After reviewing the Entertainment and Sports Center(ESC) Term Sheet. The Sacramento Kings moving to Seattle may be the best gift for Sacramentians. The 2013 sheet is overly optimistic with perfect storm forecasts. It has several unsubstantiated claims for growth and insufficient traffic/parking studies.
In a city facing deficits this year, the questions becomes is the ESC a good deal from Sacramento?
A look back……
March 06, 2012
The Sacramento City Council voted 7-2 on March 6 2012 in favor of a nonbinding term sheet to finance a new sports and entertainment complex in the old railyard on the north side of downtown Sacramento.
2012 Terms: The City of Sacramento would contribute $255.5 towards the cost of an$390.5 Arena in The Railyards. The Sacramento Kings $73.25 million-Anschutz Entertainment Group(AEG) $58.75 million with $3 million coming from sponsorship’s. Under the conditions of the 2012 term sheet the city agreed to build a new parking garage (14.5 million)
The lions share($230 million) of the cities contributions would have come from the leasing of the cities parking lots those lots contribute 9 million dollars to the city’s General Fund. The lease term was 50 years . Not all the garages are paid for. The city owed 52 million on those lots and that debt would have to be satisfied before they were leased. The city would be partially responsible for cost overruns for the arena and half the repairs .
Replenishing the General Fund: One third of the nine millions would come from ticket surcharges
Benefits, The City Say’s the ESC would: Keeping the Kings would save eight hundred jobs. Saves Natomas from blight. Would Create between 1200 to 5000 new jobs
41 Days after the council approved the 2012 Term Sheet
City of Sacramento Press Release
CITY OF SACRAMENTO RELEASES PROPOSED BALANCED BUDGET FOR FISCAL YEAR 2012/13
Ongoing Structural Budget Imbalance of $23.1 Million Must be Addressed in the Next Two Years
Today Sacramento City Manager John Shirey released the Fiscal Year 2012/13 Proposed Budget. The
Proposed Budget is balanced and addresses a projected $18 million shortfall for FY2012/13. The Proposed
Budget includes the elimination of approximately 286 Full-Time Equivalent positions and does not include use of the General Fund Economic Uncertainty Reserve.
“This is not the budget I had hoped to recommend to address next year’s structural budget deficit,” said
John Shirey, City Manager. “We continue to work with our employee groups to find solutions that would avoid the need for the elimination of positions and consequently programs and services to our community.” The ongoing General Fund budget gap is the result of both expenditure increases mostly attributable to contracted employee salary increases and the continued decline in property tax revenue, the city’s single largest discretionary revenue source.
The total budget proposed for FY2012/13 is $1.06 billion. This includes $365 million for General Fund
operations and capital projects, and $690.5 million for the operation and capital projects for the City’s
Enterprise Funds and other fund activities. The recommended budget supports 3,791 authorized full time
equivalent (FTE) employee positions. The General Fund totals $365 million and 2,777 authorized FTE
The City’s structural budget deficit in FY2013/14 is an estimated $7.4 million budget gap. Over the past
six years, the City has eliminated approximately 1,200 positions and addressed an estimated $219 million ongoing budget gap.The public hearing process will begin at City Council on May 1 and is expected to go through June 12. All community members are invited to attend. Please visit http://www.cityofsacramento.org for regular budget updates and current information. To view the Proposed Budget please visit: http://www.cityofsacramento.org.
Mayor Kevin Johnson
District 1: Angelique Ashby
District 2: Sandy Sheedy
District 3: Steve Cohn
District 4: Robert King Fong
District 5: Jay Schenirer
District 6: Kevin McCarty
District 7: Darrell Fong
District 8: Bonnie Pannell
Sacramento Entertainment and Sports Center @ Downtown Plaza
2013 Terms: The City of Sacramento would contribute $258 million towards the $447 million dollar arena. The Investor Groups contr bu tion to the ESC $189 million.
The Lion Share ($212 million) would come from future parking revenues.$38 million from land the city owns. The balance would come from taxes and city funds. The city would gift 3700 parking spaces under Downtown Plaza to the Investment Group. and pay towards the cost of signage for the ESC.
Replenishing the General Fund: Tickets surcharges, parking revenues and arena profits. Under the profit sharing agreement the city at a minimum would receive a million dollars that would go into the general fund.
