Wednesday, June 1, 2011

Sacramento Bee Editorial: Now comes the hard part on a new Sacramento arena

Friday, May 27, 2011

A highly anticipated study offers some assurance that a new arena in downtown Sacramento is doable.

But it leaves many, many unanswered questions – most significantly how to pay for it – and there's not a lot of time. Under the reprieve granted this month by the NBA, Sacramento has until March 1, 2012, to have funding secured. Otherwise, the league is almost certain to let the Kings leave town.

The analysis – done pro bono by local developer David Taylor and ICON Venue Group of Denver, and submitted Thursday to the City Council – says that the Sacramento market can support a new arena without a public subsidy to operate it; that a facility with luxury suites, premium seats and other required amenities can be built for less than $400 million; and that it can fit on city-owned land in the downtown railyard.

As developers, city officials and others flesh out a funding plan over the next 100 days, they ought to hew to some key principles:

• It needs to be a public-private partnership, with as little public money as possible. Any new taxes or fees should be aimed at visitors and arena users, not the general public.

The 47-page report outlines how some newer arenas elsewhere have been financed; the public contribution came through hotel taxes, car rental taxes, ticket surcharges, land or infrastructure. It's likely that some combination of those will be pursued here.

• It should be a regional effort. Politicians in the area have been receptive to Mayor Kevin Johnson's overtures, but now comes the difficult part: talking dollars and cents.

• The Kings owners need to put up significant money, with the size of their contribution based on their role in a new arena.

If the Maloof family wants to operate the arena and collect the revenue as it does at its current home, it ought to be a major funder. If the team wants only to be an anchor tenant, besides fair lease payments, it should help pay for luxury boxes and other features it so desires.

Frankly, the tenant model may increase public support, given the sour taste left from the Maloofs' flirtation with moving to Anaheim. Also, a private operator could be a substantial investor in a new arena. One company that might fit the bill is AEG, which has close ties with ICON and successfully operates Staples Center in Los Angeles, Sprint Center in Kansas City and others.

It's not just financing that has to be worked out.

There needs to be more analysis of whether an arena can share a site with a planned transit hub. If not, the city will have to haggle with the railyard's owner, Inland American Real Estate Trust.

Under the proposed timetable, the new arena would not open until the 2015-16 season. That would mean the Kings would play four more seasons at Power Balance Pavilion (formerly Arco Arena). If so, would the city and team need to upgrade the arena? What would be the cost, and who would pay?

Also, it is not too early to plan what would happen to the existing arena site. Natomas is too important to Sacramento to let it deteriorate.

It was always going to be a heavy lift to make an arena happen. This week's report reveals what kind of political muscle – and creativity – will be required.

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