Details on Kamilos-Taylor plan (split)

[Larry David]

Benchmarks

A. Framing the Deal

May 31, 2010 – Kamilos must agree to formal binding agreements to proceed on this project with the NBA and MSE.
July 15, 2010 – State legislation must be introduced that: (1) permits the land swap and (2) creats a tax increment financing (TIF).
July 31, 2010 – Kamilos must agree to formal binding agreements to proceed with State of California and Cal Expo Board regarding the private development of Cal Expo. Also, preliminary commitments for funding must be in place.
August 29, 2010. Last day for Kamilos and MSE to finalize agreements that secures the “ARCO Land” from MSE and MSE to approve preliminary designs from Kamilos.
At some unspecified time, but not until the items above are done, the city will: (1) resolve how the MSE loan will be addressed; (2) reach agreements with Kamilos that commits land at Arco and Railyard; (3) “develop the business points of the Kamilos proposal” – i.e. splits of costs and revenue streams.

Nothing is made public until all of the steps above are completed.

B. Closing the Deal

By December 5, 2011:
Cal Expo Board must vote to approve the deal.
State legislature must vote to: (1) swap the 350 acres of developable land at Expo for 188 acres in Natomas; and (2) designate the Cal Expo site as a special tax district – were the taxes from new housing, businesses, and retail development would help pay for the construction debt.
Governor must sign the law.
City Council must vote to approve the deal.


Part A is pretty straight forward. Part B – is complex and tough.


The more I look at this, I don’t think there are going to be many problems with negotiations between MSE and Kamilos. Along with the NBA, they walked this deal in together. They’ve already agreed on $300 million in rent and parameters that indicate the Maloofs will “donate the Arco land” and payoff the loan in some form. While they may need to hammer out some final terms, we should assume there is morethan enough money on the table and a sufficient framework between MSE and Kamilos in place to keep them happy. To put it another way, if these two principals are saying – “If you approve this, we’ll give the city/state a new arena and the Natomas land” … well, let’s just assume there are plenty of profits to divide. This deal will not hinge on shares of a Kings Dog.

1. State approval.
Per the Sac Biz journal on 3/12, the state gets: (1) the city’s and Maloofs 188 acres in Natomas as a proposed site for a new state fairgrounds; (2) 25% of future net profits when developers sell land parcels to builders; and (3) $2 million for planning and moving costs. The state gives up: (1) 350 acres of developable land (is bigger); and (2) tax revenues dedicated to the TIF.
In principal, it’s a fair deal. State, you are giving up a parcel that’s in a much better location and twice the size, but you’re unable to improve it yourself. In exchange, you initially get a great Expo hall and better parking. In the future, the profits will enable you to build modern fair grounds. That will make sense to a lot of people.

However, there are issues. Will a majority of the state representatives support a deal where the state takes a lesser asset to improve Sacramento? Can they pass the TIF? Does the deal work for Kamilos without a TIF? Is this a no-bid transaction, or will there be a FRP to attempt to get the best possible price? Will the RFP be limited to this plan or anybody willing to privately develop Cal Expo? Under any format, does somebody outbid Kamilos on the RFP? Will the State simply want the money for the Cal Expo land and move the state fair elsewhere? Maybe they complete the swap, but the 25% profits will go to the general fund and not the fair? How long until the new fair grounds are usable? How long until they have as many facilities at Cal Expo? Will the State fair temporarily be held elsewhere? How long?
Obviously, all of those risks are not equal. But I’m sure that list is not complete. State approval will be the most significant hurdle. And it might be a deal breaker. Don’t discount how broke the state is. In the 90s, that state built a ton of buildings downtown. The idea was – it will be cheaper in the long term because we’ll own them. For 20 years, we paid off the construction costs. This year – the state decided to sell some of them. Including buildings that were recently paid off. Now, this plan calls for those same people to say: (1) the State should trade this asset and improve the State Fair over the long term; and not (2) wow, that land is valuable, why don’t we just sell it to the highest bidder to help close the deficit.

2. Expo
To a lesser degree, you should be worried about the Cal Expo board. It’s still a risk. They could play the role of a holdout. Between attempts to grab a better deal and lobbying and misinformation from people affiliated with horse racing, the board could be a pest or even a hurdle.

3. City Council.

They should have the votes, but it’s not a no brainer. The loan, estimates regarding the value of the city’s land, Natomas lobbying, city politics, Dave Jones, impact on the State Fair, NIMBYs, traffic, ect. Don’t assume the city can’t fumble the final vote on the goal line. The final vote will probably occur when the NBA is not playing due to a lockout. That shouldn’t matter, but believe me. It will make the NO people scream a lot louder. Get ready for “The city is broke and this is a ____ million dollar public subsidy to the NBA, during a time when they aren’t playing because billionaires are arguing with millionaires over billions of profits. … Cops, schools, roads, ect….” Just prepare yourself for that now.

