The ultimate, definitive Sacramento Kings arena number crunch
←
→
Page content transcription
If your browser does not render page correctly, please read the page content below
4/8/2014 Sacramento News & Review - The ultimate, definitive Sacramento Kings arena number crunch - Feature Story - Local Stories - December 19, 2013
The ultimate, definitive Sacramento Kings arena number crunch
SN&R's definitive, final-word breakdown of Sacramento's plan to build the team a new downtown
home
By Cosmo Garvin
cosmog@newsreview.com
Read 4 reader submitted comments
This article was publishe d on 12.19.13.
Billions and billions. That's how m any dollars the ne w Kings are na will ge ne rate for Sacram e nto. As in,
“The e nte rtainm e nt and sports com ple x , if locate d downtown, is e x pe cte d to bring ove r $7 billion of
e conom ic im pact to the re gion ove r the ne x t 30 ye ars.”
That's the claim by the groupDowntownA rena.org, an e x te nsion of the de ve lope r group R e gion Builde rs,
form e d to prom ote a ne w publicly subsidize d Sacram e nto Kings are na.DowntownA rena.org re ally drive s
hom e the e conom ic-im pact m e ssage on its we bsite , touting $100 m illion in re ve nue annually for
downtown and $157 m illion a ye ar in e conom ic activity for the re gion. In fact, R e gion Builde rs dire ctor
Joshua W ood said that “$7 billion is probably a conse rvative num be r. It will absolute ly transform
Sacram e nto.”
The m e ssage se e m s to be ge tting through. W he n a Sacram e nto Be e write r re ce ntly slippe d and re fe rre d
to the city's are na “subsidy,” he was corre cte d by a Be e le tte r write r: “The city will own the ne w are na, a
ve ry valuable asse t from which the city will de rive m assive financial re turns. The city's m one tary
contribution should rightfully be calle d a sm art inve stm e nt, not a subsidy.” Anothe r write s, “In the long
run, it will provide a lot of m one y to the city.”
Massive financial re turns. Se ve n billion dollars, conse rvative ly spe ak ing.
The proble m is that those financial re turns are n't re al.
“I’m ope n to som e wild ide as, but that one just de fie s be lie f,” says Ge offre y Prophe te r, a Ph.D.
candidate at Ge orge W ashington Unive rsity. Prophe te r is from Sacram e nto, and his re se arch on the
e conom ic im pacts of urban bask e tball are nas has actually be e n use d by paid city consultants and
Sacram e nto Be e colum nists to support the city’s plan. He ’s a bask e tball fan, and he think s the re are
valid re asons for citie s to he lp build are nas.
But $7 billion in ne w e conom ic activity? “A num be r lik e that ge ts pum pe d into the political syste m , pe ople
start parading it around as if it we re gospe l. Pre tty soon, it’s ’Le t’s rubbe r stam p this suck e r.’ That’s a The city recently released renderings of the
trave sty.” proposed Kings arena. Could Sacramento get a
better deal, if the project goes through?
The conse nsus am ong e conom ists is that are nas don’t ge ne rally produce m ore m one y for city coffe rs ILLUSTRA TION BY BRIAN TAYLOR
than the y consum e . The sam e e conom ists will te ll you that publicly subsidize d sports are nas are not
e fficie nt job produce rs or the be st way to re de ve lop blighte d are as. The y are but one way to do
re de ve lopm e nt, and the y can be e ffe ctive —unde r the right conditions, with the right safe guards. Related stories:
Let’s have a look at those new Sacramento Kings
But the y don’t produce m assive financial re turns. And that’s not just the opinion of som e anti-are na arena design concepts
folk s. But it is som e thing that has to be unde rstood in orde r to have any sort of hone st discussion of a De ve lope rs pre se nt “hypothe tical” conce pts for a
proje ct lik e this. ne w Sacram e nto Kings hom e as city le ade rs we igh
the im pacts on downtown. SN&R, 11.07.13.
Also, it is not true , as is ofte n said, that this are na plan has no e ffe ct on the city’s ge ne ral fund.
According to the city’s own num be rs, financing the are na will dive rt m illions of dollars e ve ry ye ar that
Kings arena debate gets nasty
http://www.newsreview.com/sacramento/ultimate-definitive-sacramento-kings/content?oid=12302426 1/84/8/2014 Sacramento News & Review - The ultimate, definitive Sacramento Kings arena number crunch - Feature Story - Local Stories - December 19, 2013
would othe rwise be available to the ge ne ral fund, or could be use d to lowe r tax e s or m ak e othe r This late st are na de bate frustrate s be cause it's
inve stm e nts. More on that be low. ne ve r be e n about facts or truth. SN&R, 07.25.13.
