City to pay lion’s share of cost for an arena fit for Kings
The city will be responsible for the majority of the cost of a new entertainment and sports complex, according to the much-anticipated financial term sheet released Thursday – a total of nearly $256 million.
The contribution from Anschutz Entertainment Group, the new arena operator, will be $58.75 million, according to the terms of the agreement, and the Sacramento Kings owners, the Maloof family, is bringing in $73.25 million.
The term sheet outlines the specifics of who pays for what to get a new arena built downtown and provides a framework for negotiations with potential parking operators – the linchpin in the city’s ability to meet its part of the deal.
Representatives of the Think Big Committee, the group spearheading the arena effort for the city, have said they expect to get more than $200 million up front for agreeing to a 50-year lease of the city’s parking operations.
“We think that is a fairly conservative number,” Kunal Merchant, Mayor Kevin Johnson’s chief of staff, said of the estimate.
That dollar amount is negotiable, however, and will depend on a number of factors including the length of the parking lease and concessions made to protect parking rates from escalating.
Merchant said the team owners are going to work with the city to pay their current loan in full with the help of new bonds issued by the city to retire the existing loan.
“(The Maloofs) would still pay the old loan until new bonds are issued,” Merchant said. “To their credit, they have always made their loan payments.”
A new loan will release the current arena and land in Natomas as collateral on the current loan, making it possible for Power Balance Pavilion and the surrounding land to be sold or reused.
“This is great for Natomas, too,” Merchant said.
“We get three more years of economic activity thanks to the Kings being there, and (meanwhile) the community gets to ask a cool question, ‘What’s next? What’s the right way to redevelop and reuse this land?’ ” Merchant said.
City Councilwoman Angelique Ashby, who represents the Natomas area in District 1, declined to comment, she said, until she has time to fully review the term sheet.
The new arena plan includes a 30-year commitment from the Kings to stay in Sacramento, and a 30-year operating lease with AEG.
There is also a guarantee by the ICON-Taylor team to deliver a completed facility by September 2015 – in time for the start of the 2015-16 basketball season – and cost overrun protection, assuring the city of a $391 million final price tag.
Another detail in the term sheet is a revenue-sharing plan between the city and AEG from operating profits at the entertainment and sports complex.
The tiered revenue-sharing plan gives the city 15 percent of the first $10 million net operating profit from the facility, and 30 percent of the next $5 million of profit. The city would get 50 percent of all net profit after that.
A primary concern expressed by City Council members has been protecting the general fund through the process of financing and building a new arena.
Merchant said Wednesday that the financing plan addresses that concern.
“Long term … we’re going to back-fill the general fund, by and large, through revenues generated by the facility – user fees, ticket surcharges, things like that,” he said.
“Before the facility opens, there won’t be those revenues, so, as we move forward with the parking opportunity – which we hope will generate a lot of upfront dollars – part of those dollars will be separated out from the arena project to back-fill the general fund in those first few years,” he said.
City representatives have been briefing City Council members on the details of the term sheet since Tuesday, Merchant said, and Johnson encouraged council members to “poke holes” in the plan to make sure all of their questions are answered.
The City Council will discuss the full term sheet March 6. If the council votes to approve the deal, city staff will pursue a potential parking lessee, and the arena project will move into the design stage – the first step toward breaking ground on the new facility.
To read the term sheet for the Sacramento Entertainment and Sports Complex, click here.
Melissa Corker is a staff reporter for The Sacramento Press. Followher on Twitter @MelissaCorker.