Keep your eye on the ball
Arco Arena has been called obsolete, but that may be part of a sales plan
The vacancy on the edge of downtown Sacramento smells like creosote. It is 240 acres covered in fine yellow dirt and overgrown with weeds. At the heart of the Richards railyard property is a row of massive red-brick shop buildings with rusted tin roofs. In one corner of the lot, a pile of at least 100 railroad ties is stacked pell-mell like a gigantic game of pick-up sticks.
This mostly empty, desolate patch of industrial land—part locomotive works, part hobo jungle—tucked in the northwest corner of downtown, represents the single greatest development opportunity Sacramento has left in the inner city. It is a blank slate upon which today’s leaders will write a major part of the city’s future.
And there’s a good chance the city will do what so many other cities have done with major redevelopment opportunities: plunk down a multi-hundred-million-dollar sports arena, using a significant chunk of public money.
The idea of a downtown arena springs from two assumptions: One is the mayor’s and others’ hopes that an arena would be a powerful draw to the redeveloped area that was once an industrial wasteland; the other is the widely held perception that the Sacramento Kings’ current arena, Arco, is getting old and will soon become “obsolete.”
But it wouldn’t be the first time Sacramento gave money to the Kings to promote development. It did so just four years ago when it loaned the team $73 million, and that, too, once held the promise of redevelopment. But that promise wasn’t kept.
And what constitutes an “obsolete” arena by NBA standards may in fact mean that it’s not as trendy as those in some other cities, or that it’s just not profitable enough.
The soft sell
By now, it has become a stock scenario—the owners of a major sports team demand that a city shell out millions, or hundreds of millions, of dollars to build a new sports stadium or arena. If you love us, they say, you’ll pay. If not, we’ll take our ball and find a new home. And over the last decade, cities across the United States have responded to the threat over and over again by giving the teams the money.
But people will only put up with hardball for so long. Ultimately, threats from greedy team owners don’t work anymore. Cities are beginning to turn down public financing of new arenas with increasing regularity. In June, voters in a Charlotte, N.C., referendum turned down a publicly financed arena for the Hornets, despite threats that the team would skip town, and despite a lopsided campaign in which the team heavily outspent arena opponents.
So what do you do if you are a sports and entertainment mogul who wants a new facility, but it’s clear that the old hard sell won’t work in your town?
Perhaps you play it very cool and make it look like somebody else’s idea.
The Sacramento City Council at the end of July committed $50,000 to help finance a “feasibility study” of a new arena for the Sacramento Kings’ basketball team.
Officially, the team’s owners aren’t pushing the new arena idea, and have adopted a “we could take it or leave it” attitude, at least as far as the media is concerned.
“We’re very happy with Arco Arena. But if a new arena was something that was good for the city, we’d be interested in it,” said Sonja Brown, director of public relations for Maloof Sports and Entertainment.
The Maloofs must already be at least a little bit interested, having enthusiastically ponied up $50,000 of their own for the study.
It is the city’s mayor, Heather Fargo, who has taken the lead, saying that she thinks a new basketball and concert arena may be just the thing Sacramento needs to jump-start redevelopment of the old rail yards.
“The Maloofs haven’t demanded this. They aren’t trying to sell us on anything. But I think they are intrigued,” said Fargo.
Fargo announced during her mayoral campaign last year that she thought a new arena might be a good idea. Coincidentally, her campaign was run by powerhouse political consultant Richie Ross, who was at the time, and continues to be, a paid consultant to the Kings.
Fargo says she came up with the idea, and then shopped it to the Maloofs and the landowner Union Pacific Railroad Company. But the Richie Ross connection has raised at least a few eyebrows around City Hall. (Ross did not return several phone calls from the SN&R.)
Oh, you’ll pay
The City Council approved the feasibility study resolution on the condition that the city would not enter into any deal that taps the general fund, or impose a tax increase without the vote of the citizens. Nothing in the City Council resolution guarantees that the arena wouldn’t be built entirely, or even mostly, with private money. But no one has offered to do that.
If the arena is to be built, history suggests Sacramentans are likely to bear much of the cost.
“Public financing has by no means been taken off the table,” said City Councilmember Dave Jones, who has been the most skeptical about possible public subsidies to the new arena.
The city may, for example, waive any number of fees, from building permits to the cost of environmental review documents. Or it could divert some revenue stream, such as the city’s hotel tax, to the project.
