Arena backers claim $11.5 billion in economic impact

Published: Thursday, Dec. 19, 2013 - 12:29 pm
Last Modified: Friday, Dec. 20, 2013 - 11:21 am

Facing a possible ballot fight over the proposed NBA arena in downtown Sacramento, project backers served up an economic-impact study Thursday that said the new facility would generate an $11.5 billion economic bounty for restaurants, bars, hotels and other businesses over its 35-year life.

The estimate was the major finding of the study, commissioned by Mayor Kevin Johnson’s newly formed political action committee. The group’s leaders said it builds the case for the city’s proposed $258 million subsidy for the arena.

“We’re taking a $258 million investment and leveraging it to $11.5 billion,” said Joshua Wood, executive director of The4000 committee. “I would honestly challenge anyone from the opposition – what is your plan for generating $11.5 billion?”

The so-called “Renaissance Report,” conducted by Sacramento consulting firm Capitol Public Finance Group, includes the estimated economic impact of the new arena as well as the planned redevelopment of 1.5 million square feet of surrounding space at Downtown Plaza. The $448 million arena, to be situated in the southeast corner of the troubled shopping mall, would become the new home of the Kings.

Wood’s committee released its report a little more than a week after project critics submitted 34,000 signatures in their effort to force a public vote on the city’s subsidy – which they say is too risky and too costly. Elections officials won’t know until late January whether the critics have enough valid signatures – 22,000 – to qualify the issue for next June’s ballot.

The report drew immediate scorn from project critics. “There’s little if any evidence that ... subsidies for arenas can be justified on the grounds of economic development,” said Julian Camacho, co-founder of Sacramento Taxpayers Opposed to Pork. He called the report an attempt “to paint a rosy picture.”

Many academic economists also dismiss such studies, arguing that sports stadiums simply move dollars from one part of town to another as consumers spend their money on arena tickets instead of bowling or movies or other forms of entertainment.

“Basically they are just PR documents,” said Dennis Coates, an economist at the University of Maryland, Baltimore County, and a frequent critic of public subsidies for stadiums.

Coates, who hasn’t yet seen the Sacramento study, added: “I’m pretty sure people eat and drink even if they don’t have a team in town that night.”

The study’s author, Cathy Dominico, a managing partner at Capitol Public Finance, said those criticisms ignore the fact that the Downtown Plaza arena would anchor a full-fledged nightlife district – a site that would generate far more spending than the Kings’ current building, Sleep Train Arena in the suburban-style Natomas area.

“You’re not just creating an arena,” said Dominico, who authored two previous reports on proposed Kings arenas. “You’re creating a destination. ... We’re creating new spending.”

The study said the arena and the surrounding development at Downtown Plaza would lead to $230 million in annual spending, not counting arena ticket sales. Factoring in inflation, that would add up to $11.5 billion in 35 years. Taking out the dollars that would be spent “regardless of the existence of the new facilities,” the net impact is reduced to an estimated $25 million a year, or about $1.25 billion over 35 years.

Dominico defended the use of the larger number, saying she thinks the net figure is a gross understatement of the project’s true value because of the “catalyst” effect it would have on downtown. Beyond the impact on restaurants and bars, she estimates 15 percent of arena-goers would spend the night in a downtown hotel. All told, the arena is expected to bring in 1.6 million visitors a year downtown, the report said.

Backers of the project note that the Kings may leave Sacramento if a new building doesn’t open by 2017 – the deadline imposed by the NBA. That would not only eliminate hundreds of permanent jobs associated with the team; project backers say it would jeopardize the flow of concerts and other shows at Sleep Train.

As it is, the aging arena is struggling to bring in some top-name shows, project backers argue. “Money is leaving the economy and going to other areas like San Francisco,” Dominico said.

The report says related development at Downtown Plaza – including hotels, retail and more – would generate 2,084 new permanent jobs directly at the site, not counting employees working full time or part time for the Kings.

Construction itself, including redevelopment of other portions of Downtown Plaza, would create 11,700 temporary jobs. The figure includes off-site construction jobs, plus those jobs created at restaurants and other businesses that would benefit from the big project.

“This would include your planners, your designers, your engineers,” Dominico said, plus “the suppliers of the materials, suppliers of the wood and steel and concrete and copper.”

She acknowledged that a portion of those jobs would be created outside of Sacramento, although the report doesn’t break that number down. The Kings have pledged to award 60 percent of the construction work to area firms.


Call The Bee’s Dale Kasler, (916) 321-1066. Follow him on Twitter @dakasler.

Read more articles by Dale Kasler





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