Its a stressful time for the National Basketball Association board of governors. Two cities, Seattle Washington and Sacramento California are vying for one professional basketball team the Sacramento Kings.
The issue for both cities may come down to which city is in the best position to build a new arena?
In 2006, Sacramentians voted against a measure that would have built an new Arena. In the same year, the owner of the Supersonic’s wasn’t able to get support from the Washington state government officials to provide funding to update Key Arena.
Key Arena opened in 1962. Key Arena was the first publicly financed arena in the area to be fully supported by earned income from the building. It was last renovated in 1996.
An ownership group, led by Howard Schultz, sold the team to “Professional Basketball Club LLC‘ ” , an investment group headed by Oklahoma City businessman Clayton Bennett. Bennett, approached local government to fund an 500 million arena complex.
Bennett’s group notified the NBA that it intended to move the team to Oklahoma City. In 2008, the rebadged Oklahoma city Thunder played it first game in the Ford Center now called Chesapeake Energy Arena.
The Ford Center opened in 2002 its located downtown across the street from the Cox Convention Center. On March 4, 2008, the citizens of Oklahoma City passed a $121.6 million initiative designed to renovate and expand the Chesapeake Energy Arena and to build a practice facility for the relocated Seattle SuperSonics team which is now known as the Oklahoma City Thunder. Financing consists of a temporary 15-month, 1-cent sales tax that will be paid by Oklahoma City residents and shoppers beginning January 1, 2009.
Many people believe Bennett and the NBA mislead Seattle ,a city that had a strong fan base..
753 miles south in Sacramento. The Maloof’s, majority owners of the Sacramento Kings were shopping the team and settled on Anaheim, California the home of Disneyland and the Honda Center.
The City of Sacramento fought for the Team and was granted a year reprieve The City had to have plans for an Arena in place or the team would be allowed to move. At the eleventh Hour the Maloof’s pulled out of the deal, siting fuzzy math.
A Plan in Seattle
Last September, the City of Seattle reached a tentative agreement to build an arena in Seattle’s SoDo neighborhood. By January 1st 2013, Hansen and his investment team reportedly spent over $55M on land related to the arena project. The location is near Safeco Field where he Seattle Mariners play baseball and Century link Field where the Seattle Seahawks play football.
The new Arena would house an NBA and Hockey Team .
Private investment 290 million dollars. The proposal stipulates the City finance the arena by issuing bonds of up to $120 million in addition to bonds issued by the County for up to $80 million.
The Investor Group is responsible for any shortfalls in Arena tax revenue, and is obligated to protect the City and County General Funds from any exposure to Arena-related debt obligations.
To supplement this guarantee, the Investor Group will fund a reserve account equal to one year’s worth of City/County debt service payments, and will increase the reserve amount any time the Arena does not generate at least double the revenue necessary to pay one year’s debt service. Furthermore, the Investor Group’s equity investment in the Arena and NBA franchise will serve as collateral against the City’s contribution.
The Key Arena remains in place and the Arena group agrees to modernized the 51 year old building.
Critics and Lawsuits
Parking: Many locals are concerned when there are events at Safeco Field and the Arena.
Traffic : They are worried that increased traffic would harm operations at the nearby Port of Seattle.
(Investors have also agreed to put $40 million into a fund to pay for transportation improvements in the Area.)
Some applaud the investors, however many feel $40 million is a drop in the bucket.
Last October, The International Longshore and Warehouse Union workers filled a lawsuit. The lawsuit alleges that city and county officials ,working with investor Chris Hansen approved agreement to build the arena in the industrial Sodo neighborhood without first completing an environmental review as required under state law. The International Longshore and Warehouse Union is concerned that adding a third stadium to the area south of downtown would choke freight traffic and cost jobs.
The union’s Local 19, representing workers at the Port of Seattle sued saying an environmental review should have preceded any agreement.(3)
In February .The Judge threw out the suit . King County Superior Court Judge Douglass North held that the agreement between the city of Seattle, King County and an investment group led by hedge fund manager Chris Hansen does not violate state environmental law. He said the agreement technically set out a framework for a future deal, but didn’t commit the city or King County to building an arena south of downtown.”There isn’t a binding decision here,” North said.(4)
In March, the Union appealed the ruling . They believe the court failed to acknowledge that the memorandum of understanding between investor Chris Hansen, the city of Seattle and King County is in violation of the state environmental protection act.(5)
A second lawsuit was filed in January of this year. Alleges the Arena deal violates Initiative 91. The measure approved by Seattle voters in 2006 said the city must make a profit on any sports facility investment . The new arena plan calls for $200 million in public money, to be repaid through arena revenue.
