teichert, which came to a head in 2009. As the council debated Johnson's proposal to broaden his mayoral powers to directly control top city officials, Teichert advised KJ to recuse himself from the discussion. When he declined, jaws dropped as no one could recall a Sacramento mayor so publicly rebuking legal advice from the city attorney.

Johnson was the only "no" vote on the council in the recent hiring of Shirey.

Meanwhile, Fehr is known to be a fiscal conservative who won't be intimidated by anyone. He is supervising the city parking study being conducted by analysts at Bank of America, among others. The hope of arena proponents is that the city will be able to tap enough city parking revenues to provide a stable funding source for the arena.

Consultants working with Sacramento recommended in September that the city explore a public-private partnership where city parking garages and street parking meters could potentially be leased to a third party who would provide a large upfront payment and annual lease payments for the arena.

Last week, City Hall sources familiar with the discussion told me that the preliminary valuation of city parking revenues could be between $250 million and $350 million.

But Fehr has not confirmed any numbers and won't until his parking analysis is done and he presents his findings to the council on Dec. 13.

The question is: Will Fehr and banking analysts determine that parking valuations are far lower than initial estimates? The numbers are critical because no one knows how much real money the Kings owners or the NBA would put into an arena deal, if any.

Meanwhile, the city is in discussions with AEG, the Los Angeles-based facilities developer, to run a Sacramento arena. AEG contributed roughly $50 million to the Sprint Center in Kansas City. If AEG put $50 million into a Sacramento arena and if Sacramento parking money added up to roughly $150 million to $200 million, that could leave a hole of $100 million or more in arena financing if the Kings owners and the NBA didn't ante up.

What then? Sacramento is not in a position to assume a ton of debt as a funding stopgap. Think Big Sacramento, Johnson's arena task force, has cited limited debt as critically important to keeping interest rates low in any arena financing deal.

So Fehr is on the hot seat as he crunches parking numbers and tries to fulfill his mandate to protect the city's financial interests. Teichert is in the hot seat as she studies whether it's even legal to use street parking meter money for a privately used facility. Shirey and his staff are in the hot seat dealing with AEG and the NBA.

Meanwhile, Johnson is under enormous pressure to keep the Kings, the highest-profile business in Sacramento, from leaving town. He's trying to preserve a regional amenity though no other city or county in the region will contribute a dime to the project. And he's trying to build a downtown arena to boost a flagging downtown Sacramento.

He's doing so without a robust private sector or access to broad-based taxes to pay for an arena. He's dealing with mercenaries in the NBA – and he can't control the city bureaucrats charged with making the details work.

It's the clearest example yet of why Johnson yearned to be Sacramento's "strong mayor."

© Copyright The Sacramento Bee. All rights reserved.

Read more articles by Marcos Breton



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