First off, some of this will be quoting my tweets. Some of this will be to simply point out things like the PDF report from Think Big Sacto is already here. Another point is that I think they were presenting options that are out there and not really coming up with a plan.
So before I go around quoting bullet points about thoughts and observations, I’ll point out that this seemed more to be a step in the “let’s tell the public about what’s going on up to this point that we feel publicly presenting” rather than a full fledged plan. There are issue’s with the Maloofs payment (the NBA was mentioned by Kevin Johnson multiple times and in the Q&A session mentioned that the Kings/NBA are interlinked to each other), how to finance the public end using parking and land sales (or leases–whatever), and the status of the 67 million loan. That’s the broad view of the thing. I’m going to dive a lot more in depth below.
* KJ, Senators Gaines and Steinberg all focused on the talking points. Chris Lehane did as well. But Dan Barrett was the guy who sussed everything out and it was purposely left to the back end of the conference. This is not such a bad thing.
* Speaking of talking points: They generally were the 1/3 splits mentioned in Breton’s column in the Bee this morning, that the public taxpayers were going to be protected as much as possible and that there were still decisions on the ultimate financing options.
* KJ went out of his way to connect the Maloofs to the NBA (or vice versa–that’s almost literally what KJ said word for word) and, at the same time, thank them for not filing on May 2nd when the Maloofs could have. (They would have lost the petition and pissed off David Stern. However, this is simply smart politics by KJ.) KJ also pointed out, as James Ham talked about at Cowbell Kingdom yesterday, how the Kings have been proactive in selling tickets in such a challenging environment.
* It’s clear to me that after listening to Barrett talk, the city is hoping to double dip on the parking/land sales/leases (whatever it ends up being) in order to take as much strain off the general fund as possible. This could end up being true in terms of the loan and the Maloofs payment.
* It would not surprise me that when it comes time for the loan and terms from the NBA’s end to sell, that the Maloofs end up selling the team to a new ownership group willing to make that investment. Obviously Ron Burkle will come up a lot at this juncture, but, and I say but because I know a lot of people will see San Jose connected with Larry Ellison, don’t count out Ellison. If Ellison has to rule out San Jose, and I think it’s clear the failed bid by Anaheim made abundantly clear, because of lost revenues the Warriors would face by the Kings moving to San Jose, than perhaps the next best thing for Ellison is Sacramento. I’m not saying it happens or doesn’t; I’m saying the Maloofs want to walk away from the team in the black with a significant amount going to them personally with a new ownership who would be buying into a new arena initiative. It’s not only the Maloofs style, but the greatest likelihood I think of the Kings staying long term in Sacramento. This is all purely conjecture however and I won’t discuss it anymore simply because I don’t know anything more.
* Additionally, I think Think Big Sacramento (TBS) is hoping to start the funding mechanisms around the Maloofs so they don’t have to rely on the team (when it’s clear they aren’t thrilled being here–or at least George Maloof isn’t) to get the arena started on say by June of 2012. There has been mention of some design and architecture work being done (or at least in that area) so there is something to the idea that there will be a new arena. In otherwords, the longer they take to get a design the longer they take to get a new building open and move away from Arco. (Which is after all the goal.) So, even though it’s clear TBS wants the Kings to play the part of an anchor tenant, they have also mentioned that’s the first priority. Kansas City (without an anchor tenant) was brought up as a way that an arena can work without an anchor tenant multiple times throughout this presser.
* Speaking of an anchor tenant and whether it’s necessary, I happen to believe it very much is necessary for Sacramento. Here is the difference between KC & Sac: KC has numerous events like the Big 12 championships (of various events), a lot of concert events that people from Kansas and Missouri (and possibly parts of Nebraska and Iowa too) come to as well. Sacramento will never get that many events a year without an anchor tenant in my humble opinion with all the competition from the Bay Area, and to a far lesser extent, Raley Field. Now, having said that, there was mention of a possibility of 200 events a year and it’s worth remembering that the Kings will only be 45-60 dates of those. The bad thing about having an anchor tenant is that they get blocks of weeks at a time that the NBA demands to have a team in those buildings have in order for things like the playoffs, flexibility in rescheduling a game if need be, and in general an ability to schedule an 82 game season for 30 teams. The other important note I’ll mention here is that those parking spaces will be used a lot more than they currently are for events simply due to the possibility of 150-200 events a year at this new facility.
* It’s clear people buying tickets to events of any kind will be paying a surcharge. You want a building and you’re going to pay for a part of it. Seems fair to me. Plus, for all the Sacramento people complaining that they are paying for an entire building this isn’t true. If 70% of the people who use a new SEC (and it will be something like that) and they are being charged for it, this means all of the financial burden by itself is not on the Sacramento residents. Plus, it also means that residents from other parts of the region will come into to spend dollars. This will help the hotels (not the heaviest chunk of money most likely but a little bit at most) and restaurants a lot. An entertainment/business district is what they are hoping to build around this facility. Additionally, with all the talk of the intermodal station, there is hope to get high speed rail that is currently not slated to go through Sacramento.
