Playing moneyball

The Sacramento City Council was expected this week to vote to approve an eminent domain lawsuit against the California Public Employees’ Retirement System, along with U.S. Bank and an investment company called C-III Capital Partners LLC.

The city wants to use eminent domain in order to wrest control of a key piece of Downtown Plaza property (the former Macy’s men’s store), so it can give it to the Sacramento Kings for the team’s proposed new basketball arena. The Sacramento Bee editorial board cheered the city’s “hardball” tactics, saying it’s time the current property owners “play ball” and sell.

It never ends with the ball metaphors, does it, guys?

Anyway, eminent domain is an extraordinary step—and politically troublesome. Is it justified? The public doesn’t have much information to go on.

The city says it’s offered $4.3 million—already provided by the Kings—a price derived by an independent appraisal. But so far, no counter offer. (The money would be split between CalPERS, which owns the land, and C-III Capital Partners, which owns the mortgage on the building.)

With negotiations dragging, the city wants the court to step in to force a sale. It can get quick action thanks to Senate President Pro Tem Darrell Steinberg’s Senate Bill 743, which expedites all legal wrangling related to the Sacramento Kings arena.

City officials say CalPERS is willing to sell, but C-III Capital Partners is not. CalPERS won’t confirm that or answer any questions at all, beyond a broad statement saying it is “confident that we will reach a solution.”

Sources familiar with the negotiations tell Bites that C-III asked for approximately $10 million, more than twice what the city is offering. The story goes that the Kings earlier offered as much as $6 million, but C-III turned it down. That was before the city got involved. If true, C-III may regret playing hardball if a judge sets a lower price.

If you’re a member of the giant CalPERS, none of this has any real effect on your pension. Still, you don’t want to see the Kings get some sweetheart deal at the public’s expense.

It’s worth mentioning here that Sen. Steinberg—who has a lot of his own political capital invested in this arena campaign and would like to be mayor soon—is just one very cozy degree separated from the CEO of CalPERS, Anne Stausboll.

They are connected through Stausboll’s husband, John Adkisson, a close, personal friend of Steinberg’s. Adkisson has worked with or for Steinberg over the years, and even ran his first city-council campaign. The three were classmates at UC Davis School of Law, all admitted to the California State Bar in 1984.

All pretty clubby. But no reason to think CalPERS won’t do its best to protect public-employee pensions, right? And that’s what judges are for, to make sure the price is fair. Still, if hardball is being played, it’s good to at least know who all the players are.

For some, eminent domain is synonymous with government abuse of power. Exhibit A: “The Kay.” For years, the city threatened eminent domain, and even sued property owners, in order to assemble properties for various planned redevelopment projects along K Street.

Businesses were kicked out, property owners were forced to sell, but the projects mostly didn’t happen. Most of the spaces along the 700 and 800 blocks have been vacant for years, and still are. So when arena boosters say the only alternative to a big arena subsidy is urban decay, let’s at least acknowledge that the city of Sacramento created much of the blight it says it’s trying to cure.

Team Scoopy reported last week that the city can’t complete the nifty riverfront promenade it has been building to connect Old Sacramento to Miller Park. It’s a great human-scale project, opening up our waterfront, but the city doesn’t have the $11 million to complete final stretch from O Street to Miller Park.

While $11 million sounds like a lot of money, it’s significantly less than what one single year of debt service on the downtown arena will cost the city.

Just to put things a bit more in perspective, the city could take the exact same parking revenue it is now proposing to divert toward arena construction and could instead: entirely fund the proposed West Sacramento-Sacramento streetcar line ($130 million-$150 million, though the cost to the city could be much less if federal aid kicks in), also build the proposed Powerhouse Science Center ($50 million), also build a Mondavi Center-style performance facility ($67 million in today’s dollars), finish the river promenade, and still have money left over to subsidize a few mermaid bars, hotels and apartment buildings. How would this package of public goods compare in terms of creating jobs and tax revenue, leveraging ancillary development and generally improving our quality of life? Don’t know. The city would have to do some sort of cost-benefit analysis of alternatives to find out. But that’s never going to happen.