Blog Entry

Can Sacramento Kings nickel-and-dime an arena?

Posted on: August 19, 2011 10:05 pm
Edited on: August 19, 2011 10:14 pm
Posted by Ben Gollivermaloofs

Who foots the bill for a new stadium when a team's owners are too poor or unwilling to pay and the city government lacks big amounts of available funds or the mandate to level heavy taxes? Well, either the taxpayers or a different city with greener pastures.

In Sacramento, Mayor Kevin Johnson and the Kings organization are trying to finance a new arena that will keep the team in Northern California. In order to prevent another relocation bid, Johnson and company have pulled out all the stops to find enough coins in their couch to keep the Maloof Family in town.

Their current solution? The Sacramento Bee reports the plan is to levy a series of surcharges on various activities related to the arena that will accumulate 

Surcharges on everything from tickets to hot dogs could raise as much as $20 million a year toward construction of a new downtown Sacramento sports arena, Mayor Kevin Johnson's task force said today.

The report, labeled "highly preliminary," outlines a broad range of fees that could be tacked on arena users. An "illustrative case study" shows that ticketbuyers could pay surcharges ranging from $1 to $3 apiece, for example.

The task force is trying to patch together a series of funding sources with the understanding that taxpayers would never agree to a general tax increase to fund the railyard arena.

"The burden will be spread...far and wide," said the task force's director, political strategist Chris Lehane.
Setting up a business district near the stadium and taking lease payments from the Kings would combine with the surcharges to complete the financial picture of the stadium. Give the task force credit for its effort: a piecemeal approach is the only real solution absent big money, and putting those pieces together is no easy task.

One obvious hurdle in this plan is that it requires people -- a lot of people -- to show up to the arena. A low-dollar surcharge isn't likely to keep people from attending games by itself, but the Kings were second-to-last in home attendance last season, at under 14,000 people per game. A new arena can spark interest in a bad team, for sure, but only sustained success will keep fans coming in a smaller market.

Expecting to gross $20 million in arena-related surcharges 14,000 people at a time sounds like a stretch. If we're only talking about 41 home games (and not concerts or other events), $20,000,000 total in surcharges would require each fan that attended each game to pay nearly $35 dollars in surcharges alone, a preposterous sum. If, instead, we say that a new arena could draw 20,000 fans and host 100 nights of entertainment a year, we're still talking about $10 per fan per event in surcharges to reach the goal.

That's a very, very difficult target to reach given that a night at an NBA game -- tickets, parking, concessions, memorabilia-- is already pretty pricey. And it would theoretically need to happen year after year after year until the stadium was paid off. Getting dinged like that would get real old, real quick.

That sounds a lot more like a fan tax than a surcharge. Certainly there are a few thousand die-hard season ticketholders who wouldn't blink at paying an extra $400+ per season to ensure the team gets a new arena and stays in town. But what about everyone else? This is a casual fan's league and we're not talking about casual sums of money.

Since: Apr 23, 2007
Posted on: August 21, 2011 7:02 am

Can Sacramento Kings nickel-and-dime an arena?

Living on the ground here in Sacramento, I can tell you emphatically that you have no idea what you're talking about. There are talks among many businesses and investors to capitalize on the new arena. We also just lost $40 million in property tax revenue last year. The white papers on property value for this type of a development are clear -- the arena will increase property value by hundreds of millions of dollars (according to noted economist, and opponent of public subsidies Brad Humphreys). If the Feds would rule that the league was a monopoly and outlaw subsidies it would be one thing, but in reality-land the people of Sac have a fiduciary decision -- and 100+ games/shows are the only responsible approach. Sure, they can whine about tax dollars, but they do so at their own peril. It's time commenters took some time to read the white papers before spouting off child-like anti-tax rants.

Since: Dec 5, 2006
Posted on: August 21, 2011 12:50 am

Can Sacramento Kings nickel-and-dime an arena?

Ben, you nailed it. If Sacramento is down to raising the bonds repayment from attendees you can be sure the Kings Royals are going to Disneyland. The more the surcharge the less the attendance. The less the attendance, the higher the surcharge must go. Planning to receive more payoff dollars from a business district adjacent to the Arena is also pie in the sky, Would you want to fund a new business isolated from the other businesses to reach fans 41 times a year? Neither did the businesses projected to flock to the Rose Garden in Portland when their arena was built. The Blazers gave up on that development this year.

This seems a time when politicians have finally realized that public financed arenas are too expensive. The Washington legislature realized it after financing a new NFL stadium and a new MLB stadium. There was no appetite for the Sonics who were subsequently hijacked to OKC. Anaheim has a stadium ready to receive an NBA team. Kansas City also has a new stadium and is looking for an NBA tenant. It is sad - truly sad to see Sacramento fans go through what Seattle fans went through.

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