Thursday, May 24, 2012

STORYLINE Proposed Entertainment Sports Complex (ESC) Arena funding

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As part of the $550K spent on consultants to walk City staff through the feasibility/how to finance a new arena, City staff is seeking approval of a Request for Qualifications (RFQ) to identify interested/qualified parties to lease out the city’s parking assets occurs at tonight’s Council meeting. Please go comment:

In 2006 both measures Q & R to fund an arena were voted down indicating that the public does not want to finance a new entertainment sports complex (ESC) arena. The parking assets route of taking public property and turning it over to the private sector for years TBD proposal should be put on the ballot in June if it is determined to be something Council wants to pursue.

Better: our elected officials will stand in the public interest and insist that any financing for an arena come at the expense of the millionaires who stand to gain the most financial benefit from it. An ESC is a private sector for-profit business, not a City public service.

As I understand it, the parking option would be a key component to the overall financing strategy/decision that will be made in January and February --as follow-ups to this meeting & to meet the March deadline.

The City will be operating at a $26 Million deficit over the next 2 years. I strongly recommend that it not give up it’s parking areas by leasing them out to the private sector to gain financing for a new arena. This would be a short-term gain & a bad long-term decision. It is not the public’s responsibility to fund an ESC arena.

Further, we have an arena in Natomas. What is proposed for its future and why can’t it be the site of the new arena, if there is to be one?

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Conversation Express your views, debate, and be heard with those in your area closest to the issue.

joell83

December 13, 2011 | 8:54 AM

There is no set paln as of now, thef unds lost from the parking would have to be replaced if it was to be used. The city would own the arena and if successful would gain revenue after the arena operator AEG was compensated, assuming the deal is similiar to Kansas City.

Q and R has little to do with this current plan as there will be no taxes raised. Why dont you wait till the actual plan is proposed before you freak out.

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YouWantWhat

December 13, 2011 | 11:24 AM

I would counter that measure Q is very germane to the current plan.

Measure Q's was a non-binding vote, devised to get voters advice on whether voters agree to use public money to build a sports and entertainment center somewhere in Sacramento County,

County wide. it was defeated with over 72% opposing it. It was advisory not binding.

However the message was clear on the use of any public money for a sports arena...NO Way.

Now you have a shill force claim that public sentiment has changed and they have a "poll" to prove it. They also come up with a scheme to extract public money from the long term lease of the city's parking asserts...all to go to an arena construction budget.

Put the non-published "poll" to the test...and make it binding... then we will actually see how public opinion has changed since Measure Q went down in flames.

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Ben Ilfeld

December 13, 2011 | 2:36 PM

Q and R were tied together and to a very specific plan to use public money to fund a privately owned arena.

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William Burg

edited on December 13, 2011 | 9:48 PM

Q and R were tied together to avoid the 2/3 requirement for new taxes but still failed to pass. The arena that would have been built was intended to revert to public ownership after 30 years, which was part of why the plan was so bad--if Arco was obsolete after 20 years, what would the Q/R arena look like in 30?

The Maloofs' response to the latest proposal is even more lukewarm than Q/R: they would also lose their parking revenue stream in the proposed plan, and they don't have the cash to buy the city contract.

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Tony Sheppard

edited on December 13, 2011 | 11:05 AM

The component that seems to be missing in any article or set of questions on this topic is what happens to the current practice of validating (providing free or reduced cost parking) at local stores, restaurants, venues, and events? We're told a new arena will bring new vitality and revenue to downtown (although much is money that would be spent elsewhere otherwise) and better events. But we also have local businesses, multiple arts festivals, the Downtown Plaza, etc. that rely on the validation program that the City operates, with the City also benefiting from the economic activity in its downtown core. In addition to the lost revenue factor, any plan needs to address how a contracted parking operator would handle validations and/or how to compensate local enterprises if it is discontinued. Otherwise, we're championing one local business at the potential expense of dozens of others.

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Curmudgeon

December 13, 2011 | 1:54 PM

OK, if not leasing out parking spaces (and on what terms?), where will the money to build a new arena come from?