In April, King County Superior Court Judge Laura Middaugh ruled that the case was filed too soon, and that it could be brought again if and when the arena deal is finalized. The complaint argued that the arena plan violated a Seattle law that bars the city from investing in sports facilities unless it makes a profit.
Scrambling in Sacramento
Last month, the City of Sacramento voted 7-2 a non binding deal that set the ball in motion towards an Arena. The City would contribute $258 million towards a new arena to be located in Downtown Plaza. The last minute deal at Downtown Plaza was assembled in 72 hours before the council voted on it.
Private Investment 189 million. The city’s contribution is $258 million towards the $447.7 million arena .The city says it can raise $212 million by setting up a nonprofit corporation to borrow against future revenue generated by its downtown garages.
The balance would come from giving the Burkle group parcels of city owned land worth an estimated $38 million. Sacramento’s parking operation generates $9 million a year in profit – money that would flow to lenders once the bonds are sold. But officials have a plan to “backfill” that sum and keep the budget intact. Much of it would come from ticket surcharges, a slice of parking revenue and a minimum of $1 million in arena profits guaranteed to the city.
Critics and Lawsuits
Stockton, California is one hour south of Sacramento. That cities bankruptcy is a sobering reality for Sacramentians who saw an decrease in Police and Fire personal last year. Stockton built an Arena Ballpark Complex in 2006.
Sacramento Bee Editorial Council said, Building an arena at Downtown Plaza – not the railyard as in last year’s deal – would reduce the number of parking spaces. So the new agreement is likely to include new elements, possibly the sale of city-owned land and joint real estate development. Those new proposals are the one that need the most serious vetting. They should get several days at the very least to scrutinize the terms and to hear from their constituents. It’s unfortunate that three public forums – Thursday evening, Friday and today – are being held without any specifics to discuss.
Local Policy Group “Eye on Sacramento’s President Craig Powell says “There are serious risks to the taxpayers of Sacramento if this deal moves forward “Funds would be diverted from other priorities and opportunities, and if the revenue from parking and the hotel tax comes up short the city would be forced to dip into the general fund.” Powell also noted the long history of failed economic development projects intended to revitalize Sacramento’s downtown area, citing at least $500 million invested in downtown over the years as a “very well-known debacle.”(2)
Stop Taxpayers Opposed to Pork or STOP leaders have recently announced their renewed intention to launch an initiative campaign to require a public vote on any public subsidy of an arena. They have also been interviewing campaign consultants, petition gathering firms and professional fundraising consultants in recent weeks. They are also evaluating the option of pursuing a referendum of a council’s decision to approve the proposed term sheet. Both an ordinance initiative and a referendum would require them to secure the signatures of approximately 23,000 registered city voters (10% of registered city voters, in the case of a referendum, and 20% of the number of voters who voted in the last gubernatorial election, in the case of an ordinance initiative). A referendum, which would overturn a “legislative act” of the council, would require that the requisite signatures be secured within 30 days of the effective date of the legislative act, while an initiative requires that the necessary signatures be obtained within 180 days of commencement of signature gathering.(7)
Neil deMause, co-author of 1999 book Field of Schemes, blogs about sports-arena and stadium deals“ said 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<(8)
At the council meeting Kings fan ,Jeffrey Anderson said Mr. Mayor, your attempts to pull off an upset win could adversely affect this community for decades,” who asked the council to put the plan before voters or he would file a lawsuit to stop it. (6)
A resent poll conducted by Tab Communication showed 80% of Sacramento voters want to vote on the new Arena. (9)
On April 2, A Group “Coalition for Responsible Arena Development filed a notice of intent to Sue . The notice says a lawsuit will allege that the approval of the term sheet — which was approved by Sacramento’s City Council on March 26 — violates California’s Environmental Quality Act. The notice goes on to say that a lawsuit “will also be based on unlawful gifts to public officials and misuse of public funds for private benefit.” The group alleges that according to the term sheet, the city will be provided a luxury suite, suite tickets and preferential parking during arena events. James Cathcart, treasurer of Sacramento Taxpayers Opposed to Pork, told KCRA 3 he supports the group’s threat to sue.
One Sacramento Neighborhood Associations is planning to vote next month. They may join another group to gather signatures to get an the arena vote on the ballot.
Seattle or Sacramento ?
Both cities have a strong loyal fan base. Both cities have resisted taxing themselves for professional sports. Fans of both cities have experienced anxiety of not knowing if their team will be around the next season. Both cities have successfully fought the retain the names of their teams . And both cities were mislead by the teams owners.
These truths makes this vote more than a relocation. Both cities are fighting , they have done every thing the NBA has asked of them.
If the vote was based on emotion alone, Sacramento has the edge. The small market team , who’s fan filled the seats year after year win or lose. The city that suffered with the professionally unpopular Maloof family. One of the investors Vivek Ranadive, could help the NBA expand its fan base outside the United States.