* Here is the official press release from the NBA (H/T TZ @ StR). Looking at this tells me one thing: The Maloofs were not consulted in this press release. (Which they will deny categorically 100%.) Jonathan Santiago has a brief discussion of this at Cowbell Kingdom. The audio from the Q&A at the end is also here from Santiago at CK.
* The report identifies 258 million in construction costs and 129 million in soft costs such as engineering, design, legal services and the like. This is the 387 million of total costs you are hearing mentioned.
* The current plan calls for 50 luxury suites (instead of the 30 at Arco II
Power Balance Pavilion now. But the biggest difference may be the mini-suites and loge boxes that will add 70-75 additional funding sources. The Club seats are expected to more than triple.
* The Geographical Ring hits as far west on I-80 as Vacaville, as far northwest on I-5 as Arbuckle or Williams (this includes Woodland CA), as far as North East as Auburn, as far east as Cameron Park and as far South as Galt and Lodi (this is all at a 30 mile radius). Obviously this leaves some key places out and the fact that there is a lot of fans in the Northern Valley like Marysville, Yuba City, Chico and Oroville. As the committee stressed, there was a lot of conservative guesstimation going on here.
* The competition of other facilities (as I mentioned here) is a big part of why Kevin Johnson has pushed this so hard: There really isn’t any other facilities that are real competition in the region outside of Stockton and Raley Field. That gives Sacramento a huge leg up in attracting events that are currently not coming to Sacramento. (You want things like The 1st 2 rounds of the NCAA tournament. That brings a lot of outside non-California money for a 4 day period that would not otherwise be there.)
* There are a bunch of ways taxes have been used to fund facilities elsewhere on page 35. I suggest reading them for yourself. But, I doubt this will be the majority of the public side of the funding source.
* There is a lot of discussion on bonds on page 39. My understanding of bonds is minimal so I won’t waste your time. Listening to Dan Barrett (and I’ll discuss him more below), it’s clear to me that at the very least the bonds will be issued with the backing of multiple jurisdictions (this will get murky I think) using the Bonds issued for Raley Field as an example of multiple jurisdictions issuing bonds. The actual reality of this happening? No clue.
* The EB-5 bonds (page 41) are “a development bond issued to foreign investors who in return get a green card”. The investment ranges anywhere from 500K to 1 million dollars. This is being done in regards to the Barclays Center in Brooklyn before you think it’s that silly of an idea. The quote is quoting (mostly anyway) the report from TBS. As the report notes, it’s being done on ancillary parts of the Barclays Center and not on direct construction.
* Tax Exempt financing doesn’t seem capable of happening. (I’m reading this off the report. This sounds to me like an answer of a way to help service debt in a more manageable way. Again, sounds like. I’m not an expert in this area.)
* Page 45 has 58 potential mechanisms for funding. Obviously not all of them used and the one’s most typically quoted (land sale & parking structures lease/sale mainly) are the most likely public funded mechanisms. This is along with the rental car and hotel tax too. Page 46 has the actual mechanisms that haven’t been ruled out.
* It sounds to me that starting the project is the single hardest factor. Once progress is had, it will make completion many times easier.
* Here is the big bullet point you need to remember that is on page 48 (and it’s in the link to JS on CK earlier): The financing mechanisms have ranges which is why this is only preliminary. The “private portion” is about 91-156 million (lotsa wiggle room right?) which includes the Kings themselves and an arena operator. This also includes vendors using the arena. I’m interested to see how this plays out particularly. There are so many working parts that are so complicated that I wonder how it will be pulled off. (I’m optimistic that it can if the NBA has KJ’s back. If not, it won’t work at all.)
The public portion includes a preliminary range of 93-123 million and does not included the parking “opportunities”. Users/Beneficiaries* will be in the range of 90-121 million. This includes the users of the actual ESC and restaurants/hotels around the ESC that will benefit greatly from such an arena.
* There are 4 approaches on page 49. I won’t go into more detail on that other than to say the first approach is not recommended and the last three are.
* Goldman Sachs is part of this (not fond of this but that’s the way this goes). Orrick, Herrington and Sutcliffe are listed as bond counsel and are very worldwide as a firm. (I wonder if this is where the EB-5 bonds would come into play.) Nielsen Merksamer Parrinello Gross & Leoni LLP looks like the legal counsel for the city (I think) and are based in San Rafael (Marin County which is near San Francisco) and Sacramento itself. Plus you have the City of Sacramento (KJ & his staff in otherwords) along with the TBS group participating.
