Sacramento - New Arena Plan

[KingsFan#1]

What a great day. Kings are here to stay! In your face Sandy Sheedy

Unfortunately, knowing Sacramento, this project will run out of money by 2013.

[NME22]

[BrianSac]

Originally Posted by Sactorleans

Inland American now owns The Railyards property, and they are supposed to have deep pockets for investing. With the placement of the arena adjacent to the railyards, they would seem to have a lot to gain financially.

Therefore, why have they never been brought to the table as possible investors in the arena deal?

Could it be because they are investing funds in the infrastructure of the railyards already?

[BrianSac]

Originally Posted by KingsFan#1

What a great day. Kings are here to stay! In your face Sandy Sheedy

Sheedy is out of touch. She needs to retire. I'm really liking Angelique!

[BrianSac]

Originally Posted by wburg

I'm sure people said "Of course people won't be stopped from walking under I-5 to the river, you highway foes are just trying to impede progress!"

wburg, you actually made me think twice about this.

But, I don't think you can compare a freeway to an arena.

The freeway is a true barrier, its meant only for cars and trucks, not pedestrians and it is 10 blocks long. An Arena is for people and its only 1/2 a block wide. An Arena is a destination point from the intermodal station, and a destination point along the way to the Central Shops.

Footnote: What was that triangle bell thing you clanged?

[BrianSac]

The Arena Vote:

So it was KEVIN J-the MAN, ANGELIQUE-the WOMAN, the 2 Fongs, the black lady (Pannell), and the 2 old guys (Cohn and Jay). Voting YES

My councilman-the "Politician" (Kevin McCarty) - voted No

The out of touch Crumudgeon - Shady Sheedy. - voted No

You can bet Shady Sheedy, McCarty-the Politician, Darrell Fong, and Pannell are going to be trouble down the road regarding future votes.

You can tell Shady Sheedy doesnt like Kevin J, and McCarty is jealous of him, just my 2 cents from the peanut gallery.

The Politician (McCarty) pissed me off when he started talking about using the parking monetization for his special interest......after we do all the work getting it thus far.

We built Central Terminal B UNDER Budget, and opened it 3 months earlier than planned. Can we build our Arena in 3 years, YES we can!

[wburg]

Originally Posted by BrianSac

Footnote: What was that triangle bell thing you clanged?

I don't know, it was on your mom's nightstand.

[Surefiresacto]

Such an awesome day. I am so thrilled that this plan is continuing to move forward.

[goldcntry]

It's about flippin' time! Hopefully this will be the catalyst to jump-start the Railyards and the 300 Capitol sites...

...one can dream. Now if only y'all would do something about Shady Sheedy.

[innov8]

I think Kevin McCarty made many valid reasons why he voted against it. And in less
than 3 months, there will be more layoffs as we make another $25 million in budget cuts. Read below.


March 7, 2012

Dear District 6 Constituents and City of Sacramento Residents,

At the City Council meeting last night, I voted against a financial plan to build a new downtown sports area. I would like to share why.

Over the past few months, I have heard from hundreds of constituents and city residents who have called and emailed my office. I’ve talked with advocacy groups, business owners, Kings’ fans and interested parties in the arena deal. In addition, I’ve done my homework, researched other city arena deals and read through over 1,700 constituent surveys on this issue. I came to this conclusion carefully and thoughtfully.

In addition, I want folks to know that I am not an automatic "no vote" on public funding for an arena. My stance is that if we put public money into this project, it must be a good deal for the city and its residents. The deal put before us Tuesday night had too many risks and assumptions and not enough upside. It just isn’t a good enough deal for the City of Sacramento.

Here are the problems I see…

Problem 1: Pressing City Priorities

A Parking Authority idea is very intriguing and should be pursued regardless of whether the Arena deal goes forward to help produce millions in new monies annually for our City. If nothing else, this process helped us get here. However, it's really a policy choice where the new parking revenues should be allocated.

