Yield of dreams

Last week, Mayor Kevin Johnson’s commission for building a Kings arena, Think Big Sacramento, unveiled a new report suggesting a downtown arena would be an economic boon for the region.

Local media mostly gave the study the benefit of the doubt. We asked Robert Wassmer, professor of public policy and administration at Sacramento State, for a more critical look.

He says it’s to be expected that the report would promote the benefits of a new arena and that taxpayers shouldn’t mistake the study, titled “The Economic Engine Report,” for a rigorous or objective look at the real merits of spending public money on such a facility.

“It’s a political document and a marketing document,” says Wassmer, adding that these sorts of studies are “usually very overblown and best-case.”

This economic analysis, provided for free by Capitol Public Finance Group, concludes a new downtown arena would bring $157 million in spending for the region every year—with two-thirds of the money going to downtown Sacramento.

Wassmer says much of that spending would happen anyway. Either at the existing Power Balance Pavilion in North Natomas or at movies, concerts, dining and other events around the region.

The report does mention that once-existing spending is taken into account, the entire economic benefit for the region would be closer to $24 million, with new sales tax—regionwide—coming to about $5 million per year. That number is likely less than the interest payments needed to finance construction of a new arena.

“The Economic Engine Report” only considers the possible economic benefits of a downtown arena, and does not consider the possible economic benefits of building an arena in Natomas. The Natomas Chamber of Commerce and others have argued that the Natomas site makes more sense because much of the needed infrastructure, including expensive freeway off-ramps, are already in place, and because shuttering the arena there would likely be a blight to that neighborhood.

An earlier “feasibility report,” provided pro bono by developer David Taylor—who has long been a proponent of a downtown arena—concluded that the land around the existing Power Balance Pavilion would make a good hospital campus, or an office park or an auto-mall.

But the costs of retrofitting the Natomas land, along with the costs of any incentives needed to attract new tenants, are so far unknown.

Wassmer worries that the abandoned Natomas facility will become an eyesore and a “white elephant.” He says the cost of demolishing Power Balance Pavilion, probably in the tens of million, should be understood and included in any costs estimates for building a new facility.