Still, the re are argum e nts to be m ade for building a downtown are na with public m one y. It could he lp to Joshua Wood is the smiling assassin
re vive a part of town that has be e n stubbornly re sistant to the city’s e fforts. W hat would it tak e for the The Sacram e nto activist slays anti-are na force s and
Kings are na to be one of the succe ss storie s? fights for m ore W alm arts. He 's polarizing, e ve n
fe are d, but also adm ire d and succe ssful.
That’s what this story aim s to e x plore . W hat are the proje ct’s lik e ly costs and be ne fits, both tangible and W ho is this k id? SN&R, 08.22.13.
intangible ? Is it the be st tool to achie ve the city’s state d goal of a re vitalize d downtown? If Sacram e nto is
to go ahe ad with the plan, is it ge tting the be st de al it can ge t? On how a new Sacramento Kings arena might
impact low-income downtown
And, with the possibility of a public vote on the plan in June 2014, doe s the city have any le ve rage to ge t
But what will re vitalization m e an for the
a be tte r de al?
ne ighborhood’s lowe r classe s? SN&R, 06.27.13.
The NBA cartel
Advertisement
Supporte rs of the are na plan will te ll you it’s not about bask e tball. It is, howe ve r, about the e conom ics of
the National Bask e tball Association.
“W hat m ust be re alize d is that NBA owne rs have form e d a carte l that ope rate s as a ne ar m onopoly,
e x e m pt from U.S. antitrust policy,” says R ob W assm e r, who te ache s e conom ics and public policy at
Sacram e nto State Unive rsity. “It se ts the price —in the form of public subsidie s—that ne e d to be paid for
our city to buy the ir product.”
O the rwise , the NBA will se ll to som e one e lse , lik e Se attle or Anahe im . The price to e ach city large ly
de pe nds on how profitable the m ark e t is for the NBA.
For Sacram e nto, the price is $258 m illion. That’s about 58 pe rce nt of the e stim ate d $448 m illion price
tag for a ne w are na on the site of the e x isting Downtown Plaza. As part of the agre e m e nt, the city
prom ise s to contribute $212 m illion in cash, and various parce ls of prope rty last asse sse d at $38 m illion.
The city is also throwing in signage rights to billboards in the are a of the are na proje ct, and giving up the
3,700 park ing space s it now owns (and colle cts re ve nue from ) be ne ath Downtown Plaza. The Kings would
contribute $189 m illion. Any cost ove rruns are to be borne by the de ve lope rs.
Oh, bondage
In orde r to ge t the $212 m illion in cash, the city will have to se ll bonds. All of the m one y will be paid
back from the re ve nue the city colle cts from its park ing m e te rs, tick e ts and garage s. That m one y now is
e ithe r re inve ste d in park ing ope rations, or it goe s into the ge ne ral fund to pay for se rvice s lik e police
and park s.
The city actually ne e ds to borrow m ore than $212 m illion in orde r to cre ate a re se rve , pay le gal fe e s and othe r costs of borrowing, and possibly to m ak e
im m e diate re pairs and im prove m e nts to its e x isting park ing garage s.
C ity Tre asure r R usse ll Fe hr says that his conse rvative , worst-case e stim ate is that the city would borrow as m uch as $304 m illion in bonds. He says that num be r
will be re vise d lowe r as he ge ts close r to re le asing his final financing plan in m id-Fe bruary—two m onths be fore the Sacram e nto C ity C ouncil is e x pe cte d to vote to
approve the de al.
Part of the additional borrowing by the city will be use d to he lp m ak e the bond paym e nts in the e arly le an ye ars, whe n it e stim ate s the park ing syste m won’t
ge ne rate e nough to m ak e the annual de bt obligation. O the rwise , the city would wind up tapping its hote l tax or the ge ne ral fund.
The city will m ak e “inte re st only” paym e nts on its bond de bt for the first e ight ye ars. Afte r it is done paying off anothe r se t of bonds—which it’s still paying for
the construction of downtown park ing garage s—that m one y, about $3 m illion, would be switche d ove r to start paying principal on the are na de bt.
It’s also true that local gove rnm e nts always pay lots of inte re st on big public proje cts; that’s the nature of public financing. It’s true of hom e m ortgage s and
colle ge loans as we ll.
