City wins possession of old Macy’s building for new Kings arena

The real estate is under control and most of the legal challenges are history. Now the city of Sacramento and the Kings are making a final push to get construction going on the team’s long-delayed new arena later this spring.

With a judge giving the city permission to take over the final piece of property needed at Downtown Plaza, officials with the city and the team said they’re on track toward finalizing a development agreement to build the $448 million arena. City officials said they’re making progress on two other critical elements of the project, the environmental impact report and the pending bond sale to finance the bulk of the city’s proposed $258 million share.

A major piece of the arena puzzle fell into place Thursday. After delaying his ruling by a day, a Sacramento Superior Court judge awarded possession of the former Macy’s men’s store, at the southeast corner of Downtown Plaza, to the city. Judge Raymond Cadei’s decision affirmed an earlier, tentative ruling, and enables the city to use the eminent domain law to wrest control of the vacant building from its owners, a group of mortgage-certificate holders and CalPERS. The pension fund didn’t fight the city, but the mortgage holders did.

“I’m not going to pop the cork until October ’16,” said Kings President Chris Granger, referring to the arena’s expected opening. “But it’s a certainly a good moment for us.”

While the purchase price for the building won’t be resolved for months, Cadei’s ruling keeps the arena project on schedule. After more than a decade of false starts and wrong turns in the effort to build a new arena, city officials said demolition of much of Downtown Plaza could begin in early June.

“There’s a lot of things left to do,” Granger said. “Nice to check this off the list.”

John Dangberg, assistant city manager, said the City Council could vote on the environmental report, bond sale and development deal with the Kings as early as April 29. The bonds could be sold soon after. He said Cadei’s ruling on the Macy’s case helps the city firm up its timetable.

“With this hurdle past us, we now have a clear path toward City Council action on this project,” Dangberg said.

He said the city will soon schedule a series of public meetings, probably in April, that must be held before demolition can occur. Those sessions include a public briefing to the City Council on the development deal and other aspects of the project. Separately, the Planning Commission must vote on the project’s design and the environmental report before the council can vote. The deal between the city and the Kings will be released to the public 10 days before the City Council takes its final decision.

A year ago, the City Council approved a nonbinding “term sheet” outlining the basics of the project and the proposed $258 million public subsidy.

City officials negotiated the term sheet primarily with Southern California billionaire Ron Burkle, who was leading the effort to prevent the Maloofs and their partners from relocating the Kings to Seattle. Burkle gave way to a group led by Vivek Ranadive, but the city and the Kings say negotiations on a definitive agreement haven’t missed a beat.

“Everything is moving along,” Dangberg said.

He noted that while the fine points are being negotiated, the city’s proposed subsidy remains capped at $258 million.

Granger, who was hired by Ranadive last summer, said the definitive agreement will consist of a host of voluminous documents, collectively dwarfing last year’s 19-page term sheet. But the basic outline is the same.

“The core elements don’t change at all,” including the size of the subsidy, the Kings executive said. “I feel good about where we are.”

He said the Kings are plowing through design elements large and small. On Wednesday, the team witnessed a demonstration of technology that would allow fans to re-charge their cell phones from their seats inside the new arena. The technology has been developed by telecom giant Qualcomm Inc., whose chairman Paul Jacobs is the Kings’ vice chairman.

“You could set your phone on your armrest and it could charge your phone,” Granger said. He said it’s possible the technology could be introduced at the team’s current home, Sleep Train Arena.

The Kings have already spent $36 million buying most of Downtown Plaza and were anxious to take control of the final parcel. The city valued the old Macy’s building at $4.35 million but the owners wanted millions more, according to court papers.

The city filed its eminent domain suit in January, saying it needed to gain control of the property so the arena wouldn’t slip behind schedule. If the building doesn’t open by 2017, or one year after the current timetable calls for, the NBA has the right to buy the Kings and move them out of town. That option is part of the agreement Ranadive made with the NBA last spring, when league owners blocked the Maloofs’ attempt to sell the Kings to a group from Seattle. The Maloofs then sold the team to Ranadive.

Cadei held off on a final ruling after hearing last-minute arguments from the lawyer for the certificate holders, who said the city had botched the eminent domain process and was only entitled to take over the land beneath the Macy’s building. City officials said they didn’t make any mistakes, and the judge ultimately agreed.

The city still needs to serve the owners with a signed order from the judge. Once that happens, the city will control the building 10 days later, said Assistant City Attorney Matthew Ruyak.

After the price is set by a jury, the Kings will pay for the property, even though it was the city that filed suit.

The mortgage certificate holders’ lawyer, George Speir, was unavailable for comment.

The project still faces one legal challenge, from a group of citizens who say the city has lied about the true value of the public subsidy. Ruyak recently called that case “a nuisance suit.” Several of the same citizens recently lost a court fight to force a public vote in June on the subsidy question.

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