Kings will spend $90 million in early months of arena construction, document shows

05/15/2014 4:01 PM

10/08/2014 11:57 AM

In the next five months, the city estimates, the Sacramento Kings will spend $90 million on the new downtown arena.

A city staff report released Thursday, in advance of Tuesday’s City Council vote on the arena development agreement, provides a glimpse of how quickly the Kings plan to get the $477 million project going at Downtown Plaza. The Kings expect to start several weeks of preliminary work as early as next Wednesday, including shutting off water and electricity at the eastern end of the shopping center. Major demolition will probably start in July.

“Their spending ramps up quickly,” said Desmond Parrington, the city’s project manager for the arena development. “It’s a pretty good chunk of change after they start the serious work in July.”

Not all of the expenditures are in cash. The figure includes $16 million worth of land at Downtown Plaza that the Kings are transferring to the city, said Assistant City Manager John Dangberg. The arena, scheduled to open in 2016, will be city property but will be run by the Kings.

The Kings’ expenditures in the early months were included in a report summarizing the basics of the development agreement going before the council.

As part of the deal, the city plans to give the Kings a short term, interest-free loan of $12 million to cover various permit fees that must be paid before construction can start. City officials cited the big outlay of cash by the Kings in the early going as justification for the loan. Although the City Council is expected Tuesday to agree to spend $255 million on the arena, no additional public money besides the loan is going into the project for several months.

The Kings’ share of the project is $222 million. That doesn’t include money spent on acquiring the arena site.

Earlier this year, the Kings spent $36 million buying most of Downtown Plaza. A portion of that purchase price is included in the $90 million – namely, the $16 million in property being transferred to the city.

Beyond that, the team will spend additional dollars on the final parcel at the mall, the former Macy’s men’s store, when a purchase price is established by a jury during eminent domain proceedings a few months from now.

The staff report says city officials made changes in one of the financing agreements that was released May 9. They described the changes as minor, but said they will need the council to waive the customary 10-day waiting period required for contracts that exceed $1 million. It takes a two-thirds supermajority of the council to waive that requirement, and Dangberg said he believes the council will agree. Otherwise, the vote on that particular agreement would have to be delayed, but the project as a whole would go forward.

The report also touches on two specific complaints raised by critics of the proposed subsidy: the donation to the Kings of the city-owned parking garages at Downtown Plaza and the right to install six digital billboards on city property. Those donations aren’t counted as part of the $255 million subsidy.

The report says the garages generate such tiny revenue, and will require $39 million in capital improvements over the next 40 years, that they’re essentially worthless.

As for the billboards, the city report says officials could not come up with a reasonable estimate of the signs’ value. Although the city gets $180,000 a year for each billboard controlled by marketing conglomerate Clear Channel, the report says the deal with the Kings isn’t comparable. The Kings plan to use the billboards to showcase some of their corporate sponsors as well as promote downtown events.

Although the council voted 7-2 a year ago to approve an earlier, nonbinding version of the development agreement, the project remains controversial. City officials urged citizens to arrive at City Hall by 5 p.m. on Tuesday to get a ticket for the council meeting, which starts an hour later. “Stakeholders opposing and supporting the (arena) will have fair access to an equal number of tickets in accordance with required capacity limits,” the city said.

The council chambers seats 200. Overflow seating will be available on the second-floor mezzanine, on the plaza outside the building, and in Old City Hall; the meeting will be broadcast on giant video screens.

Related information:

•  Arena timeline: How the deal came together
•  Arena deal completed, heads to City Council for historic vote
•  City rewriting billboard law for Kings

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