It was no surprise when a lawsuit challenging the financing of Sacramento’s new downtown arena was shot down in court on Friday.
Anyone who has paid attention to the suit brought by three city residents could tell where it was going. There was no proof of a “secret subsidy” cut behind closed doors between the Kings and the city. There was no evidence that the city purposely undervalued parking spaces and digital signs thrown into the arena deal to entice the Kings. There was nothing to this suit except bitterness that wasn’t much more substantive than a Facebook diatribe.
But when Superior Court Judge Timothy Frawley rebuffed the litigants on every last point – when he chided their misinformation and rejected their arguments completely – the enduring takeaway from this exercise was as galling as it was positive.
Yes, the last remaining legal hurdle for an arena a year away from completion was all but cleared with Frawley’s ruling. And by Friday night, the city was moving forward with the process of taking $282 million in bonds to market to pay for the structure.
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But that it took this long – more than a year after the arena deal was consummated – is preposterous. Legal fees incurred by the city to defend this “secret subsidy” case will be at least $2 million, and city officials estimated Friday that they could end up closer to $3 million.
Mind you: The Kings are not going to pay that bill. The city of Sacramento is on the hook for it.
For that, you can thank the litigants – Julian Camacho, James Cathcart and Isaac Gonzalez.
They represent a constituency of people against the $255 million city investment in an arena valued at around $500 million.
A price tag that big is bound to inspire opposition and healthy debate. There is nothing wrong with that. But this lawsuit went beyond opposition to a far more negative place.
It was about refusing to accept that the downtown arena was approved by a majority of the Sacramento City Council. It sought to strip the council of its authority because the litigants didn’t agree with the decision.
These same litigants had already lost a previous case before Frawley, when the judge ruled that petitions they had gathered to force a public vote on the arena were invalid. Frawley also had ruled the Sacramento City Charter empowered the council to approve the arena and therefore a public vote would have stripped it of that right. In addition, there was an environmental lawsuit that was denied in Frawley’s court as well.
One could argue that lawsuits challenging the legality of a public vote on the arena and the environmental impact of the arena were issues ripe for clarification in a court of law. But the “secret subsidy” lawsuit seemed vindictive. When you can’t win on the merits, argue fraud – or at least that’s what they did.
You could say it was risible when the star witness for the litigants – former City Councilman Kevin McCarty – said in open court that he knew of no “secret subsidy.” McCarty simply didn’t like the deal, and he’s hardly alone. There undoubtedly will be people who will react with anger at the news of complete victory by the city of Sacramento over those who sought to invalidate the investment of city money in an arena constructed at the site of the old Downtown Plaza mall.
I saw one man suggest on Facebook that Frawley would be getting Kings season tickets as payment for his ruling. Such comments are irresponsible, but that’s the nature of public discourse today on almost any topic. In the minds of some, truth and facts are not important when they clash with opinions and biases.
But this little exercise came at a real cost to taxpayers, and for what purpose?
“The testimony consistently showed that there was no secret subsidy asked for or given,” Frawley wrote in his 41-page decision. “The evidence shows that the city’s goal in structuring the (arena) deal was to use items that currently have little or no value to the city, and use them to negotiate a better deal for the city.”
On the “secret subsidy” claim: “Because the city agreed to contribute assets beyond its capital contribution, plaintiffs infer a nefarious, backroom deal to subsidize the investor group’s purchase of the team, separate from the arena deal. ... However, the evidence shows that the additional assets conveyed to the Kings are essential components of a single, integrated arena deal.”
A reading of Frawley’s ruling makes other significant points that arena opponents omit: That the city obtained critical concessions from the Kings. Chief among them: The Kings will pay the city at least $391 million in lease payments; the Kings will pay all pre-development costs and capital repair expenses on the arena and its parking garages; and, most significantly, the Kings – and not the city – would take full responsibility for tens of millions in arena cost overruns.
But even if you don’t see the value in that, Frawley’s ruling cut to the reason why Sacramento made this deal in the first place: The city wanted to keep the Kings as an asset while energizing a dying mall and downtown core. City negotiators accomplished this by throwing in 3,700 parking spaces that were a drain on the city – but could be valuable to the Kings.
Plaintiffs had alleged Sacramento had forked over highly valuable parking assets as sweeteners to the Kings owners. Frawley found this argument to be unfounded. He was particularly critical of McCarty, who had testified in court that he disagreed with the city’s parking analysis.
“(Now a state assemblyman), Mr. McCarty occupies an esteemed position in our government, but he is not a parking expert. ... In any event, his opinion is misguided.” Frawley cited statistics showing how the Downtown Plaza parking lot was performing terribly and, when maintenance costs were applied, was losing money for the city.
It was only worth something to the Kings, who will use former Downtown Plaza parking for its premier season ticket holders. The only reason these spaces become valuable is with an arena. Without them, you have no arena deal. Without an arena deal, you have worthless parking spaces in a dying mall.
“The choice confronting the city was to lease the sites to the Kings investors or continue to hold them in their current (unused) condition,” Frawley wrote.
The downtown is already alive with investments in buildings that had sat vacant for years – many of these buildings purchased after the Kings arena deal was consummated. Is that a return on investment? Yes. Will some still be in opposition? Yes. Frawley even acknowledged as much: “When it comes to spending public funds, the only certainty is that public opinion will diverge on what is a blessing and what is a curse.”
That’s what happened in the fight over the Kings arena – a fight lost by arena opponents.
Frawley ruled that the city has a right to recover court costs, “estimated at $54,000 or $98,000, depending on how they are measured,” wrote The Bee’s Tony Bizjak.
The litigants – Camacho, Cathcart, Gonzalez – could be responsible for those costs. If they appeal Friday’s ruling, perhaps the city could pursue placing liens on their properties. In a way that would be poetic justice, but the better option for them would be walking away. This fight is over. Facts prevailed over bias. Opening night for the arena in the fall of 2016 can’t come soon enough.