Sacramento signed a monumental deal two years ago to build a sports and entertainment arena in the heart of the city. Now comes the time to pay for it.
On Tuesday night, the City Council will be briefed on a plan to extend downtown parking meter hours to 10 p.m., allowing the city to collect meter revenue from fans attending nighttime events at Golden 1 Center when it opens in October. Most city parking meters now shut down at 6 p.m.
City parking officials also propose to lengthen meter hours to 8 p.m. in a slice of midtown. The city also plans to institute a system called SpotZone that allows drivers to add time beyond the meter’s regular limit by paying a premium price.
City parking officials described the meter-hour changes as part of a downtown parking-modernization plan that was in the works long before there was talk of building an arena at the old Downtown Plaza site. As part of that plan, the city recently installed smart meters, which allow drivers to pay via credit card or smartphone. Officials say they expect parking revenues to grow naturally in the coming years as downtown grows.
But numerous city financing analyses over the past two years also make it clear that in signing the May 2014 arena deal with the Sacramento Kings, the city committed to collecting millions of dollars in new parking revenue, peaking at an additional $5.3 million a year by fiscal year 2018-19, in order to repay the city’s arena bonds.
Tuesday night’s proposal is the second of three notable changes involving parking meters.
Last year, the city increased hourly rates at meters by 50 cents, from $1.25 to $1.75. It was the first rate increase since 2008. City parking officials said that increase reflected market demand and market pricing, and helps pay for the purchase and installation of the new smart meters.
In the next few months, city parking officials say they plan to create meter-rate geographic zones downtown, essentially charging higher parking rates the closer patrons park to the arena when events are going on. City parking chief Matt Eierman said his division has not yet decided what the increased rates will be. Parking now costs $12 for Kings games at Sleep Train Arena, and $15 for other events.
City officials said they do not know how much additional revenue the city will collect by keeping parking meters on later in the night.
“There is not a revenue estimate on these recommended policy changes that anyone can offer,” city spokeswoman Linda Tucker said in an email. “We would merely be speculating. If there were, it would be in the council report.”
“At the end of the day, these recommendations and the others to come are aimed at improving parking and making it easier to find a space for short term and long term.”
Parking chief Eierman said night metering should prompt more visitors to park in city garages, making metered spaces available for people who want them, and decreasing the number of cars circling blocks looking for parking as downtown becomes more crowded.
“We are creating good parking policy that helps us grow,” Eierman said. “If people have a perception that parking (is difficult) in our city, it is going to hamper growth.”
The financing arrangement for the downtown arena is complex, and parking revenue represents only a part of the picture.
The arena construction cost currently is $519 million. The city, which will own the arena, will pay $255 million of that. The Kings, who will operate the arena, will pay the rest.
While the city’s $255 million subsidy includes several land parcels being transferred to the Kings, the bulk is in cash. To finance that contribution, the city sold $273 million in parking bonds. About a fifth of the bond proceeds are being set aside in mandatory reserve accounts, leaving $220 million to be pumped into arena construction.
Annual debt service on the bonds will be $17.9 million. Including interest payments, the city will spend a combined $625 million through 2050 to pay off the bonds.
Two-thirds of the money the city needs to repay the bonds will come from the Kings in the form of lease and tax payments, according to a report submitted to the City Council in January by former City Treasurer Russ Fehr. The Kings’ annual rent will start at $6.5 million and will grow to at least $17.2 million by end of the 35-year lease.
In the first few years of the arena’s life, however, growth in city parking revenue will be crucial. In the 2018-19 fiscal year, the city is counting on $5.3 million in new parking revenue: $4 million from the modernization program, and another $1.3 million in revenue generated specifically by motorists parking downtown to attend events at Golden 1 Center.
New net parking revenues are expected to account for 23 percent of the money the city will need to pay its debt, according to Fehr’s analysis.
The need for new parking revenue will begin to drop in 2022. By that point, the Kings’ annual lease payments, which are tied to inflation, will have grown. The city also will benefit from having retired some existing debt on parking garages, which will free up $4.2 million in additional cash for paying back arena bonds.
Sacramento officials say the financing strategy is a smart way for the city to handle its share of the arena price tag. It spreads the costs among downtown visitors from around the county and broader region, not just city residents, they point out. It also means, though, that people who park downtown for other purposes, not to attend arena events, also pay a share of arena costs.
The reliance on parking fees has prompted complaints from some downtown visitors. One critic of the arena deal, Craig Powell of the Eye on Sacramento watchdog group, suggested of the new meters: “The city should really rename them all ‘arena pay stations.’ ”
Sacramento resident Michael Paddock called the proposal “predatory” and said he will be less likely to frequent downtown venues. Other critics say investing so much in the arena means the city general fund has less money to be spent on other services.
In a written report to the City Council in January, Fehr acknowledged the trade-off the city is making by using increased parking revenues as part of the arena financing, but he countered that much of the new revenue, notably parking revenues on arena event nights, would not exist without the arena.
“It is true that, to a certain extent, city support of the Golden 1 Center construction represented a trade off with capacity to support other programs or services, but it is far from a one-to-one exchange,” Fehr wrote.
The city recently won a victory in court over the way it plans to use its parking meter revenue as part of the plan to finance the arena’s debt. In a lawsuit last year, opponents of the arena deal challenged the city’s use of parking meter revenue, saying it violates city and state law. Legally, the city can use parking meter revenue only to pay for meter and street-related expenses, such as supervision, inspection, installation, maintenance, and costs of regulating street parking.
City officials countered in court that they will not use meter money directly to pay arena debt. The city does not collect enough parking meter revenue to pay for the legally allowable costs of meter and street regulation costs. The city has been using general fund money to help pay for those costs.
The increased net parking meter revenue will “free up more of (the city’s) general fund for other uses, such as paying debt service on the bonds,” Superior Court Judge Timothy Frawley concluded in a July 2015 ruling siding with the city.
Geographic areas for proposed parking meter evening hours:
10 p.m.: From Front Street to the west side of 16th Street; from C Street to W Street
8 p.m.: From the east side of 16th Street to the east side of 19th Street; from C Street to W Street