I’m still kind of stunned by the way the City has handled released of the arena term sheet–detailing (sort of) the basics of the deal with the investor whales to build a new Kings basketball arena on the site of the Downtown Plaza. The City posted the term sheet Saturday night. I spent a big chunk of Sunday talking to those hopeless cases who wanted to spend a big chunk of their Sunday talking about the arena term sheet. I tried to get some clarification on some points from the City Manager’s office Monday, but was told no luck because of the Cesar Chavez holiday. Vote’s tonight. Ugh.
As you know, the plan 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 source is a five 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 Power Balance Pavillion 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 organization. A more conservative estimate would be to count on current attendance, rather than the higher figure, 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 provide the money you need. It’s like magic.
I’m told that this means when the city issues the arena bonds they will borrow a little extra, and use that to partially pay back the general fund. That’s basically borrowing money to pay for cops and other basic services, at least in the early years. Later on the parking system is supposed to generate a lot more money–what with all the revitalization going on. But that’s assuming a great deal, especially given that the City plans to give all of its parking in the Downtown Plaza to the arena operator. That’s cutting the parking inventory by a third.
This angle is well dissected over at Neil deMause’s blog (he calls it the “perpetual parking revenue machine) and in this Sac Press piece by William Burg.
Either way, a lot of things have to got right. The plan is sufficiently risky that the City plans to use hotel tax revenue as a backstop. So though the City Manager’s office talks about how this plan “protects the general fund” that seems to mean “takes money out of the general fund that will be paid back if our very optimistic projections come true.”
The few polls that have been 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 working with local folks fighting against the subsidy and pushing for a public vote on any arena plan.
It’s still a long shot that the NBA will approve 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 to gather signatures and put the plan to a referendum in a special election.
The main problem with Soluri’s group is that he won’t say where they get their money from, other than, “It’s a purely local coalition. All of the money is local and we are pursuing local goals.”
Soluri is a local land use attorney. He dabbled in criminal law on behalf of Occupy protestors, beating back the City’s unfair arrests and prosecution. He also represented the Westfield Group former owners of local Downtown Plaza, in challenging the City’s plans to develop the downtown railyards. How do we know he’s not getting money from some other local development interest, pursuing their own angle?
We don’t. But that doesn’t mean a referendum isn’t a good idea. Mark Paul, a former Sac Bee opinion writer and co-author of the great book California Crackup, makes an eloquent argument for a public arena vote.
While California’s overuse of the initiative has been kind of a disaster for the state, Paul writes on his blog The California Fix, that the referendum is by contrast, “the underused tool in the kit of California direct democracy.”
“The referendum is about holding a conversation,” he writes. “Our representatives make decisions and through the referendum we voters tell them whether they got it right, or should go back and try again.”
In fact, the public seems to 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 to be heard.
Update: Here’s another critique from Eye on Sacramento. And a more upbeat one from Jeff Michael, econ professor University of the Pacific. Michael was recently quoted in the Bee as saying this deal is better (for the City) than the one offered to the Maloofs. But even though he says some pretty positive things about the proposal, his take is still that, “it will increase the strain on the general fund by $4-8 million per year.” It would be nice if the City, or the Bee, would say that.
