Marcos Breton: Sacramento arena plan calls on all parties to pay up
09/08/2011 12:00 AM
10/02/2014 12:14 PM
Several years ago, the Sacramento Kings owners stormed out of a City Council meeting when it was proposed that they split the cost of a new arena with the city.
To Joe and Gavin Maloof, "50-50" were fighting words.
Today, Mayor Kevin Johnson's Think Big Sacramento committee will unveil an eagerly anticipated menu of funding options that could presumably finance a $387 million arena for the vacant downtown railyard.
What is the guiding principle of Sacramento's new plan?
That's right: A virtual split – this time in thirds – among the private interests of an arena, the public and the arena's patrons.
What you will see in today's arena presentation are plans for three different funding pots to generate the $387 million or more needed to get an arena built.
According to people familiar with the document, the Kings, the NBA and a private developer would contribute $91 million to $156 million in lease payments, upfront money, land and other revenue to pay for an arena.
The city of Sacramento would contribute the sale of public land, a tax on hotels and taxis, and money from items such as digital advertising and parking valued at $94 million to $123 million.
And, while residents in the six-county Sacramento region will not be asked to raise their taxes to subsidize a new arena, patrons of the venue will help pay for it. The third pot of money will be fueled by ticket surcharges, naming rights and other revenue sources that could generate $90 million to $121 million.
After today's first public airing of these ideas, it won't be surprising to find skeptics complaining that a Sacramento arena will cost much more than $387 million. There also may be those who wonder whether Sacramento can come close to generating the annual funds necessary to make an arena profitable and pay its debt service.
And in a city where land deals are a contact sport, controversy could arise when Sacramento officials have to decide whether to sell city land to help pay for the project.
One thing is certain: Sacramento does not have the corporate base to privately finance buildings, such as AT&T Park in San Francisco or the Staples Center in Los Angeles.
In this case, splitting the arena funding pie into equal thirds becomes a necessity – even if arena deals are normally stacked heavily in favor of the NBA and paid through corporate largesse or public subsidies.
So today, as the clock starts ticking toward an end-of-the-year goal for an arena accord, one question becomes central to the endeavor:
Will the Kings and the NBA go along with this idea?
The fortunes of the Kings owners have flagged greatly since the team's peak years between 2000 and 2006, when the local NBA team was soaring and the Maloofs were touting their net worth at $1 billion.
In that climate, a 50-50 split of an arena with Sacramento was viewed by the Kings owners as an insult. Since then, the Maloofs have lost control of the Palms Casino Resort in Las Vegas. They've sold the lucrative beer distributorship that was once the bedrock of their family fortune.
The Kings are the primary business the Maloofs control now. They had been willing to make big concessions in that business to relocate the Kings to Anaheim earlier this year, but the move was blocked by the NBA to give Sacramento one more year to get an arena deal done.
Now the concessions the Maloofs made with Anaheim greatly inform Sacramento's arena deal.
For an arena to work here, Sacramento will need the Kings and the NBA to agree to a deal that works for everyone.
Major sticking points will be the size of the lease payments made by the Kings. The NBA, like other sports leagues, is leery of ticket surcharges and personal seat licenses – but they are key components of this proposal. So are some city control of naming rights and parking revenues.
It's been a massive effort for Sacramento to arrive at today's presentation. For this plan to work, it will have to enact several complex funding mechanisms while securing an agreement with a private operator to run the arena.
There are a million moving parts and open questions, the biggest being whether the Kings and the NBA are willing to play ball.
About This BlogHello, my name is Marcos Breton, and I'm the news columnist with The Sacramento Bee. What's a columnist supposed to do? I'm supposed to make you think, make you laugh, make you mad or make you see an issue in a different way. I also write a weekly baseball column during the baseball season. I am a native of Northern California and the son of Mexican immigrants. I've been at The Bee for more than 20 years, and I love Sacramento.
Contact Marcos Breton at email@example.com or 916-321-1096.
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