Sacramento, Kings, & NBA announce new arena deal framework

On Saturday I took a drive up to Sacramento. I went to Raley Field and took in part of Sacramento State Hornets baseball game. While I was up in the capitol I dropped by the train station, which is immediately south of the Railyards, the site of the proposed arena entertainment and sports complex. 240 acres of dirt and old buildings will make way for an arena, a new intermodal transit facility to go with the historic rail depot, and future ancillary and related development.

Looking east across Tower Bridge towards downtown Sacramento. The Railyards is off-picture to the left.

So I guess I was fortunate to get a glimpse of things before today’s announcement by the City of Sacramento, NBA, and the Kings about a Railyards arena deal (City press release). The $387 million arena plan has been in the works for the last year, with a complete term sheet to be put up before the City Council by March 6. Details have been coming out in the last week as negotiations between the City, team, league, future arena operator AEG, and Sacramento County have caused the numbers to shift considerably as all parties rushed towards the league’s deadline (originally March 1).

When I wrote about the project two weeks ago, I opined that as usual, the devil would be in those details. Now it appears that the deal is on fairly solid footing because of the Maloofs and AEG providing more money to bridge known funding gaps. Those raised contributions, when taken in conjunction with the selling off of parking rights throughout downtown, should provide enough money to get the plan off the ground. The tenets of the deal are these:

  • $190-200 million from selling future parking revenues to private operators. To make this work, the City will have to guarantee some $9-10 million per year in revenue, which means the City may have to make up a shortfall if revenues don’t come in as expected. Sacramento County has apparently pledged revenue from three lots it owns for the effort. Existing debt the Maloofs owe to the City would be refinanced. The “cash” the Maloofs are pledging may actually come some kind of loan, though the loan wouldn’t come from the league.
  • $75 million upfront from the Maloofs, plus $75 million from future rent payments and perhaps a revenue sharing deal. Part of the upfront contribution would be $25 million in land in Natomas near ARCO/Power Balance.
  • An unknown amount from AEG. Initially this was speculated to be $50 million, but the fact that AEG will probably split gate and concession money with the Kings makes this more difficult to assess. There was also talk that AEG’s contribution would actually be part of the Kings “cash” share, but I’ve seen nothing to confirm this. AEG’s updated contribution is expected to be $60 million.
  • A 3-5% ticket surcharge being assessed by the City will not be used to pay off the arena. Instead it will go straight to the City’s general fund in order to offset the lost parking revenue. (Back of the napkin math has this at $3-5 million in revenue annually.)
  • ICON/Taylor, the developer planning the arena, is pledging to handle cost overruns.

From what I know of the area, I have to believe that for the project to get through the CEQA process at least one additional exit/interchange on I-5 between J Street and Richards Blvd. will be necessary. 7th St to the east of the Railyards is merely two lanes wide, so it’ll probably have to be widened to handle traffic not just for the arena but also for the other area development. Remember the Cal Expo plan floated in 2010? There were tons of traffic concerns associated with it, with no clear way to deal with it. Fortunately the Railyards arena will be very close to light rail and Amtrak service.

Now that the plan has been hammered out, it’s all process from here on out. The project EIR started in October, which means a draft should come out of it in the next six months. The tricky part of sequencing everything is that if the parties are all still aiming for opening in May 2015, they’ll have to certify the EIR in only 15 months in order to start building in January 2013. If the project goes to a public vote, there’s little chance that vote can happen before the EIR certification. It would seem more prudent to aim for a October 2015 opening to coincide with the start of the NBA season.

Will this get the job done? It’s a lot better looking plan than any I’ve seen for the Kings in the past decade. That’s a major improvement over the sense of impending doom that shadowed the team last April. It’s clear that this is the final shot for Sacramento to get something done for the Kings, and it’s a decent shot at this early juncture. The losers at this point are Seattle and Anaheim, both of whom were looking to poach the team. If there’s a winner, it’s David Stern, who has somehow come off looking magnanimous while not loaning or otherwise spending any league money to get the ball rolling. A year can make a lot of difference, though Kings fans should be cautiously optimistic. The Railyards arena plan is fragile at best, and while Mayor Kevin Johnson characterized today’s news as hitting the front end of a one-and-one (free throws), plenty of players and cities have bricked that second free throw.

22 thoughts on “Sacramento, Kings, & NBA announce new arena deal framework

  1. This is good for Kings fans. I wish there was a bit more urgency like this in Selig’s office. I hope Sacramento and the Maloofs can make this happen without the city having to commit a lot of public money.

  2. you should have taken some pictures of the arena site when you were up there. can you also do the article about the stadium site tour you said you did in a previous article where you said you would get back to addressing that?

  3. guessing this means that the bay area will never get that second nba franchise it desperately needs because the w’s are a complete joke of a franchise and has been for almost three decades now. since their championship year of 74/75 they’ve only had maybe a dozen .500+ seasons. 12 out of 37 years this franchise has been respectable. if the clippers weren’t around, the w’s orgs would and really still should be one of the laughing stock franchises in the nba.

    good job by mayor kj and fans up in sactown.

