The Sacramento City Council voted 7-2 to approve ongoing discussions and negotiations to keep the Kings in the capital city. That wasn’t a surprise. What was a surprise was that another group created by minority partner John Kehriotis emerged that could put together a $750 million bid to buy the team and build an arena with City funding. For now, that bid has been relegated to Plan B, as the principals are working towards a public-private partnership on a new arena deal downtown.
For now, Kehriotis has demurred on giving details, allowing some in the media to push the presumed “whale” group to the top of the heap. There are so many variables and uncertainties in the plain that it’s impossible to tell who go-to group will be. If the “whale” group finds the project too expensive, the Kehriotis group will presumably be ready to go.
The vote authorized $150,000 to start consulting work and negotiations with the ownership group(s). The City is guided by certain negotiating principles, which were enumerated in the motion:
- Protect the Taxpayer No new or increased taxes will be considered for the financing of the ESC. Those who use or directly benefit from the ESC may be asked to contribute through ticket surcharges or benefit assessments.
- Retire the Existing City Loan to the Kings The existing City lease-revenue bond financing (loan) to the Kings must be retired. Any refinancing of the loan must be fully secured and collateralized to minimize the risk to the City.
- New Entertainment and Sports Center Must be Located Downtown To achieve the greatest community benefit, the new ESC must be located downtown and provide for further economic development opportunity. The City and team owners will agree on a location that best meets the interests and goals of the City and stakeholders.
- Long-Term Commitment to Keep the Kings in Sacramento In exchange for the City’s financial contributions there must be a secure, long-term commitment to keep the Kings in Sacramento.
- City Will Consider Investing Net Value of its Parking, Land and Other Assets Consistent with the 2012 financing plan and terms the City will consider investing the net value of its parking, land and other assets. Best practices for the monetization of the parking assets will be utilized to provide the greatest value to the City, its businesses and customers, with the shortest possible term while providing the greatest support for the development of the ESC. Any losses to the General Fund that result from parking monetization must be backfilled by new and reliable revenues. In consideration of the City’s financial contribution, the City will own the new ESC.
- Public-Private Partnership The project must be a true public-private partnership where both the City and the team share in the investment and returns of a new entertainment and sports center.
- Natomas Arena Site Economic Reuse The economic reuse of the existing arena site in Natomas is a critical element in defining success.
That’s a lot of moving parts. To be fair, no one expects all of this stuff to be figured out right away. The NBA will want that arena piece well scoped, since that is the main sticking point for both Sacramento and Seattle going forward. The Kehriotis bid throws a wrench in there with its right-of-first-refusal and the interest in going with a fully private arena. In last night’s discussion there was a good amount of noise regarding Kehriotis. A fully private arena may look more politically expedient than a public-private arena, even if it means building at the current Natomas/Sleep Train Arena site instead of a downtown. Even the Natomas option is problematic because of a ban on construction in the area. Mayor Kevin Johnson has been working overtime to rally the resources in preparation for the Board of Governors meeting in April. Picking a horse (ownership group) was probably not on Johnson’s list of tasks. If both bids are legitimate, it’s a good problem to have. If not, the NBA could see Seattle as the easiest path. It promises to be a crazy next six weeks in Sacramento.