Sacramento arena plan appears to have 5 council votes for passage
03/06/2012 12:00 AM
02/26/2013 11:46 AM
It's a potentially risky bet, but so far the Sacramento City Council appears willing to keep playing the game.
Four City Council members on Monday expressed support for the preliminary "term sheet" agreed to by the city, the Kings and arena operator AEG to build a $391 million arena in the downtown railyard. With the mayor's support, that adds up to the five votes needed for passage of the nonbinding document at tonight's council meeting.
Some at City Hall said they think seven of the nine council members could vote to move forward.
Council support has increased in part because of a new approach the city is considering to wring $200 million or more in upfront cash from its parking operations.
The city had been focused on the idea of leasing its parking out to a private operator for as long as 50 years in return for a big, upfront payment. But more recently, staff members have introduced the possibility of creating a public parking authority and borrowing against future parking revenue.
Several cities, most on the East Coast, have municipal parking authorities. San Francisco is the most prominent Western city to have one.
A parking authority could give the council more control over rates going forward and allow the city to keep workers currently employed by parking operations.
A financing authority "is certainly something people want to take a look at," said Councilman Rob Fong. "It could be good for all the right reasons. The city still runs the parking. No one can say you sold it for too little or you gave it away."
Still, Fong and others said they want the city to follow through on soliciting bids from the private sector on leasing parking operations.
"It's premature to rule anything out," said Councilman Steve Cohn.
While gaining support among council members, the parking financing authority model carries risk.
If parking revenue falls short of what's needed to repay the bonds issued to generate money for the arena, the city could be forced to dip into its general fund to make up the difference. The general fund pays for most basic services, including police, fire and parks.
The parking authority could be structured to insulate the general fund. But experts said the city might feel compelled to step in anyway and make up the difference because a default by the parking authority could hurt the city's credit rating.
"That taint will stay with them," said Marilyn Cohen of Envision Capital Management in Los Angeles.
There are potential upsides as well.
If revenue came in above what the city needed to repay its bond debt, that money would go into the city's coffers. "If you assume more risk, you also assume more potential upside," said City Treasurer Russ Fehr.
City officials are banking on bringing in as much as $230 million from either parking arrangement to cover most of the public share of the arena project. The Kings have agreed to provide $73.25 million and AEG, the company tapped to operate the facility, would put in $58.75 million. The city would own the arena.
Cohn, Fong and council members Jay Schenirer and Angelique Ashby have expressed support for the term sheet. Councilwoman Bonnie Pannell expressed interest last week in the parking authority plan but said she remains leery of a deal that could put the city at financial risk or lead to city employees losing their jobs.
Councilmen Darrell Fong and Kevin McCarty said Monday they have several concerns about the deal points and had not decided how they would vote. McCarty said he wants more assurance that plans to protect the city's budget are sound and is concerned that the city's share of the project cost has grown to two-thirds.
Councilwoman Sandy Sheedy, who has been a vocal opponent of the arena plan, did not return a phone call seeking comment.
The city's total contribution toward the arena is slated at $255.5 million, or roughly 65 percent of the project cost. That total could include the sale of city-owned property.
City Manager John Shirey said the deal does carry risk to the city if revenue falls short of the arena's financial projections – but not to the city alone.
"If it is a financial disaster, it's a problem for us as well as the Kings and AEG," Shirey said.
He added he does not believe that would be the case.
"There are a lot of people who have put a lot of time and effort into due diligence and making sure the numbers will work," he said.
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