Is the Kings' Arena Land Swap an Indirect Taxpayer Hit?

The Sacramento Bee's champion politics columnist Dan Walters today wrote about the proposed Cal Expo land swap, and specifically the Legislature's role in facilitating the deal. The thrust of Walters' argument can be summed up in this short passage:

The net effect of such a swap, it appears, would be that the taxpayers of California would indirectly finance the basketball palace for the Kings and their owners, the Maloof family.

The Maloofs already own Arco Arena, where the Kings play, but they want taxpayers, one way or the other, to build them a new arena. Sacramento voters turned down a complex tax issue to finance such a facility. The family, local politicians and the National Basketball Association then shifted to the Cal Expo scenario.

From what we know, is that a fair assessment?

This is how the land swap breaks down in a macro sense:

KINGS

Gets: a new arena downtown.

Gives: current land/facilities on Arena Blvd. in Natomas.

Why?: the funding mechanism helps pay for a good portion of the arena.

DEVELOPER

Gets: revenue from the development of the current Cal Expo property.

Gives: upfront financing of the arena and new Cal Expo construction.

Why?: $$$.

CAL EXPO/STATE

Gets: a new site built to its specifications.

Gives: its current property, and the potential to earn revenue off it.

Why?: eliminates financial risks from developing part of current Cal Expo site on its own, and guarantees an improved fairgrounds.

***

Essentially, Cal Expo can make some much-need cash by getting a bond measure passed or by developing part of its current property. But who's on the hook to repay a bond? Taxpayers. Who is on the hook if a partial development plan goes wrong? Taxpayers.

If the land swap goes through, who's on the hook to pay for the new Cal Expo? Private financiers. Who's on the hook if the current Cal Expo site doesn't meet development revenue goals? Private financiers.

For Cal Expo, this deal moves the financial risk from the state -- the taxpayers of California -- to private financiers funding the whole shebang. In no way will taxpayers be funding the new "basketball palace." Private financiers are funding the new Taj Maloof. And private financiers are funding the new "Versailles of State Fairgrounds." (If we're going to be ridiculous and call NBA arenas "palaces," let's go all the way and compare other pieces of property with buzzword-y terms.)

***

The issue of revenue splits at the proposed new arena with respect to parking, as well as the matter of the Kings' outstanding $70 million debt to the city of Sacramento, are separate from the land swap, and outside the legislative purview of Sen. Darrell Steinberg, so I will assume Walters is not lumping those in with this critique. Also, he didn't mention those items, so I ain't about to try to defend them now.

(In other words, the city of Sacramento has more to worry about with regards to this project than the taxpayers of California do.)

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