The Sacramento City Council took a critical step Tuesday night toward financing a new downtown sports arena by voting 7-2 to ask companies interested in leasing the city's downtown parking operations to step forward.
Upfront revenue from a parking agreement could garner $200 million toward the arena, by far the most significant single financing option for the project. The facility, proposed for the downtown railyard, is expected to cost at least $406 million.
"It's clear this parking is an opportunity for us," Mayor Kevin Johnson said.
The council vote sets in motion a frantic month for Johnson and city officials trying to come up with the remaining funding.
That process intensifies Friday, when Johnson will meet in New York with NBA Commissioner David Stern and Tim Leiweke, the president of arena operator AEG. The NBA and AEG are being counted on to provide significant cash toward the arena project, and the mayor said his talk in New York would focus on "how to make this deal real."
City officials want to have a financing term sheet detailing the various public and private contributions toward the project by mid-February.
The Sacramento Kings have indicated they intend to seek relocation if a workable arena plan is not in place by March 1.
Voting in favor of the parking plan were the mayor and council members Angelique Ashby, Steve Cohn, Rob Fong, Jay Schenirer, Kevin McCarty and Bonnie Pannell. Council members Sandy Sheedy and Darrell Fong voted against it.
Several council members who voted to move forward added they would not support a final financing plan that negatively affects the city's general fund budget, which pays for police, fire and most other basic services.
Sheedy, who has emerged as a vocal opponent of the project, expressed skepticism about handing over the city's parking operations to a private company, saying, "We're not going to be using (the upfront payment) on anything the city needs done."
She later asked city staff to draft a measure for the June ballot that would ask voters for their say on an arena financing model, if one is in place by Feb. 22.
A majority of the City Council would need to approve placing that measure on the ballot.
Most members of the council chamber audience Tuesday appeared to support the parking plan.
Several Kings fans filed to the podium to address the council, took off their Kings jerseys and promoted the benefits a new arena would bring to the city beyond basketball.
And top officials with the Convention and Visitors Bureau, the Downtown Sacramento Partnership and the Sacramento Metro Chamber spoke in favor of the plan.
City officials said they could bring in as much as $245 million in upfront cash for the arena project by leasing parking spaces, garages and enforcement to a private company.
Roughly $50 million of that would have to go toward paying off debt on garages built by the city, placing the maximum windfall at around $200 million.
City Manager John Shirey said responses to the request for qualifications also called an RFQ would "help to confirm some of the numbers in terms of the value" of the parking assets.
While the RFQ vote was an essential step forward, there are plenty of barriers left to cross in the city's years-long pursuit of a new arena.
The next big step will come early next year, when the City Council will decide whether to issue a request for proposals seeking formal bids for the parking assets.
While the cost of the RFQ will be covered by $555,000 in consultant fees approved by the City Council in September, the request for proposals could cost the city more than $1 million, officials said.
Also left to be determined is how much money the private sector specifically the NBA, the Sacramento Kings and AEG is willing to contribute to the project.
While city officials have declined to discuss how much they are asking from those companies, the total private contribution could be in the $130 million range.
Dan Barrett, a sports consultant hired in September by the City Council, said negotiations with the NBA have been "not as productive as we would like, given where we are." But, he added, talks with AEG have made "good progress."
Other public subsidies, including proceeds from the sale of city-owned land, also remain in the mix of funding options.
The mayor and other city officials said their goal is to come up with enough upfront funding to avoid issuing bonds to finance the arena construction.
Officials will also have to come up with $9 million a year that parking operations currently pump into the city's general fund.
The City Council is also expected to seek a level of control over future parking rates, should a private company take control of city garages and parking enforcement.