And, once again, Daniel Weintraub puts SOME of the facts out there without regard for the rest of the story. And the Bee will hide behind the "He's a columnist; he can say what he likes" response if called on it...
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http://www.sacbee.com/content/politics/columns/weintraub/story/14284043p-15091637c.html
Daniel Weintraub: A better arena deal: Let the Kings play for free
By Daniel Weintraub -- Bee Columnist
Published 12:01 am PDT Tuesday, August 1, 2006
The Sacramento County Board of Supervisors is expected to vote today to ask county residents to raise the sales tax to build a new downtown arena for the Sacramento Kings. The team's owners would pay an average of $4 million a year in rent over 30 years and, in exchange, would keep all the profits that the arena generates.
Instead of charging the Kings rent, however, it would be a better deal for the taxpayers to build the arena, run it under public management and let the team play there for free.
But the Kings would almost certainly turn down such an offer. They don't want to play in Sacramento for free. They want us to pay them to play here.
That's what this deal amounts to. The owners of the Kings -- the Maloof family -- could end up clearing millions in profit from our arena over the life of the agreement, even before they count their profits from running the team.
Although the promoters of the agreement have characterized the Maloofs' rent payments as a contribution to the arena construction costs, that's not really an accurate way to evaluate the deal. The public would pay the entire cost of construction, using about half the proceeds from a quarter-cent sales tax increase over 15 years, or about $600 million.
The Maloofs would deposit $20 million into an account for future maintenance and repairs on the building, and pay rent beginning at $3 million in the first year and increasing 2 percent a year.
So why would it be a better deal for the taxpayers to let the team play there rent-free? Because under the terms of this deal, the Maloofs get to keep every penny of revenue from the arena, including rent charged to other users, concessions, parking, advertising and the lucrative naming rights.
A study performed three years ago for the city estimated that a new arena would generate about $1 million in profits in the first year, increasing at 5 percent a year. The naming rights, the study guessed at the time, would fetch another $2 million a year.
It doesn't take a math whiz to see what's going on here. The negotiators who framed this deal set the Kings' rent to match what the Maloofs would take in from running the arena and selling the naming rights. It's a wash. The Maloofs' "rent" would be covered by the money they make off an arena we build.
But those projections were based on very conservative assumptions, the study's authors said at the time.
And city and county leaders now say they expect the arena to host 200 events a year -- 25 percent more than the 160 upon which the study's profit estimates were based.
That would be worth about $250,000 a year more in profits at the beginning of the deal, and $21 million over the life of the agreement, assuming the same 5 percent annual inflation used by the authors of the study.
Other assumptions in the study might also be out of date. The naming rights could easily go for more than $2 million a year. FedEx paid more than twice that to put its name on a new arena in Memphis. And parking in the structure next to the arena could go for more than $10 a car. The Golden State Warriors charge $15 to park at their games in Oakland.
If the Kings got $3 million per year for the naming rights and charged $15 for parking, they would instantly double their income from the arena, compared to what the study projected. Over 30 years, the money would amount to more than $200 million.
So, under the most conservative scenario, management of the arena is a break-even proposition for the Maloofs, assuming they would pay about $122 million in rent over that period. That means their "contribution" to the entire $600 million project would be the capital repair fund of $20 million they would set aside, an expense they are already bearing at their own arena -- Arco -- today.
The second scenario, assuming 200 events a year, a more lucrative naming deal and more expensive parking, makes the deal a $115 million windfall for the Maloofs -- after they pay us rent with the money they make from our arena. Even if you consider that money will be worth less in the future than it is today, and you deduct the $20 million the Kings will put into a repair fund, they would still be clearing about $50 million in today's dollars.
And none of this even considers the additional money they stand to make off their ownership of their main Sacramento business, the basketball team.
It's one thing for the public to build an arena with taxpayer dollars. It's another to build that arena and then hand the keys to a private party to profit from it.
If this is an asset the community wants and needs, it would be better to build it and manage it ourselves. Even if we let the Kings play there for free.
