How the Kings arena will shake-up downtown Sacramento as we know it

Outfitted in faded jean shorts and a Kansas ball cap, Oscar Johnson hardly looks like a canary in a coal mine.

Sidled up against a blue road bike beneath the ecru awning of the Marshall Hotel, the 63-year-old retiree chats with a former neighbor. Six weeks ago, this aging tenement for the destitute and disabled—Sacramento’s hardest to house—was Johnson’s home.

Earlier this year, in late February, Johnson and his five-dozen neighbors, most of whom are on Social Security, received eviction notices. With construction of the long-deferred arena suddenly inevitable, the Marshall’s owner wasted no time ditching the residential-hotel business and courting an altogether richer crowd.

Plans are to gut the five-story brick edifice on Seventh and L streets and transform it into “a 150-room boutique hotel for business and corporate travelers,” with added floors, a restaurant and a rooftop bar, says the Downtown Sacramento Partnership. Multiple high-rise plans are also being dusted off as developers look to surround the arena with the best that millions can buy.

But where will this leave the people who live and work in the city today?

Local community activists and a growing chorus of economists say everyday folks could be fated for the same priced-out exodus as Johnson.

Development of the Sacramento Kings’ $477 million new home “will gentrify the area around the arena, running up land prices and forcing out current residents,” predicts Bill Kennedy, a managing attorney at Legal Services of Northern California. “I am not just talking about low-income Sacramentans, but the ’hipsters’ that currently give the downtown-Midtown area its character.

“The arena will be the end of the hipster movement.”

That is, unless Kings owners, who are accepting $255 million (and counting) of the public’s cash to build their shiny citadel, agree to spread the wealth in the form of housing, small-business and transit commitments to benefit existing downtown residents, similar to what developers of large-scale projects in San Francisco and Los Angeles agreed to in recent years.

“This is something that Sacramento deserves as much as Los Angeles, as much as any other city,” says California Reinvestment Coalition executive director Paulina Gonzalez, who worked on securing a benefits agreement with the University of Southern California and has consulted on Sacramento’s flailing campaign. “That opportunity is quickly fading.”

These community benefits agreements—or CBAs, as they’re known— are designed to help workers, small businesses and other average wage earners survive the shock waves of huge developments. Poor folks like Johnson are just the first ones to feel the tremors.

One of 57 Marshall residents deemed eligible to receive alternative housing or $2,400 in relocation aid, Johnson took the check and shuffled a few blocks to the Congress Hotel. It’s one of the last places someone like him, subsisting on partial retirement benefits, can make the rent. The relocation money is already gone.

“I can’t afford much,” he says. Gripping his bike’s handlebars, Johnson saunters to locations unknown. His neighbors had until June 30 to join him.

More canaries. And one looming coal mine.

Seated at a park bench with his back to a black-clad busker strumming “It’s a Small World” to transfixed children, Matt Jojola looks like one of Kennedy’s endangered hipsters. A sleek bicycle perched nearby, he’s dressed in a fitted plaid shirt and smart eyeglasses, and has his ears plugged with white earbuds.

While no fan of public subsidies, Jojola views the arena as a “last-ditch effort” to reinvigorate janky K Street. “It’s such a dive,” he says of the troubled block.

The 29-year-old pharmaceutical-company tech lives about nine blocks away, on 24th and P streets, but will soon move into his first home in Curtis Park.

He initially searched for downtown rental opportunities, including one of the two-toned units behind him on 15th and Q streets, but said he saw asking prices of $1,600-$1,800 for one measly bedroom. A mortgage outside of downtown ended up being cheaper. “Rent’s been going up for a bit,” he observes.

An employee with Sacramento Self-Help Housing tells SN&R the same thing. The referral program has tracked an increase in rents over the past three months, she says.

“There’s a pressure to raise rents just to cover costs,” adds Jim Lofgren, executive director of the Rental Housing Association of Sacramento Valley, which represents rental owners and property managers.

Lofgren agrees there’s already a need for more mid- to low-income housing in the city, but doesn’t believe rent control or developer mandates are the way to make that happen.

