Bee (Breton): Arena funding is messy game

[VF21]

http://www.sacbee.com/100/story/47214.html

Marcos Bretón: Arena funding is messy game
By Marcos Bretón - Bee Columnist
Last Updated 12:07 am PST Sunday, October 29, 2006

It would be easy to dump on officials from the city and county of Sacramento for the failure that is the proposed downtown arena for the Kings.

Measures Q and R -- which ask voters to raise the county sales tax and fund a $500 million arena -- will be trounced at the ballot box Nov. 7.

What would you expect after Sacramento and the Kings failed to reach an agreement on how to build the arena even though the two measures remain on the ballot?

Consequently, many are left wondering if this means Sacramento is a backward cow town.

Nope.

If anything, Sacramento's stab at building an arena in the public eye was doomed because such efforts are stacked in favor of the owners and don't pass public scrutiny.

The whole idea of taking a public giveaway for sports owners to the polls is like lighting a stick of dynamite and hoping it doesn't blow up.

Yeah, you heard right. Boom went the dynamite.

That's what Sacramento gets for trying to convince you that a virtual pile of manure -- a half-cent sales tax for a $500 million arena -- actually smells good.

And that's what Sacramento gets for trying to negotiate with an NBA monopoly that knows only one way to play:

They win, you lose.

In California, there was no successful model for Sacramento to follow in this election season.

The only places where arena initiatives worked were in cities where there were no owners to divide the electorate at voting time: San Jose and Anaheim.

Or where there was no public vote, a la Stockton.

Here, you had the worst of both worlds.

You have a public vote mandated by state law because it involves a sales-tax increase, where other cities raised taxes or diverted public money in back-room deals.

Meanwhile, the Kings' owners have done a swell job of swaying skeptical voters. The TV commercial in which the Maloofs scarf down burgers and a $6,000 bottle of wine while their net worth is trumpeted at one billion dollars?

Priceless.

So what's the alternative for Sacramento?

Say to (heck) with the voters, find a way to tap the money, break ground and brace yourself for whatever comes.

I'm not advocating this, just stating the facts.

In every city, arena/stadium deals are messy. They are about building showcases for owners who often contribute little, reap all the profits and sometimes pay no property taxes or rent.

And then the owners barely blink while saying without shame that they make no money off their ventures.

Sound familiar? Yeah. Think it's unique? No way.

To sidestep voters leery of such bunk, cities such as Washington, D.C. -- with its huge crime rate -- chose to raise business taxes and pump other city coffers into a new stadium for the Washington Nationals.

Approved by the city council in an 11th-hour pact in the dead of night, D.C. Mayor Anthony Williams then tried to slip out of council chambers surrounded by a half-dozen police officers.

"I don't want to talk to anybody, OK?" Williams was quoted as sneering in the Washington Post.

Originally thought to cost in the $400 million range, the D.C. stadium will cost more than $600 million -- all paid for by D.C. residents.

In Detroit, where thousands of auto workers have been laid off, there were no public votes to pump hundreds of millions of dollars into Comerica Park and Ford Field, homes of the Detroit Tigers and Lions.

And in Minneapolis, a city known for good government, politicos bypassed a skeptical electorate to approve a new downtown ballpark for the Minnesota Twins.

Not restricted by law, Hennepin County officials raised the sales tax without a public vote.

Were people in Minneapolis angry? Yeah. Did Minnesota politicians pay a price for their treachery? No. Have many other cities, such as Memphis, Tenn., Indianapolis and Charlotte, N.C., done the same? Yes.

What does it all mean?

That despite trying to hide details of arena negotiations with the Kings from the public, Sacramento's arena quest was clean as these things go.

Which is why it will fail miserably Nov. 7.

About the writer: Reach Marcos Bretón at (916) 321-1096 or mbreton@sacbee.com.

 

[twosomeca]

Getting a publicly funded arena out here on the west coast has become an almost impossible task, and we all know what the problems are here up and down the state. Even if the proposal was in hand, this would still be a tough battle. The NIMBYs come out in force on stuff like this.

 

[ladyjay114]

The NIMBYs come out in force on stuff like this.

Amen to that!

I'd love to ask these people opposing the plan what their plan is for revitalizing Sacramento.

 

[kupman]

Amen to that!

I'd love to ask these people opposing the plan what their plan is for revitalizing Sacramento.

I completely agree!!! I have asked anti-arena folks this question before and have never received a concrete answer in return.

 

[kupman]

That's what Sacramento gets for trying to convince you that a virtual pile of manure -- a half-cent sales tax for a $500 million arena -- actually smells good.

