New twist to the parking lease

[JB_kings]

Parking plan evolving

The city, as arena owner, would provide the lion's share of the project costs, somewhere between $200 million and $250 million, said the source. Most of the city's share would come from a still-evolving plan to wring millions in upfront cash from the city's parking operations.
The city has spent months studying a plan to privatize those assets by leasing them to an investor. A source familiar with the issue said the city also is looking at a different model that would involving borrowing against future parking and hotel-tax revenue, although a private parking operator might still be brought in.

The hotel tax money would be dedicated to the Community Center Theater.
The new model could make more economic sense for the city than leasing the parking to an operator, the source said. But it creates risk if revenues fall short of expectations.

The city's share of the arena deal also would include cash from sales of city land, including 100 acres next to the Kings' current home, Power Balance Pavilion.

The Kings' share is shrouded in uncertainty, too. The Maloofs said they would obtain financing to produce $75 million upfront. Some of that money would come from the eventual sale of the old arena site.

The team also agreed to provide the city with about $75 million in game-night revenues. Much of that would come from ticket surcharges.

The Maloofs would continue to make payments on their existing $67 million loan from the city. The city would have to refinance the loan in 2015, when the old building goes dark, by issuing new bonds, said City Treasurer Russ Fehr. The new loan would let the Kings spread payments out longer, a source said.

Fehr said the new bond offering could be somewhat risky for the city because, unlike the old debt, the new loan wouldn't be secured by an arena and its surrounding real estate.

The Maloofs' financial commitment to the arena project surprised some observers in light of their recent woes. They lost controlling interest in their Las Vegas casino. Besides their debt to the city, they owe millions under an NBA line of credit.

"They can't put any more debt on this team," said a source familiar with the Maloofs' finances. The source insisted on anonymity because he's not authorized to speak for the family.

But when asked how the family would get $75 million, George Maloof said, "We can finance that."

The NBA may also assist in the deal, but the details aren't clear.

http://www.sacbee.com/2012/02/28/4296121/elation-now-big-votes-next.html

 

[Section 101]

The problem I see is it could allow the detractors a shot at a public vote if bonds are used.

 

[kennadog]

The problem I see is it could allow the detractors a shot at a public vote if bonds are used.

Yes and I see some other red flags, unfortunately. I hope these details are all still under discussion. I don't understand borrowing, instead of up front money.

Well, we'll see the deal Thursday.

 

[Larry David]

The city could take on more risk, in terms of getting it passed and money, to make even more money on the back end.

Because the city is kicking the tires on this, it puts pressure on the bidders to pony up.

And if they can't get a bid they want for the parking, it's plan B to keep this moving.

Smart.

 

[Section 101]

The city could take on more risk, in terms of getting it passed and money, to make even more money on the back end.

Because the city is kicking the tires on this, it puts pressure on the bidders to pony up.

And if they can't get a bid they want for the parking, it's plan B to keep this moving.

Smart.

True. If they can't get what they want from a vendor upfront then leveraging against bonds maybe the only way.

 

[kennadog]

The city could take on more risk, in terms of getting it passed and money, to make even more money on the back end.

Because the city is kicking the tires on this, it puts pressure on the bidders to pony up.

And if they can't get a bid they want for the parking, it's plan B to keep this moving.

Smart.

This is true and they should have more than one scenario in mind. The back end would have to pay off, because that would be a whopping amount of interest to pay. They would have to be convinced the revenue stream will support that. The plus might be that if they sell bonds based on predicted parking revenues, any excess revenues could be used for other purposes, including covering the general fund deficit. This would mean a lease where the city gets a share of some of the parking revenues.

If so they would get less upfront money and they would need the bonds, instead. But it might mollify some on the city council members who have said they would like to see some revenue sharing as part of the lease deal. D. Fong in particular, although I still think he votes no.

I'm sure the council members are in deep discussion on the finer points, before the term sheet gets published Thursday. This period is the in-house negotiations to get a term sheet passed with as much of a majority as they can get. It would make the deal a little more bullet-proof.

Forgot to add that sine there is significant equity investment coming form the team and AEG, it reduces the risk to the city significantly. The city's loan to value ratio would make the investment much more secure, if they decide to go the bond route on this.

 

[Glenn]

The Maloofs' financial commitment to the arena project surprised some observers in light of their recent woes. They lost controlling interest in their Las Vegas casino. Besides their debt to the city, they owe millions under an NBA line of credit.

"They can't put any more debt on this team," said a source familiar with the Maloofs' finances. The source insisted on anonymity because he's not authorized to speak for the family.

But when asked how the family would get $75 million, George Maloof said, "We can finance that."

Does anyone get the idea that George is a little thick. He was born with a silver spoon in his mouth but doesn't realize the spoon was pawned.