To be on the safe side , Fe hr’s m ode l assum e s a high inte re st rate of 5.75 pe rce nt on the bonds. The rate could be lowe r; he says it won’t be highe r.
http://www.newsreview.com/sacramento/ultimate-definitive-sacramento-kings/content?oid=12302426 2/84/8/2014 Sacramento News & Review - The ultimate, definitive Sacramento Kings arena number crunch - Feature Story - Local Stories - December 19, 2013 It should be note d that the total cost of financing the are na, ove r tim e , is going to be close r to $770 m illion, once you count all of the inte re st the city will have to pay ove r the 35-ye ar life of the bond. Again, that’s assum ing high inte re st rate s. In the city’s m ode l, bond paym e nts start at about $6.5 m illion a ye ar in 2016, the y jum p to about $17 m illion a ye ar in 2019, the n to $19 m illion in 2022, topping $23 m illion by 2035. SN&R ask e d how m uch those e stim ate s m ight re asonably be e x pe cte d to change , assum ing lowe r rate s and lowe r borrowing costs, and Fe hr said it could vary by $3 m illion to $4 m illion. So, inste ad of a $17 m illion paym e nt, the city m ight m ak e a $13 m illion paym e nt. All of the se num be rs are suspe ct, according to C raig Powe ll, with the local gove rnm e nt-watch group Eye on Sacram e nto. Powe ll is also one of the le ade rs of the e ffort to gathe r signature s and force the are na issue s to a public vote . He says inte re st rate s have be e n rising, and the city can’t afford to add so m uch de bt to the $2 billion it alre ady holds. He obje cts to borrowing e x tra m one y to cove r the e arly de bt paym e nts—be cause it adds as m uch as $93 m illion to the total costs of financing the proje ct ove r tim e . “This thing is put toge the r with bubble gum and baling wire ,” says Powe ll. And he obje cts to spe nding park ing re ve nue that could be use d for core city se rvice s on an are na. “That’s a source of re ve nue that the city de spe rate ly ne e ds to ge t he althy.” Backfill or bust? C ity officials say this plan prote cts the ge ne ral fund, or “holds the ge ne ral fund harm le ss.” In othe r words, Sacram e nto can build the are na, and it won’t affe ct the ability to provide se rvice s. “This is wordplay. The city’s curre nt ge ne ral fund will not be hurt by this—but the city’s future ge ne ral fund will be hurt,” says W assm e r. According to Fe hr’s m ode l, in 2014 the city e stim ate s $26 m illion in park ing re ve nue . About $11 m illion will go to pay for the ope ration of the park ing syste m . Anothe r $5 m illion goe s to pay the e x isting de bt on the outstanding bonds for the city’s park ing garage s. Alm ost $10 m illion a ye ar would be “profit,” which goe s into the ge ne ral fund for se rvice s lik e cops, park s m ainte nance and k e e ping swim m ing pools ope n. Unde r the are na plan, the se future profits go to pay de bt on the are na bonds. The city has ide ntifie d se ve ral source s that it propose s to “back fill” the ge ne ral fund. But the am ounts of the de bt se rvice and the am ount of the back fill are n’t e qual. The large st source of back fill, about $3.75 m illion a ye ar, would com e from a 5 pe rce nt surcharge on all tick e ts at the ne w are na. It’s worth noting that the sam e surcharge was in the are na de al offe re d to the Maloof fam ily m ore than a ye ar ago, and it was criticize d by the firm Be acon Econom ics, who said it was base d on tick e t sale s num be rs that the curre nt are na hasn’t se e n since the e conom ic boom tim e s of the e arly 2000s. (Ke e p in m ind, Be acon was hire d by the Maloof fam ily to asse ss Sacram e nto’s are na financing plan, and Maloof is not a nam e that e nge nde rs m uch trust around Sacram e nto the se days.) But Be acon owne r C hris Thornbe rg told SN&R his asse ssm e nt stands. “The re ve nue s the y are pre dicting are not the re . Sim ple as that.” Som e of the back fill m one y, about $1 m illion a ye ar, will com e in the form of profit give n to the city by the Kings. The building will ge ne rate a ce rtain am ount of tax re ve nue s. The city e stim ate s $300,000 a ye ar in sale s tax e s, and $898,000 in prope rty tax e s. O f course , the city will own the are na, so the re it is counting m one y that it is paying to itse lf. According to the te rm she e t approve d e arlie r by the city council, the city will re ly on a ce rtain am ount of ne w re ve nue from park ing by patrons of the ne w downtown are na. But not ve ry m uch—only about $625,000 a ye ar. The num be r is low partly be cause the