Arena update from SlamOnline(sorta)

[cfechter]

City, county and RDA meetings are public. I don't have the time to provide that kind of research for you. The Bee had a great article a while back about the convention center and the subsidizing of the Hyatt by the city, but I can't find it with a cursory search.

I have worked in government financing for housing development for over 20 years, however. I'm not ignorant of what governments can do, when the motivation is there.

John Saca was set to get money from the city for the furnishings in the hotel portion of his condo towers. The Sheraton was constructed with the help of tax-exempt bond-financing provided by the city. Thomas is waiting for the city to come up with $500 million for infrastructure financing so he can develop the railyards. (Homeowners, on the other hand, are stuck with paying for the infrastructure improvements supporting the development of their homes almost all the time. (e.g., Mello-Roos, higher property taxes)

Don't get me wrong. I'm not saying it is always a bad thing for cities to offer financial incentives for construction/development or to lure businesses. Not at all. A government entity is just like a person. Some things you are going to have to pay for, if you really want it. You can drive a 20-year-old, inefficient, unsafe beater of a car and save money or you can break down and spend the bucks for a new, or newer, one (likely more fuel efficient, with all the latest safety features.) It costs money, tho.

Most affordable rental housing right now receives major funding from 10-year chunks of tax credits purchased by major corporate investors. A worthy cause, but the federal government is giving up major future revenue in return. It never shows up on the books, because it's money never received. The government has given out multi-billions in those tax credits. (You wouldn't believe the money lawyers, developers and tax syndicators are making out of these deals.)

Prop 13, the limit on property taxes has been a far greater boon to business and commercial landowners, than to homeowners in California.

The question isn't whether governments provide various forms of financial incentives to business and developers. The arguments arise over for what those incentives and funding should be provided. Certainly a valid point of public discourse. My only objection has been for so many people to act like any public financial contribution to a private business (arena) is an unheard of government action. Something that isn't done.

It is valid to discuss whether it should be provided and, if so, how much should be provided. To think other private interests, just like MSE do not benefit from government subsidized financing or government financial incentives is ridiculous. MSE is hardly the first private business to want help from local government for their business.

(I would also add that I think the NBA needs to look at this problem with their current business model, but that's a whole other subject.)

CalPers did "give" Saca money, at the cost of him providing a percentage of the investment to CalPERS (they would have been a silent partner, from what I understand). Unwise investment in retrospect, I would say. The city committed to providing him with some money in "fixtures", I wonder what exactly that consisted of.

Sure the city gave the Sheraton some money (13.4 million per the Sacramento business journal) but you have to realize that the revenues the city will realize from having the Sheraton here will far outweigh the cost of that subsidy. The tax exempt bond which was backed by the city had to be paid back (at least I'm 90% sure it did - sorry, research at midnight may not be the most effective way to go about proving my point).

Thomas and the railyards, again, you're looking at a quid pro quo situation in this circumstance. Sure the company will develop the railyards, but they'll receive a payment for services performed (I would need to look more into this to provide a more informed opinion).

Tax credits which allow individuals or corporations to keep more of their own money is not a subsidy in my opinion. The government, in general, attempts to affect private sector behavior with various incentives (which is a completely wrong and misguided effort, in my opinion). Again, "letting" corporations or individuals keep more of their own money is not the same as simply gifting public funds to private parties.

I would have no problem whatsoever with the city/county forgoing property taxes on any new arena project. The economic benefits derived from having the Kings in the area would far outweigh the lost tax revenues from just having the arena there.

I would have a problem with the City/county giving public funds to the Kings owners to help finance an arena the NBA could finance on their own. Those who do not utilize the services the Kings/NBA provide should not be forced to fund an arena they would not use. One thing is to provide $10,000,000 to purchase fixtures on a project that would generate around $1,600,000 of annual property taxes for the city (400 units in the towers, average price of $400,000 = 160,000,000 * 1 percent - city recoups its investment in a few short years just from the property taxes, let alone other economic benefits), another thing is to give hundreds of millions of dollars to a private enterprise that could theoretically fund its own construction. What could they do - half all salaries in the league, save the money, maintain a sinking fund, and draw upon it when a team wants a new arena - Would that happen? Of course not, but the way the NBA does business just stinks, in my opinion.

I, as a fan and user of the services the Kings provide, wouldn't mind paying extra to help fund any type of project; put a surcharge on the tickets for starters, charge a buck extra for each soda/beer, etc. Let us know what it is for, etc. However, the type of funding the NBA is asking for shouldn't be the public's responsibility to provide.

 

[kennadog]

Actually letting people/corporations "keep more of their own money" through tax breaks is the same as a giving money away. If a corporate investor receives $1 billion in tax credits, that is $1 billion the government won't receive to spend on health care, research, highways (bridge repair anyone?), education, etc. If a city waives $200,000 in fees and assessments for a developer, that's $200,000 the government can't spend on something else right now. Individuals don't have near the opportunities to "keep more of their own money" that businesses, especially big businesses do.

