March 15, 2010

Kings land swap plan moves forward, but where's the money?

To absolutely nobody's surprise, on Thursday Sacramento Mayor Kevin Johnson's Kings arena task force officially endorsed developer Gerry Kamilos' three-way land swap deal that would end up with an arena on city-controlled land at the downtown railyards and a new Cal Expo on the site of Arco Arena. City officials now say they hope to sign an "exclusive negotiating contract" (presumably a memorandum of understanding or something similar) with Kamilos by next month.

The big question remains how the heck the Kamilos plan would be paid for, especially given that the state-run Cal Expo says it won't agree to relocate unless someone pays for a new modernized state fair facility, and that "someone" isn't them. There's also the issue of whether tax-increment financing (i.e., kicking back property taxes to the developer) would be involved, as previously hinted; city councilmember Sandy Sheedy, showing unusual perspicacity for a local elected official, noted, "Sometimes when you just say no new taxes, it doesn't mean the rest of the public funds that go into it."

And Sheedy's not the only one getting cold feet: The Sacramento Bee has run a slew of columns and opinion pieces over the last few days questioning the arena deal. Some samples:

Bee associate editor Foon Rhee:

There's a reason why financial projections for arenas and stadiums tend to be so rosy, says Stanford University economist Roger Noll, an expert in the field. Support from sports fans alone is not enough to build a majority in favor of public subsidies, he says, so boosters resort to two lines of argument: the benefits will ripple far and wide, and the arena will attract lots of family-friendly events besides sports.

But such boosterism is "increasingly not working," Noll said, because inflated claims are getting punctured by hard reality.

Economist Jock O'Connell:

Even if construction of a new arena is entirely financed by private investment (which is unlikely to be the case), the task of repaying lenders and bondholders — not to mention generating the revenue to cover the arena's maintenance and operations costs — will fall largely on individual ticket-buyers and those local businesses still able to lease luxury boxes.

It should come as no news to elected officials struggling to balance budgets that the Sacramento region is a much less affluent place than it was just three or four years ago. And no amount of civic cheerleading — or exceedingly optimistic economic impact studies — can obscure the fact that we are staring at several years of sluggish, if not jagged, economic growth in this region.

Bee columnist Dan Walters:

If the city is bent on providing the Maloofs with a new venue for events that only a tiny fraction of the region's residents can afford to attend, that's its business. But why should the state get involved?

Cal Expo, built four decades ago on the fanciful notion that it would become a year-round, Disneyland-like attraction, is a concrete and steel monstrosity and should be reconstructed or replaced with something more like the traditional fairgrounds it replaced. If selling the underlying property would provide the money to do so, as the arena promoters envision, so be it.

If, however, the Cal Expo site is valuable enough to finance a new fairgrounds and a basketball arena, then the excess should be returned to the state treasury, not ripped off by the city and the Maloofs. The state would be making this unjustified gift while it simultaneously is trying to sell other property and the state workers' compensation insurance system to cover gaps in the state budget.

This scheme is insanity, and someone should have the guts to strangle it before it takes on a life of its own.