Risk and referendum

Bites looks at holes in the proposed Sacramento Kings arena plan—and what's up next

Bites assumes the Sacramento City Council jammed through a nonbinding deal with the whales to build a new Kings arena on the site of Downtown Plaza. The term sheet was released on Saturday, the vote scheduled for Tuesday. If they didn’t approve it Tuesday, they will Thursday or next week.

Aside from the woefully, unforgivably late release of the deal terms and the rushed vote, it’s clear that the proposed arena plan has some major risks. As you know, it diverts about $9 million in public-parking money away from the general fund and into a newly created parking authority to pay the bonds for a Kings arena.

The money is supposed to be backfilled by several sources, the biggest being a 5 percent ticket surcharge, which the city estimates will bring in $3.7 million a year.

That same number was used in last year’s arena deal with the Maloofs. The team owners hired Beacon Economics to assess the plan, and Beacon blasted it, noting the revenue projection is based on rosy attendance numbers from years ago, way above what Sleep Train Arena is currently drawing in.

You can object that Beacon’s analysis was paid for by the Maloofs, who wanted out of the deal, anyway. But it’s at least as trustworthy as any of the glowing economic reports you’ll see generated by the mayor’s Think Big Sacramento organization. A more conservative estimate would count on current attendance, but then the deal wouldn’t pencil out.

Another $3 million will be generated by a little maneuver described thus in the city’s term sheet: “The Public Parking Financing model will be structured in such a way to provide $3 million annually to backfill the City’s portion of the General Fund revenue.”

Short a few mil? Just “structure” your model to spit out more money. No further explanation needed. It appears that the plan is to borrow a little extra when the bonds are issued and to use that to partially pay back the general fund. It’s basically borrowing money to pay for cops and other basic services, at least in the early years. But don’t be nervous: Later on, the parking system is supposed to generate a lot more revenue—what with all the revitalization going on. But a lot of things have got to go right; otherwise, this thing blows a hole in the general fund.

Bites doesn’t get the impression that the public is clamoring to get this deal done. Past polls done of city residents have indicated everything from apathy to antipathy for public participation in any arena scheme. If you count measures Q and R from 2006, it’s safe to say voters flat-out hate arena subsidies.

“If the council is fixated on this subsidy, they should give the public an opportunity to vote it up or down,” says Patrick Soluri, a local attorney fighting against the subsidy and pushing for a public vote on any arena plan.

Sure, it’s still a long shot that the NBA owners will approve the sale of the Kings to the team of local whales—nixing what appears to be a solid offer from a group of Seattle investors. But if that happens and the Sacto whales strike a final, legally binding agreement with the city, then expect a campaign from Soluri’s group or someone else to gather signatures and put the plan to a referendum in a special election.

The main problem with Soluri’s group is that it won’t say where it gets its money. Is it Seattle money? Soluri just says, “It’s a purely local coalition. All of the money is local, and we are pursuing local goals.”

Soluri is a land-use attorney. In fact, he once represented the Westfield Group, recent owners of Downtown Plaza, in challenging the city’s plans to develop the downtown rail yards. Coincidence? How do we know he’s not getting money and support from some other local development interest, pursuing their own angle?

We don’t, and that will be a point for arena supporters to attack. But that doesn’t mean a referendum isn’t a good idea. Mark Paul, a former Sacramento Bee opinion writer, former California deputy state treasurer, and co-author of the great book California Crackup, makes an eloquent argument for a public arena vote on his blog, The California Fix.

“The referendum is about holding a conversation,” he wrote. “Our representatives make decisions and through the referendum we voters tell them whether they got it right, or should go back and try again.”

Sounds reasonable. Healthy, even. Sacramento citizens have been trying for some time to tell City Hall they don’t like arena subsidies and have other priorities for public money. Ultimately, they may resort to the referendum in order to be heard.