Arena Finance Plan Unveiled!

Circa_1985_Fan

Circa_1985_Fan

All-Star
http://www.kfbk.com/pages/robmcalliste.html?article=9834041

Ticket surcharges and other profits from the arena will be used to help fill the revenue lost in the proposed parking lease deal so that the city of Sacramento can construct a new home for the Kings.

Plugging the $9 million hole will primarily come from those who will go to the new sports and entertainment complex at the Railyards, said Mayor Kevin Johnson’s Chief of Staff, Kunal Merchant.

“On all of the tickets, except for suite tickets, there will be a 5% surcharge,” Kunal said during a meeting at City Hall Wednesday.

That will include more than 200 events such as concerts, circus acts and Kings’ games.

A percentage of other revenue made will also filter back to Sacramento’s general fund. The city will receive 15% of the first $10 million made, another 30% of the next $5 million in profits and half of everything else made after that. AEG will get the rest for assuming control of the arena operations.

“That way AEG is motivated for the facility to be a success and the city is motivated for the (arena) to be a success,” said Merchant. “Together we wind up being on the same page.”

The upfront construction costs will be handled by the three major partners. The city of Sacramento will put up 65% of the estimated $390 million cost through the parking lease deal. If that does not equal $255 million, the city will look to sell vacant public land that will likely increase with the construction of the arena in downtown.

The Maloofs have agreed to pitch in $73 million while AEG will contribute another $59 million. A fundraising campaign known as "Brick-by-Brick" could add another $3 million.

Shifting Money:

To help the Maloofs, the city is also considering refinancing the current loan the Kings owners assumed when they took over the team in the late 1990’s.

The city will issue new bonds to retire the existing loan so that the Maloofs can avoid payments that are set to balloon in the near future.

Sacramento assumes the same risk and the loan amount remains the same. This will be done to help alleviate some financial burdens so that the Kings owners can reinvest into team and help with upfront construction costs.

Other Arena Updates:

* A one dollar surcharge on tickets will also be put into a fund for repairs. AEG has a similar formula at the Staples Center in Los Angeles. This will keep the financial burden of repairs away from the owner of the building, which is the city, as well as operator, AEG.

* Risks also associated with construction cost overruns will be handled by the developer Taylor/ICON. David Taylor said he is currently in talks with the contractor to ensure the arena project does not hit a snag when the tractors start digging into the ground.

The public will get an in depth report on the financial term sheet Thursday. City Council will take a vote to move forward on the arena March 6th.
 
I'm so happy this is happening. I drive right by the Railyards every morning at like 6am and I just keep glancing over there (quick glances haha) ... can't wait.
 
Honestly, I think this is about as good a deal as Sacramento could hope to get. And I would say the terms are pretty good in favor of reducing risks for the city. Remember folks, the city will be paying 65% of the costs of building an arena it will own 100%.

All the millions the Maloofs and AEG put into this deal is 100% investment in the city of Sacramento. That's millions in investment that never comes to Sacramento without this deal.

I think this just gets better and better. :) If some council members vote against this, then I'd have to argue that they don't want an entertainment/sports complex anywhere in Sacramento, no matter how good the deal.

Somewhere today I read or heard that there are already developers calling to ask about land near the arena that might be available. That's called a stimulus to revitalization that so many naysayers want to say never happens, even though it has happened in city after city. I'm so excited, not just for the arena, but for what the whole rail yards could be someday with enough vision and political will. Yay!
 
Not really sure this should go here but it's a vid from about a year ago talking about the Railyard past and future and also a bit of new Arena talk.

 
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kennadog said:
Somewhere today I read or heard that there are already developers calling to ask about land near the arena that might be available. That's called a stimulus to revitalization that so many naysayers want to say never happens, even though it has happened in city after city. I'm so excited, not just for the arena, but for what the whole rail yards could be someday with enough vision and political will. Yay!
Click to expand...

This is the part that really pisses me off. Where is Inland in all this? They should have been first in line to help get the ESC going since they have the most to gain.
 
Half of everything after the first like 15 mill or whatever? That's an insane amount of money that Sac will be getting. That's way more than the 9 million or whatever that needs to be back filled. Jesus Christ, the city of Sac is going to be raking in the dough. I thought AEG would end up getting more than that.
 
BMiller52 said:
Half of everything after the first like 15 mill or whatever? That's an insane amount of money that Sac will be getting. That's way more than the 9 million or whatever that needs to be back filled. Jesus Christ, the city of Sac is going to be raking in the dough. I thought AEG would end up getting more than that.
Click to expand...
That is net earnings. Kansas city has seen some of that revenue, but not immediately and not in amounts I would call raking it in. But it's all gravy and means that KC's arena is successfully producing enough net revenue to have some to share with the city. Of course, the naysayers don't want to hear that.
 
