A new downtown arena for the Sacramento Kings carries some risk to the city but is likely to give the region a substantial economic boost, according to the latest quarterly forecast from the University of the Pacific.
UOP economist Jeff Michael, in a forecast released Thursday, said the new arena at Downtown Plaza should improve the region's current state of "tepid job growth." Construction is supposed to begin sometime next year, with the $448 million building opening in time for the 2016-17 NBA season.
Michael noted a huge irony in the city's long-running arena saga: The soon-to-be-former owners, the Maloofs, did the city a favor last spring by scuttling plans for a new facility at the downtown railyard.
Now that the Maloofs' plan to sell the Kings to a Seattle group has been blocked, the family is selling the team to well-heeled investors and the arena site has shifted to a more central location.
"While many Sacramento residents were irate with the Maloofs for backing out of last year's deal, in hindsight they should be thankful for their change of heart," Michael wrote. The new project "has the potential to accomplish broader city goals and help other city assets like the Convention Center in a way that other proposed locations such as the railyard or Cal Expo would not."
City officials say construction of the arena will create 4,000 jobs. They also anticipate massive spinoff effects as redevelopment spreads to the rest of Downtown Plaza and beyond.
But while Michael said the arena is shaping up as a plus for the city, he added that the deal creates some financial risk as well. Michael, director of UOP's Business Forecasting Center, said the city's share of arena revenue might not be enough to cover its financing costs.
The project will create "some burden on the city's general fund," Michael said in an interview. But he acknowledged that he hasn't yet seen detailed financial projections from the city.
City officials have said the financial risk is minimal because the city stands to receive millions of dollars from ticket surcharges, guaranteed arena profits and other sources. The city is contributing $258 million, mostly by borrowing against future downtown parking revenue.
Michael also said, as some arena critics have charged, that the city is understating the true size of the public subsidy. He did not provide his own estimate of the subsidy's actual size.
The economic boost from the arena brightens an otherwise drab outlook. Although unemployment in Sacramento fell to 8.3 percent last month, Michael's forecast calls for average unemployment to remain above 9 percent this year. He added that the region's economic forecast will be revised upward soon as the impact from the arena becomes clearer.
UOP expects California's unemployment rate, currently 9 percent, to drop to an average of 8.7 percent next year and 7.7 percent in 2015.
Statewide economic growth will be fairly modest this year, Michael said, but should accelerate in 2014.
Call The Bee's Dale Kasler, (916) 321-1066. Follow him on Twitter @dakasler.