Category Archives: Basketball

07.13.13
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Warriors backing away from 2017 SF arena opening date

On June 20 the California Assembly easily passed AB 1273, a bill from San Francisco’s Phil Ting that aimed to speed up the CEQA process by bypassing the Bay Conservation and Development Commission (BCDC). That hope faded on the 25th, when a Senate committee refused to take action on the bill, citing the importance of the BCDC and the State Lands Commission. The bill was withdrawn from committee shortly thereafter.

The Snøhetta/AECOM-designed Warriors arena on San Francisco’s Piers 30/32

The BCDC is the first and largest regulatory body that approves any and all development along the bay. The Warriors and SF pols hoped that by not involving the BCDC they’d be able to hit their target opening date of fall 2017. For now the 2017 date looks shaky, as involvement with the BCDC and contingent agencies could add a 1-2 years (or more) to a normal CEQA process.

Tim Kawakami saw the other shoe drop when he interviewed Warriors co-owner Joe Lacob this week.

LACOB: I do know there’s a possibility, certainly, that (the arena) could be delayed. It’s not a probability at this point. The probability is that we achieve our goal.

Not exactly a rallying cry, rather a more tempered response than Lacob has previously exhibited. Lacob has shown no signs of giving up on the project, as he and Peter Guber most certainly see the revenue advantages it would bring even the arena were delayed 1-2 years. Lacob also said that he’d consider Lot A across McCovey Cove/Mission Creek from AT&T Park, but not Pier 50 next door (which would bring up the BCDC threat all over again). Chances are that the W’s would only build on Lot A if they received exclusive development rights, which have already been given to the Giants with plans drawn up. Not that they couldn’t be changed if the right deal were struck. The Giants are refinancing their remaining debt on AT&T Park to help finance the Lot A project, so you have to think it’s already pretty far along in the process for them.

Interestingly, the apparent defeat of AB 1273 marks the fourth instance of large political effort to fast-track a project that has either backfired or failed to help the effort. A letter from the Pacific Merchant Shipping Association (among others) made note of previous instances:

  • AB 900 in 2011 was legislation for a Portside San Diego Chargers stadium. Eventually the plan fizzled as no one could figure out how to bridge the funding gap.
  • A fast track bill for Farmers Field was passed in 2012, but became moot as Phil Anschutz wavered when confronted with the high price the NFL was going to make him pay to bring one or two teams downtown.
  • Seattle interests also bumped up against their own working Port to ram through a SoDo Sonics arena.

The first two instances of demise were purely financial as no one could make the deal terms pencil out. Bills or other measures may have helped in the end, we’ll never know. The brief list doesn’t include Carole Migden’s failed attempt to block the 49ers’ move to Santa Clara. Seems like the memo to any teams trying these shenanigans should be to simply let the process work itself out, no matter how painful it is.

In the letter link above is also Oakland Mayor Jean Quan’s opposition to the bill, framed in terms of economic impact to Oakland. Quan has also mentioned the BCDC in interviews, but she was smart to not include that argument in the letter. After all, she’s advocating for a ballpark at Howard Terminal, a piece of land that, like Piers 30/32 in SF, is subject to BCDC and SLC review. The BCDC website’s FAQ barely scratches the surface of the regulatory work required to build anything on the Bay (bold are my emphasis):

What types of activity require a permit?

A BCDC permit must be obtained before you do any of the following things within the Commission’s jurisdiction:

Place solid material, build or repair docks, pile-supported or cantilevered structures, dispose of material or moor a vessel for a long period in San Francisco Bay or in certain tributaries that flow into the Bay.

Dredge or extract material from the Bay bottom.

Substantially change the use of any structure or area.

Construct, remodel or repair a structure.

Subdivide property or grade land.

Shouldn’t be a problem for a Howard Terminal ballpark, right? Easy peasy.