I already agree that the NBA needs to do something. Their business model is clearly part of the problem, although I guess they won't fix it as long as some cities want a team and are willing to help build an arena to get one, like Oklahoma City. (Why can OK City build one and Sacramento has never built an arena or stadium?)

Actually bond financing was proposed for a new Sacramento arena. It was rejected as an idea, because the it was considered too risky for the city. It might very well be too risky, because a new arena may not generate enough cash flow to cover the bond debt service, even though it would be lower debt service than conventional financing.

The very crux of the problem. MSE can't borrow enough private money to do it themselves, because debt service on non-governmental funding would be too high.

As to the idea that people shouldn't have to pay for services they don't use. Let me count the public services I don't use, rarely use or hope I never have to use, but still (happily) paid for or pay for every day: schools, libraries, the convention center, performance venues such as the Community Center and Memorial Auditorium; UC Davis Medical Center; school lunch programs; child abuse intervention services; foster care programs; aid to the blind, aged and disabled. Give me time and I could come up with more than I'd ever have time to post.

Beyond that, I'd want an arena with or without the Kings. I believe it brings entertainment options that would otherwise be unavailable in the Sacramento region. It might be only the rare occasion that I can afford it, but I detested having to drive to the Bay area to attend events that Arco drew and a new arena could draw.

I'm dying to see what Stern comes up with, but it's hard to imagine that some public financial help won't be needed. I think it's just as valid to help build an arena as it is to help build a hotel.

If I can find the Bee article, I'll post it, altho It's probably an archived article that has to be paid for. The City also guaranteed against losses for the Hyatt for a certain number of years. Hyatt didn't want to build in Sacramento, because, because their market study indicated they would lose money here. The City wanted hotel rooms, because they were having trouble attracting conventions to the center for lack of upscale hotal rooms. The convention center lost money for quite a while, too.

 

[kennadog]

The city committed to providing him with some money in "fixtures", I wonder what exactly that consisted of.

"Fixtures" is usually items that are not real property. Lenders who loan money for such items lien those through a fixture filing. On rental projects, we lien such possible financed items as landscaping and maintenance equipment/tools; office equipment and furnishings; community room furnishings and appliances, playground equipment, etc.

My understanding was the city was going to provide money for furnishings, drapery, etc. in some or all of the public areas (not the rooms) of the hotel.

 

[cfechter]

Actually letting people/corporations "keep more of their own money" through tax breaks is the same as a giving money away. If a corporate investor receives $1 billion in tax credits, that is $1 billion the government won't receive to spend on health care, research, highways (bridge repair anyone?), education, etc. If a city waives $200,000 in fees and assessments for a developer, that's $200,000 the government can't spend on something else right now. Individuals don't have near the opportunities to "keep more of their own money" that businesses, especially big businesses do.

I already agree that the NBA needs to do something. Their business model is clearly part of the problem, although I guess they won't fix it as long as some cities want a team and are willing to help build an arena to get one, like Oklahoma City. (Why can OK City build one and Sacramento has never built an arena or stadium?)

Actually bond financing was proposed for a new Sacramento arena. It was rejected as an idea, because the it was considered too risky for the city. It might very well be too risky, because a new arena may not generate enough cash flow to cover the bond debt service, even though it would be lower debt service than conventional financing.

The very crux of the problem. MSE can't borrow enough private money to do it themselves, because debt service on non-governmental funding would be too high.

As to the idea that people shouldn't have to pay for services they don't use. Let me count the public services I don't use, rarely use or hope I never have to use, but still (happily) paid for or pay for every day: schools, libraries, the convention center, performance venues such as the Community Center and Memorial Auditorium; UC Davis Medical Center; school lunch programs; child abuse intervention services; foster care programs; aid to the blind, aged and disabled. Give me time and I could come up with more than I'd ever have time to post.

Beyond that, I'd want an arena with or without the Kings. I believe it brings entertainment options that would otherwise be unavailable in the Sacramento region. It might be only the rare occasion that I can afford it, but I detested having to drive to the Bay area to attend events that Arco drew and a new arena could draw.

I'm dying to see what Stern comes up with, but it's hard to imagine that some public financial help won't be needed. I think it's just as valid to help build an arena as it is to help build a hotel.

If I can find the Bee article, I'll post it, altho It's probably an archived article that has to be paid for. The City also guaranteed against losses for the Hyatt for a certain number of years. Hyatt didn't want to build in Sacramento, because, because their market study indicated they would lose money here. The City wanted hotel rooms, because they were having trouble attracting conventions to the center for lack of upscale hotal rooms. The convention center lost money for quite a while, too.

Clearly we disagree about tax incentives, but hey, we can still like each other, right? My opinion is that allowing anyone to keep more of their own money is not a subsidy.

