Think Big executive on arena project: A “defining moment” in Sacramento history

by Blake Ellington, special to Cowbell Kingdom.  Blake writes on everything Kings for the blog site Bleed Black and Purple.  He is also the founder of the grass roots campaign Here We Stay and a co-Producer on the documentary film Small Market, Big Heart.

The city of Sacramento recently released a list of companies interested in purchasing a collection of city-owned parking garages that would provide a substantial upfront payment to help fund a new downtown entertainment and sports complex.

The list, shown below, is a mixture of national and local parking companies and financial institutions.

  • Ontario Teachers’ Pension Plan Board
  • Xerox Corporation
  • InterPark LLC
  • Guggenheim Securities, LLC
  • Sacramento Forward, LLC
  • Gates Group Capital Partners
  • LAZ Parking/CIM Group
  • The Carlyle Group
  • CMB Export LLC
  • Morgan Stanley Infrastructure, Inc.
  • Bainbridge ZKS
  • Revitalizing Sacramento LLC
  • Capital City Parking Group

I recently spoke to Chris Lehane, executive director of the Think Big Sacramento coalition, about the status of the arena financing plan. The Sacramento City Council is expected to vote on whether or not to move forward with the parking lease at their Feb. 14 meeting.

BE: Are you pleased by the response and quality of the companies interested in purchasing the parking facilities?

CL: “We had 25 entities expressing interest, 13 actually made an RFQ. To make an RFQ it costs money, you have to spend money and time. It’s a complicated process to go through, so you have 13 entities and that really does represent the top-tier entities in the country, nationally who are involved in parking. Top-tier banks or financial institutions, and in addition to that we’ve also got some of the cream of the crop in the region who have expressed interest. People who have done successful projects in Sacramento, people who have significant credibility here in Sacramento. So it gives the city an opportunity to really be able to have some confidence that it can move forward with an RFP.”

BE: Obviously, there is a big city council vote coming up. How do you see this playing out in the coming month?

CL: “I don’t want to be presumptuous, I think the council has done a great job to date in terms of doing their diligence and looking out for the best interests of the city and their constituents…I do think as we work through February the city is going to have a major decision to make that will be a defining moment in this city’s history.”

“It can go one of two directions. One direction, and I don’t think this is going to happen, but one direction is for whatever reasons the decision is made not to go forward with the leasing of the parking, and I think that decision would make it very challenging. Not impossible, but challenging, for the arena deal to be able to move forward, for the 4,000 jobs to be created, for the $7 billion in economic development to happen – all of the great things that can happen from an economic perspective. And the other decision is to move forward with the leasing of the garages, which will then help provide basically, the catalyst for this entire deal to be able to move forward. If the deal moves forward, we keep the Kings, the Kings are the anchor tenant to develop the facility. The facility gets developed, the downtown is transformed.”

“This is going to be the biggest decision that the city has faced since the decision was made to have the transcontinental railroad end in Sacramento, which basically kicked off modern-day Sacramento. And if this city wants to move into the future and have a vibrant, robust downtown – a real economic epicenter – this is that moment in time.”

BE: If the city council votes yes to move forward with the lease of the parking facilities, does it put the ball in the NBA’s court to show a dedication to stay in Sacramento?

CL: “They almost have to happen concurrently. So the RFQ has happened. We now know that there are 13 entities. We now are going to be in a place where we can move forward on an RFP which will have some type of a baseline number that would represent the contribution from the city, again derived from the people who would be parking there, who would have otherwise not been there. That point is now. The NBA is going to need to be in a position where it either says, ‘this is a deal that makes sense, we’re prepared to move forward’ because it is difficult for the city to move forward with the RFP until they know that the NBA, and by extension the Kings, are prepared to move forward because the RFP locks you in. Once you do an RFP you are committed to whichever bidder is the best.”

BE: With the meetings that the city and the Mayor has had with the NBA, do you get a sense that if the city council votes yes on this parking deal that the NBA will be on board?

CL: “If you look around at the various arena deals that have been done by the NBA, this would represent a deal that makes sense from an economic perspective. It is not the single best deal that has ever taken place – it’s not Orlando which paid 110 percent of the cost – but it is a very competitive deal. It is certainly a better deal than what was available in Anaheim. It is a deal that should allow the team to be in a much stronger economic position. It is a deal that should allow the NBA to stay in a market that they have expressed a strong desire to stay in. At the end of the day, we have always said that this is about economics. The economics have to work for the city, it has to work for the league, it has to work for the team. We know it works for the city, based on what we know it should work for the league and the team, and so with those types of facts in the mix, I see every reason why folks should go forward. But I can’t speak for the NBA and don’t have the benefit of knowing what is exactly inside their heads.”

BE: Is AEG waiting until the city OK’s this parking lease to put their full support behind the arena financing?

CL: “AEG is very much a possible big piece of the formula, but their piece is really continent ultimately on whether the NBA decides to move forward. I am comfortable that we have an economic scenario that will allow a really credible operator, whether it is AEG (and AEG is at the top of the list), or someone else to participate in this, and by participating also make revenue available that will help pay for the facility. I am very confident and comfortable that we have a viable formula that works.”

BE: Ron Burkle recently expressed interest in purchasing the Los Angeles Dodgers. You know him personally, do you think he is still keeping an eye on the situation in Sacramento?

