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Katy Grimes

The quiet Arena lawsuit moves forward

Last week a judge ruled against the lawsuit to place the proposed public subsidy for the new basketball arena before Sacramento voters.

Local media heralded the decision.

But there is another Sacramento arena lawsuit taking place in Sacramento Superior Court. I’ve attended the court proceedings. And I’ve written about it.

The lawsuit accuses city officials of making a secret deal to provide an extra $80 million of public money to help the investors’ group beef up its offer against a well-funded Seattle group that wanted to buy the Kings and move them to Seattle, which lost its NBA team to Oklahoma City in 2008. Plaintiffs’ attorney Patrick Soluri said city officials have committed fraud because they have not fully informed the City Council and the public about details of the deal.

The city subsidy, according to the lawsuit, is actually $338 million — not the $258 million the city claims.

Most other media seem to be ignoring it, or incorrectly reporting the importance of the lawsuit, and allegations of fraud by city officials, and illegal gift of public funds.

This is serious. It’s not about being Kings arena deniers, as several Sacramento Bee columnists and reporters would have you believe.

Plaintiffs Issac Gonzalez, James Cathcart and Julian Camacho applied to the court to be able to depose the defendants, Mayor Kevin Johnson, City Manager John Shirey, Deputy City Manager John Dangberg and other city officials over allegations of alleged secret deal by city officials and staff.

Attorneys Jeffrey Anderson and Patrick Soluri have conducted the depositions of several city officials and other document requests.

The plaintiffs have tried to get the details of the arena deal and purchase of the Sacramento Kings to be made public.

However, it appears Sacramento Mayor Kevin Johnson and the City Council have tried to accelerate their approvals of the arena and related bond sales to May, which were previously scheduled for summer or fall 2014.

The lawsuit

In a recent deposition in the lawsuit, City Councilman Kevin McCarty testified that multiple representatives of the Kings Ownership group demanded that the city compensate the Kings investors by $125 million because they were “overpaying” for the franchise.

Assistant City Manager John Dangberg’s deposition was taken last week.

The attorneys obtained more evidence from him supporting allegations of fraud and illegal gift of public funds.  Dangberg, as the lead negotiator for the City and key architect of the ESC project, cannot give any plausible reason for how the City’s contribution to the project is capped at $258 million.  His testimony as to the value of the real estate parcels reflected in the term sheet and the lack of any assigned value of the digital signage rights and parking rights to be conveyed to the Kings owners is laughable.

In recent depositions, Sacramento Economic Development Director Jim Rhinehart and City Councilman Kevin McCarty testified that multiple representatives of the Kings Ownership group demanded that the city compensate the Kings investors by $125 million because they were “overpaying” for the franchise.

Officials with the city, unable to contribute any more cash than the $258 million offered to the former owners of the Sacramento Kings, the Maloof family, in 2012, instead agreed to provide a litany of “sweeteners” in the form of city assets including properties located throughout the city, thousands of off-street parking spaces, and digital billboard leases.

“This testimony squarely supports our serious allegations that city officials were caving into the will of the NBA and neglecting to consider the best interests of Sacramento’s citizens when they promised millions of dollars of corporate welfare to the Kings Ownership group in 2013,” said Soluri. “These officials neglected to do basic due diligence, to negotiate in good faith to get the best deal for the taxpayers who will be on the hook for this deal, and worst of all, took steps to deceive the public about the true nature and scope of the city’s public subsidy. It’s shameful.”

Media hopes

“The hope is that before he leaves office in November, Senate President Pro Tem Darrell Steinberg can use his massive influence to help untangle the 700 block of K so it can be more than a block of boarded-up buildings,” Sacramento Bee columnist Marcos Breton wrote on Sunday.

Breton neglected to say those boarded-up buildings on Sacramento’s K Street are all owned by the city of Sacramento. After decades of , eminent domain, redevelopment blunders, and single-handedly chasing business and shoppers away from the K Street Mall, the city of Sacramento appears to believe they desperately need this new arena shoehorned into downtown to increase the property values of the city-created downtown slum.

“That would help trigger more investment downtown and create synergy with momentum building in nearby West Sacramento,” Breton added. “A once dismal little town is fast becoming a hub for agriculture innovation as the U.S. home for several foreign ag companies.”

This “once-dismal little town” has had plenty of options for development and good growth. What’s been “dismal” is the decades of failed city leadership, easily distracted by a new shiny object.

The existing arena

So, what’s the plan for the Sacramento Kings’ current arena, parking lots, and surrounding land, if the new arena is built?

The new Kings owners will own all of it, including the adjoining 100-acre parcel with the half-built baseball stadium.  While there are no plans whatsoever for these properties, there are a couple of interesting caveats:

* The arena cannot be used as an arena after a new downtown arena is built, to keep it from competing with the new arena; and

* The city is obligating itself under the term sheet to give the owners any and all law use approvals, re-zonings and entitlements they may wish, in order to put the properties to their highest and best use, which is another way of saying owners can do whatever they wish with the properties.

Losing games

The City has played games with the attorney’s discovery requests.  The next hearing will be March 17, 2014, for the plaintiff’s motion to compel further deposition testimony, and further production of documents from the City.

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