 

[bajaden]

Benchmarks

A. Framing the Deal

May 31, 2010 – Kamilos must agree to formal binding agreements to proceed on this project with the NBA and MSE.
July 15, 2010 – State legislation must be introduced that: (1) permits the land swap and (2) creats a tax increment financing (TIF).
July 31, 2010 – Kamilos must agree to formal binding agreements to proceed with State of California and Cal Expo Board regarding the private development of Cal Expo. Also, preliminary commitments for funding must be in place.
August 29, 2010. Last day for Kamilos and MSE to finalize agreements that secures the “ARCO Land” from MSE and MSE to approve preliminary designs from Kamilos.
At some unspecified time, but not until the items above are done, the city will: (1) resolve how the MSE loan will be addressed; (2) reach agreements with Kamilos that commits land at Arco and Railyard; (3) “develop the business points of the Kamilos proposal” – i.e. splits of costs and revenue streams.

Nothing is made public until all of the steps above are completed.

B. Closing the Deal

By December 5, 2011:
Cal Expo Board must vote to approve the deal.
State legislature must vote to: (1) swap the 350 acres of developable land at Expo for 188 acres in Natomas; and (2) designate the Cal Expo site as a special tax district – were the taxes from new housing, businesses, and retail development would help pay for the construction debt.
Governor must sign the law.
City Council must vote to approve the deal.


Part A is pretty straight forward. Part B – is complex and tough.


The more I look at this, I don’t think there are going to be many problems with negotiations between MSE and Kamilos. Along with the NBA, they walked this deal in together. They’ve already agreed on $300 million in rent and parameters that indicate the Maloofs will “donate the Arco land” and payoff the loan in some form. While they may need to hammer out some final terms, we should assume there is morethan enough money on the table and a sufficient framework between MSE and Kamilos in place to keep them happy. To put it another way, if these two principals are saying – “If you approve this, we’ll give the city/state a new arena and the Natomas land” … well, let’s just assume there are plenty of profits to divide. This deal will not hinge on shares of a Kings Dog.

1. State approval.
Per the Sac Biz journal on 3/12, the state gets: (1) the city’s and Maloofs 188 acres in Natomas as a proposed site for a new state fairgrounds; (2) 25% of future net profits when developers sell land parcels to builders; and (3) $2 million for planning and moving costs. The state gives up: (1) 350 acres of developable land (is bigger); and (2) tax revenues dedicated to the TIF.
In principal, it’s a fair deal. State, you are giving up a parcel that’s in a much better location and twice the size, but you’re unable to improve it yourself. In exchange, you initially get a great Expo hall and better parking. In the future, the profits will enable you to build modern fair grounds. That will make sense to a lot of people.

However, there are issues. Will a majority of the state representatives support a deal where the state takes a lesser asset to improve Sacramento? Can they pass the TIF? Does the deal work for Kamilos without a TIF? Is this a no-bid transaction, or will there be a FRP to attempt to get the best possible price? Will the RFP be limited to this plan or anybody willing to privately develop Cal Expo? Under any format, does somebody outbid Kamilos on the RFP? Will the State simply want the money for the Cal Expo land and move the state fair elsewhere? Maybe they complete the swap, but the 25% profits will go to the general fund and not the fair? How long until the new fair grounds are usable? How long until they have as many facilities at Cal Expo? Will the State fair temporarily be held elsewhere? How long?
Obviously, all of those risks are not equal. But I’m sure that list is not complete. State approval will be the most significant hurdle. And it might be a deal breaker. Don’t discount how broke the state is. In the 90s, that state built a ton of buildings downtown. The idea was – it will be cheaper in the long term because we’ll own them. For 20 years, we paid off the construction costs. This year – the state decided to sell some of them. Including buildings that were recently paid off. Now, this plan calls for those same people to say: (1) the State should trade this asset and improve the State Fair over the long term; and not (2) wow, that land is valuable, why don’t we just sell it to the highest bidder to help close the deficit.

2. Expo
To a lesser degree, you should be worried about the Cal Expo board. It’s still a risk. They could play the role of a holdout. Between attempts to grab a better deal and lobbying and misinformation from people affiliated with horse racing, the board could be a pest or even a hurdle.