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In the Kawakami interview, Lacob also referenced the departure of AECOM from the project. According to Lacob, the AECOM had already finished its task of completing design work for the inside of the arena. That means that design work is largely complete, barring CEQA-mandated changes to the project. That should show you how serious the W’s are about getting this thing built.

05.16.13
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Sacramento 22, Seattle 8. Now Oakland’s turn.

As the MLB owner meetings were held this week in New York, the owners may have spent a lunch or two observing the proceedings in Dallas, where the NBA’s Board of Governors was deciding the fate of the Sacramento Kings and Seattle. If they paid attention, they probably noticed that there was a commissioner in David Stern who encouraged independent thought, debate, and consensus via democratic vote instead of decree (the vote was 22-8, not a bogus “unanimous” decision). By having a transparent, well laid out process for arriving at a decision with the Kings/Sonics, the matter was decided in four months. Compare that to what’s happening to the A’s, who have been in limbo for four years.

As usual, the A’s were not on the agenda at the meetings, with no reports issued or recommendations made. With the A’s continuing to get their annual revenue sharing check and keeping their expenses in check, the A’s are effectively a model franchise for MLB from an operational standpoint. Status quo it is, fans be damned.

I heaped praise on Sacramento Mayor Kevin Johnson on March 1st for his handling of the Kings’ situation. With no support from the Maloofs, KJ put together a big money ownership group, assembled an arena deal with public funding, and rallied the vast majority of other NBA owners to his side. The feat was positively Herculean, and will serve KJ well in his future political or business endeavors, whatever way he wants to go. More importantly, KJ created a blueprint (one based on the efforts to keep the Giants in SF) for any city to keep a team in danger of moving.

Which brings us to Oakland. At present, the City and Alameda County are at loggerheads with the A’s over the future lease, even as baseball is encouraging the City to loosen up on some negotiating points. As the months progress, chances are that the A’s and baseball will be more desperate to get a deal made since there is no other ballpark solution immediately available. It’s a calculated risk that could pay off big for the revenue-short public agencies. On the flip side, MLB won’t take kindly to the A’s being gouged by the Coliseum JPA.

Long term, Oakland is doing some of the things KJ did – for the Raiders, that is. They’re trying to build business support within the community, with the two sides holding events to determine the economic potential in the East Bay. They have a program level EIR started for Coliseum City and have worked with the Raiders and the NFL on stadium concepts. For the A’s, Oakland has trotted out three stadium sites and little else. Community groups such as Save Oakland Sports and the new Oakland Fan Pledge (which has gotten 1,179 pledges worth $2.87 million so far) have tried to fill the gap for fans. If we’re judging by the level of effort, the City wants to keep the Raiders in town a lot more than they want to retain the A’s.

City officials and others will point to the A’s ownership group’s lack of cooperation as a motivating factor. Given the hell that Sacramento fans and pols had to go through, that’s not a good excuse. Oakland should be presenting its best vision for the A’s – whatever it is – and it should be doing all of the necessary background work so that if a decision comes down in favor of Oakland or Wolff/Fisher actually decide to sell the team, the ballpark effort can use some procedural and political momentum to secure a deal and get the park built. (San Jose got an EIR certified without any promises, why not Oakland?) Without a sincere and honest effort, what are the owners supposed to think? What are fans supposed to think? At least one owner, Jerry Reinsdorf, has both MLB and NBA franchises, and there’s no doubt the others at The Lodge were picking his brain to see how the boys in Dallas arrived at their decision. They can point to a commissioner who properly guided the discussion, a mayor who cared enough to fight, and a fanbase that was small but vocal. There’s still a ways to go before Sacramento has a shiny new arena, but they’ve already crawled through the proverbial river of shit. Congrats Cowtown. Don’t go spending all $258 million in one place! (er…)

05.06.13
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Ranadive-Mastrov group to pay dearly to keep Kings in Sacramento

No one to date has ever confused Sacramento for a big market. Thanks to a promise made by potential Kings buyer Vivek Ranadive, Sacramento may be treated like one.