My viewpoints are very libertarian when it comes to government finance (I'm a semi-objectivist) so the other stuff I don't directly use I can't say I agree with funding either. I'm a Kings fan, big time, have been since I was a kid, but why should I impose my own likes/dislikes on those of others? Why should the fact that I enjoy going to Kings' games and wiggles concerts with my kids have anything to do with anyone who doesn't like doing those things? Why should they pay for it (indirectly)?

I agree with you on a lot of the things you said here, and I'm proud to stand corrected about help the city has provided to private industry. Even though it appears a lot of the time that it's not quid pro quo, I think in many circumstances it is due to the tax revenues the project will generate. And again, a $300,000,000 hand out to a private party is way way way different than committing $10,000,000 to a project that would cover itself in less than 10 years.

Again, I'm MORE than willing to pay a surcharge on the games I go to and the stuff I buy there to help finance any arena, but I don't think the public in general should be asked to support a multi-billion dollar enterprise that could do it themselves.

Debt service on a 300,000,000 loan @10% over 30 years = $31,000,000 per year - the NBA has the ability to do that, just halve the salaries and use the remainder as debt service (granted, I have not a clue how hard it is to obtain that kind of financing or what rates are outstanding - and, the players would never, ever, ever, ever, ever, ever agree to this).

 

[cfechter]

"Fixtures" is usually items that are not real property. Lenders who loan money for such items lien those through a fixture filing. On rental projects, we lien such possible financed items as landscaping and maintenance equipment/tools; office equipment and furnishings; community room furnishings and appliances, playground equipment, etc.

My understanding was the city was going to provide money for furnishings, drapery, etc. in some or all of the public areas (not the rooms) of the hotel.

Ok - I understood what fixtures are, my question would be, would the city maintain title to these assets if they purchased them for the hotel? I.e. - say the project had gone through and Saca decided to sell the entire thing in a few years, would the city recoup its investment upon selling?

 

[cfechter]

I'm dying to see what Stern comes up with, but it's hard to imagine that some public financial help won't be needed. I think it's just as valid to help build an arena as it is to help build a hotel.

I am as well - I just seeing this being a hard sell in California for any kind of voter approval.

In all fairness to the Maloofs and MSe, even though they're worth a crapload of money, it's not like they have $500,000,000 of cash and liquid investments sitting around in the bank, waiting to be used. I would guess most of their holdings are wrapped up in non-liquid investments, such as their hotel (for example). I don't blame them looking for money since it's been done elsewhere.

 

[kennadog]

I am as well - I just seeing this being a hard sell in California for any kind of voter approval.

In all fairness to the Maloofs and MSe, even though they're worth a crapload of money, it's not like they have $500,000,000 of cash and liquid investments sitting around in the bank, waiting to be used. I would guess most of their holdings are wrapped up in non-liquid investments, such as their hotel (for example). I don't blame them looking for money since it's been done elsewhere.

I would almost bet money on that. Especially if I had as much as them.

I agree about a hard sell to voters. Remember, tho, voter approval isn't required for every kind of public funding. Depending on the source of funding and where the project is, it could be just city council, board of supes and/or an RDA board vote. Of course, public hearings would have to be held. Contentious, I'm sure.

 

[Arena Skeptic]

I've been away.

Cub Scout camping trip, and on and on.

Yeah, I believe what Waters said, largely because he made that prediction about 7 years ago, and then it came true. One of Q&R's biggest flaws is that the plan was not set in stone. I believe very, very strongly that's just what the Maloofs want; we'll never be asked to vote for a set-in-stone plan, and it will always be an outline. So far, I'm one for one.

And I am not anti-arena. What I am anti was a plan like Q&R, where the general outline was the Maloofs pay $200 million to obtain 100% control over an arena for 20 years that cost $600 million plus to build. If I can see a plan where the tax revenues derived from the facility will cover 100% of the costs, I'll vote for it. There has to be some sort of clause about how, over each 5 year segment of the lease, if tax revenues don't cover the costs, the party that occupies the building will. That can be done.

But seriously, I've moved on to Breton's Sunday column, where he's 100% correct: There is no political leadership to get this done. The part Breton missed, though, was the reason for that... It's a political third rail. We are voting in a new Council in 2008. Any of these politicians that hitch their wagon to the "Let's raise taxes for a new arena!" horse will lose their re-election bids.

That's really the key point here.

The Maloofs are afraid to lead (but they must lead to some extent, because we can't just make guesses about what they want; they HAVE to specify SOMETHING, like the size, the location, the parking spots, and so on; if we have to guess, this will not get done... And I do want it to get done).

The politicians are afraid to lead (Something about losing a vote by a 4-1 margin spooks politicians. Go figure.).

So, who's left?

We must get leadership from a politician (yes, one would do it), the Maloofs, and (drum roll, please) corporations. When our largest corporation is a non-profit (VSP), we're in trouble.