3. City Council.

They should have the votes, but it’s not a no brainer. The loan, estimates regarding the value of the city’s land, Natomas lobbying, city politics, Dave Jones, impact on the State Fair, NIMBYs, traffic, ect. Don’t assume the city can’t fumble the final vote on the goal line. The final vote will probably occur when the NBA is not playing due to a lockout. That shouldn’t matter, but believe me. It will make the NO people scream a lot louder. Get ready for “The city is broke and this is a ____ million dollar public subsidy to the NBA, during a time when they aren’t playing because billionaires are arguing with millionaires over billions of profits. … Cops, schools, roads, ect….” Just prepare yourself for that now.

Great and informative post. In regards to number 3. I can't imagine the city council turning this deal down after all the other obstacles have been surmounted. I can see Kevin Johnson doing some serious body slamming and elbow twisting.

 

[TheWileyVet]

Benchmarks

A. Framing the Deal

May 31, 2010 – Kamilos must agree to formal binding agreements to proceed on this project with the NBA and MSE.
July 15, 2010 – State legislation must be introduced that: (1) permits the land swap and (2) creats a tax increment financing (TIF).
July 31, 2010 – Kamilos must agree to formal binding agreements to proceed with State of California and Cal Expo Board regarding the private development of Cal Expo. Also, preliminary commitments for funding must be in place.
August 29, 2010. Last day for Kamilos and MSE to finalize agreements that secures the “ARCO Land” from MSE and MSE to approve preliminary designs from Kamilos.
At some unspecified time, but not until the items above are done, the city will: (1) resolve how the MSE loan will be addressed; (2) reach agreements with Kamilos that commits land at Arco and Railyard; (3) “develop the business points of the Kamilos proposal” – i.e. splits of costs and revenue streams.

Nothing is made public until all of the steps above are completed.

B. Closing the Deal

By December 5, 2011:
Cal Expo Board must vote to approve the deal.
State legislature must vote to: (1) swap the 350 acres of developable land at Expo for 188 acres in Natomas; and (2) designate the Cal Expo site as a special tax district – were the taxes from new housing, businesses, and retail development would help pay for the construction debt.
Governor must sign the law.
City Council must vote to approve the deal.


Part A is pretty straight forward. Part B – is complex and tough.


The more I look at this, I don’t think there are going to be many problems with negotiations between MSE and Kamilos. Along with the NBA, they walked this deal in together. They’ve already agreed on $300 million in rent and parameters that indicate the Maloofs will “donate the Arco land” and payoff the loan in some form. While they may need to hammer out some final terms, we should assume there is morethan enough money on the table and a sufficient framework between MSE and Kamilos in place to keep them happy. To put it another way, if these two principals are saying – “If you approve this, we’ll give the city/state a new arena and the Natomas land” … well, let’s just assume there are plenty of profits to divide. This deal will not hinge on shares of a Kings Dog.

1. State approval.
Per the Sac Biz journal on 3/12, the state gets: (1) the city’s and Maloofs 188 acres in Natomas as a proposed site for a new state fairgrounds; (2) 25% of future net profits when developers sell land parcels to builders; and (3) $2 million for planning and moving costs. The state gives up: (1) 350 acres of developable land (is bigger); and (2) tax revenues dedicated to the TIF.
In principal, it’s a fair deal. State, you are giving up a parcel that’s in a much better location and twice the size, but you’re unable to improve it yourself. In exchange, you initially get a great Expo hall and better parking. In the future, the profits will enable you to build modern fair grounds. That will make sense to a lot of people.

However, there are issues. Will a majority of the state representatives support a deal where the state takes a lesser asset to improve Sacramento? Can they pass the TIF? Does the deal work for Kamilos without a TIF? Is this a no-bid transaction, or will there be a FRP to attempt to get the best possible price? Will the RFP be limited to this plan or anybody willing to privately develop Cal Expo? Under any format, does somebody outbid Kamilos on the RFP? Will the State simply want the money for the Cal Expo land and move the state fair elsewhere? Maybe they complete the swap, but the 25% profits will go to the general fund and not the fair? How long until the new fair grounds are usable? How long until they have as many facilities at Cal Expo? Will the State fair temporarily be held elsewhere? How long?
Obviously, all of those risks are not equal. But I’m sure that list is not complete. State approval will be the most significant hurdle. And it might be a deal breaker. Don’t discount how broke the state is. In the 90s, that state built a ton of buildings downtown. The idea was – it will be cheaper in the long term because we’ll own them. For 20 years, we paid off the construction costs. This year – the state decided to sell some of them. Including buildings that were recently paid off. Now, this plan calls for those same people to say: (1) the State should trade this asset and improve the State Fair over the long term; and not (2) wow, that land is valuable, why don’t we just sell it to the highest bidder to help close the deficit.