The Sacramento Bee’s Dale Kasler wrote today that Ranadive pledged to take the Kings off the NBA’s revenue sharing plan if he and his group were allowed to buy the franchise. It’s no small amount, thanks to terms negotiated as part of the NBA’s 2012 collective bargaining agreement. According to a 2012 Sports Business Daily article, the revenue sharing receipt for a small market team such as the Kings or Milwaukee Bucks was worth as much as $16 million per year. The scheme is similar to MLB’s plan, except that teams in the NBA share 50% of local revenues (as opposed to baseball’s roughly 40%). A ramp-up period was imposed so that the scheme won’t fully take effect until the 2013-14 season, the same time extremely punitive repeat luxury tax penalties will also start being levied.

The Kings will face their own transition to being net payers, as Ranadive has even agreed to receive reduced revenue sharing for the remaining years at Sleep Train Pavilion. The exact amount isn’t known, but even if it were 50% of $16 million, the Kings would be hard pressed to make up the rest of that revenue solely by selling out the arena for the next two NBA seasons (my estimate of increased revenue: $8.8 million). While Sacramento is a top 20 media market, the Kings don’t get TV revenue from Comcast as a bigger market should. Either Ranadive will have to negotiate seriously lucrative increases (2X at least) or the Kings will be a very revenue-limited team.

Ranadive will have one other constraint that doesn’t hamper poor baseball teams – a salary floor. In the NBA, teams have to spend at least 85% of the salary cap. For the 2012-13 season that translated to more than $49 million. The Maloof-owned Kings spent $54 million on payroll during that period. Revenues should be a good deal higher with a new arena and increased goodwill from the community, but the fact remains that Sacramento simply isn’t a big market. It’s not going to surpass Phoenix or the Twin Cities because the population is simply not big enough, and teams like the Orlando and Cleveland will continue to get the competitive benefit of revenue sharing, plus a ton of upcoming draft picks to help their rebuilding efforts. Even Oklahoma City and Memphis, playoff teams with no need for help, will benefit at the expense of Sacramento because they’re small markets.

The Kings’ roster is made up of players without the talent or leadership ability to deserve max contracts, so for the next few years this shouldn’t be a big deal. If the team can make the right moves to have a competitive team built and timed to coincide with a new arena, all will be well. If not, even the solid ticket-buying support by Kings fans will be tested. Ticket prices are sure to be a good deal higher at the new arena, and with that comes higher expectations for success. Even if the team is successful and has multiple max-deserving players, they could be more quickly stuck in a situation like the Thunder and Grizzlies, who had to give up critical players in order to keep their payroll in line.

Sacramento backers framed their argument to keep the team in the Capitol with the idea that unlike Seattle’s competitive multi-sport market, the Kings are the only game in town. By virtue of last week’s relocation rejection, the owners are taking that to heart. Sacramento asked to be treated like a bigger market, and by golly they will be, whether they like it or not.

05.05.13
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Warriors revise and scale down SF arena with public feedback

Finally! The Warriors released detailed images of their planned arena at San Francisco’s Piers 30/32. In doing so, developers Snøhetta and AECOM made changes to the scope of the arena. Least noticeable is a proposal to reduce the height of the arena from 135 feet to 125 feet. The kayak ramp planned for the south end has also been removed, replaced by the cruise ship terminal fought for by the Port and the ILWU.

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View from NW corner looking at northern façade

To minimize the visual impact of a 12-story tall structure, Snøhetta is breaking up the façade on all four sides in different ways. Along the north side there’s some terraced landscaping along with a two-level peripheral building which will serve as additional retail or arena support space. Streetside (west) has its own retail buildings and an upslope to the arena’s main level. The south side is marked by a long exterior ramp that leads to a balcony on the east that looks into and out of the arena, which is something I hoped for from the beginning. The ramp divides the space in such a clean way that it looks as if God could reach down and pry the arena open along that “seam” with one hand. The bowl’s curtainwall façade will be made of clear glass, mounted in a slightly diagonal fashion.