So far, I count zero politicians, zero Maloofs, and zero corporations.

And in the meantime, Las Vegas IS moving forward, regardless of what you say.

The casinos cannot stop it. Nevada HAD laws on their books about taking local teams off casino lines up until about 2 years ago. They abolished those laws. You can bet on UNR and UNLV games in Reno now. Saying the odds are 500-1 against Vegas getting a team is just a claim. If you say it, it doesn't make it true.

 

[VF21]

The Maloofs may well be somewhat afraid to step forward because of the unending attacks they've endured at the hands of the Sacramento Bee. And I cannot blame them.

As far as Vegas goes, the whole Donaghy mess has put a stop to any thoughts of the NBA in Vegas in the foreseeable future. You can bet on it.

 

[Arena Skeptic]

The Maloofs may well be somewhat afraid to step forward because of the unending attacks they've endured at the hands of the Sacramento Bee. And I cannot blame them.

As far as Vegas goes, the whole Donaghy mess has put a stop to any thoughts of the NBA in Vegas in the foreseeable future. You can bet on it.

Okay, now why is that? Donaghy lives in Florida, and the guys he had ties to were in Phillie (home of the 76ers). So do we also ban teams in Florida and Penn because of this? Many, many large towns are within easy driving distance of Atlantic City; does the NBA say, "No more teams within 120 miles of Atlantic City!"?

I don't think so.

Plus, the NBA has absolutely no jurisdiction to make laws in any state; not even in Nevada, which already gets plenty of visitors from Sacramento, the Bay area, the LA area, the Phoenix area...

No matter where you go in America, there is illegal betting.

It's already been noted that Donaghy had ties to illegal gambling rings, so we get to punish legalized gambling for the sins of illegal gambling?

Whether you like it or not, Las Vegas is moving forward with plans for a $9.5 billion development zone that includes a 22,000 seat arena. The plans are under way, and the financing is set. That's not a guess; it's fact. They would not be moving ahead with such plans if they thought a major league team was not coming. Okay, that last bit is speculation, but just think it over; would you build a dam in a canyon if you thought the canyon would never get rain??

And where do we sit? In a leadership vacuum, that's where. No Maloofs to lead; no politicians to lead; no corporations to lead. In that environment, you eventually have to conclude that something bad's going to happen.

The next few months leading up to June 2008 will be very telling. If there's nothing to vote on in June 2008, it is over. So if they assemble a package that's less generous to the Maloofs than Q&R were, the Maloofs will not back it, but if it's more generous than Q&R, the voters will not back it.

It's a very difficult situation.

 

[JB_kings]

Okay, now why is that?

Well because Stern has a huge gambling image problem on his hands. The last thing he needs to run into the arms of Las Vegas. The press would have a field day with that. Pretty obvious.

 

[BMiller52]

Harrah's To Build 20,000 Seat Arena One Block Off The StripAugust 22, 2007 - 2:24 pmLos Angeles Times -
Prospects for an NHL or NBA franchise here increased Wednesday with the announcement of an arena partnership deal between AEG and Harrah's Entertainment.

A privately financed, 20,000-seat arena, which would open in 2010, would be on 10 acres of Harrah's land holdings, which is behind Bally's and Paris resorts, one block east of the Strip. Groundbreaking for the facility is scheduled for 2008.

The AEG-Harrah's alliance was first reported this morning in the Las Vegas Review-Journal. A news conference to discuss the project was scheduled here for later this morning.
http://www.realgm.com/src_wiretap_a...ild_20000_seat_arena_one_block_off_the_strip/

 

[Arena Skeptic]

Well because Stern has a huge gambling image problem on his hands. The last thing he needs to run into the arms of Las Vegas. The press would have a field day with that. Pretty obvious.

Okay, one more time: Tim Donaghy lives in Florida; the ILLEGAL gamblers he dealt with were from Phillie.

Las Vegas did not figure into it. If it had, I'd see your point. I get it.

But the gamblers were NOT from Vegas.

You're perfectly willing to punish Vegas for something a guy from Florida did? Fine. My father-in-law's car got stolen last week; how about I send the police to your house to arrest you because, since you stole a candy bar from a store once about 30 years ago, you MUST be the guy who stole that Toyota?

 

[kupman]

Booze is readily available just about everywhere. Having said that, I would still strongly advise a recovering alcoholic not to take a job at BevMo.

 

[JB_kings]

Do you not remember Donaghy mentioning that he witnessed other refs gambling? You really haven't grasped how bad this has gotten for Stern and the NBA. Gambling is a stigma that is a very real problem for the NBA to deal with now. Vegas is gambling - period. Nobody thinks of Florida or even cares where Donaghy lives. The NBA is a national show and adding Vegas to that showcase is associating with gambling. Only somebody with an interest in seeing the NBA going to Vegas is going to be blind to the obvious connection. Look at Atlanta and it's clubs and the rep of players partying there. Now magnify 100 times and put gambling and players and refs into the spotlight 80+ nights a year. The NBA needs Vegas right now like it needs another ref spotted in a casino.