2. Expo
To a lesser degree, you should be worried about the Cal Expo board. It’s still a risk. They could play the role of a holdout. Between attempts to grab a better deal and lobbying and misinformation from people affiliated with horse racing, the board could be a pest or even a hurdle.

3. City Council.

They should have the votes, but it’s not a no brainer. The loan, estimates regarding the value of the city’s land, Natomas lobbying, city politics, Dave Jones, impact on the State Fair, NIMBYs, traffic, ect. Don’t assume the city can’t fumble the final vote on the goal line. The final vote will probably occur when the NBA is not playing due to a lockout. That shouldn’t matter, but believe me. It will make the NO people scream a lot louder. Get ready for “The city is broke and this is a ____ million dollar public subsidy to the NBA, during a time when they aren’t playing because billionaires are arguing with millionaires over billions of profits. … Cops, schools, roads, ect….” Just prepare yourself for that now.

thanks!!

 

[kupman]

Larry, you are taking posting to a whole new level. I think that your last couple of posts are far better than almost everything I read in the Bee. They should consider hiring you.

Props dude.

 

[nebs]

Definitely great post, Larry. Made my headache go away.

 

[Trueblood]

Excellent info as always Larry. It's much appreciated.

I don't think there will be a lockout. Despite the dark clouds hovering overhead, we have to remember that both sides need to leverage each other in order to maintain their bargaining position. When it's all said and done, I think a deal gets done. While they may not come to an agreement by July 1st, 2011 when the current agreement expires which would actually lead to a lockout that I'm saying won't happen, I don't think any games will be missed. I think that we'll see a good portion of the off season missed but like 1995, hopefully they'll get a deal done in September and rush the offseason signing period so that October training camps will start on time. 2005 shouldn't be mistaken for 1998 when we did see a long work stoppage.

My confidence comes from the fact that they are talking at such an early date. That didn't happen in '98 so we saw the work stoppage. This time, both sides made it clear that they want a deal in place.

Thanks again for the rest of the info. The timeline makes it clear why we may not see the new crib until 2015 which is what I've been asking around about. Now I see. It will be interesting.

 

[VF21]

I moved this into its own thread since it's obviously head, shoulders and torso above anything the local newspaper has seen fit to print.

Nice work, Larry!

 

[stevetaebo]

Thanks for the details Mr. Moag err Larry.

 

[Larry David]

Regarding the state laws we need - which are the biggest issue. Don't discount this fact. Of the three major sports, there are 12 teams in this state - 4 for NBA, NFL, and MLB. Also three hockey. While we are the only NBA team with a problem, every NFL team wants new digs. Way down the road, they will all need new places to play.

There will be a lot of reps that say - look, we are being asked to contribute land and taxes here ... and we aren't getting into this game. Other states do that, but not here. If we say yes now, it's too hard to say no later.

Don't confuse the NFL LA news. In order to draw superbowls to the state, they let them around some of the red tape for enviro and other studies. That does not equal.

Plus if the Kings move, it's most likely going to be intrastate. So they really can't play that card.

 

[kennadog]

I, too, see the State as the single biggest issue in the swap. It's kind of funny that they raise a bunch of issues about the land being at a low market value right now, where will the fair be temporarily, where will they get the money for a new fair, etc., when the guv was considering selling Cal Expo right now, with no plans or money or land to replace it. In other words a state fire sale of pr0perty.

Now that a deal could potentially be made they can't do it now unless they get this, this and that.

I'm uncertain why they talk about where the financing will come from to build a new fairgrounds. A few years ago the State Legislature allowed Cal Expo to create an authority that has the power to sell bonds. It was back before Cal Expo was being considered for an arena at all.

The idea was to rehabilitate the fair grounds, primarily with bond sale proceeds. That's money from private investors, although the selling authority has to guarantee repyment to the investors. The bond investors are supposed to be repaid from cash flow.

Actually, one arena proposal shot down some years ago was for the city to sell bonds to pay for an arena. Private investor money with a city guarantee of repayment.

By the way, I personally think the Natomas site would be a better fair location. Visible from California's main north/south highway, with markedly better transporation access. Light rail will eventually have a station within confortable walking distance.

 

[Trueblood]

One thing I did notice is that everything has to be signed off on by December 11th, 2011. Would it be possible for groundbreaking to occur the following summer 2012? And if so, I'm thinking that the arena would be ready by 2014 as opposed to 2015. Or would it take longer since the arena would be connected to a transit center?

