National Basketball Association
Sacramento releases arena financing plan
National Basketball Association

Sacramento releases arena financing plan

Published Sep. 8, 2011 1:00 a.m. ET

A task force established by Sacramento Mayor Kevin Johnson recommended a rough plan Thursday to raise about $400 million to build a downtown arena, a key step in the city's efforts to keep the NBA's Kings.

The plan announced by the Think Big Sacramento committee gives a menu of financing options to build an entertainment and sports complex near downtown, with the NBA franchise as the primary tenant.

The group proposes a three-way plan combining user fees with public money and private investment to generate approximately $400 million without broad tax increases. The proposal also includes ideas about leasing city parking spaces to a private company, which could generate millions more.

The NBA has given Sacramento until March to come up with an arena financing plan or it will consider allowing the Kings to relocate, perhaps to Anaheim.


In a statement Thursday afternoon, the Kings organization praised the report and said the team looks forward to continuing to work with the city and other interested parties.

The proposed sports complex ''will bring substantial economic benefits to the entire region and we hope will enable the team to continue playing in Sacramento,'' the statement said.

Backers say developing the arena would generate more than 4,000 construction jobs, bring an additional 3 million potential customers downtown each year and generate more than $7 billion in revenue over its lifetime, all without a general tax increase.

The plan will be presented to the City Council next week.

Johnson's efforts this spring to rally public support and $10 million in corporate sponsorships helped delay what looked like an all-but-certain relocation of the Kings to Anaheim. The team agreed to wait a year and give Sacramento another chance to craft an arena plan.

Sacramento is a relatively small NBA market and the aging Power Balance Pavilion where the Kings play lacks many of the profit-boosting features seen in newer arenas, such as a variety of premium seating options that command higher ticket prices. In addition, the state capital lacks large corporate operations, which have helped other cities finance arenas, like the Staples Center in Los Angeles or the United Center in Chicago.

The economic downturn has left few politically viable sources of public money in California. And Sacramento voters in 2006 overwhelmingly rejected a sales tax increase to finance an arena.

This spring, NBA Commissioner David Stern was so dubious about another Sacramento arena push that he characterized it an ''eye-roller,'' and when Anaheim city officials offered $75 million in bonds to lure the team it seemed the Kings were headed south to Orange County.

Johnson, himself a former NBA All-Star, was able to win one more chance for Sacramento and the city assembled the study group to pull together a financing plan.

The Think Big proposal includes no broad-based taxes, said Chris Lehane, a political consultant who served as director of the study group.

''The public has made that clear, and we respected that,'' Lehane said.

The report is the clearest sign yet that the city can develop an arena while still protecting taxpayers, Johnson said.

''The majority of funding will come on the private sector side and not on the public,'' the mayor said in presenting the plan before the Sacramento Press Club.

The next steps will be to work with the City Council, the Kings, developers and other business interests to firm up a financing plan by January, Johnson said.

''I'm not saying it's going to be easy. These discussions are difficult, but I do think everybody's head is in the right place,'' he said.

Johnson was joined by state Sen. Ted Gaines, a Roseville Republican, and Senate President Pro Tem Darrell Steinberg, a Sacramento Democrat, who served as co-chairs of the study group.

Steinberg called the proposed arena the linchpin of redevelopment efforts that have continued for decades at the Sacramento rail yard, which once marked the western end of the first transcontinental railroad.

The proposal lays out three ''buckets'' of potential funds:

- $91 million to $156 million in private financing, including rent payments and investments by the Kings, the arena operator and developer, vendors and other sources.

- $94 million to $123 million in public support through sale of city-owned land, extending a hotel room tax and other contributions.

- $90 million to $121 million from user fees and other financing from those who would benefit from the new arena, including ticket surcharges, rent for concerts and other events, naming rights, and self-assessments from businesses that would benefit from the arena.

In addition, Lehane said, the study group looked at downtown parking, which in Sacramento includes government-owned structures that empty out at the end of the work day. The group did not recommend outright sale of public parking, he said, but other cities have cut deals for leases to private parking companies that generate millions in upfront revenue and annual payments.


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