Last week, in the lawsuit targeting the arena deal orchestrated by Mayor Kevin Johnson, a former NBA star, Sacramento Superior Court Judge Eugene Balonon had issued a tentative order on the depositions. But he said he would deliberate a little longer on the case law before issuing a final ruling.

The judge's order issued Tuesday supports petitioners’ requests that they be allowed to depose McCarty and Rhinehart.

The plaintiffs are a group of citizens known as STOP (Sacramento Taxpayers Opposed to Pork) who are fighting the arena subsidy deal. According to the lawsuit filed by STOP, the city subsidy is actually $338 million — not the $258 million the city claims.

STOP has tried to get the details of the arena deal and purchase of the Sacramento Kings to be made public.

'Undiscoverable, privileged' information?

The attorney for the defendants insisted in court and in legal filings that the information the petitioners seek from McCarty and Rhinehart is “undiscoverable, privileged information.”

“The court disagrees,” wrote Judge Balanon. “Defendants have not met their burden in asserting this privilege as to Councilman McCarty.”

An order protecting Rhinehart from being deposed was also denied by the judge.

Deposition notices were sent to city officials in September. But according to the plaintiff's attorney, Patrick Soluri, the mayor and city officials have engaged in various avoidance tactics, including filing numerous objections to deposition notices, rolling demurrers, and refusing to comply with a court order directing them to reschedule a further hearing. Soluri said these were stall tactics designed solely to delay the inevitable discovery until after the city’s expected formal approval of the arena in April.

“Defendants request for a stay of all discovery pending a ruling on another demur is DENIED,” the judge wrote in Tuesday's ruling.

Following the hearing last Thursday, Sacramento Bee columnist Marcos Breton ridiculed the lawsuit.

“Did you hear about the 'secret deal' between the city of Sacramento and the Kings? It’s supposedly a backroom, off-the-books, under-the-radar, 'sweetener' that was cooked up secretly between city officials and Kings owners. It would secretly provide hidden subsidies from the city to the Kings for the purpose of secretly making the Kings owners financially whole for 'overpaying' to buy one of the worst franchises in the NBA.”

essay to buyToday Breton may be eating crow for lunch. He's openly championed the arena deal and mocked anyone opposed to it.

Councilman McCarty has consistently opposed the arena deal. He sent a letter to City Manager John Shirey and the news media last February, challenging the use of public money for an arena, questioning whether the city would get a return on its investment and asking who would be accountable if revenues don't meet expenses.

Ballot initiative on subsidy

Beyond the legal challenge to the city’s deal, there is also a ballot initiative petition to require a public vote on any public subsidy for a professional sports franchise.  The petition signatures are currently being counted.

However, it appears Mayor Johnson and the City Council will attempt to moot the result of that vote by pushing up their approvals of the arena prior to the June vote that would thereafter require voter approval.  Approval of the deal and related bond sales were previously scheduled for summer or fall 2014.

See recent CalWatchdog stories covering the Sacramento arena deal here, here, here  and here.

And go here for all of the CalWatchdog stories on the arena deal.

Last week, Sacramento Superior Court Judge Eugene Balonon issued a tentative ruling in the lawsuit targeting the arena deal orchestrated by Mayor Kevin Johnson, a former NBA star. It supported petitioners’ requests that they be allowed to depose Sacramento Councilman Kevin McCarty and Sacramento Economic Development Director Jim Rhinehart about undisclosed dealings between city officials and the new Kings ownership group to help it buy the team.

The Sacramento Investor Group, led by tech entrepreneur Vivek Ranadive, purchased Sacramento’s NBA franchise from the Maloof family in May.

Arena deal: Many key issues remain murky

The arena deal has prompted questions over the lack of public debate about key details, dubious financial numbers from the city and the public subsidy the project requires. Also, last-minute legislation by Senate President Pro Tem Darrell Steinberg, D-Sacramento, would let the arena’s construction proceed without a credible environmental impact review.

Plaintiffs Issac Gonzalez, James Cathcart and Julian Camacho are members of Voters for a Fair Arena Deal. They hope to put the arena subsidy issue on the ballot in Sacramento.

Defendants, who include Johnson, City Manager John Shirey, Deputy City Manager John Dangberg and other city officials, have sought to keep the deal behind closed doors and off the ballot.

The lawsuit accuses city officials of making a secret deal to provide an extra $80 million of public money to help the investors’ group beef up its offer against a well-funded Seattle group that wanted to buy the Kings and move them to Seattle, which lost its NBA team to Oklahoma City in 2008. Plaintiffs’ attorney Patrick Soluri said city officials have committed fraud because they have not fully informed the City Council and the public about details of the deal.

