City wins tentative control of last parcel needed for new Kings arena

03/18/2014 2:26 PM

10/08/2014 11:45 AM

Sacramento and the Kings are on the verge of overcoming one of the last major legal obstacles to a downtown arena after a judge said he’ll probably give the city control of the final piece of real estate needed for the $448 million project.

In a tentative ruling Tuesday, Superior Court Judge Raymond Cadei awarded control of the former Macy’s men’s store, at the southeast corner of Downtown Plaza, to the city. Cadei is expected to make a final decision on the matter at a hearing this morning.

While the city still needs to complete an environmental review, finalize a development agreement with the Kings and issue bonds to pay for the public’s share of the project, gaining possession of the vacant Macy’s site is significant. Assuming Cadei affirms his tentative ruling, it would enable the city to take possession of the property in the coming weeks even though a trial on the sale price won’t come for several more months.

“This is a major milestone,” said Assistant City Attorney Matthew Ruyak.

Demolition of much of the mall is scheduled to begin this spring, with arena construction starting in the fall. The building is expected to open in time for the 2016 NBA season.

“We’re almost there. Everything now is about groundbreaking (in) 2014,” said Joshua Wood of Region Builders, a labor-management organization that has worked with the city and the Kings to beat back legal and political challenges to the arena.

The city in January filed an eminent domain lawsuit against the owners of the vacant Macy’s building, a consortium that includes CalPERS and a group of mortgage security investors. CalPERS declined to fight the lawsuit and sided with the city.

The city offered $4.35 million for the property, but the two sides were millions of dollars apart. The owners haven’t made a public counteroffer but said in court papers the property is valued at $10 million on the property tax rolls.

Although the city filed the suit to gain possession of the Macy’s site, the Kings will ultimately pay for the parcel. The team already has spent $36 million buying the rest of Downtown Plaza.

City officials argued that they need control of the old Macy’s building soon to keep the project on schedule. The NBA has given the Kings a year’s grace period, to 2017, but reserved the right to buy the team and move the franchise out of town if the building doesn’t open by then. The deadline is part of the agreement the new Kings owners, led by Vivek Ranadive, made with the NBA when the league’s owners rejected an attempt by the previous owners to sell the team to a group planning to move it to Seattle.

The owners of the Macy’s site, which has been vacant since October, fought the city mostly on technical grounds. For instance, they argued that the eminent domain case was flawed because the city hadn’t made a proper offer for the building.

Cadei rejected the owners’ arguments. He noted that the building is empty and the owners face no “substantial hardship” if the building is taken over by the city.

“There is an overriding need for the city to possess the property ... and the city will suffer a substantial hardship if the application for possession is denied or limited,” the judge wrote in his tentative ruling. “If the construction deadlines are not met, the project will be placed in significant risk.”

Just a week ago, Judge Robert Hight rejected the owners’ request to move the lawsuit to a “neutral venue,” such as Alameda County.

The attorney for the building’s owners couldn’t be reached for comment Tuesday. The Kings declined comment, referring questions to the city. A spokesman for Mayor Kevin Johnson, who has championed the arena project as a savior for downtown Sacramento, said the mayor would have no comment until the final ruling.

The city’s preliminary victory in the eminent domain suit comes three weeks after it also prevailed in a lawsuit filed by two taxpayers’ groups trying to place the question of the city’s subsidy on the ballot. Their efforts were thrown out of court last month because of legal defects. At this point, the only pending legal challenge is a fraud suit filed last year by some of the same people attempting to block the proposed $258 million city subsidy for the project, arguing that the true size of the subsidy is considerably larger.

Last week Ruyak called that case a “nuisance suit.”

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