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Interior of arena with new open peek out to Bay Bridge also provides limited views of action from outside

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A look inside the arena from publicly accessible exterior ramp is reminiscent of AT&T Park’s knothole area along promenade

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View of south façade is perhaps the most monolithic. Exterior ramp helps break up the look.

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Night view from afar exposes arena as a more traditional venue than previously suggested

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View from South Beach towards arena and Bay Bridge gives arena a crystalline look

An overhead view shows the arena as an assymetrical oval

An overhead view shows the arena as an assymetrical oval

The original plan called for 630 parking spaces on site. The revised plan and Matier and Ross note that spaces will be reduced to only 500. There are no plans to build additional parking anywhere else close to the site. While the changes being proposed are meant to satiate some critics of the plan, the most strident opponents are steadfast in their belief that the site is simply not the right place for an arena due to the visual and traffic impacts. These new changes are typical of the CEQA process, which factors in feedback from citizens and interest groups during community meetings. More are likely to come, though no one should expect any major changes from here on out.

05.03.13
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Might as well dream big

Coliseum City strikes me as the City of Oakland’s equivalent of playing a big lottery like Mega Millions or Powerball. The chances are infinitesimal at best, yet they can’t win if they don’t play. So they’re putting in a few million dollars to get some studies done in hopes of a lot of circumstances falling very neatly for them to keep the three current tenants at the Coliseum complex.

Never was this more evident than in the Oakland Planning Commission meeting on Wednesday, when the City gave more details on the plan. It’s expansive, to put it mildly.
  • 68 – 72,000 seat NFL stadium with 1.8-2.2 million square feet of space, covering 12.6 acres
  • 35 – 39,000 seat ballpark with 1.2 million square feet of space, covering 12.3 acres
  • 18 – 20,000 seat arena with 850,000 square feet space, covering 5 acres
  • 14 million square feet of office, R&D, commercial, and retail space
  • 6,370 housing units
  • 15,000 parking spaces at Coliseum site (mostly through garages, existing site has 10,000 spaces)
The word expansive is often trailed closely by the word expensive. At a conservative $150 per square foot, the non-parking buildout alone hits $2.1 billion, closer to $3 billion when including the additional stadium development costs. Either is an astounding figure, and for anyone who actually operates in the commercial real estate development world or has even basic knowledge of the Oakland market, a truly puzzling one. This is redevelopment era thinking in a post-redevelopment world.
Coliseum City Specific Plan

Coliseum City Specific Plan

The facilities described in the project summary would be among the largest and most expensive in the nation respectively. The football stadium would rival Cowboys Stadium in scope, and while there’s no mention of a dome, there’s no way to get the kind of flexibility the City is aiming for without a dome. Cowboys Stadium was built with a $300 million loan from the City of Arlington, yet City Administrator Fred Blackwell “defiantly” stated that the era of publicly financed stadia was over. All Mayor Jean Quan talks about so far is EB-5 funding or grants to provide infrastructure. Infrastructure will probably end up being 10% of the cost of the project in the end. From the looks of things that will include:
  • A new transit hub, including a widened, more pedestrian-friendly bridge from the BART station to the stadium complex
  • Two additional bridges that span I-880 to the arena and greater development west of the freeway
  • An elevated, landscaped public space that connects everything
  • A revitalized Damon Slough
  • A new water inlet leading from San Leandro Bay to the arena
  • Many new garages
Just this list of items is going to run into the hundreds of millions of dollars. It’s a lot of new concrete construction – particularly the bridges, plus land acquisitions, and reshaping of waterfront areas. And let’s also consider the whopping 6,310 housing units. That’s twice as big as the finally reborn Brooklyn Basin project and nearly two-thirds of the way to Jerry Brown’s famed 10k plan, which was largely done under redevelopment. And note that in the map there’s a Ballpark District, which contains housing. Any chance of that getting built if the A’s aren’t there? Not likely.
Furthermore, how on earth is any of this going to be paid for? Something has to drive private development to gamble its own money on the other 90%, and it’s not clear what that is. East Bay Citizen noted that a meeting of East Bay business luminaries will be held to assess corporate capabilities in the region for the Raiders stadium. That’s a start. The stadium will be at least $1 billion to construct. Understand, however, that the East Bay alone isn’t going to cut it. Anyone without blinders on knows that the East Bay’s corporate strength is not a strong suit. Similar to what Kevin Johnson did in Sacramento, East Bay interests need to attract a lot of money from within the Greater Bay Area and outside it to convince anyone that the stadium is feasible. It’s going to be even tougher because the stadium will be twice as expensive as the planned arena.
Some on the Planning Commission rightly asked about how anything would be paid for, a question that went without a real response. Oakland officials can keep talking hope and pie-in-the-sky concepts as much as they want. They can only duck behind that for so long. Eventually they’ll need to reveal the price tag. When they do, they’ll have no place to hide.
05.01.13
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Falcons stadium concepts blow everything else away