About the writer: The Bee's Daniel Weintraub can be reached at (916) 321-1914 or at dweintraub@sacbee.com.
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http://www.sacbee.com/content/politics/columns/weintraub/story/14284043p-15091637c.html
Daniel Weintraub: A better arena deal: Let the Kings play for free
By Daniel Weintraub -- Bee Columnist
Published 12:01 am PDT Tuesday, August 1, 2006
The Sacramento County Board of Supervisors is expected to vote today to ask county residents to raise the sales tax to build a new downtown arena for the Sacramento Kings. The team's owners would pay an average of $4 million a year in rent over 30 years and, in exchange, would keep all the profits that the arena generates.
Instead of charging the Kings rent, however, it would be a better deal for the taxpayers to build the arena, run it under public management and let the team play there for free.
But the Kings would almost certainly turn down such an offer. They don't want to play in Sacramento for free. They want us to pay them to play here.
That's what this deal amounts to. The owners of the Kings -- the Maloof family -- could end up clearing millions in profit from our arena over the life of the agreement, even before they count their profits from running the team.
Although the promoters of the agreement have characterized the Maloofs' rent payments as a contribution to the arena construction costs, that's not really an accurate way to evaluate the deal. The public would pay the entire cost of construction, using about half the proceeds from a quarter-cent sales tax increase over 15 years, or about $600 million.
The Maloofs would deposit $20 million into an account for future maintenance and repairs on the building, and pay rent beginning at $3 million in the first year and increasing 2 percent a year.
So why would it be a better deal for the taxpayers to let the team play there rent-free? Because under the terms of this deal, the Maloofs get to keep every penny of revenue from the arena, including rent charged to other users, concessions, parking, advertising and the lucrative naming rights.
A study performed three years ago for the city estimated that a new arena would generate about $1 million in profits in the first year, increasing at 5 percent a year. The naming rights, the study guessed at the time, would fetch another $2 million a year.
It doesn't take a math whiz to see what's going on here. The negotiators who framed this deal set the Kings' rent to match what the Maloofs would take in from running the arena and selling the naming rights. It's a wash. The Maloofs' "rent" would be covered by the money they make off an arena we build.
But those projections were based on very conservative assumptions, the study's authors said at the time.
And city and county leaders now say they expect the arena to host 200 events a year -- 25 percent more than the 160 upon which the study's profit estimates were based.
That would be worth about $250,000 a year more in profits at the beginning of the deal, and $21 million over the life of the agreement, assuming the same 5 percent annual inflation used by the authors of the study.
Other assumptions in the study might also be out of date. The naming rights could easily go for more than $2 million a year. FedEx paid more than twice that to put its name on a new arena in Memphis. And parking in the structure next to the arena could go for more than $10 a car. The Golden State Warriors charge $15 to park at their games in Oakland.
If the Kings got $3 million per year for the naming rights and charged $15 for parking, they would instantly double their income from the arena, compared to what the study projected. Over 30 years, the money would amount to more than $200 million.
So, under the most conservative scenario, management of the arena is a break-even proposition for the Maloofs, assuming they would pay about $122 million in rent over that period. That means their "contribution" to the entire $600 million project would be the capital repair fund of $20 million they would set aside, an expense they are already bearing at their own arena -- Arco -- today.
The second scenario, assuming 200 events a year, a more lucrative naming deal and more expensive parking, makes the deal a $115 million windfall for the Maloofs -- after they pay us rent with the money they make from our arena. Even if you consider that money will be worth less in the future than it is today, and you deduct the $20 million the Kings will put into a repair fund, they would still be clearing about $50 million in today's dollars.
And none of this even considers the additional money they stand to make off their ownership of their main Sacramento business, the basketball team.
It's one thing for the public to build an arena with taxpayer dollars. It's another to build that arena and then hand the keys to a private party to profit from it.
If this is an asset the community wants and needs, it would be better to build it and manage it ourselves. Even if we let the Kings play there for free.
About the writer: The Bee's Daniel Weintraub can be reached at (916) 321-1914 or at dweintraub@sacbee.com.
