Kings arena deal still has parking questions

It must be almost ribbon-cutting time on the new downtown arena.

Following the Kings-Utah Jazz game last week, just after a tentative arena-financing proposal was announced, Bites spied Sacramento City Manager John Shirey in the Power Balance Pavilion concourse, warmly receiving congratulations on the deal from fans. The Malooves took the court while the PA system blasted “My Hero,” by the Foo Fighters, and they later were joined by Mayor Kevin Johnson who proclaimed, “We did it!”

The question now is, did what?

Bites is going to go out on a limb and guess that Tuesday (just after this column went to press), the Sacramento City Council voted to approve the arena term sheet. The vote was technically nonbinding, but it will certainly make it much harder for the city to extract itself from the deal as it moves forward.

You know the basics by now. The whole arena is estimated to cost $391 million, with the city’s share coming to $256 million, most of it coming from “monetizing” the city’s parking lots and meters.

Leading up to Tuesday’s vote, it was clear that some council members had heartburn about the outright privatization of parking. Under this concession approach, the city would lease the parking system to a private company for 30 or 50 years or so, in exchange for a big upfront payment, maybe $230 million. (Maybe.)

The city’s general fund would lose out on $7 million to $9 million in parking revenue every year.

The plan was to “backfill” that general-fund money with ticket surcharges ($3.7 million), the city’s cut of arena profits ($1 million), ad revenue and other small money streams created by the new facility.

The problem with the concession approach is that city would also lose a lot of control over parking rates, but more importantly would give up millions in future revenue growth from rate increases and growing demand for downtown parking.

The whole notion of giving up that 30 or 50 years of future parking money for a lump sum today is, as one in-the-know city staffer put it off the record, a lot like going to a payday lender to get your arena money.

Which is why there’s growing interest in the “parking authority” model, in which the city would keep its parking revenue, and use it as collateral for about $230 million in bonds, which could then be used to build the arena.

But the details are still fuzzy on how those bonds would be paid off. “We’ve done no analysis under the parking authority model,” Assistant City Manager John Dangberg told Bites last week.

Let’s assume that the revenue streams used to pay off those bonds would be the same set of surcharges and other pots of money used for “backfill” under the concession model—about $7 million in new revenue.

The problem is that just paying back those bonds would likely cost more than the new revenue.

Really, you can go online and find one of those loan-amortization calculators. Plug in $230 million, and an interest rate of, say, 3 percent. Put in a term of 30 years. You’ll get an annual payment of about $11.7 million, much more than the $7 million generated to backfill the general fund.

Dangberg wouldn’t respond to this bar-napkin math, because, after all, they haven’t done that analysis yet. Surely, the city has some expensive consultants on hand with better, more expensive math to show why the average citizen shouldn’t try to figure these things out.

Still, it seemed there was an awful lot of pressure on the city council to vote “yes” on Tuesday, on something that many of them probably don’t understand much better than the average citizen.

Asked what he thought about that, Dangberg just said, politely enough, “That’s your opinion, I’m not going to respond to it.”

Fair enough. After all, we did it. Didn’t we?