City might make a run at arena deal
By Mary Lynne Vellinga and Terri Hardy -- Bee Staff Writers
Published 2:15 am PST Sunday, February 27, 2005
In the hopelessly complicated game of strategy called "Build a New Arena for the Kings," the ball has bounced squarely back on the toes of local politicians. A private plan by North Natomas landowners to raise nearly $300 million for a new arena collapsed last week. And Joe Maloof, whose family owns the Kings, now says the idea of an arena built entirely with private money was unrealistic.
"Everybody wants to try to get it done privately, but I don't know if that can be accomplished," Maloof said in a phone interview last week. "I think it has to be a private-public partnership. That's the way it's been done in markets of our size."
Some local officials agree.
Sacramento City Councilman Steve Cohn said he believes it's possible to salvage the private arena proposal by adding a public component. He has asked Sacramento City Manager Bob Thomas to research whether the financial gap could be bridged by adding 180 acres of Natomas land owned by the city and the Maloofs into the equation.
"Right now, it's like we're at an eighth-grade sock hop," Cohn said. "Everyone's standing awkwardly at the sidelines wondering who's going to make the first move, who's going to ask who to dance - but it isn't over yet."
The land owned by the city and the Maloofs sits next to Arco Arena. The newest idea is to allow development on that land, and use the profits to augment the money offered by the landowners. The private-financing plan fell at least $75 million short of the $300 million that proponents said it would take to build a new arena - and well short of the $400 million the Maloofs called for.
Steve Thurtle, a member of the landowners group, said he would welcome such a proposal.
"If there's any way to bridge that gap, I'm sure we'd jump back in and proceed," said Thurtle, senior vice president of Richland Planned Communities.
The landowners proposed opening up thousands of acres of North Natomas farmland for building. The plan called for them to dedicate 20 percent of their profits toward construction of an arena, as well as creating a fund for the arts and youth sports.
The approach fell apart after the family of former U.S. Rep. Doug Ose and two other landowners said they would not participate, leaving the group short of property to make the financing work.
Ose said he remains interested in some kind of deal for the Kings but thinks elected officials must play a major role in crafting a solution. "I can't tell you how pleased I am to see Steve Cohn picking up the ball and starting to run with it," he said.
With the landowners' plan shelved, at least for the time being, predictions that the Kings will leave town are swirling. Speculation has been running rampant, with cities such as San Jose, Anaheim, Kansas City and Las Vegas all bandied about as possible destinations.
The Maloofs have made no direct threat - and publicly maintain they want to stay. But some local leaders believe if Sacramento doesn't get an arena plan in place soon, the city will lose the Kings.
"It's just a matter of connecting the dots," said former Sacramento City Councilman Jimmie Yee.
The Maloofs have made it clear they want a new arena in five years, and the details of building such a facility - obtaining voter approval, nailing down funding, design and construction - likely would take nearly that long, Yee said.
Still, from a business perspective, the profitable and fast-growing Sacramento market would be hard to match - a notion not lost on the Kings or National Basketball Association Commissioner David Stern.
Also, the Kings organization last year signed a lucrative cable contract to broadcast games from Chico to Fresno, laying the foundation for a larger fan base.
Leaving one of the country's fastest growing areas to go somewhere like Kansas City - previous home of the Kings - might not be such a great deal, Cohn said. But relocating to a place like San Jose, with an arena already available, could be more enticing. They might even be able to retain their cable contract.
"They would never tell us until just before they decided to leave," Cohn said. "There we'd be, in the offseason, and the announcement would come. They'd be gone in weeks."
Maloof reiterated last week that his family wants to keep the team in Sacramento, but needs a new arena.
"Look at Arco Arena. It's antiquated; the roof leaks. Where can you play if you can't play at Arco? I think eventually the NBA is going to say that you can't play in that venue anymore," he said.
He said he's still confident an arena could get built here, although he's a bit "disheartened" at the moment: "I never thought in a million years it would be this difficult."
The Maloofs have been pushing for a new arena since 2002.
It was then, they say, that they first asked City Manager Thomas to place a measure on the ballot asking voters if they would support using public funds for an arena.
Subsequent proposals by Mayor Heather Fargo and business leaders to build an arena in the downtown railyard and then at the eastern end of Downtown Plaza imploded over cost issues. Under those scenarios, the city would have helped raise money for an arena, perhaps through bond sales; in exchange, it would have owned the facility and used it to spur development downtown.
At one point last year the City Council, led by Cohn, capped the city's contribution toward such an effort at $175 million. That decision sent the Maloofs storming out of the council chambers.
Fargo said Friday that she's not sure "where we go from here."
"Obviously, I tried twice," she said. "There's a lot of political risk, a lot of financial risk, so it's a very difficult thing to do."
Some participants in the arena effort said it's no surprise it has dragged on for years.
"These things are inevitably a saga, not a short story," said Sacramento County Supervisor Roger Dickinson, who helped devise the financing plan that brought the River Cats to West Sacramento.
The Maloofs look at places like Memphis, Tenn., or Charlotte, N.C., and see brand new arenas built with public funds. But since passage of Proposition 13 in 1978, it has been difficult to do such deals in California.
It takes a two-thirds vote of the public to approve new taxes. Property tax increases are capped, which leaves local governments perennially short of cash.
"The rules of the fiscal game are completely different here," said Peter Detwiler, consultant to the state Senate Local Government Committee.
Add to that California's high labor and land costs, and the recipe for building new arenas becomes a difficult one to write.
In San Diego, Detwiler pointed out, the pro football Chargers have spent three years trying to finance a new facility to replace aging Qualcomm Stadium.
Earlier this month, the team backed away from a controversial proposal to designate the stadium site in booming Mission Valley as "blighted" so it could use redevelopment money to help build the facility.
Instead, the team is focusing on development of 166 acres of city-owned land next to Qualcomm. This approach resembles the idea Cohn and Thomas are floating for Sacramento.
The 100 acres the city of Sacramento owns near Arco is encumbered by a legal agreement that prevents the city from developing it without the Kings' approval. The Kings similarly are barred from developing the 80 acres they own next door without a sign-off from the city.
"That land sits in limbo unless there's an agreement," Thomas said. "It's an opportunity that certainly should be explored."
Using city-owned land to generate revenue could prove less controversial than other types of public subsidies, which appear to have scant support among Sacramento residents.
"Polls have consistently shown that the public has major problems with the public financing of an arena, with numbers approaching 80 percent opposition," said Jeff Raimundo, a political consultant who represented the North Natomas landowners group.
At the same time, most people involved in the arena debate said there's no chance the Kings will plunk down upward of $300 million themselves, especially when they could move to a free or nearly free facility elsewhere.
"What they're asking for is pretty consistent with what's condoned by the NBA," Thurtle said. "It's what NBA teams get."
Even if the city were to build the team an arena, Maloof said, the Kings would need to control revenues and naming rights in order to generate the money for big player salaries and fan amenities.
He repeated the owners' oft-stated position that they will pay off their $83 million loan from the city and pay enough rent to finance somewhere in the neighborhood of 15 percent to 20 percent of the arena's cost.
"We haven't made money with the Kings," he said. "I think we've made a dedicated effort to invest in our product.
"I think our fans understand we're serious about our business, and we want to bring a title to Sacramento."
About the writer:
- The Bee's Mary Lynne Vellinga can be reached at (916) 321-1094 or email@example.com.