The city subsidy, according to the lawsuit, is actually $338 million — not the $258 million the city claims.

In response, the defendants insist the information the petitioners seek is “undiscoverable, privileged information” and contend there was no secret deal. Defendants’ attorney Dawn McIntosh said in in a Thursday court hearing there is not even any formal agreement in place about building the arena in downtown Sacramento. McIntosh said the lawsuit was “a waste of everyone’s time.”

However, the City Council voted Tuesday of last week to begin eminent domain proceedings to acquire the property necessary in the development of the new sports arena.

The lawsuit’s plaintiffs want to depose McCarty and Rhinehart because they believe the city officials have evidence about the city’s undisclosed subsidies. While Judge Balonon indicated in his tentative ruling last week that he favored authorizing a deposition of McCarty and Rhinehart, he also said he would issue his final decision this week.

Councilman McCarty opposes the city arena deal, and thus far, has not responded to deposition requests. I contacted McCarty several times for previous stories about the arena deal, but he did not return phone calls or emails.

Stall tactics until the deal is done

Deposition notices were sent to city officials in September. But according to Soluri, the mayor and city officials have engaged in various avoidance tactics, including filing numerous objections to deposition notices, rolling demurrers, and refusing to comply with a court order directing them to reschedule a further hearing. Soluri said these were stall tactics was designed solely to delay the inevitable discovery until after the city’s expected formal approval of the arena in April.

Those behind the lawsuit are not the only ones who think that Mayor Johnson and other city officials aren’t being honest about the real size of the public subsidy. Public policy watchdog Eye on Sacramento says that when all of the publicly owned assets being thrown into the deal are accounted for, the public’s contribution is actually $375 million — far higher than the city’s $258 million claim.

The city also agreed to give the arena’s private development group the city’s empty 100-acre plot next to Sleep Train Arena in North Natomas and six other city properties, five of them adjacent to or near the downtown arena site. City officials are also giving away the city’s parking lot at the site, and the revenue from parking meters, after claiming the parking lots have no value.

Beyond the legal challenge to the city’s deal, there is also a ballot initiative petition to require a public vote on any public subsidy for a professional sports franchise.  The petition signatures are currently being counted.

However, it appears Mayor Johnson and the City Council will attempt to moot the result of that vote by pushing up their approvals of the arena prior to the June vote that would thereafter require voter approval.  Approval of the deal and related bond sales were previously scheduled for summer or fall 2014.

Craig Powell, president of Eye on Sacramento, calls this “stealing the election.”

The files on the arena lawsuit are available on the Sacramento Superior Court website, case no. 34-2013-80001489.

There was no fast break at a recent court date concerning a suit by Sacramento activists opposed to tax subsidies for a new arena. The activists are Issac Gonzalez, James Cathcart and Julian Camacho.

CalWatchdog.com attended the Dec. 19 hearing before Judge Eugene Balonon, who was expected to decide the case one way or another. Instead, the judge postponed the hearing date out to Jan. 9, 2014.

Just before that date, the plaintiffs and their attorneys, Patrick Soluri and Jeffrey Anderson, hope to be deposing the defendants, Mayor Kevin Johnson, City Manager John Shirey, Deputy City Manager John Dangberg and other city officials. The deposition dates are on Jan. 6, 7 and 8.

“I think we are starting to see the light at the end of the tunnel where we can actually start engaging in some serious discovery to obtain evidence to support the allegations we have made,” said attorney Anderson after the hearing. The attorneys said they are trying to force city officials and staff to reveal an alleged secret deal.

“We believe that will develop additional evidence that we can then take and do further depositions of other city officials and other document request,” Anderson said.

The lawsuit accuses the officials of making a secret deal with arena investors to provide an extra $80 million of public money to help an investors’ group beef up an offer against a Seattle group vying for the Sacramento Kings professional basketball team. Instead of a $258 million subsidy, as the city claims, the city allegedly was really going to deliver $338 million for the arena, according to the lawsuit. In the lawsuit’s wording from its May filing:

“Rather than risk a groundswell of public opposition that would be generated by accurately disclosing the combined subsidies for the arena and purchase of the Kings franchise, Mayor Johnson, Mr. Shirey and Mr. Dangberg determined that it was more politically expedient to simply misrepresent to the taxpayers the true value of the city’s subsidies.”

The entire case file is available at Sacramento Superior Court services.

Response

In response, Mayor Johnson, a former NBA player, the other plaintiffs and their attorneys insist the information the petitioners seek is “undiscoverable, privileged information.” According to a search on the Court website, they claim the discovery “is not permissible.” And they insist:

Solura said of the judge’s ruling on the depositions, “It informed the city that these stunts and tricks to prevent us from getting to discovery will simply not be tolerated anymore.”