 

[kennadog]

I believe very, very strongly that's just what the Maloofs want; we'll never be asked to vote for a set-in-stone plan, and it will always be an outline. So far, I'm one for one.

Q&R turned out badly and rightly so. However, the Maloofs/NBA backed out of supporting it when the NBA and MSE found out the city had misled them about infrastructure financing. Also, rightly so.

If I can see a plan where the tax revenues derived from the facility will cover 100% of the costs, I'll vote for it. There has to be some sort of clause about how, over each 5 year segment of the lease, if tax revenues don't cover the costs, the party that occupies the building will. That can be done.

That's such limited thinking about financing possibilites. What if the city doesn't provide 100% of the financing? Then why should tax revenues cover 100% of the cost? I'll assume you mean cost to the city/county?

But seriously, I've moved on to Breton's Sunday column, where he's 100% correct: There is no political leadership to get this done. The part Breton missed, though, was the reason for that... It's a political third rail. We are voting in a new Council in 2008. Any of these politicians that hitch their wagon to the "Let's raise taxes for a new arena!" horse will lose their re-election bids.

There has long been a lack of strong leadership in Sacramento. Long before any arena issue came up. The only one I would say offered strong leadership was Serna. Lo and behold, he is the one who managed to get a city loan for the Kings (pre-Maloofs), with bond financing. For which the franchise is ahead of schedule on payments.

So far, I count zero politicians, zero Maloofs, and zero corporations.

I think at this point this is premature. I'll wait for Stern's proposal. Then we'll see who supports it.

Whether you like it or not, Las Vegas is moving forward with plans for a $9.5 billion development zone that includes a 22,000 seat arena. The plans are under way, and the financing is set. That's not a guess; it's fact. They would not be moving ahead with such plans if they thought a major league team was not coming. Okay, that last bit is speculation, but just think it over; would you build a dam in a canyon if you thought the canyon would never get rain??

The next few months leading up to June 2008 will be very telling. If there's nothing to vote on in June 2008, it is over. So if they assemble a package that's less generous to the Maloofs than Q&R were, the Maloofs will not back it, but if it's more generous than Q&R, the voters will not back it.

It's a very difficult situation.

Since Las Vegas is replacing an arena built in 1983 and is now very old and out-dated, so apparently a dam was built in a dry canyon before. So do lots and lots of other cities, like Kansas City. A lot of cities seem to to build arenas for a lot of reasons besides a pro-sports teams.

I think you are assuming a lot about June 2008. Not all public financing requires a public vote. But even more the point is I also think the Maloofs will back whatever makes business sense to them, regardless of if it's perceived as "less generous than Q&R."

That it's a difficult situation? I agree 100% with that.

 

[kennadog]

Ok - I understood what fixtures are, my question would be, would the city maintain title to these assets if they purchased them for the hotel? I.e. - say the project had gone through and Saca decided to sell the entire thing in a few years, would the city recoup its investment upon selling?

Usually the lender liens these. They lien real property with a deed of trust (CA) and "fixtures" with a fixture filing with the Secretary of State. Altho, my old State employer revised their deed of trust with language that made the deed of trust serve as a fixture filing as well (also liened rents and other stuff).

As to recouping money? Let's face it, used furniture, drapes, equipment or whatever are not going to get you all their new value back in the event of foreclosure. It's really just a matter of trying to lien every possible thing you can, to try and get as much back as you can in the event of foreclosure.

No lender can be absolutely sure of full recovery of their money, in the event of foreclosure. The idea is to minimize the risk and get as much security as you can. Underwriting decisions on multi-million dollar deals can be scary.

 

[kennadog]

Clearly we disagree about tax incentives, but hey, we can still like each other, right?

Zactly.

Debt service on a 300,000,000 loan @10% over 30 years = $31,000,000 per year - the NBA has the ability to do that, just halve the salaries and use the remainder as debt service (granted, I have not a clue how hard it is to obtain that kind of financing or what rates are outstanding - and, the players would never, ever, ever, ever, ever, ever agree to this).

Well, the "NBA business" is it's owners. Stern serves at their pleasure. Whether the league could 100% finance arenas, I don't know how realistic that is. I made some suggestions elsewjere for possible ways the league might generate at least some part of an arena's financing, even if it's only gap financing. But at the moment, I see those as a hard sell to owners with no problems with revenues or arenas.

I do very much believe the league needs to look at an overhaul of how they do business. The questions is really getting owners whose situations are fine and dandy to give up some of their revenue stream to other owners. A pretty tough sell. And getting help from the players union might be near impossible.

Unfortunately, it isn't helped by the fact that other cities are willing to lure pro-sports teams with a lot of incentives and have no qualms about taking a team away from another city. And that's really sad. I feel really bad for Sonics fans right now. Altho I certainly understand that the city has recently built a baseball stadium and a football stadium and doesn't want to do more.

