78 replies to this topic

[SacKen]

Money is money. Whether it's assets we already have, or taxes on money we are going to earn (or spend in the case of sales). It's money. There is no imagination involved in giving a for-profit corporation MILLIONS of dollars of taxpayers money. If this went to vote, it would fail. The only reason this may work is because they have apparently found a way to do it without voter approval.

Ken, I'm not talking about imaginary gains. I'm talking about current asset market value. We're going to SELL Arco arena, and take any money we make from the deal and GIVE it to the Maloofs. But, of course, you knew that. You just want an arena so you're okay with giving away hundreds of millions of dollars of taxpayers money so you can watch a stupid game.

Unless their is a real chance of realizing that gain, then it is imaginary. If you can convert that asset into something useful, that is more of a gain than letting the asset sit and rot.

Secondly, don't assume my motives. I only attend about 20 Kings games. They only play 44 total all year. A good arena can easily be used 3-4 times that often for things other than the "stupid game". My motive is for a better Sacramento. I've been a resident for all 35 of my years on this Earth and have no plans to leave. I have a vested interest in its future.

Thirdly, we are a representative republic because a straight democracy doesn't work. The current California budget mess, severely affected by the democratic "initiative" ballot process, is an example of democratic FAIL. The average person is too stupid to understand the complex nuances of cost benefits, soft benefits, ROI, bla bla bla. As this topic demonstrates, it's difficult for even above average people to grasp.

Last for now... no, I don't have a problem with taxpayer money being "given away" to for-profit corporations. It happens all the time. It's called an investment. The goal is for Sacramento to benefit more in the long-term than if we never built an arena, the Kings left, the railyard stays empty for the next 20+ years, Cal Expo continues to fall apart, and Arco becomes useless when it can't be maintained after the Kings vacate because so many other events bypass Sacramento because of a crappy venue.

If we can make this investment without raising my taxes, I'm fine with it.

[mylo]

Unless their is a real chance of realizing that gain, then it is imaginary. If you can convert that asset into something useful, that is more of a gain than letting the asset sit and rot.

There is a very real chance of selling CalExpo for a gain. I guarantee someone would buy it. That is not hypothetical. That is pure money that, if it's really that bad, we should sell and pocket.

[mylo]

Or, you could sell the cabin, give me the money, and I could buy a new boat. Boats are fun, who doesn't want a boat? I promise to take you out on it (for a nominal fee).

[SacKen]

I really am trying to see your side, Mylo. I just don't understand it yet.

I went back and reread the SacBee article. I don't see where we are giving the Maloofs $150MM dollars. I admit I might have missed it, but the only part I saw that involved the Maloofs was that their $70MM loan will be dismissed. For that, the Maloofs are giving up their portion of the current Arco land they own so it can be donated to the State as a CalExpo replacement. The Maloofs then sign a 30-year, $300 MM lease for Arco.

Nowhere did I see that we were selling Arco and giving the money to the Maloofs, which seems to be a major point of contention with you. The summary as I understand it:

1) New Arena built with private money and owned by the development group for 30 years, then turned over to the City. (No taxpayer cost.)

2) The developers fronts the cash, then make it back plus profit from development of the current Cal Expo land. (No taxpayer cost.)

3) Sacramento essentially "buys" the Maloof land for $70MM by relieving them of their loan, then donates it and the land they already own to the State. (Sacramento loss of $70MM plus the value of the city's land. No additional cash; lost land and debt assets.)

4) The State, aka taxpayers, receive cash for the sale of Cal Expo, and free donated land in Natomas, including the current arena. The cash can be used to build a new fairgrounds. (Probably no cost to taxpayers. If new grounds cost less than the sale price + what it would cost to revitalize Cal Expo, we come out ahead. Depends on Cal Expo value and cost of new Cal Expo construction. Breaking even but having a new venue is a win.)

5) Kings pay $10 MM / year to lease Arco. I assume to the group that owns it. (No taxpayer cost.)

6) After 30 years, the new arena and land are handed over to Sacramento. (Taxpayer makes whatever that future value is.)

7) New Cal Expo, new arena, redeveloped Arden area, redeveloped downtown generate jobs, tax revenue, etc. (Taxpayer makes some amount that can only be estimated.)


What am I missing? To me, it looks like everyone comes out ahead in the end.

* The state gets new fairgrounds, most likely without spending a dime.

* The group of developers make money developing Cal Expo and leasing Arco.

* The Maloofs walk away from Natomas with nothing and owing nothing, then get a new Arena for only $10 MM a year. (They are also members of the development group, so they make some money there, too.)

* Sacramento initially invests $70MM + Natomas land value. Gains income from new jobs, revitalized downtown, travelers in town for new arena venues, etc. In 30-years, gains new Arco land and building.

That sounds like it's worth the Sacramento investment of unused assets.

[SacKen]

There is a very real chance of selling CalExpo for a gain. I guarantee someone would buy it. That is not hypothetical. That is pure money that, if it's really that bad, we should sell and pocket.

That is owned by the State. Sacramento would most likely see zero benefit from that sale. Not to mention that unless the State spent money to buy and build new fairgrounds in the area, Sacramento would lose Cal Expo and some part of the sale would be washed out.

Not to mention that selling it for $150MM would have a negligible affect on the State budget woes that are in the 10's of Billions.

[mylo]

Okay, one of us is missing something very serious.

