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Tuesday, June 18, 2013
City Council receives, reviews arena reports
by Melissa Corker, published on September 13, 2011 at 10:58 PM
Storyline: Politics
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City staff and Think Big Sacramento representatives presented the City Council with technical and financial option reports on the proposed entertainment and sports complex Tuesday, and asked council to direct them where to go next.
“We have a lot of work to do in the next six months,” said City Manager John Shirey, “and we need both internal and external resources to do it.”
To keep things moving forward, though, Shirey told council members that he plans to deliver three things: “a game plan with a timeline, a list of the consultant work we need and a list of how we’ll pay for those things.”
Although the technical report presented Tuesday included more detail than previous reports, Shirey said it will take some time to “dig deeper and determine if the project is really feasible.”
Shirey said he and his staff will need “special help” from outside resources to do that digging. That means turning to consultants, investment bankers and outside council for the “due diligence” necessary to thoroughly review the entertainment sports complex proposal, Shirey said.
One of the aspects of the ESC project discussed Tuesday was the potential for re-use of the current Power Balance Pavillion site in Natomas.
“Natomas re-use possibilities present tremendous opportunity,” said Rachel Hazlewood, Economic Development Department senior project manager. “We need to develop a plan of action to bring (the space) to its highest and best use.”
Hazlewood said that, because the building moratorium in Natomas will be lifted in 2013, the large site may allow for multiple users and will require rezoning – aspects of the “total arena plan” that need to be considered.
“We will need to identify potential business prospects and get the site shovel-ready for development,” Hazlewood said, “before we can re-use the Natomas site for something other than the arena that is already there.”
Arena finance expert Dan Barrett outlined the recently released Nexus report of finance “menu” options.
Barrett told council members that a public-private partnership is essential to the success of the project.
“When you structure a deal like this, it has to work for all parties,” Barrett said. “It’s clear that the public cannot fund this facility on its own, and the team cannot fund it on its own.”
Barrett said that parking income potential discussed in the Nexus report is “not a standalone financing solution,” and the Kings’ loan has to be part of the solution.
“The $387 million cost (in the initial feasibility report) may change,” said John Dangberg, assistant city manager.
Dangberg noted that infrastructure costs are not included in the estimated $387 million cost of the facility.
Dangberg urged council members to direct staff to look at financial, legal and practical aspects of the project.
“As we come up with a definitive financing plan,” Dangberg said, “we want to include enough resources to cover the real cost of the project as it becomes clearer.”
Barrett said it will be important for council members to explore parking opportunities “aggressively,” and to “critically evaluate” other public funding options.
“We’ll work together with you and staff to prepare a definitive financing plan by the end of December,” Barrett said.
Although Mayor Kevin Johnson acknowledged that the reports presented to council were preliminary reports and not a “final proposal” for a new complex, he said they were a good place to start.
“We did our best to protect taxpayers with this plan,” Johnson said. “This is about jobs – 4,100 jobs – for our region.”
Johnson said the project is in “a very critical stage,” and he hopes City Council and the Think Big committee can finalize as much as possible by January so the city can be in the best position possible by the March deadline.
Councilman Rob Fong said he supports the arena project and that there needs to be “a closer look” taken at all of the financing options suggested in the Nexus report.
“It’s really important that we thoroughly vet what we are hearing,” Fong said. “We have to make sure the general fund is held harmless, and figure out if there’s a way for us to go forward with the project”
For Think Big, the challenge remains to keep going “until we reach a point where we know for sure that we can do this – or that we can’t,” Fong said.
The City Council asked staff to take the reports back for more review. Council will discuss arena options further at its next meeting, on Sept. 20.
Melissa Corker is a Staff Reporter for The Sacramento Press. Follow her on Twitter @MelissaCorker.
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Then who's on the hook for the costs? Oh, that's right, the citizens of Sacramento.
I like calling it the ESC. LIke the ESC button on my keyboard.
More and more this group should be nicknamed "Stinks Big"
"And Chris Lehane, executive director of the committee, said its members concluded that a prime candidate for reallocation is money designated for the theater renovation."