I thought it was a 1/4 cent sales tax for a $1.2 billion civic improvement project.

 

[Arena Skeptic]

Amen to that!

I'd love to ask these people opposing the plan what their plan is for revitalizing Sacramento.

I believe strongly that is a very fair question.

Measures Q&R would not revitalize Sacramento. What they would do is allow a party to enjoy 100% of the benefits of a very expensive building, and assume 0% of the risks associated with that building (note my wording: with the BUILDING. The business itself is still a risk). The taxpayers would be on the hook for $600 million plus, and it's a virtual lock that there would be cost overruns on this project. We also would then pay for "capital improvements", although this clause is in a now-defunct terms sheet.

The worst part, though, is people keep saying that the City will get paid back because of all the new tax revenues this will generate. If we exempt the users of that arena from paying property taxes, as the now-defunct terms sheet outlines, then the part about the taxes CANNOT be true.

Yes, there will be other development around it, but the users of that arena (the ones we'd allow to have 100% of the revenues this deal would produce) will be allowed to control what businesses can form around the arena. Oh, and by the way, since we'd be building them the parking lot, from which they'd control 100% of the revenues, they'd be able to undercut existing parking downtown, which could bankrupt the very party that built this lucrative parking lot in the first place.

Then, I think in order to develop in the railyard, any other new businesses that locate there will simply tell the City that they want them to pay for 3/4 of their construction costs and grant them the exact same tax breaks. Once you set a precedent, it's hard to unset it.

What do I think is fair? Because this is helping to rebuild a decrepit area of town, I recognize that they need tax breaks. So, fine, we pay for 40% of the structure, they pay for 60%, and we give them SOME property tax breaks. Make it so for over the 30 year period they'd occupy the building, they'd pay for 60%-70% of the building's costs.

I think that's fair. I'd vote for that.

Also, it's very foolish to negotiate with a developer who doesn't even own the land yet. Maybe we should wait until escrow closes before we even entertain the idea of this. Or, heck, maybe you just sit on it for a year, and then declare eminent domain on UP. Just tell them, this is clearly for the public good. I'm thinking that those land costs would fall a lot, once a third party came in and appraised the property. With the toxics issues, some of it may even be "free" (although once you paid to clean that land, it'd no longer be free).

I also think that 1) taxpayers will NEVER approve this, if it contains a sales tax hike, and 2) the people who GO to events should pay for most of the building, using a ticket surcharge (events at Arco currently include a surcharge to pay for the $73.7 million loan).

I think I DO have some cohesive ideas. I know you think everything I suggest is absurd, so fine, go ahead with the same bankrupt idea in 2 years, a sales tax hike and the users of the arena pay well under 20% of that arena's costs, and watch it lose 80-20 as well. Then what? Two years later, try the same thing again?

Bad idea.

 

[kupman]

What do I think is fair? Because this is helping to rebuild a decrepit area of town, I recognize that they need tax breaks. So, fine, we pay for 40% of the structure, they pay for 60%, and we give them SOME property tax breaks. Make it so for over the 30 year period they'd occupy the building, they'd pay for 60%-70% of the building's costs.

I think that's fair. I'd vote for that.

What is more likely, the public passes Q&R or the Maloofs agreeing to pay for 60-70% of a new arena?


AS, if you were able to sit down with the Maloofs and get them to agree to that deal you would have the undying admiration of millions.

 

[Warhawk]

What do I think is fair? Because this is helping to rebuild a decrepit area of town, I recognize that they need tax breaks. So, fine, we pay for 40% of the structure, they pay for 60%, and we give them SOME property tax breaks. Make it so for over the 30 year period they'd occupy the building, they'd pay for 60%-70% of the building's costs.

I think that's fair. I'd vote for that.

I also think that ... the people who GO to events should pay for most of the building, using a ticket surcharge (events at Arco currently include a surcharge to pay for the $73.7 million loan).

Problem is, none of this is financially viable in Sacramento. You're living in a dream world.

MSE loses money more years than not (and lose more than they make overall) at ARCO, based on the SacBee analysis done a while back. There is a certain minimum amount of losses they seem to be OK with, and we should be happy they are willing to go that far.

There is NO WAY for them to recoup the losses they would endure for your plan to come to fruition. They'd lose money hand over fist.

And ticket prices are already high. You really can't raise them any more.

If we want to have an ARCO-type facility in Sacramento, it isn't going to primarily come from funding from ANY NBA owner (MSE or otherwise). Financially it cannot work in this market. CANNOT. It will take tax $$$ or a plan like the failed private land rezoning/development plans to raise the $$$ necessary to pay for it.