 

[cfechter]

Zactly.

Well, the "NBA business" is it's owners. Stern serves at their pleasure. Whether the league could 100% finance arenas, I don't know how realistic that is. I made some suggestions elsewjere for possible ways the league might generate at least some part of an arena's financing, even if it's only gap financing. But at the moment, I see those as a hard sell to owners with no problems with revenues or arenas.

I do very much believe the league needs to look at an overhaul of how they do business. The questions is really getting owners whose situations are fine and dandy to give up some of their revenue stream to other owners. A pretty tough sell. And getting help from the players union might be near impossible.

Unfortunately, it isn't helped by the fact that other cities are willing to lure pro-sports teams with a lot of incentives and have no qualms about taking a team away from another city. And that's really sad. I feel really bad for Sonics fans right now. Altho I certainly understand that the city has recently built a baseball stadium and a football stadium and doesn't want to do more.

Any way you slice it, it's a tough situation. No-one is going to give up making the amount of money they make to finance arenas, least of all the players union.

And yes, the shame of it is, there are a LOT of other cities that will probably be willing to finance an arena.

I"m hoping something can be worked out. The city probably should provide some sort of financing to help out, since having Arco/other arena there does generate quite a bit of sales taxes for the city/county...I just don't know how much. I can't see the city coughing up $300,000,000 for it, nor do I think it should.

It's a complicated situation. You've proven me wrong once, I'd love to be proven wrong again with my opinion about having the city finance the deal.

 

[cfechter]

Usually the lender liens these. They lien real property with a deed of trust (CA) and "fixtures" with a fixture filing with the Secretary of State. Altho, my old State employer revised their deed of trust with language that made the deed of trust serve as a fixture filing as well (also liened rents and other stuff).

As to recouping money? Let's face it, used furniture, drapes, equipment or whatever are not going to get you all their new value back in the event of foreclosure. It's really just a matter of trying to lien every possible thing you can, to try and get as much back as you can in the event of foreclosure.

No lender can be absolutely sure of full recovery of their money, in the event of foreclosure. The idea is to minimize the risk and get as much security as you can. Underwriting decisions on multi-million dollar deals can be scary.

So would the city still hold title to the fixtures?

Of course I understand that any fixtures would lose value much quicker than the building itself - but 10 million of fixtures is still 10 million of fixtures. Even after 5 years there would still be some value in them.

Sorry - just trying to figure it out. A friend of mine serves on city council, maybe he would know.

 

[VF21]

would you build a dam in a canyon if you thought the canyon would never get rain??

Um, not to rain on your dam or anything, but dams are built in canyons for water storage. They generally block rivers that could be carrying rain water and snow melt from hundreds of miles away. The question of whether or not it actually rains in the canyon is totally immaterial.

 

[kennadog]

So would the city still hold title to the fixtures?

Of course I understand that any fixtures would lose value much quicker than the building itself - but 10 million of fixtures is still 10 million of fixtures. Even after 5 years there would still be some value in them.

Sorry - just trying to figure it out. A friend of mine serves on city council, maybe he would know.

They don't "hold title." It's like a lien on your house.

The homeowner has "title" to the property. You own the land and improvements. In California, that is what your Grant Deed will show. However, the mortgage lender records a financial lien against the property (deed of trust in CA), giving them, among other rights, a financial interest in the property to which you hold title. In the event of sale or foreclosure or the house burning down, the lender is first in line to get proceeds as repayment. The lender will not hold title unless a foreclosure is completed.

For "fixtures" it's the same thing, just a different document is used for the lender to record his financial interest. The borrower owns the fixtures, but the lender records his financial interest. In CA, it's often done using a UCC-1 form filed with the Secretary of State. You can see one here:

http://www.sos.ca.gov/business/ucc/ra_9_ucc-1.pdf

Only thing is these need to be renewed every 5 years, which is why some lenders will include language in their deeds of trust making it function as a fixture filing, as well. The DOT is in place as long as the loan is outstanding.

The city would not hold title to the fixtures, unless there is a completed foreclosure.

Having said all that, I believe the $70 million dollar loan to the Kings actually involved taking title to the land (and maybe fixtures?) and not just recording a deed of trust. That is, in my experience, unusual.

Now that readers' eyes have glazed over, I'll return you to your regularly scheduled thread.

 

[Circa_1985_Fan]

Whether you like it or not, Las Vegas is moving forward with plans for a $9.5 billion development zone that includes a 22,000 seat arena. The plans are under way, and the financing is set. That's not a guess; it's fact. They would not be moving ahead with such plans if they thought a major league team was not coming. Okay, that last bit is speculation, but just think it over; would you build a dam in a canyon if you thought the canyon would never get rain??

