Arena triple play

First, there was the feasibility study by would-be arena developer David Taylor which unfortunately said little about the actual feasibility of building an arena.

Then, earlier this month, arena boosters rolled out their 100-day Nexus report which didn’t quite connect, either. It’s not a plan so much as some highly choreographed brainstorming about how an arena might be financed.

A final arena plan is now being promised by Mayor Kevin Johnson and his Think Big arena team by January—not an awful lot of time to answer some very big questions about how a new basketball arena can be paid for and whether it’s worth the investment of Sacramento taxpayers.

We know voters won’t support any kind of obvious tax measure, such as a sales tax. We know that taxpayer money—from donations of public land, from city parking structures or in the form of building needed infrastructure—is critical to any arena deal.

So, Think Big and the mayor have proposed that a three-way split of the costs: arena users—meaning ticket holders and team owners—would pitch in more or less a third of the estimated $387 million bill for a new sports-and-entertainment facility. Private investors and corporate sponsors will kick in a third, and the public—meaning taxpayers—will provide a third as well.

The marketing-minded folks at Think Big chose the number three on purpose. Three is a magic number, easy for the brain to make sense of. But once you get in to the details, the arena triple play is anything but simple.

How much is it really going to cost?

No one is sure how realistic that $387 million a price tag is. We don’t know if the Kings owners, the Maloof family, will approve of the number of luxury suites proposed, or the amount of parking, or even the number of seats—which as contemplated would be a bit small by NBA standards.

We do know about several costs that just weren’t included in the Think Big estimate. Take one example: Arena backers want the city to donate property it owns in the downtown rail yards to be the site of the new facility. But that land was bought several years back with local Measure A sales tax money—that’s money specifically earmarked for transportation projects.

Since the arena is not a transportation project, the Measure A fund would have to be reimbursed $10 million to $20 million, maybe more.

The city’s downtown rail-yard project manager, Fran Halbakken, also told the city council that the project would likely require the city to “accelerate” the construction of needed infrastructure at the site—including extending several streets, moving utilities and require new storm drain facilities.

No one yet knows where those millions in new infrastructure costs will come from, but they certainly weren’t included in the $387 million arena estimate. Sacramento City Councilman Steve Cohn says that’s probably appropriate, since the city would be on the hook for building much of that infrastructure, eventually, anyway.

There’s also been some hand-wringing about whether the new site will require a new freeway interchange. Halbakken notes that there’s a lot of capacity on the existing streets and roads and freeway on ramps. If games don’t overlap with rush hour, the system might not be strained too badly.

“Until we do a traffic study, we don’t know,” Halbakken told SN&R.

Of course, the pressure is on to greenlight an arena project now. That traffic study and other needed environmental review certainly won’t be done by the March 1 deadline that the Maloofs have given Sacramento to come up with a viable plan.

Is downtown really the best site?

The Natomas land where the current Kings arena sits has all the freeway interchanges and other infrastructure that any new sports and entertainment palace would need.

Still, developer Taylor and the ICON Construction Group—an arena construction firm he partnered with to complete the arena feasibility study earlier this year—claim that the infrastructure costs of building at the downtown rail yards would only be $3 million more than building in Natomas.

“Frankly, that just doesn’t make any sense,” said Bob Blymer, director of the Sacramento County Taxpayers League. “The freeway interchange is already in at Natomas. All the support businesses are there. There’s no toxic clean up to do in Natomas.”

And so far, there’s not been much discussion of whether it would be easier and cheaper to build in Natomas.

“It seems clear that the mayor and city council want the arena downtown. As for actual facts, showing that it’s better than Natomas, I don’t see that happening,” said Blymer.

City staff have recommended that the city council consider an incentive package to encourage new Natomas development in order to avoid creation of a big blighted hole where the arena is now.

But the cost of any incentive package is unknown. “We don’t have any money with which to incentivize anyone,” noted Councilman Rob Fong, who is a big supporter of the arena initiative.

The city might throw some or all of the 100 acres it owns in Natomas next to the current arena as part of incentive package. But arena backers have already suggested the city sell that land, along with several other parcels, to help raise the government share of the bill for a new arena. Clearly, that land can’t be sold to raise money, and also be given away to entice a developer.

Is the city of Sacramento going to be on the hook for all the ‘public costs?’

Almost all of the “public” sources so far identified for a new arena—whether it’s the proposal to sell off city parcels or the proposal to privatize city parking structures—are very specific to the city of Sacramento.

Despite Think Big’s earlier emphasis on the need for a regional effort to build this regional asset, “In my estimation, no other jurisdiction is likely to actually kick in assets or cash,” said Cohn.

Sacramento may also wind up guaranteeing the bonds needed to begin construction. Those bonds would presumably be paid back from an array of different revenue streams—from the public, private and user “buckets” of money.

“What if they have a bad year and ticket sales drop?” asked Councilman Kevin McCarty. “We need to make sure there are rock-solid locked-in protections that won’t affect our general fund.”

Cohn thinks that risk could be spread around, suggesting others like West Sacramento and Sacramento County could also share in the bond responsibility.

What else could we do with that public money?

According to the Think Big reports, two-thirds of the people who go to basketball games and three-quarters of the people who attend other events at Power Balance Pavilion come from outside of the city.

There is an argument to be made that much of the benefit, in sales taxes and economic development, from an arena does go to the city of Sacramento. But economists for years have been writing that sports arenas are almost never the economic boon they are made out to be.

“More and more cities are realizing they’re a bad investment,” said Jean Ross, a Sacramento resident and executive director of the watchdog group California Budget Project.

Assuming the city could sell some public property and work out some sort of privatized parking scheme to create millions of dollars—should it then spend that $100 million (or more) on an arena?

Neighborhood activist Rosanna Herber says no.

“If we have $30 million or $60 million to spend, we ought to spend it rebuilding neighborhoods,” said Herber.

But Chris Lehane, the political consultant tapped by Mayor Johnson to lead the Think Big effort, says that many of the streams of money would only be available because of the stimulation of the arena project, which Lehane and the mayor have repeatedly called the “biggest thing to happen to Sacramento since the Transcontinental Railroad.”

“The arena will generate economic activity in those places that have been dead spots for years,” said Lehane. “This is not a situation where you could just sell those tomorrow and raise revenue. The city has been trying to do that for years now.”

Economist and Sacramento State University professor Rob Wassmer said it doesn’t make sense to sell off public property just to pay city payroll and other short-term bills.

“The city can always sell land, but it makes the most sense for a one-time expenditure that brings a stream of benefits into the future,” said Wassmer. An arena could fit that bill. “But so would the building of a new public park or a bike trail.”

“There are a number of options which could potentially touch the lives of a broader range of residents, and have a greater impact on Sacramento as a place to live, work and play,” Ross added. For example, “You could build world-class science labs in all city schools. You could invest in endowments for pre-school programs and after-school programs. You could Wi-Fi all of downtown. You could improve parks and other facilities that far more people would actually use over time.”

Or you could build an arena. Assuming Mayor Johnson and the arena boosters can come up with enough of the right answers.