city is giving away all of its 3,700 Downtown Plaza space s, a m ajor chunk of its garage inve ntory. Finally, the re ’s $3 m illion a ye ar in back fill com ing from the e x tra m one y the city borrowe d. That $3 m illion will be re place d afte r a fe w ye ars by the m one y the city is curre ntly using to pay off its park ing garage s. That’s m one y that could be put back into the park ing syste m , or it could be put in to the ge ne ral fund. But the are na-financing plan tre ats it lik e ne w m one y. All in all, the city’s ge ne ral fund is said to be “he ld harm le ss,” be cause the total am ount of the back fill e quals the $9 m illion that flows from the park ing ope ration to the ge ne ral fund right now. But re ally, it’s only $6 m illion in ne w re ve nue s. And that $6 m illion—the surcharge s and tax e s and additional park ing re ve nue —is far le ss than the $13 m illion, or $17 m illion or $19 m illion paym e nt that the city will ne e d to m ak e e ve ry ye ar on the are na bonds. http://www.newsreview.com/sacramento/ultimate-definitive-sacramento-kings/content?oid=12302426 3/8
4/8/2014 Sacramento News & Review - The ultimate, definitive Sacramento Kings arena number crunch - Feature Story - Local Stories - December 19, 2013 Powe ll says the city m ay have to dip into its hote l tax e s to m ak e up the diffe re nce . Fe hr says that’s ve ry unlik e ly to happe n, be cause the park ing syste m is alm ost ce rtain to grow and ge ne rate m ore m one y ove r tim e . The parking diversion And this is the part that se e m s to ge t le ft out of m ost e x planations of the are na-financing plan. Eve n afte r the “back fill” is tak e n into account, it re lie s on m illions in future park ing re ve nue that could othe rwise flow to the ge ne ral fund. The city’s m ode l up to this point has assum e d low growth in park ing re ve nue , accounting for inflation and sm all rate incre ase s that are alre ady planne d. Nothing re fle cting what Fe hr calls “growing the syste m ,” lik e te chnological im prove m e nts, additional park ing m e te rs and “dynam ic pricing” (charging pe ople m ore whe n de m and is high). But, of course , the city doe s plan to e x pand and update its park ing syste m . That’s going to happe n whe the r or not the city builds an are na. “It’s just what citie s are doing to m ax im ize park ing re ve nue s in a way that m e e ts m ark e t de m and,” says Assistant C ity Manage r John Dangbe rg. Sacram e nto is paying a com pany calle d W alk e r C onsulting LLC to do a ne w inve ntory of the park ing syste m , and give som e proje ctions about how m uch ne w re ve nue it can e x pe ct from im prove m e nts and a re bounding e conom y. It will also be gin to look at how m uch ne w park ing re ve nue m ight be ge ne rate d be cause of the are na and ne w de ve lopm e nt associate d with it. If the are na doe s ge ne rate som e ne w park ing re ve nue —be cause m ore pe ople com e downtown to park —that’s ce rtainly going to be a he lp to the ge ne ral fund. But the re st of the park ing profits would be the re in the future , anyway—with or without an are na. C om m itting those re ve nue s to the are na counts as a drain on the ge ne ral fund in the future . “The re is a dive rsion of future ge ne ral-fund dollars to this are na proje ct that could be use d for othe r city e x pe nditure s, or cuts to tax e s or fe e s for city re side nts or busine sse s,” W assm e r says. As Prophe te r says, “Mone y is fungible . You could do anything e lse with that m one y.” They're multiplying! So, what doe s the city ge t back for its inve stm e nt? C e rtainly not $7 billion in ne w e conom ic activity. That num be r was tak e n from a study by a paid consultant to Mayor Ke vin Johnson’s Think Big Sacram e nto organization. It is arrive d at by m e asuring the curre nt spe nding at the Kings are na, m ak ing som e assum ptions about how that spe nding spurs othe r spe nding (a m ultiplie r) and proje cting out 30 ye ars. The re ’s nothing wrong with ge ne rating an e conom ic im pact num be r lik e this. But it’s e asily m isuse d. Assum e that the Kings did le ave town. Pe ople only have a ce rtain am ount of discre tionary incom e to spe nd, and e ve ryone who spe nt m one y on the Kings will sim ply shift the ir spe nding to som e thing e lse , lik e m ovie s or re staurants or AAA base ball. It is spe nding that will happe n with or without the Kings. Be cause of this “substitution e ffe ct,” the se sorts of e conom ic-im pact num be rs can be quite m isle ading—giving the