More than anything else, Sacramento officials have been banking on a plan to raise millions of dollars for a new downtown sports arena by leasing city-owned parking spaces to a private operator.
But with a pivotal City Council decision on the deal scheduled in less than two weeks, city officials say those parking spots may not be as valuable as originally hoped.
City Manager John Shirey told The Bee on Thursday that the assessed value of the city's parking facilities is lower than officials' early "hopes or expectations." The recent estimates came from financial consultants at Bank of America.
Multiple sources familiar with the details of the project told The Bee this week that the city may be able get $200 million or slightly more in upfront cash by leasing its parking operations to a private company. That would include 7,200 spaces in garages, 5,500 on-street spaces and parking citation revenue.
Shirey would not confirm that figure, but he said the new estimates are lower than originally believed. Officials have never said publicly what their early estimates were.
If the parking doesn't bring in as much money as hoped, more pressure would be placed on other public and private sources for the $387 million project.
"This would be easier to do if the (parking) number were larger," Shirey said. "We have to be creative and find more ways to make ends meet."
While financing a new arena still relies heavily on the city's ability to lease its parking spaces and garages, Shirey said the lower estimate for those facilities does not derail the project. "At the outset I thought this was a very difficult project to put together," he said. "That hasn't changed."
Parking is expected to be a key topic of discussion at a Dec. 13 City Council meeting. Council members will be asked to direct city staff whether to continue exploring the parking facilities as a funding source for the arena. It is unclear what exactly the council will be asked to do at that meeting, but one possibility would be directing Shirey to issue a request for qualifications from private companies interested in operating the city's parking.
City officials ultimately want to create a funding model for the arena that relies on a few major sources. Shirey said it would be difficult for the city to sell bonds to finance the project if the funding menu is "a collection of cats and dogs."
If significant progress toward a deal has not been made by March 1, the Maloof family, which owns the Kings, has vowed to once again explore moving the franchise.
Aside from parking, the city is banking on getting a major upfront investment from AEG, the Los Angeles-based arena operator that provided $53 million to help build Kansas City's Sprint Center and now operates the facility, sharing profits over a certain threshold with the city of Kansas City. Sacramento officials are in talks with the firm.
The National Basketball Association and the Sacramento Kings, the anchor tenant of the proposed arena, also would be relied upon for funding, Shirey said. So would fees charged to arena patrons, such as surcharges on tickets and concessions.
On the public side, city officials are exploring the sale of city-owned property, as well as how much money could be raised by placing cellular phone towers on the arena's roof and leasing electronic billboards.
Several questions remain on the parking facilities beyond the value of those assets.
City officials are trying to determine how revenue from on-street meters could be used for an arena project. State law requires that meter money be used for traffic safety enhancements or to pay for parking facilities.
In addition, the City Council will certainly insist that any privatization plan replenish funds that now flow into the city's general fund from parking. The general fund pays for most basic city services, including police and fire protection, parks maintenance and code enforcement.
Shirey declined to say how much parking revenue is filtered to the general fund each year.
A report commissioned by the city says a private company could expect to earn $16 million the first year it operates the city's downtown parking. That figure could increase to $51 million annually by the 30th year of the contract, according to Walker Parking Consultants. The report does not include borrowing costs that a private operator would likely take on to pay the city its upfront cash.
If the council decides to move forward, and parking companies express interest, city staff likely will begin drafting a potential contract, said Assistant City Manager John Dangberg.
In that agreement, the council would likely try to determine what level of control the city would retain over parking rates, and whether the private operator would be required to hire city parking division workers. Both issues would play a role in the price the city could ask for its parking.
"There are hundreds of issues that need to be dealt with," Dangberg said.