The judge in the downtown arena court case offered what may be an important clue into his thinking Wednesday, on the last day of trial, when he challenged one of the deal opponents’ premises.
The lawsuit, brought by three residents, contends the city secretly agreed to subsidize an investor group’s purchase of the Kings basketball team to help assure its long-term economic viability in Sacramento. The suit challenges the 2014 deal between the city and Kings to finance a new arena.
Sacramento Superior Court Judge Timothy Frawley asked both sides questions during closing arguments, including pointedly asking the plaintiffs to explain what’s wrong with the city engaging in a business deal.
Cities are known to offer tax relief or incentives to businesses, Frawley said. “This case seems analogous to me. Are you disagreeing that governments should not be in the business of inducing a business to come or to stay in a community, that there is something inherently wrong about a public-private partnership?”
Plaintiffs’ attorney Patrick Soluri acknowledged courts have ruled city investments in professional sports arenas provide a public benefit, but said that is not what he believes happened here. The city, he said, went beyond investing $255 million worth of cash and land value into construction. It threw in other assets without telling the public their value.
“There was essentially a side agreement,” Soluri argued. “This is about misleading the public regarding the purpose and intent of city assets that are being conveyed to private individuals.”
Soluri based his case on city documents that, he says, show that it offered deal sweeteners, notably the rights to operate several thousand parking spaces and build six rent-free billboards on city land. Documents show, he said, that the city knew those assets were worth a substantial amount.
City attorneys contend plaintiffs failed to prove their allegations. “They have never produced a smoking gun,” attorney Dawn McIntosh told the judge. The Kings group initially asked for financial help to make up for overpaying for the team during a bidding war with Seattle, she said, but documents show the city flatly rejected the claim.
The rights to operate parking spaces and to build billboards were simply negotiating points the city used for leverage, knowing the Kings needed control of parking spaces next to the arena, and wanted extra signage to promote arena events.
“The city looked at their costs associated with these items and said, ‘Hey, this is an opportunity for us,’ ” she said. “ ‘We’ll include them in the deal, and we can get some things the city really wants.’ ”
She said the city got the Kings to pay all arena construction cost overruns, future upgrades to the parking garages and future arena upgrades. “All these things were hugely important to the city and they got the Kings to agree to this through these two assets.”
McIntosh contended it cost the city nothing to convey the billboard rights, other than a potential opportunity cost for lost rent. The city argued that the garage spaces at the Downtown Plaza site were worth nothing because they are in disrepair and will require as much as $60 million to fix over the next four decades. The Kings have demolished about 1,000 of them to build the arena and adjacent development.
The courtroom exchanges came at the end of the 11-day trial. Witnesses included Mayor Kevin Johnson, who testified that he deleted some texts involving the arena, despite a plaintiff’s letter informing city officials they have to retain electronic communications related to the lawsuit. Frawley said he may take those actions into account but did not indicate whether he considered the erasure a serious issue.
Frawley did not say when he might issue a ruling. It is unclear what effect a negative ruling would have on the arena project. Plaintiffs’ attorney Jeffrey Anderson said his side wants the judge to nullify the deal, which could force the city and Kings to negotiate a new one.