* Speaking of Dan Barrett, he’s clearly a numbers and bond guy who has legal expertise in dealing with these matters. Here’s a list of all the clients he’s dealt with over the years (and it’s a very long list that includes the Broncos stadium in Denver and AT&T park in San Francisco) that are public and private. Now, this guy may be the most important insider of all simply because of experience and getting a quality facility.
One thought about Gaines note that “We don’t want to be too generous to the Kings“. It seemed that while Gaines main point is that this is not an arena being built to subsidize the Kings profit margin, it’s also true that Ted Gaines is a politician working in a very difficult anti-tax climate. Meanwhile, it seems that Dan Barrett is the guy who is representing the NBA and the Maloofs. To be honest, competent adults and competent people getting their heads together is how this would be solved. Barrett mentioned several times that burdering the Kings (he never mentioned the Maloofs specifically; very politically savvy PR today I might note) is not a wise move in any way towards the success of this. The point is that even though Gaines and Barrett have different goals, they are competent adults who understand the complicated and nearly impossible nature doing something of this magnitude is. When you don’t have petulant adolescents stomping about because the city council isn’t kissing their ass, it works wonders for trying to pull off a project that would not have gotten much traction 5 years ago using the same mechanisms. It’s worth remembering moving forward.
* Here is all my tweets from my timeline so you can see what I tweeted. Some of it is word for word or summarizing. I wouldn’t necessarily quote any of them though. (Not that I’m worried about such.) I’ve also included James Ham and Tony Bizjak because I saw them tweet relevant stuff.
* Last bullet point: If you spend 387 million to end up back here in 15 years, what’s the point? You want a facility that will last 30 years before the team can publicly complain with any impunity. That’s really the goal here above and beyond the obvious talking points of jobs, extra dollars flowing in from outside sources over time and etc etc.
It seems that the city is trying to get multiple counties help for backing the bonds so that all of the weight does not fall on the city of Sacramento alone. The Maloofs may be expected to contribute the loan rather quickly (which will satisfy the debt and help the public end of coming up with dollars).
I was impressed with Dan Barrett’s presentation even though he was slow and meticulous. Why? Because until that point it was all political talking points. The general public may care about the bullet points, but I care about the whole lot of this. I don’t want to spend time every decade worrying about the Kings leaving Sacramento. I’d like a secure long term relationship that is beneficial to both sides long term. Obviously some of that means good business acumen from the Kings, but that’s a different issue. The one thing the city of Sacramento (with lots of help) can do here is simply start a painful process of getting an arena started.
If I had to guess, the NBA is serious about backing this play by Kevin Johnson because it has to at this point. I’m not sure I would trust the Maloofs on anything at this point.
Finally, I think that a big part of the options presented were to give the impression that some of this has been discussed, and the final details have yet to be determined. I think they feel confident today they have somewhere in the neighborhood of half the total cost (387 / 2 = 193.5 million) or about 193 million dollars in total sum even without saying where that cost is coming from directly. I think more or less they are looking at nailing down somewhere in the realm of 30-40% of the cost with a lot of the variation coming from the fans attending the actual events and that payment of the total cost.
There is lotsa good stuff in the report that I left out because, frankly, I don’t want to recap all of it here. I suggest going through it (for instance there is discussion of which land parcels and estimated value of sales–it looks to me at a naked eye look to be about 12 million–at the bottom end– for the 3 discussed parcels of land–they are all downtown areas that would increase greatly in value if an arena and land value goes up–a big if obviously) if you’re curious. These can be found on pages 75-79.
I can guarantee one thing: 387 million is not going to be spent on a new arena by 2015. It’s going to be less than that with a lot of good faith by a number of parties to make good. But guess what? That’s how these types of projects work, and, well, it’s not completely impossible. The Golden Gate bridge was erected on some similar circumstances and was not a public works project the way the Bay Bridge was. It was a multiple county (San Francisco, Marin, Sonoma, Del Norte–this is near the Oregon border– and parts of Napa & Mendocino counties) project that is the only of it’s kind in the world. In fact, I’m not even the first Kings fan to point this out.
The point is while I’m skeptical that a new arena can be built, I’m not skeptical about the team leading the charge. There is someone pushing for this like Kevin Johnson that this type of project has never had. It has smart people like Dan Barrett and Chris Lehane involved. There are political allies in this in atypical ways you don’t see in our political system today. And you have fans involved all over the place trying to raise awareness for this project. As Darrell Steinberg pointed out, there was only a 1/4 of the crowd available on the day they were discussing educational issues. Yet when the Kings are around there is a packed house. That means something even if the effect is only illusory in nature.
Remember, this is the first time that the political side, the NBA side and the private side are working together to get something done. There is a lot of motivation to get something completed and finished. That really has to count for something even if you’re a cynic like I am in believing a building will be constructed. Once the construction starts, that’s when I’ll believe it.
Okay. Now that’s it.