Ah crap, do you want my to physically take you to Vegas to quell your inhibitions that 'it's over' and the Kings are moving there??? For God's sake, for the last time...THE KINGS AREN'T MOVING TO LAS VEGAS!!!!!!!!!! How do I know this?...I'm not clairvoyant enough on this subject, but neither are you, and for you to 'assume' that the Kings have already landed at McCarren Airport and started planting roots is asinine. Las Vegas will either get an expansion team from either the NBA or NHL, or a franchise from another city, not being Sacramento. But you can be like all the other Dave Jones lemmings and believe what you want to believe...the Kings may eventually leave our fair city...but it wont be to the 'obvious' place. Ok, that is all...for now...

 

[cfechter]

They don't "hold title." It's like a lien on your house.

The homeowner has "title" to the property. You own the land and improvements. In California, that is what your Grant Deed will show. However, the mortgage lender records a financial lien against the property (deed of trust in CA), giving them, among other rights, a financial interest in the property to which you hold title. In the event of sale or foreclosure or the house burning down, the lender is first in line to get proceeds as repayment. The lender will not hold title unless a foreclosure is completed.

For "fixtures" it's the same thing, just a different document is used for the lender to record his financial interest. The borrower owns the fixtures, but the lender records his financial interest. In CA, it's often done using a UCC-1 form filed with the Secretary of State. You can see one here:

http://www.sos.ca.gov/business/ucc/ra_9_ucc-1.pdf

Only thing is these need to be renewed every 5 years, which is why some lenders will include language in their deeds of trust making it function as a fixture filing, as well. The DOT is in place as long as the loan is outstanding.

The city would not hold title to the fixtures, unless there is a completed foreclosure.

Having said all that, I believe the $70 million dollar loan to the Kings actually involved taking title to the land (and maybe fixtures?) and not just recording a deed of trust. That is, in my experience, unusual.

Now that readers' eyes have glazed over, I'll return you to your regularly scheduled thread.

I understand a lienholders interest, but if the city is buying the fixtures, they're not borrowing anything from anyone.

Example:

Building cost - $600,000,000

Saca & investors put $50,000,000 down, borrow $550,000,000 - lender takes security interest in whatever they construct (of course)

City comes in, borrows -0-, buys $10,000,000 of fixtures.

Does city retain title to fixtures? Does city have an interest in the property then? Is it a gift to Saca & investors?

So, upon construction, building is worth a total of $700,000,000, 6 months down the road, Saca & investors decide to sell. Would the city get any money back as consideration for their gift/investment?

 

[VF21]

Ah crap, do you want my to physically take you to Vegas to quell your inhibitions that 'it's over' and the Kings are moving there??? For God's sake, for the last time...THE KINGS AREN'T MOVING TO LAS VEGAS!!!!!!!!!! How do I know this?...I'm not clairvoyant enough on this subject, but neither are you, and for you to 'assume' that the Kings have already landed at McCarren Airport and started planting roots is asinine. Las Vegas will either get an expansion team from either the NBA or NHL, or a franchise from another city, not being Sacramento. But you can be like all the other Dave Jones lemmings and believe what you want to believe...the Kings may eventually leave our fair city...but it wont be to the 'obvious' place. Ok, that is all...for now...

The announcement of Harrah's plans to build an arena makes it even MORE unlikely the Maloofs would move the Kings to Vegas. After all, they own the Palms. Why would they allow their team to play for a competing casino consortium?

 

[BMiller52]

The announcement of Harrah's plans to build an arena makes it even MORE unlikely the Maloofs would move the Kings to Vegas. After all, they own the Palms. Why would they allow their team to play for a competing casino consortium?

Wow I just thought of that haha. You're right though. Wonder if Vegas is trying to get the Sonics?

 

[kennadog]

I understand a lienholders interest, but if the city is buying the fixtures, they're not borrowing anything from anyone.

Example:

Building cost - $600,000,000

Saca & investors put $50,000,000 down, borrow $550,000,000 - lender takes security interest in whatever they construct (of course)

City comes in, borrows -0-, buys $10,000,000 of fixtures.

Does city retain title to fixtures? Does city have an interest in the property then? Is it a gift to Saca & investors?

So, upon construction, building is worth a total of $700,000,000, 6 months down the road, Saca & investors decide to sell. Would the city get any money back as consideration for their gift/investment?

I guess I'm not explaining well or not understanding what you're asking. I'm not sure if the Saca deal was supposed to be a straight donation or not (possibly- see Sheraton blurb below). Usually a city would not donate without some kind of requirements. Whether it is donated or a loan, the city would not be buying the fixtures. The developer would buy the fixtures with money provided by the city. If it's a straight over donation, then no, the city would have no financial interest in the property and no no claim to any repayment, if the developer sold. I would hope the city would at least file a UCC-1 for a few years. They could realease their interest later, when they felt they'd gotten what they wanted for their contribution (e.g. some amount of hotel tax revenues and property taxes). I honestly don't know exactly what financial terms for the money were proposed.