And it’s not even close. 360 Architecture released two visions for the stadium that will eventually replace the still-young Georgia Dome. As Jason Kirk wrote in SB Nation, the whole thing is insane. Two concepts are being considered. The first is a fairly common stadium design called the Solarium. The catch is that instead of have the roof move on tracks to open a small sunroof, the roof and exterior walls are on hinges (with supporting tracks on the ends) that pull back to open a much larger area to the elements. The stadium also has a trick seating bowl where some of the corner sections collapse, allowing the end zones to be pulled in for a “tighter” basketball bowl.

The second concept, named Pantheon, is much bolder in terms of design, with numerous triangles that, when put together, resemble a very ominous spaceship. Key to the mindblowing nature of what 360’s done is that the roof opens like an iris. It’s beautiful to watch and at the same time very scary. Who’s coming in through the open iris, God or our new alien overlords (who I, for one, welcome)?

Either roof design presents some new practical challenges. Can the hinged roof reliably provide a weatherproof seal? That might be tough. And the iris design is completely new, novel, and unproven. It’s composed of eight separate triangular roof elements that overlap and appear to have their own motors and tracks. That’s an engineering challenge to put it lightly. 360 explains that this roof has smaller, lighter elements that move shorter distances, which should in theory make it cheaper to build and operate. Who knows, maybe it’ll work well? Then again, maybe it’ll work like the The Big Owe or the initially problem-plagued system at Miller Park.

Other innovations are being considered, such as movable walls that can allow suites to be resized on demand, and a club concept called “The 100 Yard Bar” with a display (and bar) that runs the full length of the field. (Check out the Georgia World Congress Center’s site devoted to stadium development for presentations by the GWCC and 360.)

No, this doesn’t change my mind that the Georgia Dome doesn’t need to be replaced. It’s still a perfectly good football and basketball venue. Of course, if either the Solarium or Pantheon get built, I’ll definitely hop on a Delta flight to Atlanta to bathe in the new ambience.

04.29.13
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NBA relocation committee votes against Kings move

Just in: the NBA’s relocation committee voted unanimously to reject a relocation of the Sacramento Kings to Seattle. This preliminary vote is meant to be a recommendation to the greater Board of Governors. Given that it was a 12-0 vote, the decision effectively kills any chance of the sale and relocation being approved. It’s possible that Seattle’s Hansen-Ballmer group could launch a lawsuit against the NBA, but that would interfere with any future consideration for either an expansion franchise or another potentially relocated franchise such as the Milwaukee Bucks.

Now it’s up to Sacramento Mayor Kevin Johnson and the “local” ownership group headed by Vivek Ranadive and Mark Mastrov to pull through with the money parts of the deal. KJ and the City Council have to get an EIR passed, put up $250 million in arena bonds, and work out the financial details, which aren’t yet finalized. As for the “whales”, they have to put up their half of the arena through realized pledges from the community. After years of Maloof-caused turmoil, Kings fans can for once breathe easily. The Capitol will keep its team. I can practically hear the cowbells from 90 miles away.