im pre ssion of hundre ds of m illions, or e ve n billions, of dollars in be ne fits from a proje ct that are n’t re al. Sim ilarly, the claim that the are na proje ct will cre ate 4,000 ne w jobs should also be look e d at close ly. Most of those jobs are te m porary construction jobs. The sam e consultants who cam e up with the $7 billion num be r also e stim ate d that a ne w downtown are na would cre ate 375 pe rm ane nt jobs, but said the num be r would be close r to 229 jobs once the substitution e ffe ct was tak e n into account. Show Sacto the money Last we e k , Mayor Johnson form e d a ne w political com m itte e that he ’s brande d “The 4000,” to counte r the ballot e ffort by Powe ll and his frie nds. The nam e is a re fe re nce to the jobs the proje ct would cre ate , but sports-subsidy sk e ptic and Field of Schemes author Ne il de Mause quippe d the m ayor’s group m ight m ore appropriate ly be calle d “The 229.” Sacram e nto-are a trade unions struck a de al with the de ve lope rs—calle d a “proje ct labor agre e m e nt”—that re quire s 60 pe rce nt of the construction jobs go to work e rs living in the Sacram e nto re gion. So, m any of the highly sk ille d, highly paid jobs could go to pe ople in R ose ville or R ock lin. But it’s the city of Sacram e nto subsidizing the are na, not the se othe r jurisdictions. http://www.newsreview.com/sacramento/ultimate-definitive-sacramento-kings/content?oid=12302426 4/8
4/8/2014 Sacramento News & Review - The ultimate, definitive Sacramento Kings arena number crunch - Feature Story - Local Stories - December 19, 2013
This is a k e y conside ration: How m uch of the be ne fit flows to Sacram e nto re side nts, who are paying the bill, and how m uch
goe s to othe r are as?
“If you’re in a suburb of Sacram e nto, the re ’s nothing be tte r than if the city pays for your e nte rtainm e nt, and you’re fre e to
spe nd your m one y on good schools and low crim e ,” says Victor Mathe son, a profe ssor of e conom ics at C olle ge of the Holy
C ross, who has be e n following the proje ct.
Stanford Unive rsity e conom ist R oge r Noll says urban bask e tball are nas can “bre ak e ve n” for the ir host city, if the y are done
right. The y are ce rtainly be tte r than football stadium s, which are dark and use le ss m uch of the tim e —a bask e tball are na can
be busy with othe r e ve nts such as conce rts and ice shows m ost of the ye ar.
W e k now the are na itse lf will ge ne rate som e sale s tax e s, but only about $300,000 a ye ar. And the Kings owne rs say the y
inte nd to build $500 m illion worth of ne w de ve lopm e nt—including a hote l, re tail and som e housing—ne x t to the are na.
Le t’s assum e that happe ns. O n $500 m illion in asse sse d value , the city could e x pe ct to colle ct about $1 m illion a ye ar in
prope rty tax e s.
The city says it has done no e stim ate s of pote ntial sale s tax e s that m ight be ge ne rate d by the ne w de ve lopm e nt around a
downtown are na. Le t’s tak e the ir word for it and try to find som e sort of com parison inste ad.
Le t’s assum e that the prom ise d ne w de ve lopm e nt will ge ne rate m ore in sale s tax e s than Downtown Plaza doe s—about $1.1
m illion in 2012, down from $1.7 m illion in 2000.
Le t’s go on and assum e —com ple te ly hypothe tically—the ne w de ve lopm e nt prom ise d by the Kings ge ne rate s as m uch in sale s
tax e s e ve ry ye ar as the city’s curre nt bigge st sale s-tax ge ne rator, Arde n Fair m all, which is sim ilar in size to what is be ing
propose d and which ge ne rate d $4.3 m illion in sale s tax e s for the city last ye ar.
Tak e away Downtown Plaza, re place it with an Arde n Fair-size d e conom ic e ngine , a $3 m illion gain, add a m illion in prope rty
Click on the image for a larger tax e s and voil&#;agrave;: The city could m ak e about $4 m illion a ye ar. Not ne arly e nough to cove r the de bt se rvice on the
version. are na, but e ve ry little bit he lps.
PHOTOS COURTESY OF
A ECOM/CITY OF SA CRA MENTO Best way to spend $258 million?
W assm e r warns that a re al e stim ate would tak e into account the im pacts on othe r are as. “The growth of an are na
e nte rtainm e nt district would lik e ly slow Midtown activity of this sort, and at som e of the hubs in place s lik e R ose ville , … Folsom ,
Granite Bay, north Natom as.”
That ge ts at the city’s state d policy goal. “It’s to conce ntrate e conom ic activity from around the re gion into the downtown,” says Fe hr. This is doable , says Je ff
Michae l at the Unive rsity of the Pacific in Stock ton.
