The Sonics are dead again. For now. Watch yourself Milwaukee, they'll come for you next. Sacramento saved the Kings by putting together an ownership group and an arena deal in a pinch. Sports Illustrated called Sacramento mayor and former NBA'er Kevin Johnson a hero. ESPN did too. I guess we'll see, because right now the math doesn't exactly add up. But with arena deals it really doesn't have to. It's not like you can undo an arena. Just ask Marlin fans.
Now before we start, let me just say that Sacramento is a great basketball town. They sold out the old barn at Arco when the team stunk and when they were great. They've been saddled with poor ownership, worse draft picks, and White Chocolate. Sacramento is a great basketball town. Still, these arena/stadium deals are for lack of a better term ponzi schemes where much is promised, but the public ends up holding the bag.
Let's do some math. The project is supposed to cost $448 million. The new owners (who may or may not actually exist) agree to pay $189 million towards arena construction costs. $45 million will be kicked in by the sale of the land and subsidies. The remaining $212 million would come from the city itself through parking revenue. Somewhere in the neighborhood of $16 million a year in parking, enough to pay off the bonds for the $212 million and another $3 million in carrying around cash.
The term sheet for the arena deal says, "The Public Parking Finance Model will be structured in such a way to provide $3 million annually to backfill the City’s portion of the General Fund revenue." You can keep looking around the term sheet and you won't see any of the information about how this "structure" will work. When I was in school I had to show my work on math problems. Man was I a sap. I should have just written, "this equation will be structured so that the correct answer comes forth, plus a little something for you sweet cheeks."
Here's the other problem. The city takes in $9 million in parking revenue right now. With the arena, Sacramento will lose 3,700 parking spaces to the arena and the Kings. That's about half the cities parking spots. So with half the parking spots the city is going to somehow go from $9 million to $16 million per year. All through "structuring." Let's just say parking in downtown is either going to get REAL pricey or this is fuzzy math.
Sacramento by the way can't afford any of this, it's $2 billion in the hole. "The city's tapped out," said City Treasurer Russell Fehr, who will be presenting an hour-long report on the topic. "We have very large, long-term liabilities and we have to be very cautious about assuming any new ones."
"I know these numbers are big and seem scary," City Manager John Shirey told the Sacramento Bee. "This is about trying to inform and make people aware that the city does have debts and liabilities, and we are managing them."
Why don't you get that structuring guy in there. He can craft a sentence that says something like: "We're 2 billion in the hole, but hey we've structured it so we're not!"
Who ends up losing? Hard to say. If and when the parking fees don't add up the city will have to juggle as cities do. That general fund will probably be a lot more specific as it goes to making up the shortfall. Sure they'll use revenue from the Kings games, but if and when the city has to look elsewhere for the shortfall something will get shortchanged. All this for a marginal benefit of having a Major Sports Franchise.
But hey, Kevin Johnson saved the Kings. He's burning his own city down but they'll HAVE AN NBA TEAM! Cue the dancing girls and $12 beer! Good luck Sacramento. And to any potential visitors to the city, catch a Kings game, but be careful, the parking will be pricey.
Check out Field of Schemes for tons more stuff on arena/stadium dealings.