In your list:
Sacramento 'forgives' $70M of Railroad land
Maloofs build $600M building on it

So, why does CalExpo need to move?

What I read is "will be funded by the SALE of CalExpo".

That means the $150M+ proceeds from the sale will be spent in the Rail Depot.

[SacKen]

Couldn't land be sold to pay off the debt we have so services wouldn't have to be cut, schools wouldn't have to make cuts and the tax payers wouldn't be faced with the possibility of our taxes going up in the future?
...
Am I missing something? ...

Yes. $150MM won't solve the State's budget problems. The State budget is a prime example of why voting for everything is major FAIL. Pure democracy doesn't work. Buffoons vote for things that make them feel go or get them money without realizing the overall affect. So now services are being cut because of initiatives that people voted on. $150MM for selling Cal Expo? What about the Billions we are forced to spend on High Speed Rail studies, Stem Cell Research, etc., etc. Then you have the unions and the bloated government payroll.

Fix the problem. Don't look for insignificant band-aids.

[SacKen]

Okay, one of us is missing something very serious.

In your list:
Sacramento 'forgives' $70M of Railroad land

Where do you see this? I interpreted the article to say that the city owns part of the land near the existing Arco, and the Maloofs own the rest. I did account for the city forgiving that $70MM as part of their cost.

Maloofs build $600M building on it

Maloofs don't. The private developer group does.

So, why does CalExpo need to move?

To get the developer group interested. Developing Natomas land is ripe for FAIL. Natomas is already in trouble due to the over-building out there. Developing in the heart of the city, near a University and major mall has much less risk. So getting Cal Expo to move to the land that can't support retail development is the key to the whole thing.

What I read is "will be funded by the SALE of CalExpo".

That means the $150M+ proceeds from the sale will be spent in the Rail Depot.

True, sort-of. But I don't fully understand how you reached that conclusion. I read that the developers front the money to build the arena, then make it back and then some by developing Cal Expo. So the sale and development of Cal Expo is what is indirectly funding the new arena. But the state gets the money from the initial sale, plus the donated Natomas land. The money from selling Cal Expo is not directly used to fund the arena.

[mylo]

True, sort-of. But I don't fully understand how you reached that conclusion. I read that the developers front the money to build the arena, then make it back and then some by developing Cal Expo. So the sale and development of Cal Expo is what is indirectly funding the new arena. But the state gets the money from the initial sale, plus the donated Natomas land. The money from selling Cal Expo is not directly used to fund the arena.

If the developers are paying market price for CalExpo, what is the incentive for them? Why not just buy CalExpo and build it for a profit. What's that got to do with loaning the Maloofs money to build an Arena?

[SacKen]

Mylo, your last post did make me realize that I didn't know where the railyard land was coming from. According to the graphic in the SacBee article, it looks like the arena is built on city land that the city maintains ownership of. After 30-years, the city is given ownership of the arena.

My original analysis had the developer group owning the land and the arena. I think I was wrong with that original assessment.

[mylo]

So the $150M is to buy the Railyard?

So Sac trades Arco for CalExpo, then sells CalExpo to buy Railyard.

Is the Railyard worth the fair market value of Arco?

[SacKen]

If the developers are paying market price for CalExpo, what is the incentive for them? Why not just buy CalExpo and build it for a profit. What's that got to do with loaning the Maloofs money to build an Arena?

Because a direct city/maloof deal doesn't work. Neither has what the other wants. So you bring in other parties. Like 3-team trades in sports.

Developers won't build an arena without a way to make back the money, plus some. Cal Expo is a prime spot. Natomas isn't. So simply selling Natomas to them for development won't work.

Cal Expo board wants a new Cal Expo. They don't want to just sell the land then walk away with money without a plan for a new Cal Expo. Giving them Natomas land and money from the sale satisfies them.

So now the developers have their cash-cow and are willing to front $600MM+ to build us an arena in exchange for letting them make money developing a prime location. And Cal Expo board has a new location and money to build whatever they want from scratch.

[SacKen]

So the $150M is to buy the Railyard?

So Sac trades Arco for CalExpo, then sells CalExpo to buy Railyard.

Is the Railyard worth the fair market value of Arco?

No land ownership is "traded". Sac will never own Cal Expo in this deal. Sac donates Natomas land to the State. The developer group buys Cal Expo directly from the State, not Sac.

Sac maintains ownership of the railyard land where the new arena is built.

A critical factor in making the financing work, however, will be the development group's ability to make a deal with state officials to move the State Fair from Cal Expo.

The NBA's Moag said the development group, including the Kings, would seek to buy Cal Expo from the state, then donate the land at and around Arco Arena to the state to relocate the state fairgrounds.

[Robert Giacometti]

No land ownership is "traded". Sac will never own Cal Expo in this deal. Sac donates Natomas land to the State. The developer group buys Cal Expo directly from the State, not Sac.

There are issues with this plan in that each agency should send out RFP's to get the best possible price for the sale of the land. By sending out RFP's another entity could offer more and buy one of these parcels sinking the deal.

On the other hand, sending out RFP ensures the residents that everything is done on the up and up and the public gets the best possible deal.

After thinking about it, I'm skeptical that the Arena deal will happen this way. I still think it will be built downtown, the Maloofs will kick in about half and Sac City will raise the other half through surcharges on tickets and sales tax increase on meals/beverages/hotel rooms in a area dowtown that benefits from the Arena.