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Dear District 6 Constituents and City of Sacramento Residents,
At the City Council meeting last night, I voted against a financial plan to build a new downtown sports area. I would like to share why.
Over the past few months, I have heard from hundreds of constituents and city residents who have called and emailed my office. I’ve talked with advocacy groups, business owners, Kings’ fans and interested parties in the arena deal. In addition, I’ve done my homework, researched other city arena deals and read through over 1,700 constituent surveys on this issue. I came to this conclusion carefully and thoughtfully.
In addition, I want folks to know that I am not an automatic "no vote" on public funding for an arena. My stance is that if we put public money into this project, it must be a good deal for the city and its residents. The deal put before us Tuesday night had too many risks and assumptions and not enough upside. It just isn’t a good enough deal for the City of Sacramento.
Here are the problems I see…
Problem 1: Pressing City Priorities
A Parking Authority idea is very intriguing and should be pursued regardless of whether the Arena deal goes forward to help produce millions in new monies annually for our City. If nothing else, this process helped us get here. However, it's really a policy choice where the new parking revenues should be allocated.
For me, it’s unconscionable to put all new parking monies toward the Arena with so many other pressing City needs. In my Council District 6, all three swimming pools are shut down. My community centers and libraries are open only a few days a week and staffed at skeleton levels.
All youth sports programs were eliminated last year citywide. Park maintenance and code enforcement staffs can’t provide adequate service levels, and more than 200 police and fire fighter jobs have disappeared in recent years.
And in less than 3 months, there will be more layoffs as we make another $25 million in budget cuts.
While I believe we must invest in the City’s future, we must also address the City’s current budget needs – unfortunately, the plan presented Tuesday night does NOT do that.
Problem 2: The Kings Loan
Under this plan, the current Kings $67 million loan will not be paid off – but refinanced. This loan would linger on the City’s books for another 30-plus years impacting the City’s credit-score and debt-ratio.
In addition, I am very leery about the absence of any real collateral on this refinanced loan. The existing loan the City has with the Kings has the arena and adjacent land as collateral. This refinanced 30-year loan would have neither. What bank would accept that deal?
This loan should be secured against real property of equal value, or with a significant financial interest, or with an NBA guarantee to protect the City against a default.
Problem No. 3: The $9 million General Fund backfill has too many assumptions, while the deal produces minimal upside
The plan backfills the City’s General Fund for core city services and magically adds up to $9 million. That dollar amount is not guaranteed and is based on assumptions. For example, I’m concerned about the $4 million annual projected income from ticket surcharges. What happens if we have another lockout or strike, or poor attendance year-after-year due to a badly performing team? Our neighbors in Stockton and Oakland lost big because of overly optimistic income projections for arena and stadium deals. Instead, why not insist that the Kings, AEG or the NBA guarantee the $4 million annual backfill?
More importantly, why are we just breaking even financially? Does anyone think AEG and the Kings only hope to break even? If it’s going to make money for them, then it should make money for the City and provide revenue for our priorities—especially since we are the ones putting up 65% of the investment.
These numbers are very revealing to me – AEG is investing $59 million and netting $5.7 million annually, while the City of Sacramento is investing $256 million and netting $1 million annually.
Problem No. 4: We’re going at it alone
We started with a regional effort last year, but today we stand alone. Sacramento would be going into this deal with very little help from other government entities in the region. Other small-market NBA cities have partnered with neighboring local governments to help make the deal work. West Sacramento and Yolo County have not been engaged as partners. They are fewer than 1,000 feet from the proposed arena site and have many businesses and retailers who would benefit from the arena’s presence. Officials in the City of Rancho Cordova have shown a willingness to listen to a partnership proposal, but they have not been engaged either. This arena will be a regional amenity; we cannot and should not be standing alone.
Problem No. 5: Our City contribution has doubled in 5 months
Five months ago, City staff and the Mayor’s “Think-Big” Committee stated that our City’s cost contribution for the arena would be 33%. That was a fair deal.
• A few months later, the City’s cost contribution increased to 50%.
• Last night, the City’s cost contribution increased further to 65%.
• That is an increase of nearly 100% since September.
As I said earlier, I am not an automatic “no vote” on public funding for an arena, but it has to be a better deal for our City and its residents. We deserve a bigger bang for our buck.