For me, it’s unconscionable to put all new parking monies toward the Arena with so many other pressing City needs. In my Council District 6, all three swimming pools are shut down. My community centers and libraries are open only a few days a week and staffed at skeleton levels.

All youth sports programs were eliminated last year citywide. Park maintenance and code enforcement staffs can’t provide adequate service levels, and more than 200 police and fire fighter jobs have disappeared in recent years.

And in less than 3 months, there will be more layoffs as we make another $25 million in budget cuts.

While I believe we must invest in the City’s future, we must also address the City’s current budget needs – unfortunately, the plan presented Tuesday night does NOT do that.

Problem 2: The Kings Loan

Under this plan, the current Kings $67 million loan will not be paid off – but refinanced. This loan would linger on the City’s books for another 30-plus years impacting the City’s credit-score and debt-ratio.

In addition, I am very leery about the absence of any real collateral on this refinanced loan. The existing loan the City has with the Kings has the arena and adjacent land as collateral. This refinanced 30-year loan would have neither. What bank would accept that deal?

This loan should be secured against real property of equal value, or with a significant financial interest, or with an NBA guarantee to protect the City against a default.

Problem No. 3: The $9 million General Fund backfill has too many assumptions, while the deal produces minimal upside

The plan backfills the City’s General Fund for core city services and magically adds up to $9 million. That dollar amount is not guaranteed and is based on assumptions. For example, I’m concerned about the $4 million annual projected income from ticket surcharges. What happens if we have another lockout or strike, or poor attendance year-after-year due to a badly performing team? Our neighbors in Stockton and Oakland lost big because of overly optimistic income projections for arena and stadium deals. Instead, why not insist that the Kings, AEG or the NBA guarantee the $4 million annual backfill?

More importantly, why are we just breaking even financially? Does anyone think AEG and the Kings only hope to break even? If it’s going to make money for them, then it should make money for the City and provide revenue for our priorities—especially since we are the ones putting up 65% of the investment.

These numbers are very revealing to me – AEG is investing $59 million and netting $5.7 million annually, while the City of Sacramento is investing $256 million and netting $1 million annually.

Problem No. 4: We’re going at it alone

We started with a regional effort last year, but today we stand alone. Sacramento would be going into this deal with very little help from other government entities in the region. Other small-market NBA cities have partnered with neighboring local governments to help make the deal work. West Sacramento and Yolo County have not been engaged as partners. They are fewer than 1,000 feet from the proposed arena site and have many businesses and retailers who would benefit from the arena’s presence. Officials in the City of Rancho Cordova have shown a willingness to listen to a partnership proposal, but they have not been engaged either. This arena will be a regional amenity; we cannot and should not be standing alone.

Problem No. 5: Our City contribution has doubled in 5 months.

Five months ago, City staff and the Mayor’s “Think-Big” Committee stated that our City’s cost contribution for the arena would be 33%. That was a fair deal.

A few months later, the City’s cost contribution increased to 50%.
Last night, the City’s cost contribution increased further to 65%.
That is an increase of nearly 100% since September.

As I said earlier, I am not an automatic “no vote” on public funding for an arena, but it has to be a better deal for our City and its residents. We deserve a bigger bang for our buck.

Councilmember Kevin McCarty
kmccarty@cityofsacramento.org

[NME22]

Originally Posted by innov8

I think Kevin McCarty made many valid reasons why he voted against it. And in less
than 3 months, there will be more layoffs as we make another $25 million in budget cuts. Read below.


March 7, 2012

Dear District 6 Constituents and City of Sacramento Residents,

At the City Council meeting last night, I voted against a financial plan to build a new downtown sports area. I would like to share why.

Over the past few months, I have heard from hundreds of constituents and city residents who have called and emailed my office. I’ve talked with advocacy groups, business owners, Kings’ fans and interested parties in the arena deal. In addition, I’ve done my homework, researched other city arena deals and read through over 1,700 constituent surveys on this issue. I came to this conclusion carefully and thoughtfully.

