Sacramento — Kings and Serfs

The City of Sacramento, CA, is trying, for some reason, to finance a new arena for its NBA Basketball Team, the Kings. The deal is that the city would build the arena and then lease it back to the Kings. They want to pay for the deal by doing a PPP on their parking and pick up $200 million to fund the effort.

The former city treasurer, in this article attempts to make a case for the deal by comparing it to Indianapolis.  I’m not sure its the same.  Indy cut a long term payout receiving money continuously over the term of the deal and then earmarking the money, I think, for upcoming infrastructure projects in the city. That to me is a lot different than getting a chunk a change up front and seeing your asset make money for someone else for the next 50 years.

First of all — why is a public agency funding a private company?  The Kings are a privately owned entity, the owners are going to make millions going forward. If this is a good deal, let them got to a bank, or venture capitalist, or developer, put together funding and build their own arena. Why should the city be involved?  If the money isn’t there going forward, its not a good deal for the city and simply a boost for a private enterprise. (I need a new office building — So I should be able to go to the city and have them build one for me and then I will move in and pay them rent?  I can’t see that happening. This is no different.) And don’t give me all that about thousands of jobs and all the spin offs.  If the owners want the Kings to play in Sacramento ( and they probably have to for a while, the NBA will see to that) then let them build a new stadium themselves.  NYC supported the Yankees building a new stadium and they ended up taking it in the shorts, for hundreds of millions.  And the Kings aren’t the Yankees.

Second — By my very rough numbers, Sacramento will leave about $700 or more million on the table. Wouldn’t they be better off hiring a professional to run their parking operation?  Pay enough to get someone who knows what they are doing. Invest a bit in new parking equipment, and then bring the prices up to market levels, collect all the money, and live in fat city.

But then, what do I know — politicians want it all now — probably to pay off debts that they incurred in the past. Sigh

JVH

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4 Responses to Sacramento — Kings and Serfs

  1. Brandy Stanley says:

    As someone who is working in a city that has followed the model of hiring their own professional to take on the role of the private company instead of farming it out, there are challenges. Since it’s only been 8 months, the jury is still out on the results, but thus far things have been mixed.

    First, governments move SLOW. It will be a full year before the parking personnel are consolidated into one organization. That’s one year of lost revenue.

    Second, governments love to give parking away for free, and it is ingrained in the culture. It takes time, persistence and a delicate political touch to change that. The first 8 months have seen a spectacular failure in all attempts to change that perception.

    To whit – I presented a parking management plan to the council, got their full buy-in, had the backing of the city manager and all top-level executives and went on a dog and pony show with the media. A major focus was on improving the financial results over time so the parking fund would be able to pick up $3,000,000 in parking structure debt service from the general fund.

    The first 2 decisions made following that presentation were:

    1) Eliminate parking fees for all city employees that had been in place for many years.
    2) Start giving the first 2 hours of parking away for free to all visitors to city hall.

    The justification? It was a wash with savings I created by cancelling a contract with the county for employee parking. Oh – and the savings went to the general fund, not the parking fund which means the net impact to parking was bearing 100% of the loss in revenues without any offsetting savings.

    Not that I’m a fan of selling off municipal parking assets to a third party – I’m not. Parking assets are a revenue generator and more importantly, a key economic development tool for any city. Cities need the flexibility to make good use of that economic development tool, and it’s difficult to retain that flexibility by selling the asset off to a third party that doesn’t manage them from a bigger picture viewpoint. The problem is managing them internally in a way that actually makes sense.

    But I’m nothing if not persistent……

  2. Keith says:

    In our fair city, a new BB arena was built entirely with private funds. The city’s share was $34 million to relocate some utilities. And in 30 years, the arena becomes City property.

    To Brandy’s point, there should be a connection between parking fees and parking benefits. We are fortunate here that funds generated by on and off street parking, as well as parking citations, all goes to the Transportation Bureau general funds. This is the second largest source of revenue (after gas taxes). It pays for street lighting, traffic signals, filling potholes, and the like.

    Give away parking for free? No way. Here everyone pays to reserve parking spaces – so do I when I need an on street space. This policy is pretty tough to overcome, given the equal pay provision. It gets overridden occasionally, but not that often.

  3. Brandy Stanley says:

    Thanks, Keith – if only everyone else was a dailed in as your fair city.

    • Dimple says:

      I too rveieecd a parking ticket on the President’s Day. I read the “holidays” and obviously incorrectly assumed I was covered. My ticket was in front of Lakeshore Learning at 1:30p so the meter folks were definitely making the city rounds! Two compliants, one of which has already been echoed (the double standard of meter fees on a WC city offices ‘holiday’) and the second a new one. I’ve been struggling with the pay/contest issue and threw in the towel this morning and decided to pay the ticket. To add insult to injury, if you want to pay your ticket over the phone at the “pay by credit card” option, expect to pay an extra $2.95 fee on top of your ticket. Really? I don’t think so. I’m disappointed in the City that they have not responded to a resident with an issue. Poor PR WC. The City just lost my shopping dollars since there’s not a single thing I NEED from downtown.

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