City officials tonight released details of the financing package on a $447 million Downtown Plaza arena intended to keep the Sacramento Kings from leaving town.
Under the agreement outlined in an 18-page term sheet, the city will put $258 million in value into the deal, mainly by borrowing against its downtown parking garage future revenues, and by contributing several land parcels to the investors. The city's contribution is the same as last year's aborted project to build an arena at the railyard.
The development team will put $190 million into the deal. That team is made of up investment billionaire Ron Burkle, 24 Hour Fitness founder Mark Mastrov, and Vivek Ranadive, a Silicon Valley entrepreneur. Ranadive and Mastrov are leading the effort to buy the Maloof family's 65 percent interest in the Kings.
Mayor Kevin Johnson announced that a deal had been struck - two days after originally planned - in a series of nine rapid-fire tweets.
At 3 p.m., the mayor wrote: " I'm pleased to announce an agreement w/Burkle-Mastrov-Ranadive group on a public-private partnership to build a new ESC at DT Plaza Mall. The deal avoids new taxes, protects the City on the Kings loan, and ensures no net impact to the general fund. The new ownership, historic in its reflection of our city's diversity, will invest up to $1B in Sac - a strong sign of confidence in our mkt ... They will also make a 35-year commitment to keep the Sacramento Kings right here where they belong!
Later, the mayor tweeted, "With all that said ... I'm pumped!! Ron Burkle and I officially closed the deal a few minutes ago."
The preliminary term sheet, agreed upon this afternoon after weeks of negotiations, is non-binding, however.
It must be approved by the City Council, a vote that is set for Tuesday night. It is contingent as well on the Maloof family accepting a bid from the investment group to buy the Sacramento Kings.
The Maloofs have already signed a deal to sell the team to a Seattle group. Sacramento officials hope to persuade the NBA to nullify that deal, and push the Maloofs to sell to the group that plans to keep the team in Sacramento.
Besides building the new arena, the Burkle group wants to redevelop 1.5 million square feet of space at Downtown Plaza. While plans are still sketchy, the group could build a hotel, 600 units of residential housing, 300,000 square feet of retail and 475,000 square feet of office space.
City Councilman Steve Cohn said he is pleased overall with the deal. He confirmed $212 million of the city's contribution is expected to come from leveraging the city's parking assets. Of the remaining $46 million of the city's share, about $38 million is coming from donations of city-owned land, including 100 acres adjacent to Sleep Train Arena and a small parcel immediately north of Downtown Plaza.
The arena project would cost more than $40 million more than last year's failed arena proposal, which was rejected by the Maloofs. City Manager John Shirey said the difference is due to "the inflationary cost of materials" a year later.
The $212 million proceeds from the parking assets is about $18 million lower than the city had envisioned last year. "This is where we landed with our financing model," said Assistant City Manager John Dangberg.
Mortgaging the parking assets would put the city on the hook for repaying millions of dollars in debt each year. But city officials said they are convinced there will be plenty of cash available to repay lenders.
To help make the bonds more creditworthy, the city is using roughly $20 million a year in hotel tax revenue as potential cushion, officials said.
Shirey and Dangberg said the deal also "backfills" the $9 million a year the city gets in profit from its parking operations. The backfill will include $3.7 million from a 5 percent ticket surcharge on all tickets sold at the new arena, including non-Kings events.
The deal also calls for the Kings' existing $70 million loan to the city to be refinanced. In order to whittle down the outstanding debt, the city will impose a 5 percent ticket surcharge on all events at Sleep Train Arena, which would operate until the new building opens in fall 2016.
The rushed nature of the deal and planned Tuesday night vote has caused some concerns among some residents and at least one councilman.
Steve Hansen, who represents the downtown area, said he is not comfortable voting Tuesday on such short notice.
"I have not been briefed yet. I don't think there is sufficient time for the council and public to review this and vote on it Tuesday," Hansen said. "I don't think that is practical. The public deserves the time to review this, at least four to five days."
Hansen and Cohn both said they are concerned there doesn't seem to be any money in the deal to renovate the Community Center Theater as they had hoped.
"I'm very firm that that gets done," Cohn said.
The city would contribute seven parcels of land; it would be up to the Burkle group to sell or develop the property. City officials said that was a key difference from last year's deal, in which the city was responsible for selling land to generate cash for the arena.
Also, the city would give the developers the 2,700 city-owned parking spots underneath Downtown Plaza. Officials believe about 1,000 of those spots will be lost to construction of the arena.
Call The Bee's Tony Bizjak, (916) 321-1059. Follow him on Twitter @tonybizjak.