In addition, I want folks to know that I am not an automatic "no vote" on public funding for an arena. My stance is that if we put public money into this project, it must be a good deal for the city and its residents. The deal put before us Tuesday night had too many risks and assumptions and not enough upside. It just isn’t a good enough deal for the City of Sacramento.

Here are the problems I see…

Problem 1: Pressing City Priorities

A Parking Authority idea is very intriguing and should be pursued regardless of whether the Arena deal goes forward to help produce millions in new monies annually for our City. If nothing else, this process helped us get here. However, it's really a policy choice where the new parking revenues should be allocated.

For me, it’s unconscionable to put all new parking monies toward the Arena with so many other pressing City needs. In my Council District 6, all three swimming pools are shut down. My community centers and libraries are open only a few days a week and staffed at skeleton levels.

All youth sports programs were eliminated last year citywide. Park maintenance and code enforcement staffs can’t provide adequate service levels, and more than 200 police and fire fighter jobs have disappeared in recent years.

And in less than 3 months, there will be more layoffs as we make another $25 million in budget cuts.

While I believe we must invest in the City’s future, we must also address the City’s current budget needs – unfortunately, the plan presented Tuesday night does NOT do that.

Problem 2: The Kings Loan

Under this plan, the current Kings $67 million loan will not be paid off – but refinanced. This loan would linger on the City’s books for another 30-plus years impacting the City’s credit-score and debt-ratio.

In addition, I am very leery about the absence of any real collateral on this refinanced loan. The existing loan the City has with the Kings has the arena and adjacent land as collateral. This refinanced 30-year loan would have neither. What bank would accept that deal?

This loan should be secured against real property of equal value, or with a significant financial interest, or with an NBA guarantee to protect the City against a default.

Problem No. 3: The $9 million General Fund backfill has too many assumptions, while the deal produces minimal upside

The plan backfills the City’s General Fund for core city services and magically adds up to $9 million. That dollar amount is not guaranteed and is based on assumptions. For example, I’m concerned about the $4 million annual projected income from ticket surcharges. What happens if we have another lockout or strike, or poor attendance year-after-year due to a badly performing team? Our neighbors in Stockton and Oakland lost big because of overly optimistic income projections for arena and stadium deals. Instead, why not insist that the Kings, AEG or the NBA guarantee the $4 million annual backfill?

More importantly, why are we just breaking even financially? Does anyone think AEG and the Kings only hope to break even? If it’s going to make money for them, then it should make money for the City and provide revenue for our priorities—especially since we are the ones putting up 65% of the investment.

These numbers are very revealing to me – AEG is investing $59 million and netting $5.7 million annually, while the City of Sacramento is investing $256 million and netting $1 million annually.

Problem No. 4: We’re going at it alone

We started with a regional effort last year, but today we stand alone. Sacramento would be going into this deal with very little help from other government entities in the region. Other small-market NBA cities have partnered with neighboring local governments to help make the deal work. West Sacramento and Yolo County have not been engaged as partners. They are fewer than 1,000 feet from the proposed arena site and have many businesses and retailers who would benefit from the arena’s presence. Officials in the City of Rancho Cordova have shown a willingness to listen to a partnership proposal, but they have not been engaged either. This arena will be a regional amenity; we cannot and should not be standing alone.

Problem No. 5: Our City contribution has doubled in 5 months.

Five months ago, City staff and the Mayor’s “Think-Big” Committee stated that our City’s cost contribution for the arena would be 33%. That was a fair deal.

A few months later, the City’s cost contribution increased to 50%.
Last night, the City’s cost contribution increased further to 65%.
That is an increase of nearly 100% since September.

As I said earlier, I am not an automatic “no vote” on public funding for an arena, but it has to be a better deal for our City and its residents. We deserve a bigger bang for our buck.

Councilmember Kevin McCarty
kmccarty@cityofsacramento.org

Couple things I want to say to this. First is that if McCarty feels the need to release this statement and defend himself, he knows he's on the wrong side of history.