“There appears to be a belief that a new facility is needed, and not merely a remodel,” he told the Business Journal last week."
Of course that news to everyone who has been involved with the project up to this point.
City Council has the authority to require a public vote on the Arena financing. This is an election year. Candidates and incumbents not supporting a binding public vote on all the financing being proposed to be with bonds, long term leases and sales of public property and the pay back of the existing ARCO loan....polish up your resumes....we don't need you as a council person and we definitely don't need you as a mayor.
Why wouldn't a developer just buy the arena directly? To me, that makes it look like they'll own the profitable part, as long as we're willing to own the unprofitable part. Just buy the arena yourself and keep those profits.
The City says that it costs $3M/year to run the City's parking, and they derive $24M/year from it. That is one awesome rate of return. I bet the arena won't produce returns like that.
Which, um, is precisely the point -- they want us to own the part that won't make a profit in exchange for them getting their hands on an asset that is very profitable.
It also seemed to me that a point was raised by several Council members -- California state law prohibits municipalities from selling off their parking meters. I missed most of that conversation. Can anyone expand on that? Did I misunderstand what they were saying?
No.
Look in the Threshold report, where they talk about it. They say there will be 3,720 jobs created during construction, with 1,302 of those within the City of Sacramento (page 19 of the report). That's for the construction phase.
During operations, I can't see why it would employ many more than the current arena, but even at that, those are just jobs that have been relocated 6 miles. They won't be new jobs.
I'm just saying, you cannot count jobs that will disappear once construction is complete. Those are temporary jobs, not permanent jobs.
The Threshold Report is the last "smaller" report included at the end of the 100 day report.
By the way, at least half of the work at an arena is non-professional. If we're spending $387M -- obviously likely to go higher -- do we want to create popcorn vendor jobs? Isn't there a better way?
This is the same risk and waste of public dollars, just on a much larger scale.
The real lost opportunity is that Sacramento like other cities fight tooth and nail for companies to move facilities here that do bring lots of jobs. Those decisions are based on all sorts of factors, but the entertainment prospects and stature of the city are actually big components.
The way I see it this is a risk, just one we should thoroughly evaluate. It does make a difference if we have a center downtown that can facilitate pro sports, conventions and large concerts. The funny thing is that poll after poll shows that the people of Sacramento feel this way too.
The question then is one of limiting taxpayer liability and trading assets that don't have as much impact as a downtown ESC in partnership with others willing to commit long-term leases. Together the value to the city might be greater than what the city has to give up.
We were pretty good at filling up houses with tract home for a time, but obviously that is a violatile portion of the private sector to base an economy upon. Sacramento's ability to draw in high tech, biotech, real green technology jobs (ie not federally funded vinyl window replacements), etc is simply abysmal.
Sacramento is a great town and I love living here, despite the fact that we have a provincial union guided city government whose competitive instincts have been atrophied by an overwhelming state government presence.
A regional ESC actually is important to the cities in the region who actually work to actively draw in new private businesses. But until we figure out a way for the neighbors to provide a lot more funding, I think the ESC is a luxury, a distraction, and a financial risk that should be pretty low on the priority scale.
This is an organization The Sacramento Press is a part of and they, like many other Economic Development Commissions (EDC) around the country, do fight tooth and nail for business.
That is not to say that the government of the city does the same, but then again that is not the mandate of city government. Still as a city - not just as a city government - many of us do work toward these ends, particularly our EDC.
Now SACTO represents the entire region, but then again, the arena is a regional question as well. The health of our economies are intertwined across our region.
I understand why you would feel the ESC would be low on the priority, but there is urgency to addressing this issues - or at least exploring it - given that it takes so much effort to bring major pro sports team to a city and we already have one.
Ben, Hey SACTO gets it, as do the city managers and councils of many of our neighboring cities that are truly hungry for economic growth. (BTW, SacPress is missing from the online membership list - you better send in your membership renewal :)).