By the way, here are some links discussing hotel financing in downtown Sacto (Sheraton and others):

To help build the Sheraton, the city donated $8 million in cash and offered a 35-year lease on a city-owned parking garage. City Hall also assisted the sale of the tax-free revenues that paid for the hotel's construction. http://www.bizjournals.com/sacramento/stories/2005/02/21/story3.html?page=2

All of the full-service hotels built downtown for the last 20 years have had some kind of city subsidy, including the Hyatt, Sheraton, Holiday Inn Capitol Plaza and the Embassy Suites. http://sacramento.bizjournals.com/sacramento/stories/2006/04/03/daily3.html?page=1

Hotels are just one example of city assistance to business/developers. They just happen to have been fairly high profile.

 

[Circa_1985_Fan]

The announcement of Harrah's plans to build an arena makes it even MORE unlikely the Maloofs would move the Kings to Vegas. After all, they own the Palms. Why would they allow their team to play for a competing casino consortium?

Sweet Jesus can we now put to grave the 'greedy Maloofs are conspiring to, and always wanted to move the Kings to their 'hometown' Las Vegas' illogical nonsense? Probably not,
I'm sure, but some people just believe what they WANT to believe...so be it.

 

[PurpleHaze]

I don't know if it's been discussed before but IF (and it's still a fairly big IF) an NBA franchise lands in Las Vegas it will likely be through expansion, NOT an existing team relocating to Sin City. The reason is fees involved and what each NBA owner gets in such a closed deal. NBA owners must approve any new deal and each one gets something like $15-$16 million for an expansion team versus only $2-$3 million for a team relocating.

In a couple of years, you might have all sorts of strange moving chairs involving some weird possibilities. Here's a few to ponder:

Vegas gets an NBA expansion team as The Maloofs sell the Sacramento Kings only to purchase the new franchise in their booming desert playground. The Sonics move to Oklahoma City. The attendance flopping Memphis Grizzlies relocate to Seattle after almost ending up in Kansas City or Sacramento. The new owners of the Sacramento Kings (a consortium of the NBA, Sacramento area businessmen, City and County governments) finally strike a deal to build a new arena in the capital city, scheduled to open in 2011-12.

 

[Arena Skeptic]

Ah crap, do you want my to physically take you to Vegas to quell your inhibitions that 'it's over' and the Kings are moving there??? For God's sake, for the last time...THE KINGS AREN'T MOVING TO LAS VEGAS!!!!!!!!!! How do I know this?...I'm not clairvoyant enough on this subject, but neither are you, and for you to 'assume' that the Kings have already landed at McCarren Airport and started planting roots is asinine. Las Vegas will either get an expansion team from either the NBA or NHL, or a franchise from another city, not being Sacramento. But you can be like all the other Dave Jones lemmings and believe what you want to believe...the Kings may eventually leave our fair city...but it wont be to the 'obvious' place. Ok, that is all...for now...

The problem here is that the NBA believes it overdid expansion. The next expansion team won't be coming for a very long time, and when it does, it may not be located in the US or Canada. No, Vegas will be getting an existing team.

Look at the list of existing teams that are looking to move; that's where they will draw from. The Sonics will be going to OKC; that's a near-certainty. How many other teams are available? Using the pigeon-hole principal, it's not hard to see that there are few pigeons that need new holes, and it's a known fact that the Kings are one of them.

Vegas will get an existing team. It will happen.

More details here: http://www.lvrj.com/news/9329031.html

As for my comment on not building a dam in a canyon that doesn't get rain; true enough. So let me amend that: The canyon better get rain or have a river in it. I think the builders of this dam have noticed a water source.

Yes, this has to be June of 2008, or Bust. Seriously, this is it, and it's because of the lead-time such a project requires. You miss June 2008, and you're looking at starting over, with June 2010 as the next realistic date. Without an agreement in place before June 2010, the Maloofs will have no other choice. This really is a hard deadline.

With the level of funding this will require, they will need a vote. This isn't a mere $11 million in building fixtures; this is $500 million, plus probably another $500 million in infrastructure. Realistically, the Council will NOT vote to spend $1 billion without voter input.

There is competition in Vegas to see who gets to build the arena. Just contrast that situation with our own.

Near the end of his life, Joe Serna admitted that his biggest regret was not having a public vote on the $73 million loan. Of course, many of you will dismiss that comment, given that Graswich was the one who reported it.

Anyway, I'm certain a lot of people thought that the Colts would never leave Baltimore, or that the Browns would leave Cleveland, and the reasons for that skepticism are quite similar to the reasons for the Kings to leave Sac skepticism; it's such a huge cash-cow, how could they leave??

Um, because someone offers them better terms than what they already have?

Another good article here: http://www.lasvegassun.com/sunbin/stories/sun/2007/aug/23/566683355.html