Proposal could raise Sacramento County sales tax for soccer stadium, arts and nonprofits
05/28/2014 12:15 PM
10/07/2014 8:44 PM
A coalition including the Sacramento Republic FC soccer team and a host of nonprofit organizations is circulating a proposal to raise the county’s sales tax rate, with proceeds going to a new soccer stadium, the Sacramento Zoo, the American River Parkway Foundation and other causes. Local governments also would get a significant funding boost.
The still-evolving proposal calls for the sales tax to increase one-eighth of a cent, to 8.125 percent. In Galt and the city of Sacramento, the one-eighth-cent increase would boost taxes to 8.625 percent.
The new tax would raise an estimated $25.3 million in the first year. Organizers want to place it on the November ballot, where it would need a two-thirds supermajority to pass, but first they have to get the county Board of Supervisors to sign off on the plan. The tax increase would be open-ended and wouldn’t expire.
Proponents say they hope to build broad political support by spreading the revenue to a multitude of programs, including the B Street Theatre relocation project and the proposed Powerhouse Science Center north of downtown. Other nonprofits could apply for funding, and millions would flow to local governments throughout the county.
“It’s about creating a big-tent approach that doesn’t leave anybody out,” said Bill Blake, managing director of B Street. The theater company would get $500,000 a year to help realize its long-awaited dream of moving to a larger location near Sutter Health’s hospital campus on the east end of midtown.
Sacramento political strategist Doug Elmets, who isn’t involved in the proposal, said the idea faces difficult odds. “They have their work cut out for them,” Elmets said.
One of the biggest challenges would be convincing county supervisors and voters that the tax isn’t “all about the soccer stadium,” Elmets added.
The soccer component is likely to garner the most attention, and perhaps the most controversy.
Barely a month after playing its first home game at Hughes Stadium, and with its semi-permanent 8,000-seat stadium at Cal Expo still wrapping up construction, Republic FC would be asking voters to help finance an estimated $125 million stadium at a yet-to-be-determined location somewhere in Sacramento County.
The stadium would get $3 million a year from the tax increase, or about 12 percent in the first year. The tax revenue would be expected to grow over time, but the stadium’s annual share would be capped at $3 million, so its percentage of the revenue would shrink to as low as an estimated 7 percent or so.
“It’s a lot of money – don’t get me wrong,” said Warren Smith, the soccer team’s president, referring to Republic FC’s share. “But it’s a small portion of the entire pie.”
Because of the considerable interest expense of financing a stadium, Smith said, he believes the tax hike would contribute about $30 million toward actual construction costs. The remaining $95 million or so needed to build the facility would be privately financed, he said. Once the stadium bonds are repaid, the team would no longer take a cut of the tax revenue, he said.
Smith said he doesn’t think voters would be turned off by the lack of a site for the stadium. “Our approach is, Let’s come up with a funding source and figure out where they’re going to play later,” he said.
The team has proved extraordinarily popular so far; two of its first three games at Hughes have sold out. A permanent stadium of around 20,000 to 25,000 seats could enable the minor-league franchise to achieve its ultimate goal of graduating to Major League Soccer.
But the proposal could face opposition from voters wary about subsidizing sports teams after the Sacramento City Council last week voted to spend $255 million for the new Kings arena at Downtown Plaza. The city is financing the subsidy mainly by borrowing against future parking revenue.
Smith, however, said he thinks the community support exists for a tax hike that would fund a broad portfolio of projects. “I think the opportunity (is) now,” he said. “I think the region has shown they’re interested in investing in their communities.”
While Major League Soccer officials have told Smith they’re keenly interested in Sacramento, he said he’s received no assurances that building the stadium would bring an MLS franchise to town. If the MLS decides it doesn’t want to come to Sacramento, he said, Republic FC would contribute its $3 million in annual tax revenue back into the general pool, where it could be distributed to other projects. Smith is also a board member of the science museum.
He said Republic FC’s contract with Ovations FanFare, the company building the interim stadium at Cal Expo, runs out in five years. In all likelihood, a Sacramento MLS franchise wouldn’t start playing before then, he said.
The tax hike would generate $10 million a year for the county itself and all of its cities, with the money earmarked for programs with social and economic benefits. The sum would grow as tax revenue improved. Another $4.5 million a year would be doled out to nonprofits on a competitive basis, and that sum would grow, too.
The spread-the-wealth approach is appealing “both from a philosophical standpoint and a political reality,” said Jeff Raimundo, a political consultant and vice president of the zoo’s board of directors. Raimundo said the zoo would get $2.5 million a year from the tax increase to help pay for a major face-lift for the facility.
The last time Sacramentans voted on subsidizing a sports stadium was in 2006, when a quarter-cent sales-tax hike was proposed in the county to finance a downtown arena for the Kings. About half the money, around $600 million over 15 years, would have gone to other community projects such as roads and libraries. Smith, then an executive with the River Cats, worked on that campaign.
However, the message about funding other programs “never got out” to the voters, said Elmets, another veteran of that campaign. After the Kings’ former owners repudiated the whole plan, the tax hike was overwhelmingly rejected by voters.
Proponents of the latest plan commissioned a poll earlier this year suggesting the tax increase would receive 66 percent approval, just shy of the 67 percent required for a tax increase. Smith said he’s encouraged by the results.
He said he’d expect some taxpayer groups to oppose the increase, but “I don’t think they’re going to be terribly combative.”
Ken Payne, president of the Sacramento Taxpayers Association, said his group would study the proposal before taking a stand.
Sacramento County’s tax rate, at 8 percent, is already among the highest in the region, tied with San Joaquin and Amador counties. The rate is 7.5 percent in Placer, El Dorado and Yolo counties.
Smith said organizers can raise the estimated $2 million needed to run a fall campaign to persuade voters. “We’ve been in conversations; we believe the funding is definitely available,” he said.
Elmets said contributors to the nonprofits that would benefit from the tax hike would constitute a likely source of campaign financing.
Organizers expect to present the plan to the Board of Supervisors later this summer. A supermajority of four out of the five supervisors must approve the plan by early August in order to have it placed on the November ballot.
Board Chairman Jimmie Yee, who was briefed on the plan recently, said he’s inclined to support the tax hike.
“It’s very broad, it’s not just one thing,” Yee said. “These are all amenities.”
Supervisor Susan Peters, however, said: “I don’t think we know enough about it yet. There’s a lot of work to be done in the community, getting the word out, seeing what the community thinks of it.”
Community leaders have been kicking around proposals for years about developing a funding mechanism for various civic amenities. “We’ve been at this for almost a decade,” said Tim Youmans, an economic consultant from Davis who is working on the latest proposal. Now “there is a window of opportunity,” he said.
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