But our lovable Sac City council really does not have the DNA to competitively chase after economic opportunities, and instead goes after $0.5B home runs instead. That how you end up with situations where the top 10 employers in the does not include a single private, for-profit employer (although year after year the city includes Folsom based Intel as their own See page 168 at the link below)
http://www.cityofsacramento.org/finance/accounting/documents/ElectronicFY10CAFR.pdf
Yes, I do actually agree that the city should support Think Big, and analyze, poke, prod and explore, kick the tires etc etc. It would be criminal not to, if just for the "closed for business" message an act like that would send.
Yes regional economic growth does lift all boats. But as wburg points out, with the current plan the city will be on the hook for $11M a year, and potentially quite a bit more. I believe the city portion of sales tax revenue is a percent or two, meaning Sacramento revenue boat needs to be lifted by a bilion (or billions) just to cover the shortfall. A billion dollars per year is a helluva lot of over-priced Dive Bar drinks and giant purple foam Kings fingers you know.
I also assume that the inflated "job creation" numbers just disclosed are a forewarning of a gathering BS storm around the ESC funding. Our city council never shown the ability to do basic math anyway. And the judgement of the more aspirant members is clouded by the fact that a no vote that would kill a bunch of union arena construction jobs right along with killing their union campaign funding necessary to reach a higher office.
http://www.macermedia.com for some more information.
I just disregard any talk like that unless the government is talking about hiring themselves and expanding the public sector, which is another topic altogether.
So their approach for a downtown, heart-of-the-city gambling casino is to require foreign passports for entry. No locals allowed. www.marinabaysands.com/
Sacramento could do the same thing. Build a big casino in the city, but require ID's to enter and not allow residents with a Sacramento city address.
For me that sounds pretty authoritarian, but it does address Isaac's concerns.
http://www.marinabaysands.com/Singapore-Casino/Casino-Entry-Levy/FAQs/
Check out this link: http://uss-mass.org/quickfacts.html
It lists many reasons why casinos are a drain on local resources. The reasons are footnoted with links to studies supporting their arguments.
Hey, I like to gamble, I drive to Reno every couple of years, and I've been to Vegas three times in 6 years, but do I want a casino in Downtown Sacramento? No. Do I want to live in Reno or Vegas? No.
More importantly it gives businesses good reason to move their facilities close to a research campus. The money invested in research by universities and the federal government is a big draw to high tech, bio tech and green tech fields. What businesses we do get to come from oversees are mostly doing so to be near those resources or to be able to lobby at the state capitol.
I think a Indian casino is a great idea.
Do you know anything about this report on Sacramento Business Journal?
http://www.bizjournals.com/sacramento/print-edition/2011/09/16/arena-funding-plan-threatens-theater.html
Did you see some of the excerpts I listed above from today's SBJ print version?
Here's a few more
"The money in question comes from hotel tax revenue — about $2.5 million the convention center has been spending annually to retire bonds used to expand the center. Those payments end in 2012, and the center’s managers want to use the money thereafter to pay for a new bond to finance renovation of the theater."
"In a typical year, the 2,450-seat theater is busy about 240 nights, said Judy Goldbar, the convention center manager. In addition to the $2.5 million annually in room taxes, part of the theater renovation money comes from a $3 fee added to all tickets for theater events, which raises about $800,000 annually."
"Those events create a critical revenue stream for nearby restaurants, as well.
“We live and die with the events at the theater, Memorial Auditorium and the convention center,” said Jason Ortega, managing partner with P.F. Chang’s at 1530 J St.
A cluster of restaurants surrounds the convention center and the theater, including The Broiler, Spataro, Esquire Grill, Mikuni Sushi, Simon’s and at least a dozen other restaurants."
There is additionally a 2007 ADA lawsuit that the Federal Court held the city harmless in 2009 due to planned renovations....which will include ADA upgrades.
It seems to indicate that Think Big will try to cannibalize any and all funding sources. I'm betting Crocker is glad they got their renovations done. So do you really generate new spending when you inhibit an existing venue's ability to maintain and upgrade its facility?
More reason to push for a binding public vote of all the city voters, just not their reps, in this election cycle....on this hodgepodge of arena financing schemes and the paying off of the original bonds for the arena on Arena Blvd...former known as ARCO