I appreciate your enthusiasm for an alternate funding mechanism, but how about proposing one that works in the real world. Everything you are asking for is just rediculous to consider right now. You can't just wave your magic wand and have a wealthy benefactor drop $550 million in your lap for a facility like this.

 

[Arena Skeptic]

What is more likely, the public passes Q&R or the Maloofs agreeing to pay for 60-70% of a new arena?


AS, if you were able to sit down with the Maloofs and get them to agree to that deal you would have the undying admiration of millions.

Maybe not as much as you'd think.

Long-term, though, one issue must be addressed, and that is the health of a sport I've loved for decades (I'm an old guy; almost FIFTY!). If the only way this sport can currently survive is for taxpayers to pay 80%+ of building costs, then I'd say this sport is in crisis. We've finally hit that stretch where expenses are exceeding revenues by an overwhelming amount.

Orlando, Memphis, Seattle, Sacramento, Portland... All in trouble. Probably others, too.

Even the situation with the Twins in Minnesota. Did you know that sales tax hikes require taxpayer approval in Minnesota? Well, opposition to the .15% tax hike in Hennepin was about 80%, and the owners knew that. So they went to the state legislature there, and got an exemption to the rule for this case. All Hennepin county legislators OPPOSED this, but it passed a vote in their legislature anyway; so they got a special exemption that allowed the sales tax hike without a public vote.

What if they tried that here? What if our legislature agreed to suspend Prop 13 for this purpose, and they just went ahead and raised property taxes without a public vote?

The dumb owners just can't stop themselves. If their payrolls get too large, they just go ahead and bid on players anyway. There's no restraint. I suppose some sort of profit-sharing plan may help there. By that I mean, heck, I bet the TV ratings for Kings-Lakers games in LA are just huge; why shouldn't the Kings benefit from that? LA TV rights are triple what they are in Sac.

Then these owners tell the public, "Look at the wonderful way we've been managing this team, but it all comes at a cost. We can't compete in this market any more in this building."

I blame the owners, the agents, the players, and even the fans, I'm afraid to say. Kings have the third-highest ticket prices in the NBA, and the fans (mysteriously) continue to pay, and yet they're losing money? There's something wrong with this picture, and I think moving into a new building merely delays far larger problems than they have now. In a couple years, when even the bad teams have $100 million payrolls, the crash will be very ugly.

Taxpayers who don't go to games see the average NBA salary (I think it's over $4 million right now), and just cannot justify being taxed to indirectly support that. It's offensive to them. That's why I keep saying if the next crack at this has a sales tax component, we're right back to an 80-20 loss.

Does any of this make sense??

 

[VF21]

I thought it was a 1/4 cent sales tax for a $1.2 billion civic improvement project.

It is. Breton made a simple mistake and his copy editor didn't catch it.

 

[kupman]

Maybe not as much as you'd think.

Long-term, though, one issue must be addressed, and that is the health of a sport I've loved for decades (I'm an old guy; almost FIFTY!). If the only way this sport can currently survive is for taxpayers to pay 80%+ of building costs, then I'd say this sport is in crisis. We've finally hit that stretch where expenses are exceeding revenues by an overwhelming amount.

Orlando, Memphis, Seattle, Sacramento, Portland... All in trouble. Probably others, too.

Even the situation with the Twins in Minnesota. Did you know that sales tax hikes require taxpayer approval in Minnesota? Well, opposition to the .15% tax hike in Hennepin was about 80%, and the owners knew that. So they went to the state legislature there, and got an exemption to the rule for this case. All Hennepin county legislators OPPOSED this, but it passed a vote in their legislature anyway; so they got a special exemption that allowed the sales tax hike without a public vote.

What if they tried that here? What if our legislature agreed to suspend Prop 13 for this purpose, and they just went ahead and raised property taxes without a public vote?

The dumb owners just can't stop themselves. If their payrolls get too large, they just go ahead and bid on players anyway. There's no restraint. I suppose some sort of profit-sharing plan may help there. By that I mean, heck, I bet the TV ratings for Kings-Lakers games in LA are just huge; why shouldn't the Kings benefit from that? LA TV rights are triple what they are in Sac.

Then these owners tell the public, "Look at the wonderful way we've been managing this team, but it all comes at a cost. We can't compete in this market any more in this building."

I blame the owners, the agents, the players, and even the fans, I'm afraid to say. Kings have the third-highest ticket prices in the NBA, and the fans (mysteriously) continue to pay, and yet they're losing money? There's something wrong with this picture, and I think moving into a new building merely delays far larger problems than they have now. In a couple years, when even the bad teams have $100 million payrolls, the crash will be very ugly.

