Marcos Breton: Sacramento arena deal is doable -- if NBA, Kings pitch in

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

It's within reach: a downtown arena for Sacramento; a new home to secure the future of the Kings here; a change in a recession-wracked city that has torn down services rather than build up amenities.

Sacramento needs this, and for the first time ever, all roads point to getting an arena built here after 10 years of trying.

But only under the right conditions.

It can't be a deal that forces Sacramento to take on more debt and risks than it can afford.

Sacramento must replicate what Santa Clara achieved last week when the City Council voted unanimously to approve an $850 million loan that will bankroll a new 49ers stadium there.

Key to the deal: The 49ers will assume the risk of cost overruns for the new stadium.

Santa Clara is taking on twice as much debt as it had promised its voters, but the 49ers have agreed to guarantee the $850 million loan if stadium revenues that are earmarked to repay the loan fall short. The NFL is kicking in an additional $150 million toward the billion-dollar cost of the stadium.

It has taken Santa Clara and the 49ers two years to hammer out this deal. By comparison, Sacramento is operating at warp speed. It was only last April 15 that fans packed the former Arco Arena for what some thought was the final Kings game after 26 years in the capital city.

Just days later, at a critical meeting in New York, Mayor Kevin Johnson got the NBA to look Sacramento's way one last time. A one-year reprieve to work out an arena deal was soon obtained, and now, less than nine months later, here we are on the brink of putting an arena financing plan in place.

KJ was back in New York on Friday to brief the league on the guts of Sacramento's arena deal – leasing Sacramento's downtown parking garages to private firms so the revenue can be used to fund an arena. The garages and other parking assets could bring in $200 million or more.

Accompanying the mayor Friday was Tim Leiweke, president of AEG, a massive sports company based in Los Angeles and the potential arena developer.

If AEG chipped in $50 million – and if Sacramento can get roughly $200 million out of its garages – it would be a huge opportunity for private investment in Sacramento.

But it's not enough.

The estimated price tag for Sacramento's arena was once $385 million; now it's $406 million. How much do you want to bet it will go up again?

Even if the cost stayed at $406 million, city parking assets combined with AEG's potential contribution still fall $100 million or more shy of the target.

How to make up the rest?

Well, Sacramento's bonding capacity is already limited by existing debt. After laying off cops and slashing municipal services, the city is loath to take on bonds that would be backstopped by the general fund. It simply can't afford to borrow its way into making up the difference.

The league and the Kings need only look to Santa Clara to see how a public-private partnership can work without pushing the city off a cliff.

If the league and the Kings can guarantee any shortfall in arena funding and assume responsibility for cost overruns, this Sacramento arena deal is in business.

The 49ers and the NFL are doing that in Santa Clara for a stadium that will cost twice as much as an arena in Sacramento.

I've said it before and I'll say it again – this arena deal gets done in Sacramento only if the NBA and the Kings play ball.

© Copyright The Sacramento Bee. All rights reserved.

Read more articles by Marcos Breton



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