Late last night, the long-awaited nonbinding term sheet and working report for the Sacramento ESC (Kings Arena) were released to the public. The term sheet itself is 18 pages long, so thankfully the City included a two-page summary. From reading the entire thing, I took away a few items.
- There’s still a lot to figure out. While the term sheet clearly spells out the initial contributions to be made by the Kings ($73.25 million) and AEG ($58.75 million), there’s no sense of what rent either party will pay to the City. That detail doesn’t have to be revealed until April 15.
- A new item, which has surfaced in the last few weeks, is the requirement of a 1,000-space parking garage near or adjacent to the arena. It appears that AEG requested this in order to satisfy potential premium seat/suite buyers. The garage will cost $25 million to build and will be funded by a combination of City downtown improvement funding (MOPA) and money from developer ICON-Taylor. The catch is that AEG is committing to leasing all of the spaces for the duration of the arena lease.
- Predevelopment costs will cost $13 million, with half of it paid by the City and 25% shares to the Kings and AEG.
- AEG and the Kings will split possessory interest (property) taxes, though it appears that those funds will be used to service debt (PILOT).
- The NBA All Star Game will be held at the arena within three years of opening.
- The team name must be “Sacramento ____”.
- The 5% ticket fee on Kings events would be part of the Kings’ ongoing contribution, a corresponding fee on non-Kings events would be part of AEG’s contribution.
- The Kings would get “net parking revenues” for games, the City would get that revenue from non-game events.
- An additional $1 facility fee would go towards a capital improvements fund.
- Power Balance Pavilion would cease to operate once the new arena started operating.
- Opening date target is September 2015.
- The EIR is expected to be completed in 12-14 months, though that partly depends on whether the arena has its own project-level EIR or is folded into the Railyards EIR as a supplemental piece.
For me, the most surprising news is the greater planning stuff. As part of previous plans for the Railyards, the tracks were to be realigned away from the train station, so that they form a sort of triangle framed by the new tracks to the north, H Street to the south, and 7th Street to the east. The arena is meant to fit inside that triangle. As you can see from the aerial shot below, some of the infrastructure has already been built, such as the platforms and new bridges for 5th and 6th streets that will extend over the tracks.
The realignment means that if you want to access the tracks from the station, you’ll have to walk under the width of the arena to do so, some 800-900 feet. It’s strange and perhaps a bit taxing, but kind of cool when you think about it. Light rail will remain adjacent to the old station.
Now that we know the upfront contributions and what the City expects/hopes to get from selling its parking revenue, we know what’s really at stake: $255 million. That’s the amount that the City is pledged to provide if the project moves forward. If the City can get $230 million upfront ir projects is the present value of parking revenue, then everything lines up. Just in case it doesn’t, the City is considering floating normal revenue bonds for the project. Over 30 years at 7%, that comes to $18 million per year. The City, with help from Sacramento County, is moving money around to protect against the project hitting the General Fund. Parking revenue provides around $9 million per year to the General Fund. To its credit, the City has listed the various project revenue sources that will be used to offset that $9 million. That includes the aforementioned 5% ticket tax revenue, the City’s parking revenue from non-King events, and various other sources. Where the math gets fuzzy is that if the Kings are getting the parking proceeds while they’re playing, that’s a huge chunk that isn’t going to the City ($2.64 million). Plus there’s the other $9 million that will be needed to service the debt. Is all of that to be provided by the Kings and AEG?
I have some confidence that in the coming months, the stakeholders will be able to whittle away at the doubts and come up with solid, if not airtight, plan. The City is expected to vote on the term sheet next Tuesday, which gives them little time to review it. Fortunately, no serious commitment needs to be made for at least another 10 weeks, while the lease details are worked out. Unfortunately, that’s also how the 49ers plan was put together. To be continued…