The city’s financing plan for the planned downtown Sacramento arena isn’t foolproof or cheap. But so far, it does appear feasible.
City Treasurer Russ Fehr told City Council members Tuesday night that the revenue projections are very conservative and that there’s “minimal and acceptable” risk – and he had the numbers to back it up.
To come up with $212.5 million of the city contribution of at least $258 million, the city plans to borrow against its parking revenues, with hotel tax revenue as the backup. With the usual reserve, some garage renovations and money for initial debt payments, the city may sell bonds for closer to $300 million.
Because the city is still paying off three garages and wants to protect the general fund, the tentative plan is to pay only interest for the first eight years and to extend the payments out 35 years. The total bill could reach $700 million. But once the garage debt is paid off, Fehr says there will be plenty of parking revenue, not only to cover the arena bonds but also to boost the city’s general fund.
Besides questioning the size of the debt, critics say that the city’s share of the $448 million project may be much higher than advertised. The city's figure doesn't include the value of 2,700 parking spaces at Downtown Plaza the city is giving to the Kings, or rent and advertising revenue from six digital sign sites. They also say the city is undervaluing the land it is giving the team. Tuesday, the council is being asked to sign off on substituting three downtown parcels for 60 acres at Haggin Oaks. As this deal moves forward, officials need to be completely clear with the public about every dollar the city is contributing.
The final financing plan won’t be put forward until early next year for a council decision, probably in April. Already, it’s at the heart of a heated political campaign over whether the city should invest so much public money into the arena.
While we don’t believe a public vote is necessary or wise, it may happen. This week, opponents submitted more than 34,000 signatures to the city clerk’s office, well more than the 22,000 they need to qualify the measure for the ballot. It will take several weeks for county elections officials to weed out invalid signatures and remove those from voters who filed forms to withdraw their names. Not waiting for a verdict, Mayor Kevin Johnson on Thursday launched a campaign group to fight any ballot measure.
Many Sacramentans may not realize this, but there would actually have to be two votes to kill the arena subsidy. First, in June there would be a measure to require voter approval for any spending or borrowing that affects the city’s general fund to develop a professional sports facility. If that passes, there would be a second vote in November on the arena subsidy.
A clean up-or-down vote – like the 2010 measure in Santa Clara approving the 49ers new stadium – would have been less confusing for voters and better for the city.
Whether by design or not, the uncertainty caused by this two-step ballot campaign, funded largely by people outside Sacramento, could derail the tight timeline to open the arena by September 2016. If Sacramento misses the deadline, the NBA could reconsider allowing the team to move.
On the other side, Craig Powell, head of the Eye on Sacramento watchdog group, is accusing the city of trying to disenfranchise voters. He argues that if it sticks to its schedule to issue the arena bonds by the end of May, a June 3 ballot measure would be made moot.
Yet, if the measure qualifies for the ballot, it seems highly unlikely the council would charge ahead. Even if it wanted to, opponents would go to court to stop the city. It’s also difficult to imagine that the bond could get through the legal and underwriting process with a ballot measure pending.
In the end, the result of all the political gamesmanship could be that the arena opens late and costs more – an outcome no one should want.