I’m an admitted contrarian and bandwagons scare me. To paraphrase Peter from Office Space, the Nazis had bandwagons. OK, that’s extreme and a bit of an Internet cliche. My point is that I’m very skeptical of this downtown Sacramento arena proposal.
Has anyone crunched the numbers who didn’t have a hard on for the Kings?
The City of Sacramento proposes selling off their $9 million a year revenue generator (parking lots) for 50 year leases to private operators which would give us $230 million right now. At $9 million for 50 years…that’s $450 million dollars in revenue we would have if we kept it. I say we because my taxes and yours are at stake here.
Selling off a revenue generator for half its worth. I’m not sure that’s sound business advice.
Part of the plan is to also sell off some land. I’m not even going to talk about how bad of an idea that is because it should be pretty obvious. Plus, it’s a smaller chunk of the overall initial investment.
What does the City get as a return on this investment? According to the term sheet, the City gets 15% of the first $10 million in profits generated by the new arena and 30% of the next $5 million. They get 50% after that, but let’s be honest…no one expects it to be above $15 Million in profit otherwise the split would be different.
So, in one year the City will probably get $3 million on their investment of $230 million. Yeah. How long will it take to get that money back? 50 years? Nope. Longer. Pretty sure Power Balance Arena isn’t that old.
I’m not taking into account the supposed hotel tax (which they should have implemented 8 years ago & won’t get passed because everyone fears taxes) or the ticket surcharge (again…why is this not already a reality?).
Someone I was chatting with on the Internet, said that if the NBA All Star Game came to Sacramento, it would generate $100 Million in revenue for the City alone.
God love him and his enthusiasm. But, that’s not even a 50% return on the investment and it’s only a one time pay out and only a possibility. Banking on possibilities is likely what helped contribute to this craptastic economy.
Granted, the Power Balance Arena probably needs to be renovated, but why isn’t anyone looking into how much it would cost? It can’t be that functionally obsolete. The usual rule of thumb is that it’s cheaper to renovate than to build from the ground up. Maybe that doesn’t apply in this economy, but all of the roads and infrastructure are already in place in Natomas. Of course, you can’t build anything there right now, but that’s a whole other ball of wax.
Any council members reading this, I urge you to vote against this investment until the numbers are in favor of the City of Sacramento. You’ll notice I didn’t even raise the argument of practicality. You know…that there are better things to spend our tax dollars on like repairing the giant potholes plaguing our streets, police officers, firefighters, code enforcement…