The Sacramento Coalition for Shared Prosperity, which has lobbied for a CBA for more than a year, wants the Kings to contribute $40 million to the city’s affordable-housing trust fund, so that arena workers and those displaced by its ancillary amenities (hotels, high-rises, luxury apartments and the like) have somewhere in the city to live.

“The cost of a Kings ticket is equivalent to one week’s groceries for most residents of downtown,” Kennedy says by email. “The movement to have a [CBA] is just a recognition that the arena as currently envisioned creates a financial benefit for precious few people.”

In the new downtown, there should be no shortage of pricey rentals. The special planning zone around the arena site has penciled in 550 new market-rate units, while developers recently revived plans of building a 1,500-unit high-rise called Sacramento Commons where about 400 older, cheaper, garden apartments currently exist. “That’s a lot of market-rate apartments,” deadpans coalition member Tamie Dramer.

With the potential for more. Downtown Realtor Josh Amolsch anticipates the arena will spur investors to buy up whole blocks of homes that they can turn into high-priced condominiums and hotels, a push that will ripple through West Sacramento and Natomas, he predicts. There are some indicators that’s already starting to happen.

The month of May was bullish for sellers in the downtown area, according to internal figures from Lyon Real Estate’s downtown office, where Amolsch works. Between April and May, there was a 39 percent increase in pending home sales for downtown-area homes and a nearly 16 percent hike in actual sales. The price-per-square-foot also shot up $7.

“It’s just a money train that everybody’s jumping on, and for good reason,” Amolsch says. “It’s almost A Tale of Two Cities.”

This take on the classic, he adds, will feature “skyscrapers with 20 miles in between them.”

Kennedy is less excited about that prospect, anticipating “a playground for privileged people who won’t like the current residents of downtown.”

As with anything, the arena project and its related development isn’t happening in a vacuum, and the uptick of rent is part of a longer trend that’s rooted in a clumsy economic recovery and political impasses over affordable-housing requirements.

“People want to pin make-or-break [status] on the arena,” Lofgren says. “The arena is going to have an impact, but it is not the panacea to all economic concerns, nor is it the grave threat to others.”

Coalition members say the arena and its ancillary development could price out many current residents, while providing no housing for all the new workers they attract.

Not so, says Azizza Davis Goines, president of the Sacramento Black Chamber of Commerce and a member of a Kings advisory group. “I don’t think that this project is going to run anyone out of the city,” she says.

Even without the arena, though, some folks are barely holding on. According to U.S. Census Bureau data crunched by the Sacramento Housing Alliance, when factoring in for inflation, median household income dropped 13 percent in Sacramento County between 2000 and 2012, settling at $52,667 annually. Over that same time period, inflation-adjusted rents notched 12 percent higher.

In the city proper, the average apartment rent dipped from just less than $925 a month in 2008 to about $875 a month in 2012, when occupancy rates hovered at 94 percent.

Vanessa White would love to pay that. On a shady street one block from Fremont Park, she sweeps the stoop to her humble abode, a two-bedroom unit that costs $1,100 a month. The mottled gray building is nothing special. The 28-year-old gestures a rubber glove at the apartments across the street, looking like something out of a Pottery Barn catalog. “I’d rather be paying 1,100 to live there,” she smiles.

White’s biggest concern about the arena is parking, already a headache, even with a permit. But she’s more excited than she is worried. “I want to see more happen,” she says, mentioning the live-entertainment opportunities the arena will likely bring.

The question is whether she and other locals can afford to stick around.

A woman in a yellow bandana unseals a garbage canister and wades in shoulder deep. Finding nothing for her backpack, she resettles the lid and strolls past the dead escalators leading to the entrance of what used to be zone 11A of the Downtown Plaza.

It’s a blustery Wednesday in mid-June, and the city’s signature open-air mall is a half-shuttered ghost town. Demolition on the eastern portion remains weeks away—a fallowing of the land so that JMA Ventures can erect 1.5 million square feet of retail and office development, as well as a 250-room hotel and 550 market-rate apartments.

Not far away, in a little alley known as Merchant Street, a handful of longtime shop owners hunker down for the boom.