More important, the new arena is in a redevelopment area—a financial arrangement that allows the city to take the property taxes generated in the area and reinvest the money in new developments. The city could use the redevelopment money to directly subsidize the construction of the arena, or to finance the sale of construction bonds.
“There are a million ways to do it without using the general fund,” remarked Neil deMause, author of the book Field of Schemes, in which he chronicles the massive role of public money in private sports facilities over the last decade.
One way or the other, noted deMause, heavy public financing has been the rule, rather than the exception, because new arenas typically aren’t good investments for sports teams.
John Christison, general manager of the Seattle Convention Center, who also oversaw the design and construction of Orlando Magic’s arena in the late 1980s, added that the astronomical construction costs of a new arena almost always outstrips the profit a team owner can expect to make.
“It’s a pretty big risk for a team to come and plop down $300 million and hope to make a return. It usually only works if there is a major subsidy from the local government.”
The feasibility study is also supposed to address the issue of the $73 million loan to the Kings made in 1997 to keep the team from leaving town.
The mayor told the SN&R that “the city shouldn’t be left holding the bag,” and added that she still disagrees with the council’s decision to make the loan four years ago. For one thing, she said Sacramentans didn’t get to vote on that loan. Also, Fargo said she generally dislikes the idea of public money to help private sports teams, but hopes the benefits of a downtown arena will outweigh whatever the city spends.
According to City Treasurer Tom Friery, under the terms of the agreement the Kings are not to leave Arco unless they pay off the loan. And so, the old loan is likely to be on the table when it comes to negotiating any new deal for the Kings. Exactly how the old loan will be handled is at this point anybody’s guess.
“I don’t want to say yeah, they’re going to pay off the loan first or no they aren’t going to pay off the loan. But I don’t think the City Council would do anything to impair the security of the city,” said Friery.
In North Natomas is another blank slate, another empty piece of land, just as weed-covered as the one in Sacramento, that the city once had major-league hopes for. This is the so-called “100-acre parcel,” right next to Arco Arena.
When the city loaned the Kings $73 million in 1997, it was primarily to keep the team in the city. But the loan also had a number of other selling points, and the resolution adopted at the time spelled out a number of ways the public would benefit from the deal.
Among them was “the improvement of the feasibility and enhancement of the North Natomas Community Plan Area as a critical area for the future growth of the city.”
Sound familiar? Four years ago, the city saw Arco Arena as a central component to development in that important growth area. Now, not long after, a new arena is being touted as the anchor of a different important growth area.
The 1997 resolution also said that the loan would bolster the chances of developing city property next to the arena, the “100-acre parcel” into “a major regional sportsplex attraction.”
So far, that hasn’t happened. Hopes for major league baseball, then minor league baseball, and finally major league soccer have all failed to materialize. In part that’s because the owners of Arco Arena, now Maloof Sports and Entertainment, have veto power over any use on the parcel next door. To date, the city and the team have been unable to agree on any project for that land.
If the Kings move downtown, the long-term prospect of the team enhancing Natomas development may be out the window.
Which might be a moot point, given the widely held perception that Arco is becoming obsolete.
Again, the Kings are not publicly saying that the arena is falling down and must be replaced. “I don’t even know what obsolete means,” remarked Maloof spokeswoman Sonja Brown.
And yet, city officials seem to have the distinct impression that Arco is approaching old age. Kings consultant Richie Ross has been quoted in the Bee as saying that wear and tear on the arena has taken its toll and that in six years the building will be obsolete.
But what is “obsolescence” when it comes to a basketball arena? Does that mean you can’t play basketball there, or that the building is somehow unsafe?
“I think, for example, that obsolescence could mean that corporate luxury boxes are a bigger deal than they once were, not that the roof and walls are falling down,” said Friery.
To the average fan, Arco may have everything needed to enjoy the game. But the luxury boxes may not be luxurious enough, or the team could make more money off more private clubs and other features. In other words, the arena may be somewhat economically obsolete, lacking the higher-end, more lucrative amenities of state-of-the-art arenas. But perhaps not obsolete enough for the owners to foot the bill.
“It’s like buying a new computer that you don’t need,” explained Neil deMause. “Can you justify buying a new $3,000 computer just because it’s a little bit faster? Probably not. But if you can snooker someone else into buying it for you, well, that’s different.”