 

[Larry David]

That's a good and valid question. But I think the issue right now is - does this even happen ... not the start and completion date for the arena.

There are just the timelines proposed by the task force. They city could change any of them. Also, snags, delays, ect ... could throw all of those dates out the window.

To me, 12-2011 is out there, because it appears unlikely the Kings don't file papers the next spring if something isn't done by that point. Thus, it's a benchmark to keep the process moving and not a hard or even firm date.

To answer your question, could they break ground before then. Yes. Or later. Or not at all.

Between 2 and 4 months from now, they will send up a bill (maybe the bill or perhaps just the first one). As we track that, we'll know a lot more about the shot we have. There might be a lot of people who share Dan Walters' view.

http://www.sacbee.com/2010/03/15/2606757/dan-walters-why-should-california.html

 

[Trueblood]

That's a good and valid question. But I think the issue right now is - does this even happen ... not the start and completion date for the arena.

There are just the timelines proposed by the task force. They city could change any of them. Also, snags, delays, ect ... could throw all of those dates out the window.

To me, 12-2011 is out there, because it appears unlikely the Kings don't file papers the next spring if something isn't done by that point. Thus, it's a benchmark to keep the process moving and not a hard or even firm date.

To answer your question, could they break ground before then. Yes. Or later. Or not at all.

Between 2 and 4 months from now, they will send up a bill (maybe the bill or perhaps just the first one). As we track that, we'll know a lot more about the shot we have. There might be a lot of people who share Dan Walters' view.

http://www.sacbee.com/2010/03/15/2606757/dan-walters-why-should-california.html

Thanks again. Here's a couple other negative nannies to go with Walters'.

http://fieldofschemes.com/

The Kings are the 3rd topic down from the A's stadium and then the Orlando Arena. It should be noted that this is a website geared towards negativity regarding the funding of stadiums and arenas so take it with a grain of salt but it's interesting none the less.

 

[kupman]

http://www.sacbee.com/2010/03/15/2606757/dan-walters-why-should-california.html

Good grief, this is another terribly slanted article/opinion in the Bee on the topic. Nowhere does the author mention what the deal has in it for Cal Expo/the state. 1) developed land (roads, water etc) near two major freeways, and an already built indoor arena - something that has been desired at CalExpo for years 2) 25% of profits from the sell of CalExpo land to build a newer, modern (albeit smaller) fairgrounds.

CalExpo is in trouble. They have no money for updates and repairs to a fairgrounds that is terribly out of date. This is an opportunity to start something new and better for the fair by giving them a new place that is already developed and by generating money.

It seems that many people believe that if a deal benefits the Maloofs/NBA it must be bad for everyone else. Everything is a zero-sum game in the eyes of many people. It is hard for them to believe that a deal could be made where everyone benefits.

If the state says no to this deal, where does the CalExpo board go from there?

 

[Larry David]

Nowhere. Cal Expo has the power to use the state land, but not to sell it. The convergence plan relies upon the sale. In fact, the first Cal Expo plan does as well.

The state doesn't pass this it's either: (1) game over; or (2) back to square one ... depending on how you want to spin it.

 

[Emma]

If I had 1 billion + dollars to blow I'd build the most incredible stadium ever. It would be better than the Colosseum in Rome. That's because I'm freaking awesome though, and nobody else in the state wants to be awesome like me

 

[kennadog]

I honestly think this is Sacramento's last chance to keep the Kings in town and I won't blame the Maloofs for moving the team. As I've said before, it would not be the Kings leaving Sacramento, it would be Sacramento telling the team to leave. All that's needed is the tar and feathers.

Dan Walters is an idiot. It mentions refurbishing the current Arco like that's even viable. The city's own consultant reports already said, several years ago, that the current Arco is near the end of its economic life. Engineers have already determined that the current foundation cannot support the needed rehab.

There's great memories of what's taken place in Arco, but too many people seem to not understand that Arco was an extremely cheap arena when it was built. It was never meant to last this long and the prior ownership was trying to work out an arena deal, which they couldn't get either. They were going bankrupt, drowning in red ink. Mayor Serna was able to get them a loan (the $70 million) to help them with the red ink, but they ended up having to sell to the Maloofs anyway.

Some idiot poster over at the article says there's "claims" that the Maloofs have made payments on the loan, but the balance is still pretty high. Another idiot who doesn't know that the Maloofs are actually ahead in their payments to the city. When times were flush, the Maloofs paid extra. The city has confirmed this and it was in the Bee.

However, it's just like any mortgage, interest heavy payments on the front end. As a matter of fact, I believe in was only ineterst-only payments for a bit.