Michae l is pre tty optim istic about Sacram e nto’s are na proje ct, though he too says, “sports are nas, in ge ne ral, have a poor re cord as an e conom ic-de ve lopm e nt
strate gy.
“If your obje ctive is to cre ate jobs and raise incom e s, the n no. A lot of the be ne fits are re ally intangible .”
Am ong those intangible be ne fits are a m ore vibrant downtown and re use of an obsole te urban shopping m all that will lik e ly ne ve r pe rform we ll again. “It’s
de finite ly an are a that ce rtainly ne e ds a catalyst. And this is a chance to shape the de ve lopm e nt and the fe e l of the city,” says Michae l.
For sure , m any citie s have use d downtown are nas as urban-re vitalization tools. But are the y the be st tools for the job? Do the y give you the m ost bang for your
urban-re vitalization buck ?
“It’s not ne ce ssarily what I would pull off the she lf. But within that unive rse , this is not bad,” says Michae l.
Som e have sugge ste d that the city could use that $258 m illion for a pack age of othe r am e nitie s—such as housing, a stre e tcar, com ple tion of the ne w scie nce
ce nte r north of downtown. Assistance to the Kings could be part of that pack age , but not all of it.
“You’ve got to ask , ’C ould we do som e thing e lse with that $258 m illion?’ Politically, that’s not a ve ry appe aling que stion, and no one ask s it,” says Prophe te r. He
says dollar for dollar, the city would probably be be tte r off m ak ing inve stm e nts to prom ote sm all busine ss.
“I’m a big fan of having a long, drawn-out conve rsation whe n you are m ak ing a policy choice to spe nd $258 m illion. It’s frustrating whe n the se things ge t
http://www.newsreview.com/sacramento/ultimate-definitive-sacramento-kings/content?oid=12302426 5/84/8/2014 Sacramento News & Review - The ultimate, definitive Sacramento Kings arena number crunch - Feature Story - Local Stories - December 19, 2013
pushe d through without a discussion.”
The proble m is it m ay not be possible to have a long, drawn-out conve rsation and still k e e p the Kings.
“In an ide al policy world, you’d say, ’I want to le ve rage this park ing asse t, and an are na is som e thing I
m ight conside r.’ That’s one tool. And you’d go through a proce ss and de cide what you want to do with it,”
says Michae l.
“And in the tim e it took you to have that conve rsation, the city would lose its te am .”
If you build it, make them come
Eve n though Prophe te r is sk e ptical about are nas as e conom ic-de ve lopm e nt tools, his work has be e n
use d by back e rs of the Sacram e nto are na.
In a 2012 Journal of Urban Affairs pape r, Prophe te r publishe d his finding that—holding all othe r factors
e qual—bask e tball-only citie s that built ne w are nas be twe e n 1995 and 2009 e x pe rie nce d a $600 annual
incre ase in pe r-capita incom e .
Are na booste rs have latche d onto Prophe te r’s study to say that are nas lift the e conom y. But he says the
re lationship m ight actually work the othe r way around—m aybe citie s with stronge r e conom ie s are m ore The city recently renderings of the proposed Kings
lik e ly to build are nas. O r the re could be no causal re lationship at all. “The short answe r is we don’t k now. arena. Could Sacramento get a better deal, if the
It’s a m e ss. The re lationships are re ally difficult to untangle .” project goes through?
Click on the image for a larger version.
If the city’s state d policy goal is to spur de ve lopm e nt and re vitalization of an are a, how can it be sure
that will actually happe n? PHOTOS COURTESY OF A ECOM/CITY OF
SA CRA MENTO
Noll says an are na proje ct has to be part of m uch bigge r e conom ic-de ve lopm e nt plan. “You can’t plunk
down a bask e tball are na and hope e ve rything e lse com e s along.” Sim ilarly, the busine sse s around the
ne w facility “can’t just be a fancy and bloate d ve rsion of the conce ssion inside the facility.”
W assm e r says the are na has to be de signe d “to not capture e ve ry re staurant and drink dollar of a patron atte nding an e ve nt the re . Entre pre ne urs can the n
locate ne arby and e x pe ct to ge t som e spillove r from an e ve nt.
“But, of course , the difficulty of actually doing this is it work s e ntire ly counte r to the are na owne r’s de sire to capture all of this re ve nue for the m se lve s by
providing it within the are na.”
Most agre e d that tim ing is im portant. “The de ve lope r re ally should be building the are na in conjunction with the re tail and the othe r de ve lopm e nt,” says
Mathe son.