Hair to Dye For stylist Toni Fletcher has worked this corridor since 1979. She remembers when there was a park across the way, instead of a barren slab of concrete. There used to be a farmers market that stretched down to 12th Street. Back then, there were more shops, and every one of them was busy, she says. Then, the city tried to “revitalize” the district.

“I’m afraid this will have a domino effect,” she says of the arena. She doesn’t mean that in a good way.

Salon owner Elizabeth Butler learned today that the already-delayed demolition will erase what’s left of the parking for her and her customers. She’s not sure what else this process has in store for her. That’s because the level of outreach from the team and city has been close to nil. “It’s been a big fiasco,” she says. “We hope that they keep Seventh Street open.”

Butler and her employees wanted to attend—and perhaps offer input— at the May 21 city council meeting where the arena project won approval, but City Hall was too packed with white-shirted Kings fans to make room for the shop owners affected by construction. “We don’t count,” she shrugs.

To be fair, the Downtown Sacramento Partnership did give local merchants an opportunity to hear from the arena construction team at an “exclusive” meeting scheduled for the morning of June 13, a Friday. But, to be even fairer, the partnership notified merchants one day before.

Butler and G. Rossi & Co. florist co-owner Michele Porter were among those who didn’t go. (The partnership’s Lisa T. Martinez says 30 people did make it to that “initial outreach effort.”)

Porter also remembers a more bustling district when she opened the fragrant flower shop 14 years ago inside a historic building at 1011 Seventh Street. She now talks of moving as an inevitability. Once the arena goes in, Porter’s reasonably sure the property’s board of directors will want to increase the rent and perhaps replace her with an upscale bar. Part of her understands. She can’t really see a place for flowers in the new downtown, either.

“I don’t see the arena is going to bring business to myself,” she says. “The future is very uncertain.”

Kings vice president of strategic initiatives, Kunal Merchant, believes the arena will prove an “essential part of the revitalization of downtown.” He knows the “revitalization” term has been bandied about before, saying he’s heard that $400 million has been dumped into the grid over the past 30 years with mixed results. “We’re making progress, but nowhere near” where the area should be, says Merchant, former chief of staff to Mayor Kevin Johnson.

He adds that a “major attractor” like the arena will spur all kinds of ancillary development, but that hasn’t been the case with other publicly financed arenas elsewhere. As The Nation reported in 2011, both the Prudential Center in Newark, New Jersey, and New York’s Atlantic Yards in Brooklyn fell way short of economic revitalization promises, as have many other pricey sports complexes.

In 2012, the Journal of Urban Affairs published a study by George Washington University’s Geoffrey Propheter that bolstered those arguments. His lengthy report focused solely on basketball arenas and whether they’re actually engines of economic development. Long story short: They’re not.

Though he noted some positive impacts between 1995 and 2009 in “basketball-only cities” like Sacramento, Propheter wrote that he found “little evidence that basketball arenas are primary catalysts of development.”

Citing such research, the Sacramento Coalition for Shared Prosperity has asked the Kings to compensate nearby merchants for any necessary relocation or revenue losses sustained during the two-year construction process, as well as fund a revolving small-business loan of $1 million.

“These are not people getting rich doing what they do. They stand on their feet all day,” Dramer says. “They just came through this economic recession and are now going to go through two years of construction. Are they going to close down all of Seventh Street? They’re dead if they close Seventh Street.”

The Kings’ counterpromise is to let local small businesses in on 15 percent of arena work.

In the ivy-walled courtyard of an Old Sacramento restaurant, the city’s staunchest social-justice warriors turn their backs to a setting sun. It’s an unintentionally apt metaphor. Elegantly draped in their cocktail-party finest, the region’s loudest voices for the poor, as well as a coterie of (mostly) sympathetic politicians, clink wine glasses to celebrate the 25th anniversary of a local housing organization that’s lost several recent battles.

They’re drinking their own troubles away, too.

Affordable-housing cutbacks, development sprawl, school closures, big-box bans—the attendees here tonight fell short in stopping each one.

Now they’re mired in a pitched battle to eke concessions from Kings billionaires who have little reason to deal with them.

The effort could be going better.