I'm just getting sick of the whole thing. Other cities seem to have the ability and the desire to build arenas, even with no pro sports teams or any expectation of getting one. Downtown Sacramento is a testament to zero visionary leadership. Decades trying to get something done at the railyards and we still haven't broken ground. Blight on K street that is still trying to get something attractive and enticing done.

And that's only scratching the surface. Take a look at what the citizen's of Kansas City have been getting done in their city. Many public projects to enhance the city, including a brand new arena. California meanwhile is just crumbling and deterioriating in every aspect, except prisons.

I work in government financing. Billions of dollars in government funding go to private businesses ever year. Why don't any of those projects get such intense media scrutiny and public outrage? Who knows, but its highly biased. Do taxpayers really think Hyatt, Sheraton and Regency should have gotten the taxpayer subsidies they received (The Hyatt for years). Maybe the city shouldn't have promised the developer of the railyards $1 billion in pure taxpayer subsidies.

 

[Trueblood]

Not only that but the public financing that a sports organization receives benefits the entire community when you consider how many different types of events take place at the arena. There's literally something for everyone when you consider that these arenas host WWE, MMA, concerts, ice shows, circuses, conventions and what have you.

When I was young in the bay area, nobody ever talked about going to the old Oakland Coliseum Arena for Warrior games. It was always Metallica, a car show or WWE (at the time it was WWF) wrestling. But I guess if it benefits the Maloofs and some 20 something "urban" athletes, there's a problem.

 

[Larry David]

While these are all valid points, this is entering another debate. Sure - the city will contribute some land and other funds ... but it doesn't require a public vote and it will lead to a ton of downtown development. So it's probably going to happen.

Here, the state will be asked to trade an asset to: (1) get a less valuable asset - which is more functional; and (2) help a struggling part of California. That's a whole different debate than just public subsidy. That's the debate that matter now. It's a new issue and new debate.

Taking them out of order, many will say the state is too broke for a Sacramento jobs project. Moreover, while there a fair ground is involved and there will be non-NBA events ... this still boils down to a sports arena. You will need votes from reps that are Chargers fans or from the Bay Area that will say - why you and not us. In this state, there are going to be a ton of reps that feel just like Dan Walters and view this as Pandoras Box.

Thus, the vote will turn on the first issue. We'll say ... Expo stinks, but if you let us swap the land you'll get a much better fair ground CA. I'm rooting for this, but if I was in their shoes - I wouldn't vote for that. The first Expo plan wasn't good for Sac, but better for the state. Under the first plan, the state keep more of the valuable land plus they got a modern fairground. Here, they get a parking lot, one huge expo hall (converted arco) ... which is old with a poorly designed roof, and later they can use their share of the profits to: (a) get back to where they are now in terms of facilities; and (b) make a modern fairground down the road. Part B is also dependent upon the market rebounding and cost over runs. You are asking them to give up a ton now (land not facility), to get more later. Not an easy sell.

They know it. So Kamilos wants to bridge that with the 25% profits thing. They want some reps to think - "Maybe we make Natomas fairground as decent as Cal Expo and then claim the profits for the general fund at that point." That my friends is playing with fire. The idea concerns selling Cal Expo and putting money into the general fund. Danger Danger Will Robinson!

You can say - well the state won't improve the fair without this. But they really don't care about that very much. They green lit the bonds, but it's not like Cal Expo ranks very high on the to-do-list. Otherwise, you would see some change out there.
And the end of the day, they have to get a majority vote to believe this is good for the whole state. That will be tough.

Due to the time line, this will get tossed out there before/during an all time budget fight. You can't forget about that. I think the odds are long on a state vote.

 

[kupman]

I am still unclear exactly how this plan works. Who gets the money from the sell of the Expo land? Does that all go to Kamilos' side of the deal? The state gets 25% of the net profits from the newly developed land to help build the new fair grounds. How is the other 75% divided?

Will there be negotiating/countering on the side of the state to try and sweeten their end of the deal? How much could Kamilos give-up and give to the state before the deal no longer works from his end? This last one is rhetorical.

 

[Larry David]

Nobody knows. Presumably, most of the money is going to Kamilos – which makes sense. He’s taking the most risk, has to pay interest to the Auzzies, pays the upfront costs for the arena and perhaps the modification of Arco, ect. While it’s unclear, it appears Kamilos is responsible for laying out the funds to get the ball rolling in order to reap the benefits on the backend.
Although nobody knows for sure, I doubt anybody sees any/much money until the significant initial costs are paid down/off. Thus, probably no split until they get to net profits. This will take some time, because the development occurs later.