Section 101 said:
This is the part that really pisses me off. Where is Inland in all this? They should have been first in line to help get the ESC going since they have the most to gain.
Click to expand...
The city has to have developers. The city will get a lot of revenue from the eventually build out of the rail yards (I think over at least 20 years). They'll receive plan check fees, inspection fees, filing fees and eventually property taxes and sales tax from shopping in downtown. There is likely to be more big events and conventions that will bring in more hotel taxes and lots more spending in the city.

And if build out is over twenty or so years, that's construction jobs for a long time, which also gives business and keeps jobs for suppliers of building materials, both finished and raw. There will be housing i the rail yards, too, which should help keep it lively downtown after work hours. Eventually the airport, through light rail and AMTRAK will all feed into downtown. People will see something going on when they get off light rail from the airport or step off AMTRAK. It just gets me so excited. :D
 
kennadog said:
The city has to have developers. The city will get a lot of revenue from the eventually build out of the rail yards (I think over at least 20 years). They'll receive plan check fees, inspection fees, filing fees and eventually property taxes and sales tax from shopping in downtown. There is likely to be more big events and conventions that will bring in more hotel taxes and lots more spending in the city.

And if build out is over twenty or so years, that's construction jobs for a long time, which also gives business and keeps jobs for suppliers of building materials, both finished and raw. There will be housing i the rail yards, too, which should help keep it lively downtown after work hours. Eventually the airport, through light rail and AMTRAK will all feed into downtown. People will see something going on when they get off light rail from the airport or step off AMTRAK. It just gets me so excited. :D
Click to expand...

inland has 200+ acres in the railyards. What is the value of the property over the next 20 years with the arena vs no arena? When can they realize the profits faster?
 
nebs said:
Not really sure this should go here but it's a vid from about a year ago talking about the Railyard past and future and also a bit of new Arena talk.
Click to expand...

Impressive. That whole Railyards area can be a JEWEL. The Railyards can be what Baltimore did with the Oriole Park at Camden Yards and the restoration of the warehouses beyond right field. Then you add the river close by? Wow. Good for Sactown!

Go Kings!
 
Glad its released because maybe, but probably not, people will finally be informed. I was at the store today, wearing a kings shirt, and had the following conversation with a cashier:

Cashier: "Hey, its great that the Kings are getting a new arena and staying"

Me: Yea, I am really excited it!"

Cashier: "I just wish it would have been the Maloofs paying for it though and not tax payers"

Me: :confused::rolleyes:.....Actually, its not through taxes etc....

Cashier: :eek: Oh....well I just listen to the radio guys and stuff....


This thing is going to be built and on opening night we are going to have a group protesting about stealing money from tax payers and money for schools, police and parks....
 
ReinadelosReys said:
This thing is going to be built and on opening night we are going to have a group protesting about stealing money from tax payers and money for schools, police and parks....
Click to expand...

And that's so ironic... because the exact opposite will be happening. MORE money will be going to police, parks, schools (through property tax and property values increasing), etc. It really is crazy how stupid some people are. Sad, really.

We're basically turning unused assets (idle land), and leveraging in a creative way certain future revenues, to make something of tremendous value. An asset. An asset is something that PUTS money in your pocket every year. This is land improvement. Building value. Sometimes I think that the biggest problem with these people is they are just uneducated in general, not necessarily uninformed. They're just kinda dumb. It's like they just do not have the skills to understand the basic concept of creating value. Using limited resources to make something of greater value that actually improves, brings benefit, and generates cash. It's like they've never made a paper airplane. You have paper lying around, you turn it into something, that thing is better than what you had before.

One thing that might help is if someone does a giant meta analysis of the overall pos/neg impact of the the project. Create a prospectus, essentially, for the public. You'd have to include projected increases in all kinds of tax revenue, (including property tax increase, estimated sales tax, hotel taxes and fees. ticket surcharges... the whole bit.) I kinda think they just wanted to put some simple bullets out there for the public to digest, but you know there's gotta be a team of number crunchers somewhere creating some realistic, best case, and worse case scenarios about how all this is going to affect the general fund, and everything else. Give people some hard dollar projections. Since this truly is an investment, I do think people (while I don't want them voting on it) have a right to know what the overall projections are economically, and how we plan to get there, just like with any other investment.

Said this in another thread: Some people are demonstrating that they simply are unable to believe that good things can happen. That you can creatively put things together and arrange elements in such a way that all parties benefit. In that sense, the project is very inspiring, and I hope it can lift some people up out of their dark caves.
 