Second, please tell me if you think that the reason we are about to make $25 million in cuts is because of the arena. Or if we don't build the arena, will the $25 million in cuts go away. If we start to build it, will the budget shortfall increase? The answer is no to all those questions, so the issues are not related in that sense. How they are related is building an arena is an attempt to generate revenue so that we don't have to keep making the same budget cuts in the future. Do nothing, and those cuts will keep coming anyways.

Next problem is that he says we should monetize the parking and use it for something else. Like what, and how does he plan to generate the revenue to back fill the nine million when he spends it on services that don't generate revenue?

The argument about generating $1 million in revenue vs $5.7 million to AEG leaves out the fact that part of the cities income is actually going to back fill the parking fund. So we're not getting taken advantage of at all. The $1 million we get is after we pay back the parking to the general fund.

Yes, Sac is doing this project alone and subject to the risk alone from the public sector. However, they are getting profits alone as well. Don't have to share what they make. Technically, Sacramento will always reap the most benefits of this thing, even if others did contribute. So it's no wonder it's a hard sell to other cities.

Last, the argument that the contribution of the city has doubled is shallow. It's not about how much we contribute, it's if it's a fair deal and we can work it out. If we contributed less, then we would also get less revenue in return. It's a fact that we couldn't make as many demands and be in as strong a negotiating spot if the other two sides were putting in the same amount of money. As it stands, we will own a building that we only put 65% into. That's serious leveraging. On top of that, AEG will cover operating losses if there are any and Taylor will coverage cost overruns on building as well as pay for a private parking garage. AEG is taking risks and so is Taylor.

[BrianSac]

Originally Posted by NME22

Couple things I want to say to this. First is that he feels the need to release this statement and defend himself, he knows he's on the wrong side of history.


Second, please tell me if you think that the reason we are about to make $25 million in cuts is because of the arena. Or if we don't build the arena, will the $25 million in cuts go away. If we start to build it, will the budget shortfall increase? The answer is no to all those questions, so the issues are not related in that sense. How they are related is building an arena is an attempt to generate revenue so that we don't have to keep making the same budget cuts in the future. Do nothing, and those cuts will keep coming anyways.



Next problem is that he says we should monetize the parking and use it for something else. Like what, and how does he plan to generate the revenue to back fill the nine million when he spends it on services that don't generate revenue?

The argument about generating $1 million in revenue vs $5.7 million to AEG leaves out the fact that part of the cities income is actually going to back fill the parking fund. So we're not getting taken advantage of at all.

Yes, Sac is doing this project alone and subject to the risk alone from the public sector. However, they are getting profits alone as well. Don't have to share what they make. Technically, Sacramento will always reap the most benefits of this thing, even if others did contribute. So it's no wonder it's a hard sell to other cities.

Last, the argument that the contribution of the city has doubled is shallow. It's not about how much we contribute, it's if it's a fair deal and we can work it out. If we contributed less, then we would also get less revenue in return. It's a fact that we couldn't make as many demands and be in as strong a negotiating spot if the other two sides were putting in the same amount of money. As it stands, we will own a building that we only put 65% into. That's serious leveraging. On top of that, AEG will cover operating losses if there are any and Taylor will coverage cost overruns on building as well as pay for a private parking garage. AEG is taking risks and so is Taylor.

NME22,
Excellent points and great retort. I had to give the same argument today when someone asked me about the cuts.


Using your descriptions above regarding the deal:
It would be like If someone gave me 35% cash to build a house in Land Park, and allowed me to own 100% of it. They covered all construction cost overruns, and added a backyard pool at their cost. They created a fund to pay for the new roof I will need in 20yrs, and all future maintenance costs on MY HOUSE.

And, to seal the deal, they gave me a piece of their lucrative entertainment profits from their entertainment company which I in turn used to pay for the elementary school down the street, and to keep the city pool open every summer, and to fund police salaries.

[BrianSac]

Originally Posted by BrianSac

wburg, you actually made me think twice about this.

But, I don't think you can compare a freeway to an arena.

The freeway is a true barrier, its meant only for cars and trucks, not pedestrians and it is 10 blocks long. An Arena is for people and its only 1/2 a block wide. An Arena is a destination point from the intermodal station, and a destination point along the way to the Central Shops.