Taxpayers who don't go to games see the average NBA salary (I think it's over $4 million right now), and just cannot justify being taxed to indirectly support that. It's offensive to them. That's why I keep saying if the next crack at this has a sales tax component, we're right back to an 80-20 loss.

Does any of this make sense??

It makes a whole lot of sense. This entire experience has made me much more sympathetic to the anti-arena crowd, although I remain pro-arena.

 

[VF21]

Entertainment is full of overpaid participants. Look at how much actors make for a single film.

The main problem with the proposals set forth is that they did focus almost entirely on the Kings and not the variety of other attractions a new entertainment complex could offer.

Ticket prices for various types of entertainment are high. We all know that. That's not what this is all about.

This is about land and construction costs. The arena will cost $500+ million to build, whether the Kings ever step foot in it or not. The real question is whether or not the people of Sacramento want to have a state-of-the-art facility that can offer concerts, tractor pulls, ice shows, the circus, basketball games and whatever else they find to fill the calendar that will appeal to different portions of the Sacramento populace.

People who are against the arena because professional athletes are overpaid are really myopic, IMHO.

 

[Venom]

Maybe not as much as you'd think.

Long-term, though, one issue must be addressed, and that is the health of a sport I've loved for decades (I'm an old guy; almost FIFTY!). If the only way this sport can currently survive is for taxpayers to pay 80%+ of building costs, then I'd say this sport is in crisis. We've finally hit that stretch where expenses are exceeding revenues by an overwhelming amount.

Orlando, Memphis, Seattle, Sacramento, Portland... All in trouble. Probably others, too.

Even the situation with the Twins in Minnesota. Did you know that sales tax hikes require taxpayer approval in Minnesota? Well, opposition to the .15% tax hike in Hennepin was about 80%, and the owners knew that. So they went to the state legislature there, and got an exemption to the rule for this case. All Hennepin county legislators OPPOSED this, but it passed a vote in their legislature anyway; so they got a special exemption that allowed the sales tax hike without a public vote.

What if they tried that here? What if our legislature agreed to suspend Prop 13 for this purpose, and they just went ahead and raised property taxes without a public vote?

The dumb owners just can't stop themselves. If their payrolls get too large, they just go ahead and bid on players anyway. There's no restraint. I suppose some sort of profit-sharing plan may help there. By that I mean, heck, I bet the TV ratings for Kings-Lakers games in LA are just huge; why shouldn't the Kings benefit from that? LA TV rights are triple what they are in Sac.

Then these owners tell the public, "Look at the wonderful way we've been managing this team, but it all comes at a cost. We can't compete in this market any more in this building."

I blame the owners, the agents, the players, and even the fans, I'm afraid to say. Kings have the third-highest ticket prices in the NBA, and the fans (mysteriously) continue to pay, and yet they're losing money? There's something wrong with this picture, and I think moving into a new building merely delays far larger problems than they have now. In a couple years, when even the bad teams have $100 million payrolls, the crash will be very ugly.

Taxpayers who don't go to games see the average NBA salary (I think it's over $4 million right now), and just cannot justify being taxed to indirectly support that. It's offensive to them. That's why I keep saying if the next crack at this has a sales tax component, we're right back to an 80-20 loss.

Does any of this make sense??

I've been saying this for awhile. The NBA is headed for an inglorious fall. Stern has been so busy trying to expand the game overseas that he has missed the erosion of the fanbase in the domestic market. Alot of things have contributed but the two-round draft, guaranteed max contract, lack of a (true) minor league, and age at entry into the league have created an untenable situation. Plus, the level of play is not much better than an And1 tour.

 

[JB_kings]

I've been saying this for awhile. The NBA is headed for an inglorious fall. Stern has been so busy trying to expand the game overseas that he has missed the erosion of the fanbase in the domestic market. Alot of things have contributed but the two-round draft, guaranteed max contract, lack of a (true) minor league, and age at entry into the league have created an untenable situation. Plus, the level of play is not much better than an And1 tour.

All pro sports go through peaks and valleys. For them to roll over an die is just fatalist thinking. Even the NHL came back from their troubles and they were in way worse troubles. The NBA will be fine. So don't pull the plug on Sacramento before the heart monitor goes flatline.

As for the level of play, that goes up and down as well. The league has marketable players like LeBron and he's worth 100 high school kids that didn't make the cut. I'll just assume you were joking about the And1 Tour. If you think their level of entertainment is comparable to the NBA... well then you have a different opinion than I do.