Last edited:
ReinadelosReys said:
This thing is going to be built and on opening night we are going to have a group protesting about stealing money from tax payers and money for schools, police and parks....
Click to expand...

And that's so ironic... because the exact opposite will be happening. MORE money will be going to police, parks, schools (through property tax), etc. It really is crazy how stupid (don't know what other word to use) some people are. Sad, really.

We're basically turning unused assets (idle land), and leveraging in a creative way certain future revenues, to make something of tremendous value. An asset. An asset is something that PUTS money in your pocket every year. This is land improvement. Building value. Sometimes I think that the biggest problem with these people is they are just uneducated in general, not necessarily just uninformed. They're just kinda dumb. It's like they just do not have the skills to understand the basic concept of creating value. Using limited resources to make something of greater value that actually improves, brings benefit, generates cash. It's like they've never made a paper airplane. You have paper lying around collecting dust, you turn it into something, that thing is better than what you had before.

Said this in another thread: Some people are demonstrating that they simply are unable to believe that good things can happen. That you can creatively put things together and arrange elements in such a way that all parties benefit. In that sense, the project is very inspiring, and I hope it can lift some people up out of their dark caves.
 
Dreamtiger said:
here is the term sheet (as an attachment on the March 6 council agenda):
http://sacramento.granicus.com/MetaViewer.php?meta_id=380674&view=&showpdf=1

Most interesting thing is that there will be private 1,000 space garage built next to the arena. Won't that affect parking revenues at all the city and county lots that are being depended on to raise city's share?
Click to expand...

Yeah but it will only affect the city in a positive way. They won't have to share that revenue with anyone, and what they might do is make that a "premium" lot, charging more (even if it is built into some season ticket or luxury box prices). My guess is they could get maybe $20 a space per nite for those. That's straight to the city, I'd guess, since after all the city owns it 100%.

rough numbers:

20 x 1000 = 20000

x 40 kings games = 800k

x additional 160 events =

another 3.2M

not bad, the parking business.

4M just running those numbers.
 
The Hammer said:
Yeah but it will only affect the city in a positive way. They won't have to share that revenue with anyone, and what they might do is make that a "premium" lot, charging more (even if it is built into some season ticket or luxury box prices). My guess is they could get maybe $20 a space per nite for those. That's straight to the city, I'd guess, since after all the city owns it 100%.

rough numbers:

20 x 1000 = 20000

x 40 kings games = 800k

x additional 160 events =

another 3.2M

not bad, the parking business.

4M just running those numbers.
Click to expand...

I believe it will include the handicap spaces as well. Aren't those free in public lots?
 
Dreamtiger said:
here is the term sheet (as an attachment on the March 6 council agenda):
http://sacramento.granicus.com/MetaViewer.php?meta_id=380674&view=&showpdf=1

Most interesting thing is that there will be private 1,000 space garage built next to the arena. Won't that affect parking revenues at all the city and county lots that are being depended on to raise city's share?
Click to expand...

I knew that was coming long ago. There's just too much money to be made off premium parking. Also interesting to note on the ESC location diagram that the oval shape is back in the middle of the plaza. Might just be a simple thing or it might mean that they needed some room for the new parking garage.

Another thing I noticed. They added a practice facility square footage to the original gross size of the arena. It's up about 15,000 sq feet in the team facilities section. And practice facility naming has been added. So mystery solved there.

Edit: Thinking about the position in the diagram. Would probably not be possible now. They built the platform tunnel right where they have the oval shown. Unless they plan on having you enter the tunnel for your train inside the event floor of the arena!
 
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Sorry more random stuff as I read the documents. Since the city railyard land was purchased with transportation sales tax funds, the ESC project must purchase the land required to build the ESC. It is not transportation related development That money goes to the Sacramento Transportation Authority. That can be used for transportation related projects. Which in this case I think can be used in part to purchase the two acres of Lot 40 and finance some of the needed SITF construction. So here's an example of the ESC project speeding up the completion of transportation projects where funding had sort of dried up at the state and fed levels.
 
Section 101 said:
inland has 200+ acres in the railyards. What is the value of the property over the next 20 years with the arena vs no arena? When can they realize the profits faster?
Click to expand...
All I can say, after many years of underwriting publicly subsidized development is that, yes, developers can make an obscene amount of money on a deal, if everything goes right. But, beyond any doubt, they take the biggest financial risks. Depending on the size of the project, they must put in millions to multi-millions upfront, just to hope that they eventually can get financing, that there's no unknown environmental hazards, that values of land don't plummet, that materials don't shoot up and that all the upfront money spent on the land purchase/option, architectural fees, engineering report costs, Phase I report costs, and soils reports costs isn't all money down the drain. Remember that Inland was the lender to the developer on the rail yards. They had to foreclose on that developer. That developer lost millions of dollars.

