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  • RANDALL BENTON / rbenton@sacbee.com

    Mayor Kevin Johnson leaves a news conference Tuesday at City Hall, where he suggested a railyard arena could be built, with or without the Kings.

  • RANDALL BENTON / rbenton@sacbee.com

    Mayor Kevin Johnson tells the media Tuesday that the city will continue talking with AEG about an entertainment facility, even though the railyard deal with the Kings has collapsed. AEG runs a non-sports facility in Kansas City and profitably books many events there.

More Information

  • Sacramento Connect community responds to failed arena deal
  • Marcos Breton: Maloofs couldn't afford Sacramento arena deal
  • Below are key issues that the Maloof family, which owns the Kings, sought to change in the arena financing "term sheet" that was approved by the Sacramento City Council on March 6.
    • They have not agreed to put up collateral for a new bond sale to extend the team's existing city loan.
    • They want approval rights over arena design and change orders.
    • They oppose paying a share of pre-development costs.
    • They do not want to be responsible for additional costs for change orders on arena.
    • They want to be allowed to continue to use Power Balance Pavilion in limited ways that would not compete with arena.
    • They do not agree to a 30-year lease. They want that issue negotiated further. City officials said the Kings want a 15-year lease.
    • They want wording allowing potential new owners to opt out of the deal.
    • They want to approve the city's arena management agreement with AEG.
    • They want priority in scheduling practices at the arena, and not to be charged for using the arena for practices and other Kings events.
    • They do not want to be responsible for game-day arena expenses, including traffic and policing costs.
    • They want a say on arena naming rights and signage.
    • They want arena to be exempt from paying any special district taxes or assessments.

Mayor Kevin Johnson still wants Sacramento railyard complex

Published: Wednesday, Apr. 18, 2012 - 12:00 am | Page 1A
Last Modified: Thursday, Apr. 18, 2013 - 7:45 pm

Sacramento officials began changing course on their arena effort Tuesday, even as resentment over the failure of the city's most recent plan continued to smolder.

Mayor Kevin Johnson announced that he wants the city to spend the next two to three weeks exploring the construction of a downtown sports and entertainment complex, "with or without an anchor tenant."

The Sacramento Kings had been expected to serve as tenant in a proposed $391 million arena in the downtown railyard before pulling out of the deal last week. Members of the Maloof family, which owns the team, have said they are committed to staying in Sacramento and have floated the idea of renovating Power Balance Pavilion.

Johnson said city officials should remain focused on a downtown arena and perhaps follow "the Kansas City model." That Midwestern city constructed the Sprint Center – one of the world's busiest arenas – without a professional sports franchise.

Still, there are financial and legal barriers to Johnson's "Plan B."

Without the Kings – and the $73.5 million the team had been counted on to contribute to an arena – the mayor acknowledged that a new arena likely would be smaller than the facility city officials had proposed. But, he said, a new arena could start off small and gradually be expanded should a professional sports franchise locate to the facility.

Johnson said the city could explore trying to lure a National Hockey League franchise.

In another potential hurdle, city officials believe the Kings would be allowed to walk away from their existing $65 million debt to the city if the city financed an NBA-caliber arena without the Kings as anchor tenant. The city said that arrangement is laid out in the team's current loan agreement.

While acknowledging the construction of an arena without the Kings would be challenging, Johnson said, "We've overcome the odds before."

Johnson's plan met with immediate resistance from City Hall's most vocal arena opponent.

"I think it's time for us to take a timeout," said Councilman Kevin McCarty. "It's time for us to pause, regroup and focus on our other priorities."

Johnson said the city might be willing to re-engage the Maloofs on the collapsed arena talks, but only if they "honor the commitment" of the handshake agreement the sides reached in February in Orlando, Fla., on the financing of the facility.

"We've got to hedge our bets slightly different, we've got to be very cautious on how we proceed, and we've got to face the brutal facts," the mayor said. "We cannot ignore the vacillation and the changes, that's just a reality we have to deal with."