To grease the wheels, the proposal calls for the state to get a 25% share of the net profits. After that, nobody has hinted how the other 75% is split.

It appears to me, the Maloofs must be getting a percentage on the backend. Right now the deal calls for them to “donate the land at Arco” and pay a lot of rent. At first glance that made no sense. That would be way more than anybody can imagine. Pure speculation here, but logically the Kamilos/Maloof partnership requires the Maloofs to throw their land into the deal to get the ball rolling and the value comes back to Maloofs with a profit share on the backend in either: (1) a defined sum; or (2) share of the net profits (depending on what they agreed to, appetite for risk, ect.) If the deal required Kamilos to buy the Maloof land, that would be another huge cost for Kamilos on the front end … which means more interest, ect.. Moreover, it won’t be very popular for the city to really donate their land while the Maloofs “donate” their land. And by donate, I mean put it in … and get paid for it several years later. For that reason, I’m assuming the deal is structured with a Maloof backend and they are trying to keep it on the down low/call it something else.


I could be wrong. But if I am, the Maloofs are contributing 300 million in rent and everything they own in Natomas to play in the building they won’t own. Which of those two options make more sense?


I think there are three reasons why we don’t have an idea about the Kamilos/Maloof split for a long time. First, it’s very early and the final terms still need to be negotiated. Second, it’s not going to be very popular. When they go before the legislature, we’ll get a good idea of the total profit. Anybody can apply a percent to those numbers and come up with some really nasty PR and press. Third, they are saying the Maloof land is going to be donated … but I think the full scope of the deal will stretch that term … and they don’t want to deal with the issue / press.

Look, don’t get me wrong. This is a great deal for the city and the public … no matter who makes however much money. But Kamilos and the Maloofs understand how segments of the public will react. So even if you don’t care – and I don’t – others will.

So that’s my guess and I wouldn’t expect to hear much on this point for a while.

 

[kupman]

Thanks for the feedback Larry.

It is pre-mature to be firmly for or against this deal until the details are known.

Those that say "the public is getting screwed again," are just displaying a knee jerk reaction and unveiling their biases. No deal...and I mean if if the Maloofs donated their land and paid for the arena themselves would make many of these people happy.

On the other side of the coin are those that are all in without knowing what "in" entails, just in the name of getting an arena built.

We will have to patient, but I will pray that all sides find enought common ground to make it happen. This is not a zero sum game. All parties stand to win if it happens.

 

[Trueblood]

The Maloofs won't own the building as the city will own it when the 30 years are up but won't they control the revenue that flows in? I was always assuming that they would pay some management team like AEG or SMG to book events at the arena but then would control the revenue. Knowing that they will probably see double the amount of suites plus several additional revenue generators like club seats and restaurants AND get revenue from events that the current building can't host due to limitations, you have to figure that they will make up the $10 million plus some so I'm guessing that's the incentive on their end.

I could be wrong though. I'm just thinking that this is an ownership group that have been hard nosed negotiators, and rightly so considering that they are in a small market. Because of that, I have to think that there is something beyond just a nice building with extra seats and suites. Those alone will barely make up the $10 million. 70 suites being leased at an average of $150,000 per season gets you a tad over $10 million. I don't think that alone will cut it for the ownership group. I have to think they will control revenue from the other events as well.

 

[kennadog]

Why would MSE hire AEG or anyone else to run the arena and book events. They won't be the arena owner, so its not their decision, unless the owner agrees to it. Also, MSE already does all booking and operating at Arco. They are as qualified as some other entity to do that. I have to think the owner (Kamilos) won't run the arena. My guess is MSE will run all operations at the arena and pay all operating costs.

Parking revenue may be part of it, too. There's just a whole lot to negotiate and pin down amongst the parties.

Also, since MSE won't own the arena, they may have no responsibility for paying for physical upkeep of the new arena, like they do at Arco. (A cost I'm sure has risen dramatifcally for them over recent years.) That would reduce costs for MSE. Of course, who handles what physical upkeep costs will be part of the negotiations. Maybe owner/tenant split costs. Maybe MSE gets a cap on contributions to upkeep. All negotiable between them and the owner of the arena.

Still, I'd bet they will have less or no responsibility for capital needs at the new arena.

 

[Trueblood]

If MSE is confident in their ability to book enough events to make themselves more profitable then definitely, they should do that but the trend around the country lately is to contract a separate management team who is well connected and experienced in booking events. The thinking is that you pay the contractor X amount of dollars and the extra booking you get due to their ability to do that puts X plus whatever million in your pocket to make it financially feasible for both parties. The contractor gets around a million a year to book events and the owner gets an extra 5 to 10 million due to having said contractor.