So while rewards can be very high, it's one of the most expensive crap games going. You need a huge stake just for the chance to win. Plenty of developers, including nonprofit developers, went belly up on deals when the real estate market crashed. Same thing happened back in the 90's, although we only thought that was a bad market drop at the time. Boy, if we'd only known what really bad was.

And the developer of the railyards can only be induced to develop the land, because of the city financial contribution. The city has committed a billion dollars in public subsidy from various sources, including federal and State sources to incentivize phased rail yard development. So that's spread out over the 20-30 year build out of all the acreage.

I'm not much of a fan of developers, by any stretch of the imagination, but I do know they put a ton of money at risk just to try and get financing to actually build.

If the city actually goes to bid out the parking lease, they estimate each applicant will spend $2-3 million preparing there proposal. That means that all those who aren't picked, just spent that money for nothing. Same thing happens with applications for public or private funding. A developer can spend a lot more than $2-3 million on an application and still end up failing to get any feasible financing to make the project work..
 
Last edited:
JB_kings said:
Another thing I noticed. They added a practice facility square footage to the original gross size of the arena. It's up about 15,000 sq feet in the team facilities section. And practice facility naming has been added. So mystery solved there.
Click to expand...
I kind of figured that's why the cost went from $387 million to $391 million. If the land in Natomas is to be sold, bye-bye to the practice facility the Maloofs built there.
 
Last edited:
JB_kings said:
Sorry more random stuff as I read the documents. Since the city railyard land was purchased with transportation sales tax funds, the ESC project must purchase the land required to build the ESC. It is not transportation related development That money goes to the Sacramento Transportation Authority. That can be used for transportation related projects. Which in this case I think can be used in part to purchase the two acres of Lot 40 and finance some of the needed SITF construction. So here's an example of the ESC project speeding up the completion of transportation projects where funding had sort of dried up at the state and fed levels.
Click to expand...
Yes and part of the year long planning indicated that the city would have to put in more infrastructure than they had originally planned for just phase 1 of the rail yards development. That extra infrastructure will speed up the overall development plan, since infrastructure to certain land will be available much sooner.
 
kennadog said:
I kind of figured that's why the cost went from $387 million to $391 million. If the land in Natomas is to be sold, bye-bye to the practice facility the Maloofs built there.
Click to expand...

Yeah I was in total geek mode last night. Got my calculator out and figured out that 15,000 sq feet is exactly two full NBA courts with sidelines all the way around. The original Populous plan already has the weight room, extra large home team NBA locker room and team offices. New plan is just about 700,000 sq feet total.

I still want my new ultra high tech and fabulous scoreboard!
 
kennadog said:
All I can say, after many years of underwriting publicly subsidized development is that, yes, developers can make an obscene amount of money on a deal, if everything goes right. But, beyond any doubt, they take the biggest financial risks. Depending on the size of the project, they must put in millions to multi-millions upfront, just to hope that they eventually can get financing, that there's no unknown environmental hazards, that values of land don't plummet, that materials don't shoot up and that all the upfront money spent on the land purchase/option, architectural fees, engineering report costs, Phase I report costs, and soils reports costs isn't all money down the drain. Remember that Inland was the lender to the developer on the rail yards. They had to foreclose on that developer. That developer lost millions of dollars.

So while rewards can be very high, it's one of the most expensive crap games going. You need a huge stake just for the chance to win. Plenty of developers, including nonprofit developers, went belly up on deals when the real estate market crashed. Same thing happened back in the 90's, although we only thought that was a bad market drop at the time. Boy, if we'd only known what really bad was.

And the developer of the railyards can only be induced to develop the land, because of the city financial contribution. The city has committed a billion dollars in public subsidy from various sources, including federal and State sources to incentivize phased rail yard development. So that's spread out over the 20-30 year build out of all the acreage.

I'm not much of a fan of developers, by any stretch of the imagination, but I do know they put a ton of money at risk just to try and get financing to actually build.

If the city actually goes to bid out the parking lease, they estimate each applicant will spend $2-3 million preparing there proposal. That means that all those who aren't picked, just spent that money for nothing. Same thing happens with applications for public or private funding. A developer can spend a lot more than $2-3 million on an application and still end up failing to get any feasible financing to make the project work..
Click to expand...

You still didnt answer the question. :p Do they see money sooner or later with an Arena and will their profits be more or less with an Arena? Sitting land is all costs no profits.
 
Rob McAllister ‏ @Rob_McAllister Close
In an effort to keep excitement up over arena it appears the city is going to release some new artist renderings at noon.

:)
 
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