Amid a festive atmosphere at City Hall, the Sacramento City Council voted Tuesday night to approve the construction of a new downtown arena for the Kings, ending years of effort and angst.
The 7-2 vote came after more than four hours of impassioned public testimony and deliberation by the City Council. An overflow crowd inside the Council chambers erupted into cheers of “Sacramento” when the vote was tallied.
Mayor Kevin Johnson said the vote marked “the end of one era and the dawn of a new one.”
“I’ve never been prouder of this community,” he said. “We had our backs against the wall and we defied the odds. We made a comeback for the ages and in doing so, I feel like we unleashed the very best that Sacramento has to offer. And for this I consider this Sacramento’s finest hour.”
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Johnson was joined by Council members Angelique Ashby, Allen Warren, Steve Cohn, Steve Hansen, Jay Schenirer and Bonnie Pannell in voting to approve the deal. Council members Kevin McCarty and Darrell Fong voted against the plan.
“After 16 years on this council, we finally have a project that will bring 4,000 jobs and change downtown Sacramento forever,” Pannell said.
Kings chairman Vivek Ranadive addressed the crowd after the vote, saying “you have our promise that we’re going to be unrelenting in our pursuit of excellence in creating the world’s greatest arena.”
“This is your team, and it’s here to stay,” he said to thundering applause.
The council gave the green light to what City Manager John Shirey called “one of the largest, if not the largest, economic development projects ever brought before a City Council in Sacramento.”
“We’ve not done anything like this in the city’s history,” said Councilman Allen Warren, a supporter of the plan. A stream of business and political leaders also stepped to the lectern Tuesday evening to express their support.
The $477 million arena will replace a mostly vacant Downtown Plaza that has languished for years. City officials say they’re hopeful the facility will spark development throughout the central city. The Kings are planning to build a hotel, office space, restaurants and apartments adjacent to the arena, although no time frame has been provided for that work.
The arena’s financing plan includes a city contribution of $255 million and $222 million from the Kings. The city will issue revenue bonds that it will repay over 36 years, backed mostly by annual lease payments from the Kings and money from city-owned parking facilities.
Councilman Darrell Fong said the plan takes on “too much risk for the city.”
Even with the monumental City Council approval, opponents of the project said they would continue to fight.
Attorney Patrick Soluri, who has filed a lawsuit challenging the arena plan, said a political action committee was being formed to seek a referendum on the City Council’s vote. That committee would need to collect roughly 12,900 signatures from registered city voters within 60 calendar days from Wednesday to force a public vote on the plan, city officials said.
Jim Cathcart, one of the leaders of a campaign that sought a public vote on city subsidies to sports facilities last year, said a group of 12 downtown residents planned to file a legal challenge to the arena’s environmental report. He said the lawsuit would challenge the report’s assessment of noise and crowd impacts created by the arena.
Critics have said the amount of public contribution to the project is too high and carries too much risk for a city that has battled budget deficits for seven straight years. Opponents filled four rows inside the City Council chambers.
Dennis Neufeld, a member of local watchdog group Eye on Sacramento, said “the city should not be in the sports arena business.” Instead, he said the city should focus on basic city services such as police and parks.
Other speakers raised concerns about the arena driving out small businesses and low-income residents who live near the site.
Supporters of the plan outnumbered opponents inside the City Council chambers by an overwhelming margin. With music booming in the courtyard outside the building and an 8-foot-wide LED television flashing Kings highlights, arena boosters began lining up outside City Hall five hours before the council meeting began.
“This team is not here but for this community,” Kings President Chris Granger said. A former NBA executive who watched last year’s saga to keep the team in town from afar, Granger said “there were several times it didn’t look good for Sacramento.”
The arena agreement includes a 35-year non-relocation clause for the Kings.
Granger said the team would begin preparations to demolish Downtown Plaza within the next few days. Demolition is expected to start in July, with construction of the arena scheduled to begin in November. The arena is scheduled to be open by September 2016.
In addition to the arena financing plan, the City Council approved the facility’s development agreement, design elements and environmental impact report.
The bulk of the public investment would come from borrowing against future revenue of the city’s parking operations. The bond offering would leave the city on the hook for $21.9 million in annual debt payments, to be repaid by arena lease payments from the Kings and expected increases in parking revenue in the coming years.
“At the core of the plan is a vanilla municipal bond issue,” City Treasurer Russ Fehr said.
City officials said they’re confident the debt can be repaid without cutting into the city’s general fund, including the $9 million a year in parking profits that currently feed into the budget.
“The risk is marginal and acceptable,” Fehr said.
The Kings will pay the city $6.5 million a year to lease the arena, a sum that will grow over time and eventually reach at least $18 million. The city is also counting on about $3 million a year in tax payments and parking fees from arena events.
Over the life of the bond, the city will pay $715 million in principal and interest, said Assistant City Manager John Dangberg. Of that, at least $390 million will come from the Kings’ lease payments.
“We think that is a great balance of revenue streams,” Dangberg told reporters before the council meeting.
Perhaps the greatest uncertainty surrounding the city’s debt repayment plan is the anticipated growth in parking revenue. The city is expecting contributions from parking to grow by $7.5 million a year by 2021, an increase of about 50 percent. City officials said they will ramp up revenue through a combination of additional meters, extended hours of operation and some rate increases – actions the city says it would take whether an arena was being built or not.
How high the parking rates will grow is unknown; Shirey has said there won’t be any extraordinary rate hikes. Dangberg said that because of competition from private garages, “we can’t take those rates beyond what the market will bear.” The city owns about 25 percent of the parking spaces downtown.
Jerry Way, the director of the city’s Department of Public Works, said Sacramento has the lowest parking meter rates among other major West Coast cities.
Dangberg said the ramp-up in parking revenue is very realistic. Parking revenue has been flat in recent years, and the combination of new technology and targeted rate hikes will yield the needed dollars, he said. New technology will allow the city to implement “dynamic pricing,” in which prices shoot up during arena events and other busy periods.
“We have substantial value in our (system) that is untapped,” he said. The enhancements will let the city “capture revenue that is being lost.”
The financing plan for the arena also calls for a donation of $32 million of various city-owned land parcels, including the land at the Kings’ current home, Sleep Train Arena. In addition, the city is giving the Kings the parking garages at Downtown Plaza and the right to build six digital billboards on city land.