Building an arena quickly is difficult

There is a reason large building projects take time. They're complex. They require a lot of work, a lot of details, a lot of studies, and often a lot of public feedback. Kevin Johnson and team in Sacramento have had some heavy lifting to do recently to catch up with where Chris Hansen already is in the development of an arena. To their credit, they made progress that is largely unheard of in regards to project of this nature.

From reports that are starting to come out of the Sacramento area it looks as if some holes in the plan are starting to open up. Concerns for where the Downtown Arena deal leaves the taxpayers for instance. Yesterday, in the Sacramento Business Journal some of those concerns were expressed.

Even if everything goes right and the team stays, another thorny set of issues arises: Can the investors and the city turn a hurried plan to build a $447 million arena on the site of Downtown Plaza into reality by 2016, as promised?
Many other challenges remain, Johnson reports:
• Crafting a finance and development agreement out of the city's initial term sheet spelling out its deal with investors headed by software magnate Vivek Ranadive and 24 Fitness founder Mark Mastrov.
• Getting past any legal challenges. Already one taxpayer group has threated to sue.
• Fast-tracking entitlements for construction.
• Devising a plan to replace parking that will be lost.
• Ensuring transportation systems are adequate to funnel huge crowds into the crowded site.

Public-private partnerships are always complex. Trying to do them quickly only makes it more difficult. While I'm not an expert, the area I suspect to be towards the top of the challenges will be infrastructure issues related to transportation. Every project of this size has to deal with lawsuits/legal challenges, so that is largely par for the course and I'm not thinking that they'll have unique issues there. And the dark horse issue just may be the parking one. Time will tell, but there is much work yet to be done in Sacramento.

Another interesting piece out of Sacramento comes from the Sacramento Bee yesterday where some other questions are being raised regarding the size of the public subsidies that will be needed to build a new Kings arena.

Sacramento city officials say the term sheet they recently negotiated with the prospective arena developers puts the city investment at $258 million - about 58 percent of the building's estimated $448 million cost.

A review of the deal, however, suggests the public's share could arguably be viewed in the $290 million range. Arena critics, who are seeking a public vote on the project, say it's really more like $334 million.

Sacramento attorney Patrick Soluri, part of a group challenging the downtown arena plan, accuses the city of "concealing the subsidy involved."

Soluri and attorney Jeffrey Anderson say they plan to participate in a petition drive to try to force the city to take the deal to a public vote.

City officials defend the $258 million figure and the analysis behind it, saying critics overestimate some numbers, take others out of context, and fail to acknowledge how the arena and nearby downtown development will produce more money for the city in the long run.

They note that the arena term sheet guarantees the city an annual payment of at least $1 million for 35 years - even if the arena loses money - and more if certain profit benchmarks are met.

The SacBee article continues on in showing potential problems with the proposed Kings arena deal related to the parking revenue that will be generated, how that is split, and the additional concern of additional improvements to the existing parking structure that will be needing $36 million in upgrades.

They close the piece with some concerns about proper valuations and the process by which those were attained thus far. It is suggested that a more thorough valuation appraisal is needed, with the added thought that the appraisal will prove that the land in question will have higher valuation than is currently being assigned. This question gets to the core issue of just how much impact economically a new arena will have on downtown Sacramento. Undoubtedly it will have some, if nothing else through a simple shift of where people are (not a net gain). But will it be enough to justify the expense and risk involved? Lots of questions remain in Sacramento.