04.21.13
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Giants refinancing ballpark debt to fund other development

The Chronicle’s John Shea confirmed something I had heard about the reasoning for the Giants’ AT&T Park debt refinancing.

The Giants’ plan to pay off their stadium debt by 2017? No longer in the works, we hear. There have been steps to refinance the $170 million loan to help fund their proposed development on parking lot A across from McCovey Cove. There was a time the Giants said they had to limit their payroll because of the $20 million annual mortgage.

Remember how, in 2009, SF City Attorney Dennis Herrera threatened to sue baseball over the perceived financial threat posed to the City if the A’s were granted territorial rights to the South Bay? Well, I’m glad for everyone’s sake that the Giants feel it’s safe enough to take on even greater debt to grow their empire. I was so worried for a while there.

Meanwhile, a group of East Bay mayors including Oakland’s Jean Quan and Berkeley’s Tom Bates are trying to upend legislation introduced by SF assemblyman Phil Ting that would help smooth (or bypass) some of the environmental review and approval process for the Warriors’ arena. It’s not strange that they would pursue this route, since it is local politics at work. The irony is that whatever new law helps the W’s arena could provide a blueprint and pave the way for an A’s ballpark at Howard Terminal, which makes sense because both are on waterfront sites and face the same restrictions.

Of course, if Howard Terminal never gets past the talking points stage no one ever has to find out how expensive it’ll be to build there.

03.27.13
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Sacramento City Council approves arena term sheet 7-2

Mercifully, the dozens of public speakers at tonight’s Sacramento City Council meeting were done by 9. That left an hour for the City Council to discuss last Saturday’s term sheet on its merits. The evening culminated with an expected 7-2 vote to approve the term sheet, which the City and the ownership bidding group will present to the NBA in New York next Wednesday, April 3.

The two dissenters were Council Members Kevin McCarty (District 6) and Darrell Fong (District 7). McCarty was concerned about the lack of detail about the economic impact of the plan, and wanted to see a real report to that effect. Fong was harsher, asking for the same and also questioning some of the revenue backfill assumptions. Both wanted to see a deal more along the lines of what Seattle was offering, which is a roughly 40% public share. The Sacramento deal rates at 58% public, though if the $70 million in outstanding loans being repaid can be counted as a private contribution, it’s closer to a 50/50 split. Fong also cited San Diego as an example where as part of the deal, Padres owner John Moores was committed to developing much of the surrounding area in the Gaslamp Quarter. The whales have promised to make some further investments downtown and in Natomas if the construction moratorium is lifted. It’s up to the City to hold ownership to that promise.

The vote was almost upstaged by news from Monday that Qualcomm CEO Paul Jacobs is joining the ownership group, making him the fourth “whale”. I figure that Qualcomm will get first dibs on a naming rights deal, which makes some sense if the Chargers eventually move into a newer stadium in San Diego or some other market. New head whale Vivek Ranadive brought Jacobs in. So if you’re tracking it, the white knights coming to save Sacramento come from Silicon Valley, LA, San Diego, and the East Bay (which Mayor Kevin Johnson was quick to point out). When including the local minority shares, practically every part of the state is “represented” within the group.

Sacramento City Treasurer Russ Fehr came out strongly in support of the deal terms, repeatedly saying that backfill revenue estimates were conservative and weren’t based on radical changes such as huge parking rate increases. While some parts of the plan such as the 5% ticket surcharge can be achieved comfortably, there was still a very vague explanation on the parking revenue passthrough that should net $3 million. CM Fong also pointed out that no one had consulted the county on the possessory income tax part of the backfill, only saying that the projected $898,000 comes from an estimate tied to last year’s Railyards proposal. Detailed financial terms will undergo much greater scrutiny when the time comes, and the term sheet is nonbinding (as opposed to Seattle’s binding proposal), so things can and will change just as they did for the 49ers stadium project in Santa Clara.

