City Beat

News, insight and discussion on Sacramento and its neighborhoods

February 29, 2012
Sacramento will contribute $255 million to new arena

By Tony Bizjak, Ryan Lillis and Dale Kasler

Sacramento city officials will release details tomorrow of the arena deal reached earlier this week with the Kings, including this notable number: $255,530,000.

That's the amount Mayor Kevin Johnson and his negotiators agreed the city officially will contribute to building an arena in the downtown railyard by 2015.

The official price tag of the arena was also bumped up from $387 million to $391 million.

The figures are contained in a 15-20 page "term sheet" agreed to Monday during negotiations between the city, the Sacramento Kings, the NBA and several private companies. The Bee received a City Hall briefing today on some of the deal points. Key elements:

- The Kings will sign a lease obligating the team and any potential future owners to remain in Sacramento for 30 years.

- The city will allow the Kings to refinance their existing $67 million city loan.

- A five percent surcharge will be applied on all tickets sold at the arena, for sports and non-sports events. That money will go to the city.

- The city receives a percentage of net profits earned by the arena operator.

- The anticipated prep and construction cost estimate for the arena has nudged up from a previous $387 million to $391 million.

-Another $3 million of the $391 million is slated to come from a public campaign, led by the mayor and Councilman Steve Cohn, where residents can purchase engraved bricks and plaques to be included at the facility site.

A mayoral spokesman said officials believe the city may be able to come up with its entire $255 million share through creative financing involving downtown garages - possibly by leasing the garages to a private operator or by creating a financing authority to borrow against expected future parking revenues. Parking revenues will increase over time, officials said, as downtown grows, as well as when the arena is built and more people park at nights and weekends.

The city also expects to sell 100 acres it owns next to the current Power Balance Pavilion in North Natomas and possibly several smaller lots in downtown to contribute to the city share.

That $255 million number means the city, as arena owner, will pay 65 percent of the arena cost.

The Sacramento Kings, as major tenant, have agreed to kick in $73.25 million, a 19 percent share. Some of that money is expected to come from sale of the Power Balance Pavilion site. Kings owners say they also have agreed to pay the city an estimated $70 million over a 30-year lease period. Some of it comes by passing through five-percent ticket surcharge revenues. Some will come in the form of taxes the team will pay the city over time.

The deal also allows the team to refinance its existing $67 million loan with the city in 2015 when the Kings would move from Power Balance Pavilion to the downtown arena. The new loan is expected to reduce the Kings' annual payments and spread them over a new 30-year term.

The project's third major partner, Anschutz Entertainment Group, a worldwide operator of sports and music venues, has agreed to put up $58.75 million for the right to operate the arena for 30 years.

The city will receive an upfront share of AEG's profits - $1.5 million out of the first $10 million net profit AEG earns each year, and $1.5 million of the next $5 million AEG earns. The city and AEG will split profits 50-50 for any profits AEG makes beyond $15 million each year.

City officials declined to say which entity, the city or AEG, will be on the hook to pay for any major arena upgrades over the 30-year lifespan of the deal. Those terms, which are to spelled out in an upcoming agreement between the city and AEG, have become major sticking points and financial headaches in other city stadium and arena deals.

The Kings will have a separate deal with AEG on revenue sharing during basketball game days.

The City Council will be asked next Tuesday to vote on that term sheet, and will be updated by city staff on the ongoing process of determining where the city's $255 million contribution comes from.

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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


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