CL: “I don’t want to speak on Ron’s behalf obviously, but I know Ron is someone who cares deeply about California. He has been incredibly supportive of efforts in California and I also know that he is a sports fan, and has had tremendous success with what he has done in Pittsburgh with the Penguins, which I was involved with.”

“I certainly believe you could take a look at the Sacramento scenario and see it to be the NBA analogue to what took place in Pittsburgh, and I think there is no one smarter in terms of looking for opportunities that people may not typically see than Ron Burkle. I’ve always said that I think that people have not looked at the Sacramento opportunity in a way that they really should. In an adjusted market analysis with only one major professional sports team here, there is a lot of revenue that is not typically available. It is also the capital of the 8th largest economy in the world. To the top 100 businesses in the United States, after Washington D.C., this is the single most important regulatory environment for them. So it’s not just necessarily looking at who the corporate base community is here, it is also looking at corporations that have an interest in what is happening in Sacramento. That impacts luxury boxes, naming rights, other types of sponsorships.”

“Ron is one of those in a small group of folks who see opportunities where other people don’t. He doesn’t think in a linear way, he thinks in a much more global way and I think that whether it is Ron or someone else who is willing to look at this in a little bit different way, there is a potential opportunity. Having said all of that, I want to be very clear, this is the Maloof’s team, they own the team. They have obviously expressed a strong interest in staying here and making this work and obviously, to have them remain here and be a big part of this is a natural solution.”

BE: Let’s talk about what is going on right now with Think Big. The Mayor announced the “Brick by Brick” campaign at his State of the City speech, which will allow people to purchase engraved bricks on the new arena. Are there any details on that campaign yet?

CL: “The details will be coming in April, we need to get through the next couple of months to have a sense of where we are. But yeah, we are going to be putting out a detailed program and that will really give people the opportunity to look at this as the ‘people’s house.’”

“The idea with this arena is that it is going to be the people’s facility, not just basketball which I do think it is important because it contributes to the community, but concerts which help bring other potential venues and events which will contribute to the community. It is a community asset. People have compared Sacramento to a greenhouse – it grows up these great kids but then the kids leave. Let’s keep the next generation of great people here in Sacramento. This facility, I think, will be an incentive to do so, and so let’s actually have a tangible connection so that people can contribute.”

“We’re not looking at this [the Brick by Brick campaign] to solve or address the funding issue, that’s a separate thing, but we are looking at this as a way to have a connection in much the same way that part of the Boston Celtics are publicly owned or the Green Bay Packers are wholly owned. Let’s have that community connection because I do think that this franchise is a special franchise. It is the only major professional sports team here. There has always been an affinity between the public and the Kings, and it is a huge part of the community. This is the type of the community that can have even a more special and enhanced relationship with the team and the community and with the facility and the community.”

BE: Think Big also brought in a group of political advisors recently as well, the “Purple Swat Team” as they are being called. What do they bring to the table?

CL: “We brought in a group of guys who are from Sacramento, their families are here and they are committed to living here, and they have deep experience in statewide politics – Aaron Mclear was the spokesperson for Gov. Schwarzenegger; Brian Brokaw ran California Attorney General Kamala Harris’s campaign; Josh Ginsberg was a lawyer for Governor Schwarzenegger. All three are making their homes here and they have volunteered their services to help do community organizing.”

“It is great that those guys have offered their services. We call it the ‘Purple Swat Team’ because first of all the Kings are purple, second of all because you are getting the red and the blue – the bipartisan – so you end up with purple.”

BE: It has been said that something like 70 percent of the construction work is going to be contracted out through local companies on this arena. It seems as though this project gives Sacramento an opportunity to build out of the recession.

CL: “Just look at the economics: 4,000-plus jobs and we have committed to making those Sacramento jobs. Right now, there may be a small number that there just aren’t people in Sacramento who can do the type of technical work, but first and foremost almost all of these jobs are going to be based here. And there is nothing that can catalyze the economy of a community more than construction jobs. The dollars attached to construction jobs have the greatest velocity. They will have a multiplier effect throughout the communities.”

“Think about it, a carpenter has a job where they may have been unemployed over the last couple of years. In the building trade, unemployment is over 30 percent in some places, maybe even higher here. That carpenter has a job for a year or two years, they are able to take care of their family, they are able to buy things in the community that money ripples out very quickly. Then you look at the $150,000-plus million a year of economic activity that’s going to be spent developing this and spun off by it. That is a huge injection of money. You have the $7 billion that will be spent over the lifetime of the arena, which is a huge injection of money and that’s obviously the net present value of that money. And then above and beyond that you are transforming downtown Sacramento.”

“This city is one decision away from really transforming itself so that when you walk through downtown it would be a remarkably different place.”

“It’s a baseball facility, but the Giants facility in San Francisco [AT&T Park] has completely transformed a neighborhood that was basically an undeveloped area of old railroad yards. So the ability of what this can do for Sacramento is just enormous. Again, people have to do their due diligence, but if you are walking down the street and you see a $20 bill on the ground, all you have to do is pick it up and you are $20 richer. This is a comparable type of decision for folks to make.”

Originally published Saturday, February 4th, at Ellington’s blog, Bleed Black and Purple.

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