Sacramento vs. Seattle: Tale of two Kings arena deals
What those outside of the Sacramento bubble say about the city's new arena proposal
When Kevin Johnson tweeted this past Saturday afternoon that, finally, an arena deal was struck, he also posted a photo: the mayor, talking on the phone, pumping his fist in the air. Local Sacramento Kings fans took the bait and began tweeting their own photos mimicking the mayor’s move. Quickly, it was trending. An online meme was born: “#KJing.”
Indeed, for Kings fans and City Hall brass, Saturday was all about back patting, kudos and “selfie” pics. Later that evening, a couple dozen members of a pro-arena group called Crown Downtown cheered at a press conference announcing the Kings plan. This latest “term sheet,” which city council greenlight this week, would develop a $448 million “entertainment and sports complex”—with the city kicking in nearly a quarter-billion dollars—plus upward of 1.5 million square feet of new housing, retail, a hotel and office space on and near the Downtown Plaza mall site.
City leaders and supporters say the nonbinding agreement protects taxpayers and the general fund, is an improvement over last year’s pact with the Maloofs, and—in addition to the city’s other lobbying efforts—will surely persuade NBA owners to keep the Kings in Sacramento.
Meanwhile, critics of the term sheet, many outside the Sacramento bubble, are baffled.
Some reaffirmed that Seattle still has a far better deal—for both the NBA and the Emerald City’s taxpayers—and that Sacramento taxpayers are getting, well, screwed.
The city of Seattle, for instance, is only paying for 25 percent, or $125 million, of its $490 million arena; Sacramento will foot 58 percent, or $258 million, for arena construction.
A bigger sticking point, however is how the two cities plan to finance their contributions.
Sacramento cobbles its nut together with $38 million in land, including the 800 block of K Street, which will be given to the investors, plus $212.5 million in bonds, which are backed by future revenue from its parking cache. More than $9 million of this parking money goes toward the general fund each year; city brass say that parking revenues, ticket surcharges and at least $1 million in arena profit-sharing will backfill the general-fund loss.
If the numbers don’t add up, though, Sacramento will have to tap into hotel-tax revenue. So, basically, taxpayers will be accountable for the deficit.
In Seattle, however, it’s a different story.
As writer David “Goldy” Goldstein wrote on The Stranger’s blog last Monday, Seattle will pay off its bonds with new arena revenue—and, if there’s a shortfall, investors Chris Hansen and Steve Ballmer are “contractually obligated to make up the difference.” Taxpayers are off the hook, unlike in Sacramento.
Other Seattle reporters (no surprise) were quick to point out the Sacramento deal’s disadvantages.
Chris Daniels, with Seattle’s KING5 TV, reminded that Hansen/Ballmer are much further along. The arena-financing was approved in October 2012, and the city’s design board has given it preliminary approval, too.
He also noted that Seattle’s unemployment rate is now 5.9 percent, while Sacramento’s hovers above 10, which draws into question this city’s revenue projections, since they are based on ticket surcharges and parking dollars during Kings game-attendance heyday.
Many Sacramentans’ beef with the new Kings arena proposal is, again, the city subsidy to pay for construction. They altogether disprove of a public dollars being used to pay for an arena; as SN&R contributor Cosmo Garvin has reported in the past, a telephone poll last year by EMC Research found that 51 percent of those queried did not want a public-private arena partnership (see “Poll shows Mayor Kevin Johnson not invincible”; SN&R Frontlines; February 2, 2012).
Eye on Sacramento, a local watchdog group, argued that the actual Sacramento contribution is upward of $334 million if you count revenue from digital billboards and free parking spaces.
Even those who can stomach multimillion-dollar public subsidies, however, questioned the math in this year’s term sheet.
Neil deMause, co-author of 1999 book Field of Schemes, blogs about sports-arena and stadium deals, and in particular whether public subsidies make sense, at www.fieldofschemes.com. He characterized the latest Sacramento plan as lacking details and “not the safest deal in the world.”
Specifically, he argued that the city’s strategy to take out $212.5 million in bonds, via forming a nonprofit corporation to oversee its publicly owned parking spaces, to pay for part of its share is very risky and still leaves the Sacramento vulnerable to revenue shortages, which would force it to dip into its general fund.
“The only way the city could magically pay for everything using parking revenues … is if the arena itself more than doubles the amount of money the city earns from each of its downtown parking spaces,” he concluded.
The entire 18-page term sheet is a lot to digest. In fact, it’s the biggest redevelopment proposal in the city’s history.
Some, including some council members, questioned whether three days was enough time for the Sacramento public and city staff to read, understand, debate and get feedback on the deal, which was made public only a few hours before the 72-hour deadline.
Those who say three days isn’t enough time to process it point out that the City Manager’s Office recently put the brakes on a proposal brought forward by Councilman Jay Schenirer’s office in February, to amend the “sunshine rule,” which would make it mandatory for the city to post items such as contract negotiations and budgets at least 10 days before a council vote. The arena term sheet likely would have been included in this 10-day “sunshine” period.
Councilman Steve Hansen, whose district would house the proposed new arena, wrote on Facebook on Monday that more time to dissect the plan is needed, and that the city “should have waited at least until Thursday to decide,” which would have given everyone five days.
Mayor Johnson’s will pitch Sacramento’s plan to select NBA owners in New York City on April 3. If, a few weeks later on April 18, the NBA shoots down the Seattle investors’ bid, which includes a binding contract to purchase the Kings and move them to the Emerald City (they’ve already given the Maloofs $30 million as a deposit), then the Maloof family has the option of selling to the Sacramento investor team.
If this does happen, supporters will be KJing in the streets. Opponents, however, will be preparing for lawsuits and referendums.