  4. @ACV – If I could’ve gotten onto the construction site without trespassing, I would’ve. Though I only have a vague idea of where the arena will be placed.

    The stadium visit post will go up either tomorrow or Wednesday.

  5. Alot of haters on here from past posts… Very excited about this!!!

  6. This should be interesting. I hope they make it happen but wouldn’t be shocked if it didn’t. Hell, after watching all this unfold over the past, what like 10 years, I won’t be shocked by any outcome.

  7. I like the picture. I see that view when I go to River Cats night games, when I like to park next to the Crocker Art Museum (parking is free after 6pm) across the river, then walk across the Tower Bridge to Raley Field.
    Now with the Kings arena deal, it’s all a matter of execution in putting all the details together. And the city council vote should pass – the preliminary passed 5-4 sans details, and now the Maloofs and AEG are actually contributing more than expected. I’d expect at least a 6-3 vote, if not better.

  8. I have a few questions:

    1. Who will loan the Maloofs 75M in this day and age when they owe the NBA and the City far more than that? I doubt their current Arena is even worth 75M with the land around it…..They would still owe the city and NBA going forward. Even with a consolidated loan what does that accomplish? More debt for the Maloofs that they barely can handle now? Now if all the revenue from the Arena went to the them like it does now that is different but hardly case with the new spot where it is divided up between them, AEG, and the City.

    2. Why would the ICON/David Taylor group agree to cover cost overruns? This makes zero sense to me as what is in it for them? Is their a kick-back of some type for other land they want to develop or something of the nature?

    3. How is Sacramento going to re-coup the parking $? Especially with the Maloofs, AEG, and ICON all wanting a piece of the revenues. ML’s math is correct of about 3M-5M from the ticket surcharge, that only covers half of the 9M-10M they are going to lose to the General Fund.

    4. They have a deal in place before the EIR is completed? That is like putting the egg before the chicken and that alone could shoot the deal down if infrastructure improvements are needed as ML pointed out above….If needed, who pays for it?

    5. I do not believe the NBA will put a dime in itself as why would the NBA help the Maloofs when they owe them $$ in the first place?

    6. Some grass-roots group is going to force this to a ballot. Like Santa Clara the citizens will have to vote on the final term sheet. Another “egg before the chicken” piece that I do not understand. Taking 9M-10M from the General Fund for an Arena has to be voted on unless a private party is guaranteeing those lost revenues….Not the case here.

    In conclusion, I think the NBA, Maloofs, and Sacramento have gotten ahead of themselves. All they have done is bought another year in the process which of course I agree is a very good thing.

    I believe there are so many moving parts still this is not even past the 50 yard line. We shall see in the upcoming months how these questions above are answered.

  9. Yup. It’s now a matter of execution

  10. Your first point assumes the Maloofs are broke, which we’ve all assumed. But that assumption is not necessarily accurate.

  11. @ sid

    Most if not all of those questions have already been answered. Doing a little research doesn’t hurt.. Guess no matter what there will always be people who hate.

  12. @Joel
    I think Sid is looking at from a perspective of an NBA team going to HP Pavillion (which he apparently wants), which probably won’t/can’t happen if the Kings stay in Sacramento, but might be possible if they move. So his skepticism on the Kings deal should be taken with a grain of salt. Apart from that, I tend to agree with his posts regarding Cisco Field.

  13. Joel… What are the answers to the questions? Got a link that explains them?

  14. Go to u can look around and find them… And question number 2 is just plain dumb. You guys from San Jose look down on sac. But right now we have one team. And San Jo has one team. Doesn’t seem better to me.. And only one has a team in a top 3 sport. Wonder which city that is.

    • @all – Relax everybody. We’ll get the financial terms via the term sheet on Thursday. If it’s clear and concise it’ll be praised. If it’s vague it’ll be suspect. The EIR should be available by September or October. Those two pieces should be able to answer most questions. That’s the process. No need to get worked up about it.

  15. Joel, there are not answers to the questions at sacbee or anywhere elae (weak sauce telling someone to do research but ot being able to back up you assertion in any meaningful way). Maybe, getting your stuff straight before firing of emotional responses to legit questions is something you should consider.
    As ML points out above, the details for much of the “deal” are not public.
    I appreciate your passion for the River City. It’s a great place, but from a sports scene perspective it doesn’t come close to the Bay Area. People in San Jose have access to the NBA, NHL, 2 NFL teams and 2 MLB teams. Sure, only one team actually plays in San Jose but if there were teams in big league sports in Elk Grove, Folsom and Sacramento I am pretty sure you’d count that as three franchises.
    Personally, I hope this is all wrapped up and Kings stay put. What we know as of now is that it is a more real possibility at this point. It is not, however, a slam dunk by any stretch.

  16. Pingback: What the Sacramento Kings’ (theoretical) new arena could mean for the Warriors, San Francisco and Oakland » Bay Area Sports Guy

  17. i think in about 10 years the bay could support 2 NBA franchises by putting one of them in HP pavilion. if san jose can finally get the A’s and they draw well i really think SJ can get a basketball team. HP is a great arena

  18. OT, but ML, do you know what came of that Coliseum City meeting today?

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