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JimMichael

December 13, 2011 | 2:32 PM

We have to remember that parking revenues are already earmarked for replacing our outdated sewage and water systems.

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Rhys02

December 13, 2011 | 5:53 PM

I suspect the author would never be considered a 'risk taker'.. Simple economics is the arena and surrounding development will generate increased property. sales and hotel tax revenue for the city far more than the parking ever will. Forgetting the Kings (most arenas pack in more folks for concerts than they do for basketball) it will bring new dollars from outside of Sacramento with the new ability to host large conventions.

And if anyone can get past their Sactown is a Cowtown mind set, the proposed operators will bring Sacramento parking into the 21st century. i would like to be able to find available street or covered parking with an app instead of circling blocks forever spewing toxic gases into the air.. but I guess smog is a better alternative than a smart business decision.

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Davi Rodrigues

edited on December 13, 2011 | 8:13 PM

You gotta be kiddin' me? Circling blocks trying to find a space? There isn't any if you have to do that. Where in the streets and highways code does it allow for a private company to own rights to a public right of way?
By the way; who is doing the enforcement on parking under this highway robbery scheme?

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Tony Sheppard

December 13, 2011 | 9:45 PM

The City already has the ability to host large conventions - the limitation in that regard has tended to be centralized hotel space. So unless the arena plan includes an extra1,000+ hotel rooms....

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William Burg

December 13, 2011 | 9:54 PM

What kind of events could be held at this arena that can't be held at the current arena? The capacity is pretty much the same. If it's okay for Lady Gaga and Justin Bieber, exactly what big-name acts are we missing?

And who are these "proposed operators"? We don't have proposed operators, or an operating scheme yet...do you know something we don't?

Davi: We don't know yet who is doing the enforcement--that would be up to whoever submits a proposal, and the requirements of the city. If the city requires that the contractor keep the current enforcement staff, the same people would be issuing tickets, but theoretically a private operator could hire their own staff. One thing we do know is that parking costs would go up: the estimate given in the report assumes a 25 cent per hour immediate increase in parking rates, going up to 75 cents more an hour within a few years.

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fredhooper

December 13, 2011 | 10:42 PM

Why do people keep talking about the current arena as if the city already owns it. It doesn't belong to the city and hopefully never will, so asking the question "what's wrong with holding it at the current arena" makes the assumption that it will still be around for a private company to operate it. Chances are it would be torn down because the upkeep makes it unprofitable and the city want's nothing to do with owning it in lieu of payment on its loan. So stop with the assumption Arco...err Power Balance will be there for them to host events and realize if this new arena isn't built, there won't be one at all in Sacramento.

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Jennifer Caldwell

December 14, 2011 | 9:52 AM

Fred, you are incorrect: The arena and 83 acres are involved in the City’s loan to the Kings. Prior to the loan, the Kings owned the land and the arena. The loan was structured as a lease transaction; ownership of the arena and 83 acres was transferred to the City. The City issued debt ($73 million) secured by the arena, the land, and lease payments from the Kings. The Kings lease the arena and land from the City. The lease payments are equal to the debt service.

Power Balance does not own any of the arena. The team sold naming rights to Power Balance. This allows Power Balance to put its name on the arena, and get the associated publicity.

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Mark

December 14, 2011 | 8:19 AM

How in the heck would private operators bring Sacramento parking into the 21st century? That’s too funny. Taking public or resident-owned assets and handing them over to private enterprise is so regressive. We’ve seen this type of give-away backfire so many time in this city. I think if the numbskulls at city hall try to do this they should be challenged in court. I’m sorry but the real bumpkins are those who still fall for this nonsense.

Simple economics DOES NOT make certain that a downtown arena will generate enough property, sales and hotel tax revenue for the city to offset our investment. The vast majority of people attending a game or concert will not be staying overnight nor will they make it past the decomposing Downtown Plaza Mall and the Old Sac tourist trap. They will be paying up good for parking though. Too bad the city wouldn’t be able to cash in on that revenue stream. There’s a difference between a good risk and stupidity.