Sacram e nto has a prom ise from the Kings to build around the are na site . “W e be lie ve this is a significant e nough proje ct to be a gam e change r on its own,”
says Dangbe rg.
But it doe sn’t have any k ind of guarante e that de ve lopm e nt will happe n, or whe n it will, e ve n though the city is giving the de ve lope rs se ve ral parce ls of downtown
prope rty.
That could be a proble m , says Mark R ose ntraub, a sports e conom ist at the Unive rsity of Michigan. He says that sports facilitie s can he lp turn around downtowns,
and he ’s work e d on proje cts in citie s lik e Los Ange le s and Edm onton. But he warns that the city shouldn’t re ly on the de ve lope rs’ good inte ntions.
“’If you build it, the y will com e ’ ne ve r work s,” he says. “If I we re you, I would be trying to figure out the be st way to m ak e sure that re al-e state de ve lopm e nt
happe ns.”
R ose ntraub says the city of San Die go is the m ode l in this re gard.
C ity vote rs the re approve d the subsidy to build Pe tco Park , ne w hom e to the San Die go Padre s, via a 1998 ballot m e asure . It include d a contractual guarante e
that the te am owne rs build supporting de ve lopm e nt in the rundown East Village ne ighborhood ne arby. The m e asure also re quire d guarante e s that the ne w
de ve lopm e nt would ge ne rate e nough ne w sale s and hote l tax e s to offse t the city’s annual bond paym e nts.
If the tax re ve nue cam e up short, the te am owne rs would be re quire d to m ak e up the diffe re nce .
http://www.newsreview.com/sacramento/ultimate-definitive-sacramento-kings/content?oid=12302426 6/84/8/2014 Sacramento News & Review - The ultimate, definitive Sacramento Kings arena number crunch - Feature Story - Local Stories - December 19, 2013 Since construction starte d in 2004, m ore than $2 billion have be e n inve ste d in the are a adjace nt to Pe tco Park , and the ne w tax re ve nue s ge ne rate d in the district around the are na are re porte d to be gre ate r than the city’s annual de bt paym e nts—as guarante e d. It’s wide ly conside re d one of the m ost succe ssful stadium -re de ve lopm e nt proje cts in the country. R ose ntraub says San Die go’s insiste nce in de ve lopm e nt guarante e s was critical. Sacram e nto is ge tting no such guarante e s in e x change for its inve stm e nt. Measuring the intangible W he n ask e d whe the r the tangible e conom ic be ne fits of the are na proje ct outwe igh the costs to the city, Dangbe rg and Fe hr will te ll you no, the y don’t. R athe r, the y de scribe it as an am e nity, for which be ne fits can be hard to m e asure . That’s true of park s, cle an air, m use um s, and also things lik e civic pride , re gional ide ntity and a vibrant downtown. The re ’s an argum e nt that the be ne fits of k e e ping the Kings in town can’t be assigne d a dollar value ; the re gion sim ply ge ts a psychological boost and a lift of quality of life that can’t be e asily quantifie d. The proble m with intangible be ne fits is that the y te nd to le t you off the hook whe n you’re trying to de cide if a proje ct is worthwhile . If you can’t m e asure intangible be ne fits, how can you do any sort of m e aningful cost-be ne fit analysis? But, as Prophe te r note s, “The re are de finite ly te chnique s to e stim ate how m uch pe ople value the se intangible things.” O ne of the m ost com m on is calle d “continge nt valuation,” and it use s surve ys to te ase out what re side nts would be willing to pay for any am e nity. Prophe te r says what re side nts are willing to pay for a sports te am is typically far le ss than the am ount of subsidy propose d. For e x am ple : In Pittsburgh, re se arche rs m e asure d a “willingne ss to pay” of $66 m illion, which was about 30 pe rce nt of the $180 m illion that was be ing ask e d for to re novate a ne w facility for the city’s profe ssional hock e y te am , the Pe nguins. O n the ve ry high e nd, re se arche rs found a willingne ss to pay in Portland, O re ., of $110 m illion, alm ost half of the $235 m illion that the Trail Blaze rs wante d to build a ne w are na. The city of Sacram e nto could pay for this sort of continge nt-valuation study, to add som e data to back up its point about intangible be ne fits. But that se e m s unlik e ly to happe n. Could Sacramento get a better deal? In the last 10 ye ars, Los Ange le s, San Die go, Pittsburgh, Ne w York C ity and Atlanta have struck com m unity be ne fits agre e m e nts with te am owne rs and de ve lope rs as part of the ir are na or stadium de als. The se pacts he lp e nsure that be ne fits from a ne w facility re