Footnote: What was that triangle bell thing you clanged?

Okay I guess it was this:



photo care of HubPages

[wburg]

I think you have me mixed up with some ding-a-ling who attended the meeting...maybe he couldn't find a cowbell on short notice?

[BrianSac]

Originally Posted by wburg

I think you have me mixed up with some ding-a-ling who attended the meeting...maybe he couldn't find a cowbell on short notice?

The other wburg is 70ish, white haired, Anti-arena, with very similar arguments to yours. When he chimimed his bell a group of youngsters couldn't stop laughing. I had to chuckle myself.

[wburg]

Originally Posted by BrianSac

The other wburg is 70ish, white haired, Anti-arena, with very similar arguments to yours. When he chimimed his bell a group of youngsters couldn't stop laughing. I had to chuckle myself.

Watching the video on the city website, you're talking about a guy named John Berger, not me. I didn't consider the chime particularly helpful to his argument.

[ozone]

Gee I'm sorry I missed it. That is so old-school Sacramento.

I'm not going to debate the financial merits or demerits of the plan because I haven't bothered to really look that hard into it. I will leave it to those who are better adept at that sort of thing than I am. But I think we can all agree that each side has made valid points.

Concerning the renderings: These are just conceptual drawings and not the actual plans. It clearly says that the 'final arena placement and design have not yet been determined.' This is where public input can make a real difference. I understand wburg's points here. IF this is going to be the site then IMO the arena would be best placed against the freeway and the station located to the east of it- closer to downtown.

[innov8]

I wanna see Sacramento prosper, but I'm not so sure about the current math being used to
get there. The city should explore an option of not leasing the parking to a third party.
In this option, the city would maintain control and create a third party non-profit
corporation similar to the deal that facilitated the Sheraton Hotel. From what I have
been hearing by some at City Hall, this would make it so that the term of the bond
would align with the life of the building. This idea along with several others are being
floated around as off ramps should the current deal become unfavorable… which I think
will eventually happen.

NME22, so which PR firm do you work for? Many of the arguments and phrases you have
used are nearly identical to PR people who have sent me emails via my blog. Care to disclose?

[wburg]

They're going through the motions of an RFP but the parking-lease idea is already dead, the next step will be the city's analysis of a bond issue. The loan will pretty much have to cover the entire $256 million, because the vast bulk of the land they plan to sell won't be sellable for years (until the Natomas building moratorium is lifted) and the city is already pretty encumbered for debt. We're also carrying the Kings loan, which is a black mark on our credit score, and if they want to roll that loan into a bigger new loan including their proposed $75 million contribution, that also counts against us--doesn't necessarily disqualify, but might mean worse terms and higher interest.

Seriously, if you are interested this and haven't followed the financial part, do yourself a favor and do so. It's a bit more demanding than looking at groovy renderings but it's the real meat of the issue--and the basis for most objections to the arena. As much as folks like nme22 try to slander arena opponents as a bunch of anti-growth old fuddy-duddies with bow ties and weird musical instruments, the issue is really the finances. I assume that most of you can remember the events of the past few years, when people who "monetized their assets" in the form of home equity loans, ARMs and other "financing vehicles" have had some pretty gigantic problems, after being told that these loans were wonderful because their property values would always go up, and they would make more money in the future to compensate for increasing mortgage payments. Sacramento was hit pretty bad in that credit collapse--now the same folks are hoping to convince city governments to use the same kind of debt instruments, and even using the same kind of language and arguments to sell the product.

Just down the road, Stockton is facing the consequences of exactly this sort of decision--their bond debt, used to finance an arena, is causing the city to fall into bankruptcy.

[ozone]

Well you are right William the financials are a bit more demanding than the 'groovy' renderings but since I've been out of the country for a couple of weeks and I just got back from Southern California where I was visiting my 48-year older brother who just suffered a massive stroke, critiquing renderings is about all I care to do at the moment. I'll leave it up to you and others to fight that battle.