Sac Hotels Could Pitch in Million a Year for Arena

(Think Big Executive Director, Chris Lehane stands with (L-R) Mike O’Brien, Sacramento Magazine- Hotel Association Pres. Doug Warren and Visitors Bureau’s Mike Testa)

The “significant contribution” hotels would pay toward the arena effort was revealed Friday after the Think Big Sacramento meeting with area hospitality leaders.

While the figure is still being negotiated, representatives with the Sacramento Convention and Visitors Bureau appear to be ready to write a yearly check.

“Six figures at the very least, more likely seven figures,” said Mike Testa, the Senior Vice President of Convention Sales & Business Development. 

Based on a 30 year span, which is typically the life of an arena, that could mean between $20-million and $30-million of the estimated $400-million cost of the proposed downtown sports and entertainment complex.

 “There are no commitments as far as amounts but we are working through the (Convention and Visitors Bureau),” Sacramento Marriott General Manager, Doug Warren said.

The money would exchange hands between the S.C.V.B. and city. Those dollars come from fees paid by those in the Sacramento Hotel Association. Concurrently the hotel representatives are working toward voting on upping the Sacramento Tourism Business Improvement District fees. That is being explored to give the Sacramento Convention Center a facelift, but it does not appear that those dollars would go to directly pay for the arena.

Warren told me after the meeting Friday that they want to come to a vote by May on upping fees to the S.C.V.B. Adding, “We would have some type of framework or idea of the contribution before then.” It seems that would be helpful for council members in favor of the arena who could then point to pending contributions from the private sector.

Potential operator, Anschutz Entertainment Group, and the NBA/Kings have yet to announce how much money each would be willing to put up for the arena at the Railyards, but their portions will have to be in the tens of millions to make the project feasible.

The hotels involvement was first reported December 14th, 2011 and it appears talks are continuing as the city awaits qualifying bids from private companies regarding the sale of public parking spaces and garages.

Mayor Kevin Johnson and the rest of the council are still operating on a timeline that sets a March 1st deadline. That was the original relocation filing date the NBA gave the city to have a “critical path” outline for an arena, or the Kings’ owners could file for relocation.

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Mayor Calls NBA Meeting “Productive”

Mayor Kevin Johnson has wrapped up his meeting with Anschutz Entertainment Group President Tim Leiweke and NBA Commissioner David Stern. The trio met in New York City to discuss the latest in the arena efforts. Here is a statement from the Mayor:
“I had a productive conversation today with Commissioner Stern and Tim
Leiweke. We exchanged updates on a range of topics, including the positive
momentum of last Tuesday’s council vote, the upcoming timeline for the city
to determine the private sector’s interest in leasing Sacramento’s parking, and
need to finalize the full set of public and private funding sources we’ll need to
reach a deal that will create 4000+ jobs and transform our economy. 
 
“I made clear Sacramento’s seriousness of purpose when it comes to developing a
true public-private partnership that will create jobs, protect taxpayers, and keep
Sacramento among the elite few cities in the world that’s home to an NBA franchise.”

AEG has yet to formally sign onto the arena project but the sports and entertainment company has been heavily involved in discussions for several months.

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Maloofs Encouraged By Arena Effort

Joe and Gavin Maloof said Tuesday they are “optimistic” and “encouraged” that the city could build a new sports and entertainment complex to keep the Kings in Sacramento.

During a brief appearance at Media Day, Joe said, “We are optimistic guys, always have been, we look at the positive parts, we think that as long as (Mayor Kevin Johnson) continues on with his ideas… we will see if they can come to fruition.”

Gavin echoed those thoughts, “We are encouraged that something can get done, obviously we are leaving that up to the Mayor, the city and the NBA.” Gavin added that the NBA has kept the Maloof family abreast of the arena negotiations.

Mayor Johnson and potential arena operator, Anschutz Entertainment Group President Tim Lewieke, are scheduled to meet with NBA Commissioner David Stern Friday. AEG has not officially signed on to the project, but there is great interest to keep a third team out of Los Angeles as AEG, which owns the Staples Center and a portion of the Lakers, would see a revenue hit if the Kings relocate to Anaheim. According to several reports, if another team moves to the L.A. market, Time Warner Cable will reduce the payment to carry Lakers games by 10%. As reported that deal is for $5 billion over 25 years.

