Sale of Sacramento-owned land could help pay for new arena

For several weeks, members of Sacramento Mayor Kevin Johnson’s arena task force have pitched the sports facility as a regional asset requiring regional financial support.

But as the project’s proposed financing model comes into focus, it’s evident the city of Sacramento alone will shoulder much of the financial burden for the $387 million project.

Among the largest potential funding sources listed in a task force report this week was the possible sale of up to a dozen city-owned properties. Task force members would not reveal which properties they’re talking about but said a review suggested the sales could generate between $30 million and $60 million for an arena.

A draft of the task force report this week indicated the committee is focusing on downtown parcels, including property in the railyard, two empty lots near the Crocker Art Museum and land in the proposed Docks development along the Sacramento River.

Although selling city property represents a significant source of revenue, members of the mayor’s task force insist the cost of the arena would be shared by people from all over the region.

That’s because the plan would rely on fans – rather than taxpayers – to fund the Kings venue through surcharges on tickets and parking.

A recent report by the task force showed that three-quarters of those who attend events at Power Balance Pavilion – and would therefore pay such user fees – live outside the city of Sacramento.

The task force is also looking at how much money could be generated by placing cellular phone towers on top of the arena, by the city leasing electronic billboards and by new fees on hotel rooms around the region.

The preliminary list of potential funding sources came as a relief to one local politician known for his anti-tax stances.

“It’s become clear to me this is not going to involve any taxing of my constituents,” said Sen. Ted Gaines, R-Roseville, co-chair of the arena committee. “That provides relief to many of my constituents who are concerned about (arena proponents) coming after their pocketbooks.”

One idea that has been rejected by voters in the past – raising sales taxes in Sacramento – will eventually be taken out of consideration as a funding source as well, the mayor said last week.

But selling city properties to help pay for a sports facility could also prove controversial.

If the city sold the properties, that revenue could go into the city’s battered general fund budget, which funds police officers, firefighters and parks maintenance.

City Hall, facing another gaping budget deficit, last year contracted with brokerage firm CB Richard Ellis to examine the city’s portfolio of the 2,400 properties. The city wanted to identify the value of those parcels and determine which ones were marketable.

Sacramento City Councilman Kevin McCarty said he is skeptical about “a fire sale of a bunch of city assets for an entertainment complex.”

“Is this the best time to sell?” he asked. “(The real estate market) is at a historical low. Are we maximizing our assets? If we did sell, is this the place we want to park those (proceeds)? We have a reserve under 10 percent of our city budget. We have other (financial) issues.”

Task force head Chris Lehane contends such deals would not necessarily take assets that could otherwise go to the general fund. He said properties near the arena site could increase in value if the facility is built, creating an opportunity for some proceeds from the sale of city land to go toward arena construction and the general fund.

Lehane, a communications consultant and adviser to the mayor, said properties could be dangled in front of developers interested in helping to pay for the arena. A developer, he said, might get valuable land in exchange for kicking in upfront financing funds for the project.

“You invest in this (arena),” he said, “but as part of that package deal, you have the opportunity to develop plot X over here or plot Y over there, so long as it is consistent with good public policy in terms of how the city would like to see those properties developed.”

One significant question is whether the properties would actually fetch as much as officials hope – or whether they would even sell at all.

Garrick Brown, the research director at real estate broker Cassidy Turley BT Commercial, said he wouldn’t dismiss the task force’s estimate for the value of the city properties, “but they’d have to be prime downtown parcels” close to the arena site.

Even if they’re good parcels, demand for this type of property is weak in the current market climate, Brown said. Potential buyers would be those “who’d be able to sit on them for a couple of years,” waiting for the market to turn around.

“It’d definitely be someone with deeper pockets and long-range vision,” he said.

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Call The Bee’s Ryan Lillis, (916) 321-1085. Read his City Beat blog at sacbee.com/citybeat.

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