The court documents tell the other side, that of the mayor and the other respondents, who maintained:

“Despite the pending demurrer, Petitioners began conducting discovery, but later conceded that their proposed discovery would not assist them in alleging a ripe claim. In light of this irrelevant discovery, respondents were forced to seek – and obtain – a stay of discovery pending its demurrer. A short time later, this Court agreed that the Petition did not raise a justiciable controversy but granted Petitioners leave to amend.”

Initiative

The court case also is competing on time with an initiative aimed at forestalling the arena. Gonzalez is the campaign manager for the group, Voters for a Fair Arena Deal. Reported the Sacramento Business Journal of the signatures the group gathered, “ ‘The overwhelming majority should be approved,’ Gonzalez said, pointing out another group involved in the effort, Sacramento Taxpayers Opposed to Pork, initially said they’d collected over 40,000 signatures, but the total submitted only ended up around 34,000. ‘There was an exhaustive scrubbing going on at the end.’”

The groups working for a ballot measure used a validation service before submitting the 34,000 signatures and think their valid signature percentage will be high, according to a recent Sacramento Business Journal story.

However, reported the Bee, “So far, the council has only tentatively approved the financing plan, and a vote on issuing the bonds won’t come until next spring. What isn’t known is whether the subsidy issue will come to a public vote in June.”

Public funds

The City of Sacramento’s approval of a term sheet on the arena deal “constitutes the illegal expenditure of public funds,” according to the lawsuit. Despite the city calling the term sheet “non-binding,” Gonzalez et al. argue the city has already “committed monies to the hiring of consultants and other services.”

Mayor Johnson and city officials approved the $447.7 million arena deal at the Downtown Plaza in March, insisting it was a public-private partnership, with the private contributions amounting to only about one-third of the deal.

The lawsuit also alleges the public subsidy will enrich the Sacramento Investor Group, at the expense to taxpayers. The Sacramento Investor Group purchased the Sacramento Kings NBA franchise.

In response, the mayor and other backers of the arena cite a city-sponsored study saying the arena will bring $7 billion in economic benefits to the city over 50 years. “That includes spinoffs such as sales at restaurants and hotels, as well as $6.7 million in taxes,” according to a Sacramento Bee story.

Sacramento’s publicly funded arena deal has been billed as “the largest redevelopment project in city history” in Sacramento, as CalWatchDog.com explained in an article.

Voters in 2006: ‘No’

However, for more than 13 years, there have been numerous attempts to gain city approval for a new, publicly subsidized arena. Sacramento voters even turned down two ballot measures in 2006 that would have approved a public subsidy through a ¼-cent sales tax.

In 2011, Johnson formed an “independent” non-profit group to develop the new arena. The “Think Big Sacramento” group conducted a bold public relations campaign to push the publicly subsidized arena plan.

But Johnson’s group turned out to be so closely linked to the Sacramento Kings organization, the Fair Political Practices Commission fined him $37,500 for his failure to report more than $3.5 million in “behest” payments from the Kings. According to the FPPC, “[T]hese payments are not considered campaign contributions or gifts, but are payments made at the ‘behest’ of elected officials to be used for legislative, governmental or charitable purposes.”

March 30, 2013

By Katy Grimes

SACRAMENTO — The unusually speedy approval of a new NBA arena for the Kings basketball team in the heart of downtown Sacramento leaves many details and unanswered questions on the table, including how this arena project possibly will be completed and ready for opening by 2015.

Approved by the Sacramento City Council, the latest plan uses overstated revenue projections, grossly overstated projected attendance numbers and city-owned parking garages to sweeten the finances. As with all of the previous schemes to keep the Sacramento Kings in town in a luxurious arena, neither city officials nor local news media have ever performed due diligence to expose the questionable business deal it will be for taxpayers.

Local media have been cheerleading the project, with little criticism or analysis. It’s another typical government-involved project, with bad numbers, pie-in-the-sky plans, lots of hype and no accountability.

Impacts on the city

A project of this magnitude will impact downtown parking, local businesses, housing and commercial property prices, traffic congestion and even air quality. Projects a fraction of this size are required to comply with extensive state mandated regulations, including Environmental Impact Reports and the state’s California Environmental Quality Act.

Many say that, given how Sacramento officials have already rammed through the term sheet approval in record time, they will also try to ram the development process through, without giving residents and businesses the standard allotted time to question the process and project.  And given the California Legislature’s recent history working around CEQA regulations for politically favored projects, could city officials already be working to ensure this project also is exempted from the state’s strict environmental guidelines?