Post NBA lockout, the Maloofs made their first public comments about the new collective bargaining agreement. “I think both sides gave a lot… at the end of the day I think it was a fair deal,” said Gavin.

The Maloofs were one of the owners seeking a boost in revenue sharing among teams that would at least in theory make the Kings more competitive salary wise with the major players like the Lakers or Knicks.

 “It increased four or five times from what it was, it enables small market teams to compete with large market teams,” said Gavin.

The plan, which will begin in 2013-2014, includes some teams paying as much as $50-million while other teams could receive as much as $20-million according to comments from Commissioner Stern.

Lack of revenue in Sacramento has been the Maloofs top reason for wanting to move the team to another market.

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Arena Latest: Parking Lease Moves Forward, Hotels to Pay In, AEG Presses On

Council Votes “Yes”

Private companies interested in assuming the control of Sacramento’s parking garages and enforcement are now being encouraged to apply with the city.
 
Council members voted 7-2 Tuesday night to move forward on the ‘Request for Qualifications’ process. This means that the city is attempting to figure out how many firms want to bid and how much these companies are willing to pay upfront to assume control of parking operations.
 
Two separate sources close to the arena effort have told me that multiple parking companies have already come forward expressing interest. Those do include some large private corporations that operate through out the country.
 
Walker Parking Consultants valued the street and garage spaces between $170-million and $240-million. City Manager John Shirey put it as, “something is only worth what someone is willing to pay you for it.” That is simply Economics 101.
 
However, I am told by one consultant, (who didn’t want to be named), that the city may have been too conservative with its projections on how much money the sale of public parking spaces could generate to help with construction costs. Which means bids may now come in lower than what city officials could have received if they used a different formula. Hopefully, a bidding war takes care of this problem. 
 
More Funding Options?
 
Listening back to the audio from the meeting, Sacramento Convention and Visitors Bureau President, Steve Hammond, sparked my interest when he said to council, “We’re so dedicated to ensuring that the project moves forward, we have been in on-going conversations with the city about an annual significant financial commitment so we can participate in the long term funding solution.”
 
A source familiar with the discussions expanded on those comments. “There is the thought of creating a Business Improvement District around the proposed arena site.”
 
The second option I am told that is being considered is expanding the hotel tax.* Supposedly 2% of the current 12% figure will soon be up for grabs and while it is slated for the Community Center improvement project, there may be a way to use some of those dollars for the arena. *SEE UPDATE BELOW
 
Both of these funding options were floated during the Think Big Sacramento report unveiling on September 8th, but now both appear to be in the works of becoming a possibility. 

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UPDATE:

While it may have been discusssed, in an interview Wednesday, Hammond said that a hotel tax would not be apart of the deal.  However, it seems members of the current Business Improvement District (which includes hotels in the city and unincorporated part of Sacramento County) are willing to put up money to help fund the arena.

“(The B.I.D) is what we would look to, to help with the funding of the sports and entertainment complex,” Hammond said.

Hammond would not yet reveal what the SCVB would contribute, but said “the amount that we are talking about has the city’s attention.”

He added, “We will be benefactors of a new sports and entertainment complex built downtown, so we believe that we need to help in the funding of (the arena).”

With a new entertainment and sports center, the Sacramento Convention and Visitors Bureau estimates as many as 3-million new visitors would come downtown each year for concerts, Kings’ games and other major events.

Hammond reiterated at the end of the conversation once again that “there will not be any new tax or any new assessment to the public.”

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AEG Involvement
 
The worst kept secret in all of this arena talk is that the Anschutz Entertainment Group is interested in the proposed arena. While the Los Angeles based arena operator and sports manager has yet to formally sign on to the project, consultant Dan Barrett said Tuesday, “AEG has had discussions with the NBA about what revenue sharing might look like. We have had discussions with (AEG) on the upfront investment in the construction of the (entertainment and sports complex).”
 
Barrett added that staff and AEG representatives have also talked about potential revenue splits and operating responsibilities once the arena is built.
 
AEG is a worldwide sports and entertainment company that owns and operates various venues and events including the Staples Center in Los Angeles, Kansas City’s Sprint Center and the Tour of California cycling race.

