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Katy Grimes

Judge rules against taxpayer groups in arena subsidy initiative

Delusions of grandeur drive the proponents of a downtown sports arena in Sacramento.

Sacramento Superior Court Judge Timothy Frawley ruled against two taxpayers groups in Sacramento, to place the proposed public subsidy for the new basketball arena before the city’s voters. Judge Frawley said the taxpayer groups made such significant errors in the wording of their petitions, the petitions, and 23,000 signatures supporting the effort, are not valid.

This is how The Sacramento Bee, which has been openly advocating for the arena subsidy, reported it: “The lawsuit, meanwhile, was funded by an agribusinessman who lives just outside the city limits and a group of nonunion electrical contractors angry that the arena is going to be built almost exclusively with union labor.”

The lawsuit effort received some funding from Chris Rufer, a local, Libertarian businessman, who believes in allowing the Sacramento voters decide on the arena subsidy.

“What makes me a Libertarian is the fact that I don’t believe in coercively imposing my personal beliefs on others or expecting anyone else to subsidize what I personally like to do,” Rufer said in an op ed in the Sacramento Bee this week.

“I am fine with this arena being built. Supporting the arena and fighting against the subsidy may seem contradictory; however, I believe the arena can, and very well may, be built without the use of a subsidy. I love basketball; having attended college and most basketball games at UCLA and seen John Wooden’s impact on the sport, its players and fans was truly inspirational.”

The non-union contractors, along with thousands of Sacramento taxpayers, are opposed to the project labor agreements with labor unions, which will significantly drive up the cost to build the arena, and prevent a fair bidding process on the construction work.

According to Eric Christen, executive director of the Coalition for Fair Employment in Construction, the Sacramento construction market is 85 percent union-free. In a September op-ed in the Sacramento Bee, Christian asked, “why would the owners agree to a PLA that will only make this project more expensive?

This is a textbook abuse of taxpayer funds, and also a gross violation of Sacramento Mayor Kevin Johnson’s campaign promise of a transparent and accountable city government. The process has been anything but transparent. Rather, it has been secretive, with the deals made between only a few local cronies who stand to greatly benefit financially from the deal, while the local taxpayers fund the project.

As Rufer correctly pointed out, the arena project “’creative financing’ involves a 35-year loan with eight years of interest-only payments; it sounds like the housing bubble.”

“The loan made by the city to the Kings in 1997 has yet to be paid in full and the current arena is dubbed obsolete,” Rufer said. “How can anyone possibly guarantee that the proposed arena will still be relevant for 35 years?”

In 1997 the city loaned the Kings’ owners $78.5 million. The loan has not been repaid.

The “creative financing” Rufer refers to was the severely understated total public contribution to the arena, done by city staff. Instead of contributing $258 million, city taxpayers will be contributing $334 million (or more) to the project, representing not 58 percent of the project cost, as claimed by staff, but 75 percent of the project’s cost.

The does not count subsidies provided by county government or future undetermined traffic infrastructure costs, which certainly will be an issue at the confluence of the already impacted downtown streets, and nearby Interstate 5.

Leaders of one of the taxpayer groups, Sacramento Taxpayers Opposed to Pork, issued a statement saying the ruling “allows the city to silence 23,000 certified voters.” “We call on our elected representatives to begin listening to their constituents,” STOP said. “It is not too late for the city’s arena deal to receive the public scrutiny and debate that it deserves.”

The whole stinkin’ deal

Sacramento needs a $391 million arena like it needs another new strip mall or shoddy housing development. The city is operating on a $60 million deficit, parks are closing or disintegrating, police officers laid off, streets are potholed, and the city desperately needs a new sewer system.

Nearly every study done on cities with arenas shows not only minimal if any economic growth and job formation, but instead, arenas are usually an economic drain on a city, resulting in higher taxes to subsidize and support the facility.

Sacramento’s arena deal is shaping up to be no different. The city is giving 3700 parking spaces at Downtown Plaza to the investors, which, according to EOS, have an estimated value of $57.8 million. But that’s not all. The city is also gifting to the investors of up to six sites for up to six digital billboards, which have a net present rental value of over $18 million.

The local mainstream media is so enamored of the idea of a big, shiny new arena they have ignored that the city’s financing plan is riddled with serious flaws, and grossly exposes the city’s general fund to potential liability.

Public Policy Watchdog Eye on Sacramento points out the deal “ties up the city’s TOT revenues, involves very high interest rates, is of a type (garage bonds) that are causing problems in other cities and involves the payment of over $80 million of additional interest in order to secure $24 million in lower payments in the first eight years of the bonds – a horrible deal for taxpayers.”

Perhaps equally disturbing is Mayor Johnson’s dubious statement of the creation of 4,000 jobs due to the arena redevelopment project.

Without demand, the arena project will not bring more jobs to our city that are not already here. The only new jobs that may be created will be more union jobs to build the structure, which will be obsolete and out-of-date before any of the loans are paid off.

The Slums of Sacto

Sacramento is located on two rivers, neither of which has ever been developed. In the downtown, K Street was turned into a pedestrian mall in the 1960′s. It was a failure, but only made worse by the city, which spent nearly $500 million over the years in highly suspect redevelopment projects, annexing buildings and property along the street, turning it into a giant slum. The City of Sacramento, the biggest slumlord on K street, and in downtown, has made a mess, from which an arena will not perform a rescue.

These are real issues that real leaders would tackle. Sacramento could be a much more interesting city, had any of the city councils allowed development along the rivers. And the downtown business district might have been a thriving area, had the Sacramento redevelopment agency not robbed the taxpayers of several hundred million dollars over the decades.

Sacramento is still operating with a massive deficit. I’ve been told by city insiders that the city’s deficit is as high as $60 million.

So let’s build an arena.

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