Benefits, The City Say’s the ESC would: Help development on K Street, Old Sacramento and Capitol Mall. Benefits Previous City Investments on K Street (the 700 Block and the Convention Center. Generates potentially large stream of tax revenue for City services as a result of ESC and additional private development.
On March 26, The Sacramento City By a 7-2 vote, the council approved a non-binding “term sheet”
The Meat and Potatoes of the Arena Deal
Economic Boom for Downtown?
If the plans of the term sheet is approved by the city. The city will give the Investors land parcels downtown, Natomas and other areas of the city. The Investment Group would eventually develop the land Adjacent to downtown plaza. The development would include, Retail, office, hotels, and Residential , The city would collect new property taxes from those developments. However, there are no time-frames set for the development, which means that land could remain vacant for…….
“The City of Sacramento has not conducted impact (Parking) study”
Currently there are 37oo parking spaces in Downtown Plaza. The plaza is estimated to lose 1000 spaces due to construction of the Arena. The Agreement calls for 1000 spaces held for premium seat holders. Leaving 1700 spaces for a mix of Kings fans and mall shoppers. The nearest parking is under I-5 at Old Sacramento and near the Crocker Art Museum.
Historically, the majority of people who attend events in arena and stadiums, eat, and shop in those venues.
The arena is likely to create parking shortages downtown, effecting local businesses.
The City assumes more people will use public transit. In Sacramento, most routes end by 10pm. The light rail in its current configuration would be overwhelmed. Regional Transit (RT) Operating budget is in the red.
The term sheet calls for An Arena comparable to other NBA facilities including the Amway Center in Orlando, Barclays Center in Brooklyn, Chesapeake Center in Oklahoma City and the Pepsi Center in Denver. Some venues, American Airlines arena in Miami and Madison Square Garden have smaller theaters generating more foot traffic.
Most business suffer a drop in transactions when the principal tenant is closed . After the NBA season is over, all of the Arenas mentioned above arenas are often dark for a week or more. How do the surrounding business benefit when the arena is dark? Note: Sacramento will be the first Arena in an existing mall.
In a perfect world, city leaders would negotiate the best deal possible for the citizens they represent. Despite the list of investors, the current term sheet is a cut and paste affair. With much of the same terms at the 2012 sheet with the city’s contribution being the same.
Most of the funding will come from the city’s parking garages… Including those the city doesn’t fully own?
The city believes it will get nearly a third of money from surcharges. The projection is based on ticket sales of many years ago when the Kings were selling out. The surcharge would not be applied to suites during Kings games.
The City will not receive revenue from parking during Kings Events. (and share revenues during non-kings events)
If approved the, city would limit events at Sleep Train (a non compete clause) after the ESC was built.
Sacramento is a medium size city with nearly a half a million citizens.. Unlike, similar cities of its size Miami, Atlanta, Kansas City Austin, Portland and Seattle. It doesn’t have a large corporate presence to absorb hiccups created by the leaders of the city.
In an attempt to keep the Sacramento Kings, it has over and understated what the city can afford. When it comes to development the city doesn’t have a positive history.
In 1996, the newly expanded Sacramento Convention Center opened. Leaders said we must have it, the older center wasn’t competitive. The city believed the expanded center would bring visitors to the city and to K Street mall. The center did not see a major increase in business. Leaders believed the problem was, there weren’t enough rooms to support the center. Nearly ten years later,backed by the city,Sheraton Grand opened next doors. The Sheraton was successful, however, today the Convention center continues to look for business. Sources say the Center is not profitable.
Last year, the city approved a term sheet for an Arena at the Railyard, shortly thereafter the city laid off nearly three hundred workers including Fire and Police staff.
The term sheet has more holes than J Street. Leaving taxpayers to fill them. If the perfect storm fails the city will have to borrow more money or issue new bonds at a higher rate of interest.
More than 9 million dollars are at risk, the city is making a Three Hundred Dollar Commitment at a time when the city cant pay its bills.
The Sacramento City Council approved the nonbinding term sheet after less than three days….. By all appearances it’s a done deal.
Newspapers, Newsgroups and bloggers can see the holes and potential damage that might be created by approving this deal. After a week ,no one from I street has publicly questioned theTerm Sheet.
Could a 300 million dollar debt bankrupt Sacramento?
This complex deal needs to be placed on the ballot and approved by local citizens.