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Mayor and Stern to Meet in NYC Friday

A face to face meeting between Sacramento Mayor Kevin Johnson and NBA Commissioner David Stern will take place Friday.

The Mayor’s office staff confirmed that the meeting will occur in New York City. It is expected that Johnson will provide an update on arena discussions to league officials. The Mayor told reporters in November that phone conversations with Stern have become more frequent since the NBA lockout came to an end. This meeting appears to be more formal and will likely include consultants and other key players involved in the arena effort.

Johnson will have plenty to report to Stern, as the city council meets Tuesday to review the possible conversion of public parking garages and spaces into private hands in order to potentially raise $245-million dollars for construction costs. The total bill for the sports and entertainment complex will likely exceed $387-million dollars.

It is not known if some or part of the parking plan will be voted on by council. Some action is likely needed however if the city is to meet the NBA deadline for a critical arena plan of March 1st, 2012.

Arena talks have included the relocation committee chair and Oklahoma City Thunder owner, Clay Bennett in previous meetings. It is not known if Bennett will be on hand Friday.

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City and Kings Talks Ramp Up

With the NBA lockout coming to an end, it appears the league is ready to turn its attention to the arena situation in Sacramento.

“We’d be only kidding ourselves, we knew the commissioner’s plate was full,” said Mayor Kevin Johnson on how talks had been going with the league.

Now, according to the Mayor, the two sides are, “negotiating at a higher degree than they had been in the past.” Kings’ representatives and city staff are drawing up term sheets and a financial plan. The talks also include developer, ICON/Taylor, and, potential arena operator, the Aschutz Entertainment Group.

Items being discussed include how much will the Kings pay as a tenant, what will happen to the outstanding loan with the city and what AEG will put up to run the sports and entertainment complex. All of those are coming on the basis that the city will make anywhere from $200-million to 250-million from the sale of public garages and spaces in downtown. The remaining gap from the $387-million estimated price tag would need to be closed by the AEG, the NBA and other sponsorship opportunities.

Even as complex as these negotiations are, Mayor Johnson would have liked to have the parking feasibility study released sooner than the December 13th date. “There is always going to be some delay and there are a lot of moving parts, we do not want to be pushed against the March 1st deadline.”

To increase the odds of meeting that drop dead date set by the Maloofs to get an arena plan in place, the Mayor wants to move quickly. That is why he does expect a vote on “every element or pieces” of the parking sale plan at the December 13th council meeting.

The hope is to have a detailed arena financing plan by mid-January.

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Lockout: Did the Players Take A Bad Shot?

More Sacramento Kings games will likely be cancelled as the players union rejected the latest proposal form the NBA owners. The National Basketball Players Association leader Billy Hunter said the union will take the battle to court so that “players can get their due process.”

You have to ask yourself why the players waited until mid-November when union President Derek Fisher said Monday that the decision was made after “after two years of making a genuine and concerted effort to close the collective bargaining agreement”. If you were so far apart in July, why not do it then? No, the players wait until the two sides are apparently closer than they had ever been.

In a phone interview, Charles Grantham, who served as the NBPA Executive Director from 1978-1995, said “even if (the players) win at this point, I am not sure that (the players) are not faced with the same decision, which is, is the owners offer going to be better or worse” than what was recently proposed by the league.

“This is very risky,” said Fordham Associate Business Law Professor, Mark Conrad. “The players are going to have to persuade the courts that the NBA has been acting anti-competitively.”

The NFL players tried a similar suit and lost in the appeals process. Which is why Grantham argues it is better to make the “threat of decertification than going through with it, because if you lose, where do you go from there?” At that point, it is likely that the players will have to accept an even worse deal or sit out the entire year to try and add pressure on the owners.

If the suit is filed, the commissioner may have to push the cancelation button anyway as Conrad believes, “it is very likely that there may not be a season (because) time is running out and the courts do not act quickly in these types of cases.”

Unless this was the players’ plan all along? But, if you are Kevin Garnett or Kobe Bryant or Steve Nash, I don’t believe you enjoy sitting at home watching a season disappear when you can count on one hand how many years you have left in the league.

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