Sacramento CEQA exemption

I contacted Senate President Pro Tem Darrell Steinberg, D-Sacramento, to find out if he plans on sponsoring legislation for the Sacramento arena similar to AB 900 and SB 292, which were passed last year and streamlined the CEQA process for Los Angeles-area sports stadiums. AB 900 was a general bill and expires on Jan. 1, 2015.  But SB 292 specifically was targeted at the $1.2 billion stadium for downtown Los Angeles being sponsored by the Anschutz Entertainment Group.

“It will be up to the government to decide if the project falls under the AB 900 criteria,” said Rhys Williams, Steinberg’s spokesman.

But in a later phone call, Williams said, “No plan was in place to fast track the stadium through CEQA, unless the project meets AB 900 criteria.” Williams also noted that Steinberg authored AB 900.

I also contacted Sacramento City Manager John Shirey to inquire about a CEQA exemption for the arena project. Shirey was not available, but spokeswoman Amy Williams said she hand’t heard of anything involving CEQA exemptions for the arena project, and said she would ask others working on the project for the city. I did not hear back from Williams.

Interestingly, I also contacted Anaheim city officials. Anaheim was in the running two years ago to acquire the Kings. Part of their proposal was to increase the size of the Honda Center indoor arena. Ruth Ruiz, Public Information Officer with Anaheim, forwarded the city-led Environmental Impact Report summary which found the Honda Center would not fall under CEQA guidelines because the expansion was only intended to enhance the design and services offered at the arena, and would not increase the maximum seating capacity.

Unnecessary financial risk

Arena opponents are concerned that Sacramento is opening itself up to risk it cannot afford. Eye on Sacramento, a public policy watchdog group, compared Sacramento to Stockton, which filed for bankruptcy protection after spending tens of millions of dollars on an arena and other publicly financed facilities.

Others are concerned about the increasing number of government projects will continue to be exempted from California’s unusually strict environmental regulations — regulations which have killed many private sector projects.

Part Two of this two-part series will be on the stadium and jobs creation.

APRIL 14, 2012

“Council members voted 8-1 in a closed session to approve John Shirey to the high profile, volatile job…” CBS news reported.

Shirey currently works in Sacramento as top dog of an agency looking deep into the abyss, after passage of Gov. Jerry Brown’s budget bill to kill redevelopment agencies in the state.

But Shirey fought back after Brown first proposed the agency elimination, albeit using a weak argument. At a committee hearing last Spring, Shirey claimed that the governor’s proposal was unconstitutional — even after State Finance Director Anna Matosantos said there was no unconstitutionality at all with the proposal, and guaranteed that it was “within the legal limits to eliminate an agency.”

And after it appeared that Brown’s budget cutting measure was growing legs, Shirey was at the helm watching as redevelopment agencies throughout the state began approving projects at record speed, increasing bond indebtedness and state obligation.

Fortunately, Sacramento’s Mayor Kevin Johnson,was not enamored of Shirey’s candidacy, as his was the only “no” vote in yesterday’s closed council session.

Sacramento has a long history of questionable publicly funded redevelopment projects, as well as preferential treatment for a few local developers. And the Sacramento Housing and Redevelopment Agency is not one of the redevelopment agencies working on altruistic cleanup projects, as many proponents try to claim.

Most recently completed redevelopment projects in Sacramento include the controversial “Dive Bar,” also known as the Mermaid Bar on the blighted and crime laden K Street Mall. The owners of the Mermaid Bar received more than $6 million in total redevelopment subsidies, which they used to build the bar on the downtown mall.

And as head of California’s redevelopment agency, Shirey has had a key role in the fight against eminent domain reform –  practices which use extortion tactics to often intimidate and eventually grab privately-owned properties more cheaply.

Even State Treasurer Bill Lockyer said at a Spring hearing that he supported Brown’s proposal, and called redevelopment agencies “vampire agencies sucking blood from everyone around them.”

After Brown’s proposal, the Legislative Analyst’s Office reported, “Redevelopment agencies lack some of the key accountability and transparency elements common to other local agencies. Specifically, unlike other local agencies, redevelopment agencies can incur debt without voter approval.”

So while the Brown most definitely did the right thing eliminating the “vampire agencies,” Sacramento City Council members showed their lack of leadership and weaknesses, while hiring a time-tested bureaucrat for the important job.

An interesting aside was the absence of reporting on this big Sacramento news. The local CBS television news channel reported the story last evening on the 10:00 p.m. news. But there was no mention of candidate Shirey or the city council vote in today’s print version of the Sacramento Bee.  The Bee story went online today at 11:15 a.m, nearly 12 hours later.

JULY 21, 2011