SACRAMENTO (CBS13/AP) — The Sacramento City Council approved a historic deal that paves the way for a $477 million downtown arena for the Sacramento Kings that will change the face of downtown and the city.
The council voted 7-2 on the package during a meeting that caps off the city’s lengthy struggle to keep the team from moving to Seattle a year ago. Mayor Kevin Johnson declared “Long live the Kings” after the final vote, and the chamber erupted in cheers along with team owners.
“We had our backs against the wall, but we defied the odds. We made a comeback for the ages and in doing so, I feel like we unleashed the very best that Sacramento has to offer,” said Johnson, a former three-time NBA All-Star who maintains strong connections to the league.
Councilmen Darrell Fong and Kevin McCarty voted no.
“I know my vote won’t stop this deal,” Fong said. “Believe me, I hope I’m proven wrong.”
WATCH THE CITY COUNCIL’S VOTES
Under the 35-year deal, the city would be responsible for a $223 million subsidy, much of it financed through a parking revenue bond. The city would pay an estimated $21.9 million a year in debt service that would be paid through lease payments from the Kings and a projected increase in parking revenue.
The city also is transferring $32 million worth of land and allowing the team to operate six digital billboards.
In return, the Kings would contribute $254 million to construct the arena and develop surrounding land with a hotel, office tower and shopping.
WHAT A DIFFERENCE A YEAR MAKES
In May 2013, the team’s fate was still in question. The team’s owners at the time, the Maloof family, had wanted to sell the team to Seattle investor Chris Hansen, who had plans to move the team to Seattle.
That city has been without an NBA franchise since the Seattle SuperSonics moved to Oklahoma City and became the Thunder.
Sacramento had been at risk of becoming the next Seattle for years under the Maloof ownership.
In January of 2011, the Maloofs had reached a secret deal with Anaheim to move the Kings to the Honda Center, but that move was rejected by the NBA Board of Governors.
Things looked rosier in February of the next year as Sacramento and the Maloofs agreed on a deal to build at the Railyards, but that deal fell apart a month later when the owners refused to pay predevelopment fees.
In January of 2013, two years after the Anaheim deal, the Maloofs had an agreement in principle to sell the Kings to a Seattle group led by Hansen. But much like the Anaheim deal, the NBA Board of Governors would reject the Maloofs again in May, opening the door for new owner Vivek Ranadive to buy the team and keep it in Sacramento.
But part of that move required the Kings to build an arena by 2017. Otherwise, the NBA would reserve the right to revisit the decision and possibly move the team.
MORE THAN AN ARENA
In addition to the arena, the team’s owners have also promised to build hotels, shops and restaurants around it.
“There are very few projects that have happened where $1 billion is going to be invested into a city’s downtown core in a short three-to-five-year period,” said Sacramento Kings President Chris Granger.
Supporters claim the deal will generate $11 billion over the next 35 years, and the city will see $2.7 million in tax revenue each year.
Opponents argue those figures are vastly inflated and believe the $9 million in parking revenue generated each year is at stake.
Independent economist Sanjay Varshney from Sacramento State says both sides could be right.
“These are all estimates and rightfully so,” he said. “One could basically poke holes and say, ‘I don’t believe. I don’t buy it.’”
But even at the worst-case scenario, Varshney says the city has to take the risk to boost the local economy.
“Every high return basically goes with high risk and if you go with zero risk you should be expecting zero return,” he said.
In the meantime, the Kings owners are all but guaranteeing the city will not lose out. Granger points to the large payment penalty the team will have to pay if it bolts.
“If we were to try to leave in one year, it’s something like a $580 million payment that is due to the city, and if we try to leave year 35, it’s still a $200 million payment,” he said.
DOWNTOWN SACRAMENTO FACELIFT
From his 20th floor office, Doug Elmets has windows with an amazing view, until you look below. Dirt lots, the old empty Greyhound station, and other long-ignored eyesores.
Arena supporters have promised the new arena will be an economic engine for all of Sacramento. Elmets says it’s a political message that’s paid of.
“To influence the voters, to bring along the members of the council, it required the belief that there is going to be this amazing economic revitalization,” he said.
Elmets has worked on failed Sacramento arena deals in the past. But the difference this time he says is easy to point to.
“Billionaires, resources, I mean the dynamic completely changed when you had Vivek and his partners come in,” he said.