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Tony Sheppard

December 14, 2011 | 12:13 PM

If we're talking simple economics, then one has to assume that a private business is only going to bid for the parking concession if they think it's worth more over time than they will pay for it. otherwise why the hell would they do it? Even if the City wanted to tap this revenue stream (which is still a huge if), it would make more sense to borrow against it and use it to service the debt than to arrange in advance for a significant portion of that revenue stream to be skimmed of by an outside entity in the form of profit.

The only way that the City could possibly yield as much in advance as it would over time, would be for the outside business to offer full value based on current/projected rates that the City would charge for 50 years, and then increase them at a higher rate in order to produce the necessary profit to both service their own debt on the advance payment and also make a profit on the back end.

Anybody feel confident predicting parking rates and occupancy 50 years in advance?

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madmikeyb

December 14, 2011 | 6:18 PM

Folks, it's kind of embarrassing that we in Sacramento can't get behind a solution to do what even Stockton has done, build a modern entertainment and sports complex. Arco, or whatever it's called this week, Arena is an outdated building. It may have some charm from it's history, but it's the same kind of charm that an ugly dog has. Forget the sports, forget the fact that we think the team's owners should pay for the building. Those facts don't match reality. Santa Clara is underwriting the loans for the 49ers new stadium, LA didn't finance the Staples Center, but gave away parking lots, tax revenues and convention space. The size of the capital investment required exceeds what it would take to start up a break-through tech company, without near the potential return so civic entities like Stockton have to step up to get these projects done. The question is whether we in Sacramento can get over being opposed to whatever idea for financing a complex comes up and actually get something done like Stockton did. Seriously, are we in Sacramento going to fail where Stockton succeeded? Are you ready to go to Stockton next time you want to see a Lady Gaga concert? Really folks? Stockton?

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William Burg

edited on December 14, 2011 | 10:39 PM

Lady Gaga didn't have any problems with Arco Arena, she played there the last time she came to Sacramento. She did not, however, play the Stockton arena--it is half the size of Arco. It also does not host a major-league team. Stockton Lady Gaga fans had to watch a video of the concert at a local theater--or drive to Sacramento.

One should also note that downtown Stockton hasn't exactly burst to the forefront of urban vitality in the six years since their arena's completion. How are property values in downtown Stockton these days?

Staples Center was financed by a $315 million "asset-backed securitization", provided by Bear Stearns, plus the city of Los Angeles provided $38.5 million in bonds and $12 million a year in TIF provided by their redevelopment agency. How are redevelopment agencies doing these days? Incidentally, how is Bear Stearns doing these days?

http://staplescenter.com/press/press-detail/214/staples-centers-groundbreaking-finance-package-is-largest-ever-for-a-sports-arena

http://www.rodneyfort.com/PHSportsEcon/Common/OtherData/NBATeamValues/NBANSLI02.pdf

http://money.cnn.com/2008/03/28/magazines/fortune/boyd_bear.fortune/

About the Santa Clara arena:

"In a financial package announced this month, Goldman Sachs, Bank of America/Merrill Lynch and U.S. Bank would back the construction with an $850 million loan, the majority of the total cost. The money would be funneled through the 49ers and the Santa Clara Stadium Authority, an agency created to oversee the stadium.

The construction loan is expected to be repaid over the next 25 years from ticket sales, rent from the team and naming rights. The city is chipping in $114 million, as approved by voters in June 2010, and the National Football League is expected to contribute $150 million."

Read more: http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2011/12/13/MNEV1MC1VS.DTL#ixzz1gaBABJNm

In other words, the city voted on it, and it passed--but the bulk is a loan from Goldman Sachs, US Bank and Bank of America of $850 million. Payments on a loan that size, assuming 5% interest over 25 years, will be about $70 million a year, and the team will pay $30 million a year in rent. One hopes that the city will be able to clear $40 million or more in annual profits every year...

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