Friday, July 21, 2006

I Am Against Public Funding of a New Arena For The Sacramento Kings

Today's major Sacramento newspaper has announced that the City and County of Sacramento governments have come to an agreement with Sacramento Kings owners Joe and Gavin Maloof on a plan that builds a new downtown arena for the Kings, who will sign a 30-year lease for the arena.

I could not be more against this proposal.

It's not that I'm against keeping the Kings in Sacramento. Actually, I couldn't care less. I don't follow basketball at all, so their presence or absence doesn't affect me at all. Until I have to pay for their presence.

Most of the money would come from a new quarter-cent sales tax that would have to be approved by a majority of voters in November.

I don't understand this. When I was a child, the state sales tax in California was 6%. It is now 7.25%, and will never decrease. Sacramento did not have a county sales tax; currently it has a .5% sales tax, which would increase to .75% under this proposal. This means that any sale in Sacramento County would have an 8% sales tax on it. That's disgusting. Maybe I'll do all my shopping in neighboring Placer County, which has no county sales tax at all.

The arguments for public funding seem silly to me.

"We'd be a 2nd rate city without the Kings." If a sports team is the only thing keeping you from being a 2nd rate city, then you're a 2nd rate city with or without that team.

"The Kings bring so much civic pride!" At what cost? According to the news article, the cost is about $1.2 billion, which is how much money the sales tax increase is supposed to generate in tax revenue.

"This Kings, in a new downtown arena, will generate more money in tax revenues than they will cost." I'm sympathetic to this argument, and hope it's true. But that doesn't do me any good since I'll still be paying higher taxes! I could support this argument, and the tax increase, if the following were done: currently this .25% sales tax increase is designed to last 15 years. If the Kings are going to fill the city and county coffers with money, the taxpayers should get some of that money back. I could support all this if, at the end of the 15 years, not only is the .25% sales tax increase allowed to sunset, but the taxpayers get an additional .25% sales tax break. In other words, for the 15 years following, the county sales tax would be .25% instead of the current .5% and proposed .75%. Essentially, I want my money back! If the Kings are going to bring that much money in to government, then government doesn't need so much of mine. Pay me back my "loan".

But I know that won't happen. What's going to happen if this tax increase goes through is that the city and county may in fact get more money, and so will the owners of the Kings. The only people who won't get more money are the taxpayers! This business with the Kings seems like an inefficient way to generate tax revenue to me. If the local governments want more money, why raise taxes to build a new arena? Why not just raise taxes directly and cut out the middleman, which is the Kings owners?

Arco Arena would be demolished. The Maloofs would sell the 85-acre parcel surrounding it, a gold mine in fast-growing North Natomas that could fetch as much as $650,000 an acre, according to a recent appraisal. They could use that money to help pay off their city loan (currently $71 million--Darren). The city would sell its adjoining 100 acres and use the proceeds to buy land and build infrastructure in the railyard to serve the project.

Honestly, I don't see why I should have to pay to enrich the Maloofs. If the Kings are such a great deal, they should be self-sufficient. If we have to front the money to pay for their arena, they should pay it back--or we should at least get the tax decrease I mentioned above.

Why should I pay for an arena that will enrich two brothers but not do anything for me?

The team owners would operate the arena and receive all revenues from events, parking and concessions. They also would get to keep the lucrative naming rights, likely worth millions...

The arena would be owned by a new public joint powers authority, which would control the building's construction and design.

So I pay for it, they get the money. Great.

Fortunately I'm not the only one who's against this proposal.

"They are talking about half a billion dollars to fund an arena, and the Maloofs would reap the revenues -- that's a massive subsidy," said Dave Tamayo, president of People United for a Better Sacramento, a grass-roots organization opposing the plan...

Previous arena efforts have been led by the city of Sacramento alone. But this time, the county acted as an equal partner, and suburban cities gave input and have been offered millions of dollars in the deal.

But they won't see that money for a while. For about seven years, the joint powers authority will use the sales tax to pay off the arena construction loan, said Paul Hahn, county economic development director.

Only after that will cities get their payday.

Good information here with which to fight this money transfer. Sacramento is such a socialist place--I thought socialists wanted wealth transfers from the rich to the poor, not vice versa.