Opponents to the term sheet were all grouped to speak first and were severely outnumbered by supporters, most of whom wore white “Crown Downtown” T-shirts. They all raised their arms in the air, which – no, was not some Nazi deal – was the group mimicking KJ when he got the phone call that the deal was done.

Arena supporters rise in unison to celebrate the vote and Mayor KJ

Arena supporters rise in unison to celebrate the vote and Mayor KJ

What’s next? The Seattle and Sacramento groups will make presentations a week from today, followed by the NBA’s Board of Governors meetings two weeks later. All along, I’ve said that NBA commissioner David Stern played this to perfection. He may have even played it too well, getting two cities to pony up at least $200 million for arenas in states where only a few years ago, this was considered impossible. Now the other team owners have the tough task of determining which bid is the most sound and beneficial to the league as a whole. That won’t be easy.

The more I look at this, the more I think that the real wildcard in this debate is something that isn’t even being discussed: local TV deals. Seattle’s a larger market, but a NBA team will be the fifth pro franchise in the area which could limit TV money. Seattle’s predominant RSN is ROOT Sports Northwest, run by DirecTV/Liberty Media. Sacramento is technically a mid-market (#20) based on size, but historically has lagged in terms of local TV revenue from Comcast SportsNet California. It wouldn’t surprise me if both bidders had already established talks with their respective RSNs to figure out how much more revenue they can get. If Seattle can get $10-20 million more per year or Sacramento can keep it competitive, that might be the deciding factor. All these histrionics, and it could come down to a factor that isn’t much in their control. Sounds about right.

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P.S. Readers who are following my articles about the Kings here or my tweets covering the news may think I’m needlessly slagging the Sacramento plan. I suppose it comes from a relative place of security. The A’s are not in danger of moving out of the Bay Area anytime soon, and if Bud Selig intended to create the kind of bidding war situation now on display in Seattle and Sacramento, he’s failed miserably so far. I’d like to see more cities hold fast to the idea of minimal public contributions and let more teams pay for the majority of new stadia. It seems like with the Kings arena and the 49ers stadium we’re regressing from earlier progress with AT&T Park and Staples Center. I certainly don’t want to see Sacramento lose the Kings, but I also think they should be able to secure the best deal possible, whatever that is. There have been plenty of privately funded arenas built over the last several years (Staples, Nationwide Arena in Columbus), yet time and time again it’s the leagues that have the leverage.

03.24.13
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Comparing the 2012 and 2013 Sacramento arena deals

It took an extra couple of days, but the City of Sacramento finally released its arena term sheet. The document was supposed to be made available late Thursday, in order to give the public and the City Counsel the customary three business days to review it. The Saturday evening release gives 72 hours of lead time in advance of Tuesday’s City Council meeting, which will have the term sheet on the agenda.

I’ve taken some time to review the document, live tweeting observations as I went. Field of Schemes’ Neil de Mause also made notes on Twitter, going straight into the financial aspects of the plan. In the term sheet is a comparison of the deal to the 2012 deal negotiated by the City, Maloofs, AEG, and NBA, the same deal that the Maloofs backed away from weeks later.

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Comparison of 2012 and 2013 arena plans

A big immediate takeaway is that the price has gone up $56.5 million, which City Manager John Shirey attributes to inflating materials costs. A 14% increase? Probably not. Instead, either the 2012 estimate was not sound and prone to cost creep, or the Ranadive-Mastrov-Burkle (RMB) group pushed for better finishes or features in the arena. It could be a little of both. The amount of the public contribution is the same, though the public percentage of the project is smaller due to an increased private share. AEG is not onboard this time around (yet), so the private share is listed solely as a Kings ownership responsibility.