Sacramento, had to scramble. The Arena plans are nearly a year behind Seattle. Local investor Chris Hansen lives and works in Seattle. He knew the position citizens when it came to taxes.
In 2006, Initiative 91 passed in Seattle with over 70% approval.
The ordinance prohibit’s the City of Seattle from Providing or Leasing Facilities or other Goods, Services, or Real Property to Professional Sports Organizations at Below Fair Value, and Providing A Method to Enforce this Restriction.
While Seattle’s operating budget isn’t expose, many feel the 200 million dollar bond violates Initiative 91 . Seattle and King County sell $200 million in bonds and pay the money to Hansen’s group, which puts in the rest. He builds an arena. For 30 years, his group has full use of it and 100 percent of the profits from it. Seattle and King County keep the title deed, which means that on the arena, the state, county, city, transit district, port and public schools collect a real estate tax of zero.
Of the two lawsuits , this one has the meat.
The Longshoremans suit,regarding environmental reports and increased traffic is the long shot. There will be a few events that will take place at Safeco field and the New Arena at the same time . However those days will be rare. As for increased traffic, Safeco field hold over 47,000 vs 18-to 20,000 for the arena.
Traffic will be one of many issues in Sacramento. Unlike other downtown arena s, the proposed site is in the center of a shopping mall. Because the arena deal is less than two months old ,business owners have not met with the city.
But the principle issue in Sacramento, its the money. Unlike Seattle, its operating budget is exposed. Many believe the cities contribution is significantly higher than 258 million dollars.
Plans to generate revenue from parking garages and ticket surcharges are very optimistic with estimates based on the Kings glory days when they where in the playoffs. The overall plan is very fragile. If one fails, the city budget will have to make up the difference.
There were many critics of the Railyard Arena Plan last year. Unlike this year, there was less ground noise. Last year 16 policemen were laid off and the city saw an double digit increase in gun violence. Sacramento’s police force has lost more than 300 sworn officers and civilian staff members and more than 30 percent of its budget since 2008. Sacramento is the second lowest staffed big city police force in the nation. More layoffs are planned with the 2013-2014 budget.
Last year Stockton, laid off 25% of its police force and Sacramentians saw the aftermath on TV. Assaults on police officers doubled in 2012 from a year earlier.
The growing noise in Sacramento is “Not Stockton” .
(In 2006, Stockton opened a new Arena and Baseball Park Downtown neither are profitable for the city)
Last year before the Maloof’s eleventh hour withdrawal, there was a small opening for the Arena in the Railyards.
The Noise is not lost on the leaders of Sacramento. Perhaps as a signal to the NBA, California Senate President ProTem Darrell Steinberg announced Wednesday,released details of his effort to overhaul California’s environmental law, including provisions that reduce the likelihood that urban infill projects like Sacramento’s proposed downtown arena would be subject to lawsuits that could stall construction.
SB 731 would “accelerate the pace at which a Downtown Sacramento sports and entertainment complex would proceed through the environmental planning process.”
Notably, however, Gov. Jerry Brown said last week he will not push this year to reform the state environmental quality act, although he has said the law is cumbersome and needs retooling at some point.
Steinberg, a supporter of Sacramento’s proposed downtown arena project, issued a press statement indicating he has been working on statewide environmental reform for some time, but that his bill is applicable specifically to the Sacramento arena.
“I introduced these concepts in this bill before the question of the Sacramento Kings’ future returned to news headlines,” said Steinberg. “Nonetheless, the story of economic development, planning laws and the Sacramento Kings are inseparable because a Downtown Sacramento Arena meets the very definition of an ‘urban infill’ project, which California has historically been very serious about promoting. It is my intent to continue that tradition with these far-reaching reforms to California’s environmental planning laws.”
Sources:(2) Editorial : Council ,public deserve time to vet arena deal (Sacramento Bee-3-23-13)(3)Longshore union files suite over Sodo site for arena.-Seattle Times-October 18, 2012(4) Judge Blocks longshore workers Sonic’s Arena Lawsuit -(Seattle Times-2-22-13)(5) ” Longshore Union to Appeal Seattle Arena Lawsuit-( Bellingham Herald 03-04-13) (6)”Sacramento Backs Kings Arena Deal (ESPN GO.COM3-27-13) (7) Report on the arena proposal ( Eye on Sacramento.com 03-13) (8)Sacramento vs Seattle: Tale of two Kings arena deal ( Sacramento News and Review 3-28-13) (9) Voters want to Vote for downtown Arena(Sacramento press.com 04-25-13) (10) Group threatens lawsuit to block Sacramento Arena(KCRA 4/2/13)