Timeline tight to develop financing plan for Sacramento arena

Published: Wednesday, Mar. 13, 2013 - 12:00 am
Last Modified: Wednesday, Oct. 1, 2014 - 5:38 pm

Eight more days. That's the deadline top city officials have given themselves to craft the financing plan for a new downtown sports arena that could cement the future of the Kings in Sacramento.

Despite a timeline he described as "compacted," City Manager John Shirey said Tuesday he expects a detailed plan to be released in time for a public forum at City Hall the evening of March 21. That timing would give the public and the City Council five days to explore the proposal before the council votes on the plan March 26.

In a 45-minute interview with The Bee in a City Hall conference room, Shirey said the city has already undergone several days of intense negotiations with Southern California billionaire Ron Burkle on the financing of a new arena at the Downtown Plaza. Those talks have taken place over hours of conference calls involving Dan Barrett, the city's top arena finance consultant; an assistant city manager, and one of Burkle's top lieutenants from his private equity firm, Yucaipa.

Shirey would not reveal details of those talks, saying they were private negotiations and many details have not been nailed down.

"We have a very short period of time to do a lot of things," Shirey said. "But things are moving along."

Burkle has proposed building an arena at Downtown Plaza as part of the city's pitch to block a deal the Kings owners have made to sell the franchise to a group in Seattle. Mark Mastrov, the founder of 24 Hour Fitness, is teaming with Burkle on a bid to purchase the Kings from the Maloof family, should the NBA reject the Seattle deal.

Shirey described the talks with Burkle as smooth. He said Burkle and Mastrov have not requested a larger public subsidy since NBA Commissioner David Stern announced Friday that the pair need to increase their bid for the Kings.

As they hammer out a deal, Shirey's office is under intense pressure from the City Council and public to provide as many details as possible about a plan that could include more than $250 million in city subsidies, the same amount the city offered the Maloofs last year for an arena at the downtown railyard.

The city manager said he had hoped to have until April 2 to negotiate this deal before asking the City Council for its approval, but he had to move that council decision up one week after Stern said the NBA would hear Sacramento and Seattle's respective pitches for the Kings on April 3 in New York. Shirey said it would not "be good if the council is acting on the term sheet the day of or the day before the meeting with the (NBA)."

"The time schedule works kind of against us in terms of being as open and transparent as we can," he said. But, he added, "we made the right decision" to move the council vote to March 26.

That vote would be to approve a nonbinding term sheet containing the deal points. The project would be subject to greater review under the California Environmental Quality Act, a process that would likely take months.

Councilman Steve Hansen said he is encouraged that the city manager's office responded to his request to solicit community input on the arena through its Envision Sacramento website and by setting up the public meeting at City Hall next week. But, he said, that isn't enough.

"We need to do more than one meeting," he said. "Coming down to City Hall is not the same (as holding neighborhood meetings). We can't afford to cut corners on a public process."

As a result, Hansen said he does not know whether he will feel that he and the community have sufficient information to vote on the issue on March 26.

Many questions about the arena remain unanswered.

Shirey said Burkle's team had not settled on an exact location within Downtown Plaza for an arena as of Monday night. The city had also not been told how much the facility was expected to cost, although a source close to the negotiations previously told The Bee the sports and entertainment center would cost roughly $400 million.

City officials do not know exactly how much of a public subsidy will be part of the plan but said a city-controlled financing authority issuing bonds secured by downtown parking operations would likely serve as the largest contributor to the project. The value of those parking assets is also unclear, given that an arena at Downtown Plaza would carve hundreds of spaces out of the city's inventory.

In last year's plan, parking revenue was slated to generate most of the city's $255 million contribution. Shirey said he doesn't think "we're going to be far off from last year in terms of value," even with fewer spaces available. Because the new proposal is closer to the heart of downtown than a railyard facility, the remaining parking spaces would be more valuable.

Even with a tighter timeline, Shirey said he is seeking a financing plan with both more details and better safeguards for the city's budget than last year's term sheet. That proposal called for lost parking revenue to the general fund budget - which supports most basic city services - to be backfilled by a complex list of sources, including surcharges on event tickets at the facility, taxes generated by the arena and the city's anticipated share of arena profits.

"The trouble with last year was that we had really solid sources of revenue that covered the bulk of it, but when we were trying to find that last few million (dollars), we were having to scratch, to really search hard to find those additional revenues," Shirey said. "It would be better from my standpoint if we could have fewer sources (to protect the budget)."

Giving Shirey confidence that a more detailed plan will be developed, he said, was the fact that the city is negotiating with "stronger partners" than the Maloofs. The Maloofs, who have suffered numerous economic setbacks in recent years, walked away from last year's plan.

"We're dealing with people that we know to have the financial wherewithal," he said.

Shirey said he is convinced an arena at Downtown Plaza could serve as a much-needed catalyst for downtown. The city has invested tens of millions of dollars on the blocks surrounding the lagging mall, with mixed results.

One of those blocks is the 800 block of K Street, where the south side of the block is largely boarded up. Shirey said city-owned land on the block could be part of the public assistance given to Burkle's team, which in turn would redevelop the blighted stretch.

"We're fortunate in that we've got this opportunity with a large amount of outside dollars to invest in our downtown," Shirey said. "That could be the pump primer for our downtown."

Call The Bee's Ryan Lillis, (916) 321-1085. Read his City Beat blog at sacbee.com/citybeat. Follow him on Twitter @ryan_lillis.

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