Kings Arena Subsidy Should The Voters Decide?By Cathleen Williams
Julian Camacho has lived in a stately Victorian in Alkali Flat for decades – and can often be found in his garden, plucking ripe tomatoes off the vines or preparing for new plantings as Fall approaches. As a journalist for the Homeward Street Journal, I stopped by the other day to talk to him about Sacramento Taxpayers Opposed to Pork (STOP), the group of community members that is gathering signatures to put on the ballot the City Council’s decision to provide a public subsidy for arena construction. Last spring, the City signed off on a “term sheet” (a list of contractual and financial provisions) for the construction of a new arena. The NBA has now decided, relying on the “term sheet,” to allow the Kings to remain here. (See,”Eye on Sacramento” Report On The Arena Proposal, March 26, 2013; the financial details cited below were current as of the date of this report, and may have been modified somewhat since then.)

“I’m a sports fan,” Julian told me, “I love the Kings. I want them to stay in Sacramento. I would like to see a new arena. But I joined STOP because we are concerned about the huge subsidies – the massive debt – that the City will assume to pay 75% of the cost of the new arena. We happen to think that the voters should decide whether it would be better to have an arena financed by private enterprise, especially if the Kings are so profitable. Why should we rush into this? Why should the NBA call the shots, instead of the residents who will pay for it?”

When I asked Julian about STOP, he said, “This is a group of people that believes there should be full discussion and debate on the arena subsidy. The City is in debt already – look at the cutbacks in services we’ve seen the past five years. To us, this is about democracy. We are walking every precinct to talk to people, to get their views, and to circulate our petition to get the arena subsidy on the ballot in June, 2014.”

Certainly, the majority of the City Council is enthusiastic about luring the Kings to Sacramento through a multimillion dollar subsidy for a new stadium on K Street. After the vote, Councilman Steve Hansen stated exuberantly, “We have four billionaires who have said that Sacramento is worthy!” (See, the Orange County Register, March 28-April 2, 2013.) These billionaires are the owners of the Kings franchise.

So what does it mean to be “worthy” of the team? I was one of 56,000 Sacramento voters who recently received a robo-call urging me not to sign STOP’s petition because of the benefits a stadium would bring to Sacramento. I asked Julian to tell me why STOP believes the arena subsidy should be decided by voters. The following analysis sums up what he told me:

The first major reason to put the arena subsidy on the ballot is the cost of arena ownership to Sacramento residents and taxpayers. The interest on the bonds that will be issued to finance the arena is at a high annual rate because the bonds are regarded as risky by investors. For the first 8 years, the City will make interest-only payments of $108 million. Over the term of the loan, 35 years, the principal and interest payments due from the City will be $465 million – almost a half a billion dollars. (The “Eye on Sacramento” Report provides these details.)

Also, the City is giving away city property and undervaluing assets to “sweeten the deal” with the Kings’ owners. This has been criticized as a gift of public funds.

So how does the City plan to repay this debt?
Currently, the City receives $9 million annually in parking revenues which has been used to fund City services. It is now being proposed that these revenues be used to pay off the debt, and that other income (in part generated by the arena) be used to “back fill” (replace) the money taken from the general fund. But according to experts, the City’s projection of replacement revenues is “shaky and/or overstated.” The City of Stockton’s recent bankruptcy is partly the result of its lavish spending on a downtown arena, which failed to meet performance projections.

“The burgeoning number of public finance crises with roots in sports facilities points to a clear need for better understanding of the long term risks and implications for taxpayers,” according to an expert quoted by the “Eye on Sacramento” Report. Placing the issue on the ballot will allow taxpayers to consider these risks and implications.

The second major reason to put the arena subsidy on the ballot is that the promised benefits of the arena – the City’s “rosy projections of future economic growth,” and its claims that the arena will lead to “broad based urban redevelopment” - should be evaluated by voters. “The near universal judgment of academics is that the arena will have negligible impact on economic growth and job formation” – aside from the 800 jobs held by Kings’ employees and the 6,000 temporary jobs provided by arena construction. “If you want to inject money into the local economy, it would be better to drop it from a helicopter than invest it in a new ball park,” observed one economist quoted by the “Eye on Sacramento” Report.
The third major reason to put the arena subsidy on the ballot is that, although many Sacramentans are Kings’ fans, and, like Julian, would like to see a new arena, voters should decide whether the City could or should fund other civic projects instead. The City won’t be able to borrow more money for a long time if the arena subsidy goes through.

Such projects would also generate jobs, and would also improve our quality of life. For example, new amenities in our neighborhoods, development of the river front, and the construction of additional units of affordable housing are some of the potential projects that Sacramento could build instead of the arena.

“We care about our neighborhoods. We have until December to complete our petition drive to put the subsidy on the ballot in June,” Julian Camacho told me. “We think we will be able to qualify. If we do, the voters will decide.”
For me, the visit to Julian generated a lot of food for thought. If you’d like more information, you can find it at STOP’s website, StopArenaSubsidy.com