Sacramento City Councilman Kevin McCarty this week testified he thinks city officials added millions of dollars worth of “sweeteners” to the proposed subsidy for the new Kings arena to placate investors who believed they were overpaying to buy the team.
McCarty made the statements Monday in a closed-door deposition for a lawsuit filed by several activists against the city in an effort to block the arena subsidy, which is pegged by city officials at $258 million. Lawyers for the activists released the 133-page transcript of the deposition to the media Thursday.
Those lawyers, Patrick Soluri and Jeff Anderson, said McCarty’s deposition supports their claim that the city fraudulently conducted a backroom deal with the Kings in early 2013 that wasn’t fully revealed to the City Council or the public.
McCarty did not go that far in his deposition, but said he feels the deal lacked transparency. “I view that the city provided a number of subsidies that weren’t properly accounted for monetarily in the term sheet,” he said.
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City officials said they wouldn’t comment on McCarty’s statements. But in Sacramento Superior Court last month, a lawyer for the city, Dawn McIntosh, called their assertions “a waste of everyone’s time.”
McCarty, who has consistently opposed the subsidy, said he was contacted by representatives of the Kings investment group asking if the city would be willing to pay a subsidy beyond the $258 million figure. The men, he said, were lobbying the city on behalf of the investors trying to buy the Kings last year to prevent them from moving to Seattle.
McCarty identified one caller as Sacramento developer David Taylor. He also said he was contacted by lobbyist and businessman Darius Anderson and Frank Quintero, a representative of Southern California billionaire Ron Burkle. Burkle, Anderson and Taylor wound up not buying the team. Instead, a group led by Bay Area tech executive Vivek Ranadive purchased the Kings last May and is pressing ahead with plans to build a new arena at Downtown Plaza – with what the city has pegged as a $258 million subsidy.
Taylor and Anderson declined to comment Thursday. Quintero couldn’t be reached for comment.
“So-called whales lobbied me and other councilmembers asking the city if they would contribute more than last year’s $258 million subsidy and using the number $125 million more because they were overpaying,” McCarty said.
The case is the second lawsuit filed over the arena subsidy. Two taxpayer groups are suing the city to force a public vote in June on sports facilities subsidies. The groups submitted more than enough signatures from voters to force a vote, but the city clerk rejected the petitions because she said the wording was legally flawed.
Subsidy critics James Cathcart and Julian Camacho are plaintiffs in both lawsuits.
McCarty said the prospective Kings owners, known as “the whales,” asked last year that the city provide a subsidy well above the $258 million that was offered to the team’s previous owners, the Maloofs, in an aborted 2012 arena deal.
McCarty added that City Manager John Shirey told him the “whale team stormed out” of a negotiating session over the investors’ insistence that the city throw in an additional $125 million. The deposition does not specify which investors were in the meeting with city officials.
The Bee reported last February that Burkle’s investor group was seeking a figure in excess of $258 million. City officials refused to raise the ante, and last March the City Council tentatively approved a term sheet calling for a $258 million subsidy.
To back up his claim that the Kings were pressuring the city for more, McCarty provided a copy of a text message he received from attorney Jeff Dorso, who now works for the Kings, that read: “[G]iven the ownership group has already substantially overpaid (say 525 for an asset worth 350) they have already assumed the risk. They need a return to make overpayment worthwhile.”
There’s nothing in Dorso’s text message that says the city should pump more into the deal to compensate the owners.
Soluri and other arena subsidy critics have focused on three aspects of the term sheet that they say are deliberately undervalued: land the city plans to give the Kings, parking spots beneath Downtown Plaza and six parcels where the Kings can build digital signboards.
McCarty testified he believed, based on conversations with other city officials, that those values were worth tens of millions of dollars more than the published $258 million figure. City officials have disputed that assertion.
City officials have said they believe the $38 million value assigned for the land is solid, based on a broker’s assessment, or “opinion of value,” conducted by the CBRE commercial brokerage last year, just before the city signed a tentative term sheet with the Kings. The Eye on Sacramento watchdog group has argued that the city should have done a more thorough “certified appraisal.”
Officials said they did not put a value on the parking spots because they were not yet certain exactly where the arena would be placed, how many spots that would leave available, and how much money would be required to keep the remaining spots operational over time.
The billboard sites, they said, are vacant, so they have limited current value. If the Kings were to put up billboards, they could, at present rates, earn as much as $19 million over the next 35 years on them, according to a Bee estimate.