Wednesday, June 1, 2011

Should Sacramento adopt a strategy similar to Kansas City to build an entertainment and sports arena?

The New Sprint Center in Kansas City.
Could it be a model for Sacramento?

By Barbara Shelly
Special to The Bee, Sunday, May. 22, 2011

In the beginning, there were believers and there were naysayers.

Believers envisioned a new arena that would awaken Kansas City's downtown, preserve its status as a college basketball hub, bring the best music and entertainment acts to town and maybe become home to an NBA or NHL franchise.

Naysayers, of which I was one, recoiled at the cost. Two hundred million dollars for an arena with no committed tenant, while the needs of city neighborhoods grew more acute by the day? It seemed preposterous.

Besides, Kansas City already had Kemper Arena, located in an industrial district a few miles from downtown. It wasn't the most glamorous venue, but it was serviceable, and the city was still paying off a debt for recent upgrades.

The mayor at the time, Kay Barnes, coined the "naysayers" label, and she made it clear what she thought of us.

"Get out of the way," she instructed, as she announced in 2002 that a year-long study had affirmed the need for a new arena. "We've had enough of you."

That, actually, was sound advice. The original believers were a zealous group, and it's always best to step aside when a train is speeding by.

When I suggested in a column in the Kansas City Star that Kemper Arena had a certain rustic charm, the local sports talk radio hosts hounded me for days.

We naysayers stood our ground, however, and for a while we prevailed. When Barnes ran for re-election in 2003, pollsters found the issue to be so toxic they advised the mayor not to even mention the "A" word.

But on a recent March weekend, Kansas City's downtown Sprint Center rocked with the energy of 30,000 college basketball fans. The Big 12 Conference, which had pronounced Kemper Arena inadequate and threatened to abandon Kansas City, now is talking about a permanent relationship.

Across the street at the Power & Light District, an entertainment hot spot built in anticipation of a complementary arena, the eateries couldn't serve up beers and nachos quickly enough.

Since opening in 2007, the Sprint Center has shattered the expectations of even the most ardent believers. Pollstar magazine rated it the fifth-busiest arena in the nation and 12th-busiest in the world in its latest rankings. It turns a profit for its operators and the city, even though a pro sports franchise has not yet materialized.

In a coup that silenced all but the most hard core of the naysayers, Kansas City built a $276 million arena without raising taxes for residents or assuming any risk for operating losses. Its story involves a great deal of luck, but it could point to a way forward for Sacramento and other cities.

After winning re-election easily in March 2003, Barnes searched for a way to get the arena vision unstuck. An adviser to the mayor suggested a talk with Tim Leiweke, a promoter who had made a success of a pro soccer team in Kansas City in the 1980s and had moved on to become president of Anschutz Entertainment Group.

AEG, which controls the Staples Center in Los Angeles and other venues worldwide, eventually offered to invest $53.2 million in the construction of an arena in Kansas City in return for a 35-year management contract. The unique agreement called for AEG to assume all of the risks of managing the arena – and virtually all of the profits.

At the same time as the AEG talks, Sprint Corp., with headquarters in a suburb just outside of Kansas City, offered to pay $62.5 million over 25 years for the naming rights.

So now the arena vision had a name and solid financial backers. But it still needed money, and local and state taxpayers weren't inclined to ante up.

A hotel-motel bed tax was an obvious course, but even that wouldn't cover the gap.

The missing piece of the puzzle was found in Texas, where Dallas and Houston had taxed car rentals to fund new facilities.

Most of Kansas City's car rentals take place at its airport. Like a hotel levy, taxing them would keep the burden away from city residents.

The prospect of getting out-of-towners to finance an arena was enough to move me into the believers' camp. But not everyone was easily convinced. City voters would have to approve the hotel and car rental fees.

Going into the August 2004 election, early polls showed the issue failing. Deliverance arrived from an unlikely source.

Across the state in St. Louis, Enterprise Rent-A-Car was fretting over this propensity of cities to finance projects by taxing car rentals. Its executives sent word that the company intended to draw the line in Kansas City. It would spend as much money as needed to defeat the arena proposal.

In Kansas City, campaign strategists were elated. Nothing rallies local voters like the cross-state rivalry with St. Louis. This was a redux of the 1985 Royals-Cardinals World Series, to be slugged out at the polls.

"It galvanized the city in a way we've never seen, since or before," said Steve Glorioso, a veteran political pro.

Enterprise threw about $1 million into defeating the arena fee proposal. With every dollar spent, support for the arena ticked up.

The fee measure won with 57 percent of the vote.

The Sprint Center, sometimes described as a giant crystal bowl, opened in autumn 2007 with an Elton John concert that had sold out all 19,000 seats within minutes of the tickets going on sale. More good fortune occurred when country singer Garth Brooks announced he would celebrate his return to the stage after a nine-year touring hiatus with nine back-to-back concerts at the Sprint Center. All of them sold out.

Over the last four years, the arena has hosted rappers, rockers and country stars. Fans travel from surrounding states and beyond to fill the seats and suites.

The one prize that has eluded AEG and Kansas City is a professional basketball or hockey franchise. Opinion is divided over whether one is needed, or even wanted. Pro teams make expensive demands and tie up dates that could be used for more lucrative events. On the other hand, the entertainment district across the street, which has been less financially successful than the arena, could use the steady business.

AEG says it is continuing to work its NBA and NHL contacts with the goal of bringing a team to Kansas City. But right now, nobody is in a big hurry.

Barnes credits the Sprint Center's success story to persistence and relationships. "Every deal is different," she said. "But what every city can do is to reach out and brainstorm all kinds of possible private partners. The public-private partnership is the key component."

When AEG and Kansas City crafted their deal, AEG agreed that if the arena ever turned a 16 percent profit, it would split half the remaining profits with Kansas City government. Both sides say the only reason AEG allowed the clause was because no one envisioned meeting that mark.

As it turned out, the Sprint Center has hit the target every year. AEG has paid Kansas City a total of $4.3 million since 2007.

That news, more than anything else, has pretty much silenced the naysayers. The absence of a pro team remains controversial, but the Sprint Center has replaced blocks of downtown blight with a symbol of pride.

As a recovering naysayer, I have to hand it to the believers. Without doubt, they got lucky. More pieces fell into place than anyone had a right to expect. But in Kansas City's arena story, the believers have indisputably carried the day.

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