Judge defers ruling on lawsuit challenging Sacramento’s plans for arena subsidy

It was a critical moment in Sacramento’s effort to keep the Kings from leaving town – a lopsided vote by the City Council in March to tentatively approve a $258million subsidy for a new downtown arena.

But the legal ramifications of that vote remain a point of contention, and on Friday a judge held off on making a definitive ruling in a citizens’ lawsuit challenging the subsidy.

The citizens argue that city officials “fraudulently” concealed the true value of the subsidy – which they claim is at least $80million more than the $258million figure outlined in the term sheet between the city and the new owners of the Kings. City officials said they’ve concealed nothing – and that the lawsuit is premature because the term sheet is a nonbinding document that doesn’t commit the city to spending a dime on the arena.

On Thursday, Sacramento Superior Court Judge Eugene Balonon agreed with the city’s contention that the case is premature. He issued a tentative ruling that puts the lawsuit on ice.

But on Friday, after hearing nearly an hour’s worth of arguments from lawyers for both sides, he said he would make a final ruling at a later date.

The arguments centered almost exclusively on the meaning of the March term sheet. Dawn McIntosh, a lawyer for the city, said the term sheet “is nothing more than an agreement to continue negotiating in good faith.”

“We don’t know what the agreement is going to look like,” she added. “There’s no certainty that this particular deal will ever happen.”

But the citizens’ lawyers, Patrick Soluri and Jeffrey Anderson, said the term sheet put the city on an irreversible path to spending money – a process that’s already underway with the hiring of consultants in recent months to study the arena project.

“The city’s dug themselves a hole ... by continuing to make expenditures,” Anderson said.

McIntosh, though, said the consultants could have been hired without a term sheet. “The term sheet didn’t authorize anything,” she said.

The judge himself noted that the term sheet was necessary to show the NBA that Sacramento was serious about keeping the Kings. At the time, the league was considering an application by the former owners, the Maloofs, to sell the Kings to a group from Seattle. The NBA ultimately killed that deal and the Maloofs sold the team to a group led by software tycoon Vivek Ranadive.

“The term sheet was necessary to keep the Kings in Sacramento,” the judge said.

Even if the judge ultimately sides with the city, the plaintiffs could resurrect the case at a later time.

The city has said it expects to sign a definitive development agreement sometime next spring, with construction on the $448million Downtown Plaza arena to begin soon after. The facility is supposed to open in 2016.

One reason the lawsuit contends that the subsidy is worth far more than $258 million is that the city is donating the parking places beneath Downtown Plaza without assigning any value to them. In addition, the city low-balled the value of the land parcels being donated, the plaintiffs allege.

The suit is part of a two-pronged citizens’ protest against the arena subsidy. The three plaintiffs in the lawsuit – Isaac Gonzalez, James Cathcart and Julian Camacho – are also leaders of a separate effort to gather signatures for a ballot initiative that would force a public vote on the subsidy.

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