Rather than outsource the convention business, as most large cities are doing, Sacramento officials believe “If you build it, they will come.” But that only works in the movies, and usually through the hard work of folks in the private sector using their own money and sweat.

The Sacramento Bee has now joined the cheerleading squad for building a larger, staggeringly expensive convention center, despite the facts. The Bee has also blatantly joined the city supporting the use of additional public subsidies for a new NBA arena in downtown Sacramento.

Just the facts, m'am

The facts come from Eye on Sacramento, a public policy watchdog looking out for public interest in local government. EOS recently released a well-researched, scathing report of the finances of the Sacramento Convention Center. Eye on Sacramento found the annual $16 million convention center deficit is being funded by the city’s 12 percent hotel tax. “Fully four-fifths of the $20 million annually brought in by the hotel tax is consumed by losses at the convention center, while most California cities use their hotel tax revenue to fund an array of services, particularly support for the arts,” EOS reported.

“The 'backbone' of any financing plan for the entire project would be the city’s 12 percent hotel tax, which is still paying for the center’s last expansion – an $80 million project in 1995,” the Sacramento Bee editorial said. “Once that $8 million a year in debt service comes off the books in 2021, boosters want to use it again. They’re also looking into federal tax credits, plus possible private money.”

“There’s some time to sort all this out since the project would be constructed in phases, over seven to 10 years,” Bee editors opined. “The theater renovation probably wouldn’t start until spring 2015.”

The Sacramento Bee editorial board has had the Eye on Sacramento report for nearly three weeks, but refuses to do a news story about it. Instead, they barely mentioned the report in their editorial.

By Katy Grimes

The NBA cheerleaders at the Sacramento Bee are giddy with excitement today. Sacramento Mayor Kevin Johnson announced during his State of the City address Thursday that the Sacramento Kings are here to stay, and will get a new downtown arena.

“The Mayor announced that 24 Hour Fitness founder Mark Mastrov has agreed to make a bid to buy the Sacramento Kings to keep them from moving this year to Seattle,” the Bee reported. Johnson also announced “grocery billionaire Ron Burkle and the owners of the Downtown Plaza have agreed to team with the city to build a downtown arena.”

The plan all along has to build an arena downtown despite public outrage. The other part of the plan has always been for the Mayor and his people to figure out a way for the arena to be publicly financed. That they can’t sell it to Sacramento voters seems to be of little concern to them.

The Bee reported:

In a statement issued just after the mayor’s speech, Todd Chapman, head of JMA Ventures, the company that recently bought the Downtown Plaza shopping mall, said he is thrilled that Johnson, Mastrov and Burkle have put together a bid for the team, and said his company is excited to participate. But he stopped short of saying his company had fully signed on yet.

“We are excited to continue our discussions with the Mayor, City Manager, Mark Mastrov and Ron Burkle about how Sacramento Downtown Plaza can be a new home for the Kings’ organization,” Chapman said. “Our goal has always been to create a dynamic center for the city in the heart of Sacramento, and an arena for the Kings at Sacramento Downtown Plaza would certainly be a fantastic addition.”

The mayoral announcements should trigger several weeks of intense lobbying by both Sacramento and Seattle, culminating in an NBA vote on April 18 on whether to ratify the deal the Maloof family has struck with Seattle.

Could this just be more wishful thinking by the Mayor who thinks that Sacramento is nothing without a professional sports team?

What’s really going on?

By Katy Grimes

Just last week, the news that the arena deal in Sacramento was dead was all the rage. The Maloof family, owners of the NBA Sacramento Kings, backed out of a handshake deal with the City of Sacramento and the NBA, citing questionable financing and revenue projections.

That was a smart decision. Now it’s time to create something on the ugly old rail yard land to benefit the region, as well as draw visitors to the tourism-deprived Capitol city.

Since taking office in 2009, Mayor Kevin Johnson has made no secret of his desire to see Sacramento grow into a “world class city.” While I’ve been a critic of relying on the Sacramento Kings to do this, transforming Sacramento into a destination city is not out-of line. But using basketball to achieve this is dumb and short-sited. And there’s mountains of evidence proving why arenas are money pits.

I’ve also been critical of the “if you build it, they will come” mentality, which public officials seem to love, while spending other people’s money. It doesn’t work.

Sacramento’s Great Park Plan

However, developing city spaces which benefit lots of different people does work. Sacramento’s unsightly 240 acre rail yard could be transformed into a huge, multi-faceted regional park, with an amphitheater, farmers market, agricultural displays, rose garden, soccer fields, ball diamonds, tennis courts, a running track, and playground and exercise equipment.

The Sacramento Zoo, which wants to expand from its current 14-acre home, could be moved to a great rail yard park, or an additional, larger zoo could be built in addition to the small zoo in William Land Park. The Sacramento Zoological Society apparently has the funds for an expansion, but city residents don’t want to give up Fairytale Town, the Land Park Golf Course, the Land Park Pony Rides, or Funderland Amusement Park for a zoo expansion in its current location. William Land Park is 160 acres, and works beautifully with many different venues.

Many residents have recommended that the zoo move out to Sutter’s Landing, but they’d be all alone. As park of a great regional park in the rail yard, the zoo would enjoy a similar situation to what they already have with many different nearby venues, but could expand greatly.

An aquarium would be wonderful – all world class cities have aquariums.

UC Davis could create beautiful botanical and wine grape gardens.

Eventually, an entertainment facility could be added. Or not.

Light rail could run to the park, and downtown trolly cars could make regular stops from nearby hotels.