Since forming in March 2013, the Sacramento Coalition for Shared Prosperity has scored a total of three meetings with city and team officials, none of them fruitful.

“I want to say it’s a roller coaster,” says Dramer, organizing director for Sacramento Housing Alliance, one of the coalition’s leading partners. “It’s not. It’s a train down the cliff.”

Some of that is the coalition’s own fault, says a City Hall official. The official, who spoke on background, criticized the group for being unable to prioritize an expanding list of demands or brokering deals among its own members.

The Kings’ Merchant agrees. “It’s never quite been clear who [the coalition] is, what its tasks are and what [it wants],” he says. “Just from a work-flow point of view, I’ve had a lot of challenges with those guys.”

He says he’s still happy to partner with its members, however.

Dramer would like that, too. The coalition has asked Kings owners, who are set to spend $254 million of their own money on building the arena, to chip in an extra $49 million or so for local housing, employment, transportation and cultural-arts programs. She says that’s an opening offer, one she expected both sides to hammer away at until they reached a compromise. But those talks never happened. Instead, in May, city and team officials unveiled the Sacramento First Community Advisory Council, a countercoalition made up mostly of city and business interests.

For Dramer and her partners, the message was clear: The other side only wants to negotiate with itself. “This whole process was a farce,” she says.

In rebuffing such calls for a legally binding benefits agreement, Kings and city officials say they’re already committed to “robust community benefits” like thousands of green construction jobs and $5.5 million in public-arts money. “A lot of items on their list have now been provided for in some shape or form,” Merchant contends.

Sacramento Basketball Holdings LLC, the name for the Kings ownership and development group, has promised to build an environmentally green amphitheater, let small businesses participate in a share of biddable work and stock its construction ranks with mostly locals. It’s also offering to donate unused concession food to local homeless organizations and pledging $864,000 to affordable housing.

The coalition counters that that’s hardly a gesture, as the Kings are required to contribute that amount by law, and argues the money will only produce eight housing units.

The California Reinvestment Coalition’s Gonzalez can relate. She most recently worked on securing a CBA with USC during its planned development of its University Park Campus in downtown Los Angeles. The 2012 agreement is worth more than $20 million, providing much of the same housing, transit and small-business assistance the Sacramento group is calling for.

Before that agreement was locked in, Gonzalez says development at USC went unchecked for more than a decade, shunting families, black people and Latinos to neglected ZIP codes where transit lines had been cut, and local hiring zones didn’t reach, making it even more difficult to find work.

Gonzalez calls it an example of “displacing poverty rather than addressing it.”

The USC agreement was inked two years ago and is in the process of being implemented, so Gonzalez can’t say whether it’s paid off. But, she says, “We know what it was like leading up to that.”

Sacramento City Councilman Steve Hansen, who represents the downtown district, says many of the goals of a CBA—like retaining Sleep Train Arena union workers, carving out construction apprenticeships for low-income and disadvantaged residents, and integrating the development so that it’s transit-oriented—have indeed been met. “This is a place that people can take mass transit to. You couldn’t say that about [Sleep Train Arena],” he says. “I truly believe this is a project that people want to get right.”

As for advocacy groups’ unaddressed desires, he says, many of those can be addressed through other avenues. “The arena is not the only road to get there.”

Kevin Brown is also considering alternate routes. A reverend at Mt. Sinai Missionary Baptist Church and a member of the Kings’ advisory council, Brown says the team is giving the community “an optimal opportunity,” one the city—not the Kings—needs to make good on. “It’s not their responsibility,” he adds. “All they can do is set the table.”

The odds of the two sides sitting together at that table to hash out their differences appear more remote than ever. On June 26, the coalition filed a petition challenging the adequacy of the project’s environmental-impact report. It joins another citizen lawsuit against the arena, which charges city officials with greasing their offer to the Kings with secret subsidies the public didn’t know about.

As the debate over what the Kings owe Sacramento for its millions shifts to the courtroom, speculation about the project’s butterfly effects will continue, with merchants and residents along K Street’s bridesmaid business corridor and beyond pondering the same questions:

Will they stay or will they go? Will they even have a choice?