Polls show that most Sacramento County residents oppose public funding for an Arco replacement.

And I hope it stays that way.

Update, 7/23/06: If this increase succeeds, Sacramento County would have among the highest tax rates in the state:

If voters agree to the quarter-cent sales tax to fund the arena and other community amenities, Sacramento County will have a sales tax rate of 8 percent. Only seven of the 58 counties in California have a sales tax of 8 percent or higher (certain cities within some counties have a higher rate than the county rate):

County: Alameda Sales tax: 8.75%
County: San Francisco Sales tax: 8.50%
County: Contra Costa Sales tax: 8.25%
County: Los Angeles Sales tax: 8.25%
County: San Mateo Sales tax: 8.25%
County: Santa Clara Sales tax: 8.25%
County: Santa Cruz Sales tax: 8.00%

Note: The sales tax in El Dorado, Placer, Yolo, Sutter and Yuba counties is 7.25%.

Source: California State Board of Equalization

Not what I'd consider a selling point.


rightwingprof said...

We are from two different worlds. When I was a child, Indiana prided itself on having NO sales tax. Then once it was instituted, it stayed at 2% for years.

Darren said...

We're at Canadian sales tax rates. The only thing left is a federal VAT.

The Rain said...

Seattle is looking at saying good riddance to the Sonics for much the same reason--the owners want a new arena and we don't want to pay for it.

Darren said...

If the market can't support the team, the taxpayers certainly shouldn't have to.

Coach Brown said...

Except that you pay for plenty in sales tax that you don't use anyway, regardless of the new arena.
I think the city should pay for some of the arena because the arena is not simply just for the Sacramento Kings. You have events there on an almost daily basis, many that bring in a ton of money to the city. If you build the arena downtown, you are making an investment in the future of the city, turning the railyard (a dump) into a refurbished paradise for Sacramento businesses. It could easily do for Sacramento what Coors Field did for Denver, even more because of the location of Old Sac.
I would have been much happier with User Tax for people that are going to use the arena. Slap on a $1 or two to the fees for tickets and charge those people, while also sunshining the law quicker.

Darren said...

Again, if the Arena can generate so much additional tax revenue, let's refund the "fronted" taxes paid by the taxpayers to get the arena.

Your idea of a user tax has some merit as well.

rightwingprof said...

We had a similar, but different, situation in Indianapolis, building a new stadium for the Pacers. Being a Republican state, however, the idea was private funding (we're talking about the Conseco Fieldhouse). Every liberal in the state howled about "corporate welfare" and demanded that Indiana raise taxes instead.

The liberals lost, of course.

EllenK said...

We had a similar debacle regarding Jerry Jones and the new stadium for the Cowboys. Not satisfied with a paid for stadium, multi-millionaire Jones went to other cities to entice them into paying for a glitzy new venue. He could have been seen as a hometown hero with a legacy for revamping the Cotton Bowl, but no, he wants everyone else to spend their money, which is why he hangs onto so much of his own. In the end, the new Cowboys stadium will end up in Arlington, a nearly 90 minute commute from most of their fan base with season tickets. The use of immenent domain to remove long time residents was painful to watch. And to top that, a University of Texas at Arlington professor did a study of new sport venues and concluded that the promised additional revenue only happens with certain types of venues, football and baseball being two that did not generate additional funds or development. You can only get a Super Bowl or All Star Game every ten to twelve years, the rest of the time, the citizens are left paying for the infrastructure and facilities. While I personally would have loved to see the Cotton Bowl morphed into a central zone in the already developed Fair Park area of Dallas, it was absolutely a right call NOT to pay for Jerry's Stadium. Maybe other cities will learn and follow suit.

Anonymous said...

No one against the arena ever seems to be able to explain why the Maloofs should invest $500m in something that's going to have an ROI of less than 2%. A basketball franchise is a going concern, government is not. Governments spend money with regard to tangible AND intangible returns, thus the economics are different for the county than they are for a business. In this market, you cannot generate enough revenue with an arena to come close to making this a sound business decision. With construction costs the way they are, I doubt that LA investors would be able to build Staples if they had to do it today - even though they have THREE major league tenants to Sacramento's one. The bottom line is, do you want an arena and entertainment facility downtown? No private investor will ever build it. The cost of construction forbids it.