The Sacramento Bee reports:
In a historic vote, the Sacramento City Council approved the financing plan Tuesday night for a $391 million sports arena in the downtown railyard.
By a 7-2 vote, the council accepted a nonbinding “term sheet” agreed to by city officials, the Sacramento Kings, arena operator AEG and the development firm slated to build the project.
Under the current term sheet taxpayers will be on the hook to give $255.5 million towards the arena project that’s projected to be complete by the 2015-6 NBA season. Most of that money is expected to come from parking revenue, while officials are considering additional opportunities for asset divestiture to make up the difference. Additionally the Kings will spend $73.25 million and the Anschutz Entertainment Group (that will operate the arena) will spend $58.75 million. Pre-development and revenue sharing agreements are still being written.
Until recently, privatization of parking assets has been widely discussed as the way to generate revenue for the arena deal. This policy tool has been proven in cities like Chicago and Indianapolis, and soon Sacramento is expected to issue a formal request for proposals (RFP) from eleven interested firms.
However officials are also considering instead creating a municipal finance authority that would retain public operation of parking assets. The municipal finance authority would then issue bonds to fund the arena project and rely on future parking revenue to pay the bonds. Negligible formal analysis has been conducted on how this alternative scenario might play out.
Comments made by Councilmembers that voted for the deal are basically indistinguishable, but comments made by the two Councilmembers that voted against the deal provide insight into legitimate concerns with the project.
Councilmember Sandy Sheedy voted no saying:
What we have in front of us is an incomplete planâ€¦ that is going to scoop up every spare nickel and dime. I don’t think an arena is worth putting the city general fund at risk. I am not interested in pursuing the same path that has put Stockton on the verge of a bankruptcy.
Councilmember Kevin McCarty voted no saying:
At this moment, I don’t think this is a good enough deal for the city of Sacramentoâ€¦ What would happen if there are bad attendance numbers? A number of these deals around the country are based on rosy revenue projections. Our lingering city priorities, we can’t ignore them. They exist. At this time, I think the risk is too great, and the rewards I don’t think are there at this current date.
Councilmembers Sheedy and McCarty echoed concerns that my colleague Len Gilroy and I outlined in a March 2, 2012 op-ed in The Sacramento Bee entitled, “Privatize Parking, But Not for the Kings.” We wrote at the time, “Despite arena boosters’ rosy claims, research shows subsidizing new professional sports arenas is bad business for taxpayers.” We go on to explain that instead:
Sacramento could invest the parking lease revenue to build infrastructure and transportation projects, pay down city debt or even shore up underfunded public employee pensions. Any of these steps would put the city on significantly better fiscal footing and deliver greater long-term benefits to taxpayers than the arena.