Economist angers city

Resentment over the way the arena deal collapsed continued to resonate. On Tuesday, a new dispute broke out between the city and an economist hired by the Kings.

City officials said economist Christopher Thornberg erroneously suggested the city had relied on inflated attendance projections in its arena plan.

In an opinion piece that ran in Tuesday's Bee, Thornberg chastised the city for what he said was an assumption that the arena would attract more than twice as many people as currently attend events at Power Balance Arena.

City officials said their projections, based on discussions with the NBA, arena operator AEG and the city's NBA consultant, are for 15,200 fans per Kings game – fewer than the 17,300 fans the team averaged through two decades of sellouts, but more than this year's average attendance of 14,228.

Overall, the city projected the new arena would hold 152 events annually, including 40-plus Kings games, and attract 1.4 million attendees, said Assistant City Manager John Dangberg. That's roughly what Power Balance Pavilion officials said they have drawn in recent years.

The dispute over those projections is just part of the ever-widening divide between the Maloofs and city officials.

Sacramento officials on Monday released a copy of a list of changes the Maloof family had wanted in the deal, along with a terse assessment that the Maloofs' desires did not reflect "a serious attempt to reach a constructive outcome." Although the Maloof letter was dated March 1, city officials said they didn't get it until Friday, hours before the deal fell apart.

The document shows just how far apart the two sides really were.

One of the biggest sticking points was the current city loan to the Kings. City officials said they'd be willing to refinance that loan, but only if the Kings put up new collateral. Documents show the Kings wanted to strike the collateral requirement from the deal.

The city expected the Kings to sign a non-relocation agreement and agree to a 30-year lease, guaranteeing the team's presence in Sacramento through the duration of most of the arena debt financing. The Kings wanted to strike that from the deal as well.

City officials, in a response issued Monday, indicated the team had suggested signing a 15-year lease, with potential financial penalties for early termination.

The team also wanted a clause saying any future team owner would have the authority to opt out of the arena deal. The city's response in a letter to the Kings on Monday: "Are you suggesting new owners don't have to honor the terms and conditions of this agreement?"

The Kings also wanted the right to continue operating Power Balance Pavilion, if they chose, in a way that wouldn't compete with the new arena.

Kansas City model

If the sides remain apart, Johnson said the city should explore what was done in Kansas City. AEG, which had agreed to operate Sacramento's facility, contributed $53 million to the Kansas City project and operates Sprint Center.

The Kansas City model is likely to be a difficult one to emulate.

Gary Bongiovanni, editor in chief of Pollstar magazine, which follows the concert industry, said the Sprint Center was "an unintentional experiment." The city expected to lure an NBA or NHL franchise to the building after it opened in 2007, but that still has not happened.

"Until Kansas City did it, I'm not sure there was a major example of an arena being built without a sports team," Bongiovanni said. "It becomes a little iffier if you don't have a sports team."

Arenas with sports anchors generate more revenue from signage and naming rights – advertisers want to be in a building that will be on television broadcasts, Bongiovanni said.

Nonetheless, the Sprint Center has succeeded without a sports team. In the first quarter of 2012, Pollstar ranked the arena the second busiest in the country and seventh busiest in the world based on ticket sales for non-sporting events. Power Balance Pavilion was not in the top 50.

While the Sprint Center is considered a success by industry experts, Bongiovanni said Sacramento could not support a new downtown arena if Power Balance Pavilion continued to operate.

The key to the Sprint Center's success was the financial involvement of AEG, said Troy Schulte, the city manager of Kansas City.

"There's a vested financial stake (for) them to fill the arena," he said. "I doubt we would have been as successful as a standalone arena without AEG."

Johnson said the city would continue talking with AEG about a new arena. AEG officials declined comment Tuesday.

© Copyright The Sacramento Bee. All rights reserved.

Read more articles by Ryan Lillis, Tony Bizjakand Dale Kasler



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