Sure Thing Vs. Potential: To Lease Parking Or Borrow Against It

Here in the basketball commentary world, we debate the risk-potential balance all of the time. Back in spring 2010, we said DeMarcus Cousins could be the greatest center of his era ... or could be Derrick Coleman, but taller. It'd embedded in every basketball decision, every lineup change or draft pick or trade or free agent chase. You're always weighing the risk of failure versus the promise of potential. Most fans prefer to shoot for the stars, because ... hey, why not?

Things are a little different in municipal governance, where risk is a much, much less desirable characteristic of a project. In the NBA, the fallout from a risk that didn't pay off is a GM getting fired, a playoff chase delayed. In, say, the city's finances, it could mean a whole lot more.

As such, how the city goes about choosing between the option with more potential for profit -- borrowing against future parking revenues -- or the one with a lower ceiling but no risk at all -- leasing the parking out to a third party?

That's one of the decisions the city will have to make going forward. Of course, if the lease bids come in under projections, they may not have a choice. The held option has a higher ceiling (should parking revenue raise more than projected, which is certainly plausible) and more protections for the users (as the city, which reports to the citizens, controls the parking rates directly). The lease option takes the general fund completely out of the equation -- it's completely without risk, though also lacks the upside of better than expected revenues.

It's the classic 'bird in hand' question writ large.

But one thing to keep in mind: either way, this is a good deal for the people of Sacramento. The city has avenues to replace the parking revenue either way, with a share of profits from the arena, boosted parking revenue and the county's annual commitment.

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