ach low-incom e com m unitie s, not just pe ople who can afford tick e ts to gam e s and conce rts. In Los Ange le s, the C BA for the de ve lopm e nt around the Staple s C e nte r include d living wage s for all jobs in the proje ct are a, m one y for affordable housing and inve stm e nt in ne ighborhood park s, am ong othe r be ne fits. In San Die go, a C BA for the Ballpark Village de ve lopm e nt include d living wage s, job-training funds, affordable housing inside the proje ct and a groce ry store . In Sacram e nto, se ve ral groups are starting to push for m ore com m unity be ne fits from the ne w are na. The Gre ate r Sacram e nto Urban Le ague is ask ing for 60 pe rce nt of ne w jobs associate d with the are na to go to low-incom e re side nts. O the r com m unity groups have joine d toge the r to form the Sacram e nto C oalition for Share d Prospe rity, to ask city council m e m be rs to include a C BA in the de ve lopm e nt agre e m e nt for an are na. The groups include Sacram e nto Housing Alliance , local labor groups, ne ighborhood groups, the Environm e ntal C ouncil of Sacram e nto and Sacram e nto Are a C ongre gations Toge the r, am ong othe rs. The y are ask ing for strong local hiring and job-training re quire m e nts, targe te d toward low-incom e work e rs who live in the city. The y want to “ban the box ” and re m ove que stions about crim inal history from job applications at all are na-re late d busine sse s. (Em ploye rs could still ask about crim inal history during inte rvie ws or late r in the hiring proce ss.) And the coalition is ask ing for “labor pe ace ,” m e aning e m ploye e s at are na-re late d busine sse s would be allowe d to join unions without inte rfe re nce . The coalition wants 50 pe rce nt of the housing built within five block s of the are na to be affordable to ce rtain incom e le ve ls. The y are ask ing that a cool $750,000 go to Sacram e nto Ste ps Forward to provide transitional housing, and it wants an additional 25 ce nt surcharge slappe d on to e ve ry tick e t sold to he lp fund the city’s Housing Trust Fund. The list goe s on—public transit and shuttle s for are na work e rs; e x te nde d bus se rvice and light rail in the are a; on-site child care for are na work e rs; bik e park ing; 24-se ve n public re stroom s and drink ing fountains in the thre e block s around the are na; and private se curity patrols for adjace nt ne ighborhoods of Alk ali Flat, http://www.newsreview.com/sacramento/ultimate-definitive-sacramento-kings/content?oid=12302426 7/8
4/8/2014 Sacramento News & Review - The ultimate, definitive Sacramento Kings arena number crunch - Feature Story - Local Stories - December 19, 2013
Mansion Flats and Southside Park .
So far, it sounds lik e city council m e m be rs are not quite sure what to m ak e of the coalition’s list.
And it’s not cle ar what le ve rage the coalition re ally has. Groups pushing for C BAs in othe r citie s we re he lpe d by the C alifornia Environm e ntal Q uality Act, and the
ability of local groups to file lawsuits and de m and that de ve lope rs m itigate im pacts in the ir com m unitie s. That’s ham pe re d by le gislation pushe d through by
Se nate Pre side nt Pro Te m Darre ll Ste inbe rg, which lim its the ability of com m unity groups to file C EQ A lawsuits against the Kings are na proje ct.
But if the m e asure on funding the Kings are na actually m ak e s it onto the ballot this June , that could provide som e le ve rage .
That’s no sure thing. The city re ce ntly de cide d to acce le rate its tim e line for issuing the bonds on the ne w are na. Assum ing the city council give s its ble ssing to
the de al in April, bonds could be issue d in late May. That could e ffe ctive ly m ak e m oot the re sults of any ballot m e asure on June 3.
And, if that’s the case , the city is ask ing for a lawsuit and a fight, says Powe ll. “The city is about to ste al this e le ction on the are na issue . It’s the m ost autocratic
thing I’ve e ve r se e n the city do. It’s dise nfranchise m e nt.”
Not having a vote m ay also m e an that city officials have le ss ince ntive to ne gotiate things lik e com m unity be ne fits or de ve lopm e nt guarante e s, or to com e up
with ways to lowe r costs for the ne w are na.
But the re will still be ple nty of pe ople talk ing about the billions in ne w re ve nue it will bring.
StumbleUpon
Contact us about this story
RELA TED LINKS:
See all stories published in Feature Story
See all stories published in Local Stories
http://www.newsreview.com/sacramento/ultimate-definitive-sacramento-kings/content?oid=12302426 8/8You can also read