Sacramento officials have been so obsessed with a “world class arena” deal, that they have wasted precious years and resources with classic small town thinking. This is what happens with trying to play in the big leagues–it’s a big hat, no cattle problem.

Arenas don’t bring in more tourist dollars; they just move around existing money. And, arenas usually require heavy subsidies. In Sacramento, taxpayers want nothing to do with subsidizing an arena, which should be an entirely private-sector deal anyway.

Building a great regional park however, could be done through a non-profit organization, and benefit the region’s residents and draw tourists. Sacramento isn’t ever going to be able to compete with coastal cities however we are located in a beautiful region, are on two rivers and the Delta, we have great weather and are able to live outdoors most of the year.

Why wouldn’t Sacramento officials capitalize on our outdoor assets and maximize the expansive region? Fortunately, we don’t have the California Coastal Commission to deal with.

Bad Arena deal

Even with no backup plan, Sacramento officials and interested parties have continued to push putting $255 public revenues into building an arena, even while suffering under what many say is a $60 million city deficit, cuts to public safety, city services, and an economically devastated downtown, and blighted K Street Mall.

If a great regional park was developed on the edge of downtown, businesses would have many different reasons to move downtown. Residents would have a reason to go downtown again, instead of avoiding it because of the roving bands of crazy homeless people, aggressive parking enforcement, crime, and spotty businesses and restaurants.

City leaders can help

There are so many things which the city could do for downtown if officials would just get the short-sighted, bad arena out of their heads, and start building Sacramento back up by getting out of the way of real job creators:

*cut taxes and get rid of putative business licenses and permits in order to encourage businesses come downtown;

*quit relying on parking enforcement for revenues. If businesses were welcomed instead of penalized for being downtown, revenues would be abundant;

*leave the Maloofs alone and let them run their own business–government involvement is usually the kiss of death anyway;

*open up to ideas about developing the land along the rivers, as well as the rail yard. Again, keep the city out of the way, except only to help businesses and developers navigate the permitting, licensing, land use, planning and compliance issues.

Government is at its best when there is less of it. The only thing the City of Sacramento can do right at this point, is to stay out of the way of those who have vision. The government’s vision is always about controlling, and not about the private sector thriving. Real world class city leaders will do everything in their power to boost the local economy by allowing the free market to do what it does best.

City officials are about to pawn public parking lots, appearing to have figured another way around being accused of publicly financing an arena. They so desperately want a new sports arena in Sacramento, they are willing to make a really stupid deal, similar to many government “business” deals.

The latest scheme Sacramento is proposing would cut a 30-year lease deal with a private company for all of the city’s parking, in order to get a quick infusion of cash.

“The parking monetization concept has the potential to yield substantial upfront cash to pay for a significant portion of a new Entertainment Sports Complex,” a recent city report stated. “At its core, the monetization of the City Parking System would be a trade; the City would give up exclusive control of certain parking operations and revenue in exchange for an upfront lump sum payment, regular payments over time, or a combination.”

It’s always about upfront cash. The city is planning on pawning the publicly owned parking lots for $175 million to $245 million in cash, despite “strong cash flows generated by public parking systems,” according to the report.

The city explained its motive: “A standard approach of of issuing long term debt to fund requires a very large amount of annual debt service payment and ESC revenues are insufficient to cover both operating costs and debt service.  In order to reduce the annual debt service, the ESC financing effort has focused on potential equity contributions to the project.  Equity contributions could come from the Sacramento Kings team owners, an arena operator, the City, and other regional partners.  Parking monetization has been suggested as a source for the City’s equity contribution to the ESC.”

Sacramento not only cannot afford to build an arena, the taxpayers have already voted down two ballot measures to pay for a new arena. So instead, city officials schemed and came up with a plan to pawn its parking lots, together with the future revenue they generate, in order to get a big enough chunk of change to be able to play in the big leagues.

The city of Sacramento will contribute between $170 million to $245 million to the arena deal, that it will collect in exchange for future parking revenue, less $52 million in remaining debt that it has yet to pay off on its parking garages. Estimates to build a new sports arena have come in at $406 million.

Despite a one time parking deal, the city has no idea where future revenues are coming from to pay for the arena.

But the city has not addressed the issue of the land – the parking structures are on land that belongs to the people of Sacramento.  Sacramento taxpayers have paid for the land. Leasing the parking lots to a private company to pay for an arena is just another way to get taxpayers to fund the arena. Shouldn’t residents be able to vote on the deal?

If Sacramento parking structures are so profitable, why doesn’t the city keep them, and use the revenue to fund crucial services that benefit everyone.  The city has cut police, closed community centers, cut back on garbage pickups, let the parks rot, and desperately needs to upgrade its utilities and sewer system.

With threats of nearly 20 percent utility rate increases, any city taxpayer funds spent on an arena does not resonate with city taxpayers. But the scheme is even more complex – city officials appear to be planning to impose higher utility taxes, which will be triggered by the proposed rate hikes in sewer and water services, to plug the $9 million hole created by leasing the parking lots.

I understand the parking company’s motive: They will pay $200 million for a parking system that already has revenues of $9 million per year. With a 50-year lease,  they are looking at $450 million, at the minimum. The private parking company can and will raise rates, and is looking at much more than $450 million in the next 50 years – estimates are coming in at more than $650 million.

It’s a city-sponsored shell game. Many believe that the city will find a way to stick taxpayers with the arena, which will lose money, while the parking company will make money for 50 years from downtown parking. It’s another typical government deal.

FEB. 5, 2012