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Grand plans, hard realities

Originally published: 10/4/06

The television ad campaign supporting the new Kings arena plan on the November ballot focuses on its potential to spur the stalled redevelopment of downtown Sacramento's railyard.

Stan Thomas, the Georgia developer negotiating to buy the railyard from Union Pacific, is funding the campaign with $2 million. The ad features his renderings of a railyard transformed into a vibrant housing, retail and sports and entertainment district.

Yet even as Thomas opens his wallet to help the arena bid, his initial negotiations with the city over other aspects of the railyard development suggest he may strike a hard bargain when it comes to selling the city and county the land for an arena.

City and county officials talking to Thomas' team about the arena won't say how much he's asking for the land on which it would sit. But last week his representatives said the land the city needs to acquire for a new train, light-rail and bus station is worth as much as $5.5 million an acre. The publicly funded station would benefit Thomas' project.

Discussions over the station -- just one part of the railyard development -- illustrate the enormity of the complex and costly issues that must be worked out before railyard development could begin.

Suheil Totah, vice president of development for Thomas Enterprises, says his firm will be ready to break ground next year, once the city approves environmental review and project plans. City officials, too, say this timetable is realistic.

"There's no reason I can see why we can't be breaking ground by next summer," said Assistant City Manager Marty Hanneman.

Yet nearly all the big-ticket issues remain on the table. Members of the Maloof family, which owns the Kings, have repeatedly pointed out that Thomas doesn't even own the 240-acre railyard. He's been negotiating with Union Pacific for more than three years.

Totah says the deal will close, but he's stopped saying when.

The city has just begun talks with Totah over who should pay $40 million to $70 million to move the Union Pacific train tracks to the north and make improvements needed for the railyard development and the planned transit station.

Totah said his company expects the city -- with help from state and federal agencies -- to shoulder the financial burden.

"I think their initial reaction is they'd like to see the city bear as much of the cost as possible," Hanneman said.

Another goal of the negotiations is a separate agreement on the 32 acres for the transit station.

In a meeting with city officials Friday, Totah presented an appraisal suggesting some of the land could fetch as much as $5.5 million an acre, Hanneman said.

"We don't agree with that value; that's just what they say it's worth," Hanneman said. "We want to get our own third-party appraisal."

Hanneman stressed that the arena land would probably be appraised for less than what Thomas Enterprises is seeking for the station piece, which is closer to the front of the railyard and thus more valuable.

Totah would not comment on the price for either property.

Mayor Heather Fargo said she has long expected that land for the station would be made available to the city at little or no cost.

Both the track relocation and intermodal station have the potential to greatly increase the value of other land in the 240-acre railyard. So does the arena.

"My opinion is that it would be reasonable, given that the intermodal is going to be the centerpiece for the entire development, and the real catalyst for the entire development, that the city would pay little if anything for the intermodal site," Fargo said. "It improves access. It provides infrastructure. It's a huge public investment in the middle of a very large private piece of land."

Construction on the station itself is expected to cost about $200 million, Fargo said. So far, the city has $17.5 million in federal transportation funds and $60 million earmarked from the county's Measure A sales tax.

The city is also working with Thomas Enterprises to develop an overall plan for building streets, sewers, utilities and other infrastructure needed to serve its railyard project -- an undertaking expected to cost hundreds of millions of dollars.

"They need everything; there's nothing out there," Hanneman said.

Thomas Enterprises plans to build a level of parking over much of the 240 acres. It will double as a giant platform for buildings and streets above. An extension of Fifth Street would curve through the development, and a new street tentatively named Big Four Boulevard would run through the sports and entertainment district and in front of the arena.

The developer won't divulge how much it is paying Union Pacific for the railyard. In addition to the purchase price, Thomas Enterprises will be responsible for completing the cleanup of toxics on the Superfund site. The cost of this work has also not been released.

"We are taking on the cleanup responsibility, and our responsibility is being backed by a large insurance company," Totah said.

Proponents of the arena plan on the Nov. 7 ballot consider its location in the railyard its strongest selling point. For some elected officials it's the only reason they've put their political capital on the line to back Measures Q and R, which would impose a new quarter-cent sales tax and ask voters to bless spending half of the $1.2 billion generated on a sports and entertainment facility. The measures received dismal ratings from voters in a Bee-commissioned poll published last Sunday.

"We always thought it was worth the kind of investment we were willing to make if it was going to be in the downtown railyard," said City Councilman Rob Fong. "We certainly recognize how important and strategic this project would be as an anchor and a catalyst."

Totah shares Fong's enthusiasm. From his office in the recently renovated Railway Express Agency building, he looks out his windows and sees 240 acres of possibility -- a former industrial hub now empty except for historic red brick buildings that once served as workshops.

Colorful drawings hanging on his walls show the railyard as he envisions it -- pedestrian-friendly streets lined with stores, housing and offices, and historic buildings turned into lively markets and museums. There's also a performing arts complex. And, of course, a basketball arena.

But Kings President John Thomas, ensconced in his offices at Arco Arena, has a different picture in mind. When he contemplates the downtown railyard, Thomas focuses mostly on the risks of moving the team from its current, comfortable berth in North Natomas, surrounded by wide roads, freeway exits and plenty of parking.

The railyard is an unknown, in his view, and he wants to protect the business interests of his employers, Joe and Gavin Maloof, by making sure they receive at least the same income from parking and concessions in the railyard location as they do at Arco.

The Maloofs broke off talks with the city and county last month, saying Thomas Enterprises failed to provide several promised concessions, including 8,000 parking spaces controlled by the Kings. The developer and government negotiators crafted a new plan and sent it to the Kings. John Thomas said the team needs more information before it can respond.

"Everybody knows that the easiest location, and the least expensive location, is right where we are now, and it's the most popular with our customers," Thomas said last week. "The Maloofs have always said we'll go downtown if that's what the community wants. ... (But) we can't go backwards."

The Bee's Mary Lynne Vellinga can be reached at (916) 321-1094 or mlvellinga@sacbee.com.

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