City Beat

News, insight and discussion on Sacramento and its neighborhoods

November 17, 2011
Sacramento looks to Kansas City for lessons on arena deal

Proponents of a new downtown Sacramento sports arena think they have a pretty good model to follow in Kansas City.

That Midwestern city - which is comparable in size to Sacramento - opened the Sprint Center in 2007. The $276 million downtown arena was financed through both private and public sources and, even without a professional sports team as an anchor tenant, has exceeded city officials' expectations.

The public contribution to the project comes in the form of a tax on rental cars and hotels that was passed by voters. That revenue covers the annual $14 million bond payments on the project and - so far anyway - enough tax has been collected to cover those payments, keeping the city off the hook, Dennis Gagnon, a spokesman for the city of Kansas City told me today.

"It has kept us whole," Gagnon said.

In Sacramento, the most significant public contribution officials are looking at is the leasing of parking spaces and structures to a private operator to help generate financing for the project. It's still unclear how much that deal could generate.

As will likely be the case in Sacramento, the Kansas City arena also could not have been built without an up-front cash infusion from arena operator AEG. That company put up $50 million toward the project and in return now runs Sprint Center.

Under a revenue-sharing agreement, AEG keeps profits up to a pre-determined threshold, after which the city of Kansas City gets a slice. So far, that agreement has generated roughly $6 million for the city - more than officials had counted on.

Kay Barnes, who was mayor of Kansas City when the Sprint Center deal was put together, said at an event today hosted by Mayor Kevin Johnson's Think Big Sacramento arena task force that the AEG agreement is "a model that has worked beautifully for Kansas City."

However, Barnes told reporters she was not familiar enough with contracts dealing with the project's financing to discuss them in detail.

As for both public support and skepticism on the project - both of which were voiced in Kansas City and are being voiced here - Barnes said it was a challenge rallying both sides.

"Not everyone will ever be on board," she said.

There might be another lesson for Sacramento in the Kansas City project that extends beyond the Sprint Center.

While the arena has performed nicely for the city, the surrounding Power and Light District has not done as well. Various press reports from Kansas City show that sales tax projections for the entertainment district - a project financed in part by the city - have fallen short, forcing the city to dip into its general fund to make up the difference.

That's worth noting, given that arenas are often celebrated for their economic impacts on surrounding areas. In Sacramento, officials are hoping an arena could act as a catalyst for development of the surrounding railyard and downtown core.

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About City Beat

Ryan Lillis has covered the city of Sacramento, its 108 neighborhoods and its politicians since 2008. Prior to that, he covered crime at The Bee. A native of upstate New York, Lillis has a journalism degree from the University of California, Berkeley.

Contact reporter Ryan Lillis at rlillis@sacbee.com

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