Just like the last plan, the bulk of the public share ($212 million) will come from the sale of parking revenues. The difference in this plan is that the City is not selling the revenue rights to a private parking operator. Instead, the City is going to the trouble of creating a nonprofit, quasi-governmental corporation to control the revenues and distributions. The corporation will contract out with private companies to manage the lots and garages. The reason for this change is simple: it allows the City to refinance debt for existing garages ($50+ million) by continuing to use tax-exempt bonds. Under the previously negotiated arrangement, the City risked losing tax-exempt status on the bonds. The corporation would control parking revenue on all downtown lots except for Downtown Plaza, the arena site. Those revenues would stay with the Kings.

Despite the added complexity in the parking revenue arrangement, projections are fairly similar. The City receives $9 million annually from its downtown lots, which is being pledged towards the arena. The task is to find sources to adequately backfill that $9 million. The City projects $1 million in profit from arena operations, $3 million in new parking revenues, and a possessory interest tax payment of nearly $900,000 every year. Due to the lack of granularity, I’m naturally skeptical of these figures, as they seem like placeholders for a much more thorough accounting later. For now, the incremental $3 million is highly suspect, as the expected increased revenues from arena events are different line item altogether. If revenues fell short, the City could use hotel taxes to complete the backfill. The term sheet is nonbinding, as the deal is subject to CEQA and other approvals. Sacramento’s City Council will have to come back at a later date and approve the whole deal including the financing and the DDA, just as Santa Clara did for the 49ers.

2012’s aborted deal had the Kings locked in for 30 years. 2013’s plan has the team in place for 35 years to start, plus two 5-year options. Capacity and estimates for premium accommodations were carried over from 2012. RMB will handle cost overruns, plus ongoing maintenance and capital costs via a $1/ticket fee. Another carryover is the noncompete clause at Sleep Train Pavilion once the downtown arena opens. In conjunction with that, the City is selling 100 acres of land near STP for future development purposes.

One item lightly addressed was the fate of the $75 million the Kings still owe per the 1997 purchase/leaseback of the STP land in Natomas. The City indicated its willingness to refinance those bonds in order to get the arena deal done, but exactly how that would occur is left completely wide open. Mastrov and Burkle appeared to have erred when submitting their bid by factoring in that debt. The NBA didn’t factor it in and asked the bid to be raised to reflect a value without a discount.

Assuming the City Council approves the deal on Tuesday, this term sheet will be part of the submission to the NBA in 10 days.

Is this a good deal? I’m inclined to say no for taxpayers, yes for the NBA and the Kings. For Sacramento, it’s an enormous price to pay to keep the Kings in town, though it isn’t as bad as fully funding an arena with taxpayer money as is frequently done outside California. RMB generated a good deal of PR by pledging up to 1.5 million square feet of ancillary development at Downtown Plaza. Unlike the arena’s projected completion date of September 2016, no date was given for any ancillary development completion. Clearly that will only be done with regard to market conditions, which in downtown Sacramento have been spotty.

If we’ve learned anything from past attempts to use arenas as part of a grand urban renewal scheme, results are mixed at best and many of the successes come in established cities with properly targeted transition areas (United Center in Chicago, Staples Center in LA, Verizon Center in DC). Most of the time, arenas and ballparks bring visitors from within the region on event days only instead of creating the oft-desired 7-days-a-week metropolises many cities aspire to become. Cleveland, Phoenix, and yes, San Jose are prime examples of this phenomenon. If you live in Sacramento and you support this plan, don’t lose sight of what this is really about: basketball. Over the last month I’ve seen social media campaigns about the arena being bigger than basketball. That’s nice from a campaigning standpoint, but it’s not reflective of what’s really at stake. Even if the Kings leave, someone will buy and operate Sleep Train Pavilion, bringing in concerts to help pay for it. Sleep Train Amphitheater will continue to operate during the summer. Concerts will be held in the area because the region’s large enough to demand them. Basketball, on the other hand, won’t come back if the Kings leave. Is basketball worth the $258 million public cost? It’s funny, the people who desperately want the Kings to stay are sometimes will to pay any price to make it happen. Those opposed to an arena couldn’t care less and think pro sports are close to worthless. It can be hard to establish a middle ground between those extremes.