I know that AEG manages the Prudential Center in Newark even though it's owned by the city. Not sure who owns the Sprint Center in KC. I think it's the city as well although it could be AEG but I do know that AEG runs that facility as well.

SMG doesn't own any building but manages NBA arenas in OKC, Oakland and New Orleans. Bennett, Cohan and Shinn know that they have no clue as to how to book stuff and neither do the building owners so it makes sense.

I'm guessing the same as you in that MSE is still well connected enough to do it on their own but I'm just throwing out ideas.

At the end of the day, it's all a moot point. What we're trying to figure out is what makes this a good deal for the Maloofs and all the extra events that the new arena will be able to hold that Arco doesn't hold will bring in a lot of extra revenue. If the Maloofs can control said revenue then that's our answer as it's a good deal for both them and the city. City owns the crib after 30 years while the Maloofs control the revenue stream while they are still in business.

 

[Gary]

Regarding the state laws we need - which are the biggest issue. Don't discount this fact. Of the three major sports, there are 12 teams in this state - 4 for NBA, NFL, and MLB. Also three hockey. While we are the only NBA team with a problem, every NFL team wants new digs. Way down the road, they will all need new places to play.

There will be a lot of reps that say - look, we are being asked to contribute land and taxes here ... and we aren't getting into this game. Other states do that, but not here. If we say yes now, it's too hard to say no later.

Don't confuse the NFL LA news. In order to draw superbowls to the state, they let them around some of the red tape for enviro and other studies. That does not equal.

Plus if the Kings move, it's most likely going to be intrastate. So they really can't play that card.

Dang it.. Made me look for 4 NFL teams hehe..

 

[stevetaebo]

From PW extension thread:

The strong possibility a lockout might wipe out the entire 2011-12 – and management’s understanding of this situation – tempers the news.

Larry, what's your opinion on how a lockout could affect arena progress? Could this some how be positive that a team wouldn't want to relocate during a lockout? Maybe it would help us buy time?

 

[Larry David]

I think it’s mostly a non-issue.

I think people like Dave Jones will use it for bad press, they will say “Why should we be dedicating public resources (at most land) as a public subsidy, when billionaires are so busy fighting with millionaires they’ve decided not to play the season?” However, that’s not really going to swing this. If they can get state approval (probably the threshold issue and it’s tricky) I think they probably get this done. And of course, it can’t happen without that.

From the Maloof standpoint, I don’t think it changes anything. No matter how much the NBA economic model changes, it appears that: (1) if there is an arena in Sacramento, the Maloofs would rather be here; and (2) if there is no road to an arena, eventually they must leave town. No matter how low a hard cap is, that’s probably just the bottom line.

So to answer your question, I don’t think it affects timeline in any meaningful way.

But you may not have thought of this. The Kings could leave town during the lockout. Perhaps the legislation gets shot down this summer, but the idea is “well, we’ll run it up the flag pole a few more times.” They continue to work on it throughout early 2011 and thus no relocation papers are filed by March 2011. Everybody goes to fan appreciation night 2011 assuming that things are still “up in the air” for an arena, but no move is eminent. Wheels fall off with the state somewhere around the budget votes in summer 2011, lockout imposed, season canceled in early January 2011, relocation papers filed in February or March, and Kings emerge from lockout in another city. So unless you are bound and determined to see the last Sacramento Kings game and you have to realize it as you watch it … no change. But if you consider that the Kings “leaving town without you getting to say goodbye.” It’s possible.

 

[kennadog]

Not saying it will happen, but if the team moves, I think I'd rather have them move really quickly. I couldn't stand having the team playing here, when I know they are not ours anymore. It would be like a prolonged death watch.

 

[FakeInjury]

The Arena still doesn't get made without the taxpayers. Look...the land gets moved around and arco gets its death sentence written on paper and fully pre-paid to be demolished in 2016, its cheaper if its pre-paid. Construction begins downtown. Construction is halted downtown. Sacramento either ponies up to finish the new arena at a PREMIUM or Construction is cancelled AND Arco goes boom. Its the only way to gain leverage against a city, hold downtown hostage...perfectly legal, no threats, just can't afford to finish the 600million dollar Arena...sorry...but if you do finish it....we get our 75% because we started it, and by giving up arco land worth ~200million and paying 300 million in rent, + providing the NBA team....they would own over 75% of the investment by only paying 50%. Not to mention the insider real estate trading they will probably do. Its what i would do if i had the resources. Shell investors ROCK!!!!