Marcos Bretón

Marcos Breton: Arena subsidy could spur revival in downtown Sacramento

Marcos Breton
Marcos Breton

A few weeks ago I addressed an audience of more than 300 senior citizens, many of them quite hostile to the idea of a public subsidy to finance a downtown arena for the Kings.

I wasn't exactly a Hereford being led to slaughter, but some in the crowd got borderline nasty. There were raised voices and a few who hollered "No!" when I made my pitch for why an entertainment facility would be great for downtown.

A subsidy for a sports facility is always a deal- breaker for some. The idea of a billionaire owner padding his bottom line with public money to pay millionaire athletes is like the Academy Awards show – millions hate it.

Academics don't agree on much, but there is academic consensus that public subsidies for sports venues don't pan out.

The cost of these buildings is always higher than advertised and the payoff is always less, the eggheads say.

They make rich guys richer off the backs of taxpayers who subsidize the buildings even if they never buy a ticket to see a show. It's "corporate welfare."

Blah, blah, blah.

This conventional wisdom may be set in stone, but with a shaky foundation.

There are too many flaws in the way academics have studied this issue for Sacramento to simply let the Kings relocate to Seattle without exploring a downtown arena that could mean much more to the region than housing a bad NBA team.

Far more exciting than the fate of the Kings is the desire of billionaire Ron Burkle to build an arena at the Downtown Plaza and develop unused property around it for an entertainment district.

That could raise the value of boarded buildings on K Street that are near a Downtown Plaza marred by too many vacancies. It could also create energy spilling onto Capitol Mall, Old Sacramento, the downtown railyard and – if done right – across the river to West Sacramento.

Compare that with what we have now: panhandlers, the smell of pot, dilapidated buildings, a dying mall symbolizing a flagging retail tax base, and almost no energy in the very core of downtown Sacramento.

Burkle built a fortune by identifying undervalued assets and turning them into valued ones.

Is there a more compelling proposal to energize the dead spots in downtown Sacramento? No. That's the point here. There aren't any prospects more compelling than this one.

The value for Sacramento would be in transforming nothing into something.

The question then would be: How would one measure the subsidy used to help create what didn't exist?

If your answer is that a subsidy for a sports franchise is too high a price to energize downtown Sacramento, then please consider a few points:

1) You can't walk anywhere in downtown Sacramento without bumping into a building or an attraction that wasn't subsidized in some way through public funding. The Crocker Art Museum got a subsidy, as did the restaurants that have improved the K Street mall near the Crest Theatre. The new terminal at Sacramento International Airport was subsidized, and the list goes on and on.

2) The economic studies of sports facilities don't do enough to separate stadiums from arenas in the minds of the public. The fact is, the most egregious examples of public money ripped off for monopolistic sports leagues are for massive stadiums that are inefficient because they are used only for small fractions of a calendar.

Arenas are different, but that message is sometimes buried in the back pages of academic text.

"The public share in arena capital and total costs is consistently below that for stadiums," wrote Andrew Zimbalist, considered by many the premier sports economist in America. "Because arenas can be used 200 to 350 days a year – sometimes twice in one day – arenas can be cost-effective private investments."

It all depends on the deal.

The city wouldn't operate a downtown arena or incur all the costs and liabilities that often drive up the price of arenas in other cities. The city would need private investors to cover cost overruns if they occur – and they always do.

Last year, the city agreed to pay $255 million of a $391 million arena with city parking revenues in a deal that fell through when the Kings owners backed out. The city can't go any higher this year and may in fact have to go lower because of parking spaces that would be lost with arena development at Downtown Plaza.

Some still think more than $200 million in public funds is too much for a $400 million arena, but consider this: It's not just for an arena. That investment would also be made in the hopes of spurring millions in private investment around the arena.

If the big zero in Sacramento's urban core became something vibrant, the rate of return for the initial investment of a public subsidy would exceed any academic measure. It would be priceless for Sacramento.