As Sacramento drowns, it finds money for a new stadium
I keep reading stories about cities doing convoluted tax deals and giving away hundreds of millions of dollars to keep sports teams from moving away. This strikes me as odd – communities giving away precious resources to millionaire sports team owners while they can’t balance their budgets. Sacramento might win the award for fiscal battiness this year. Here is a description of the state’s current effort to raise money for a sports stadium from the Sacramento Bee:
The city says it can raise $212 million by setting up a nonprofit corporation to borrow against future revenue generated by its downtown garages. That would represent the bulk of the city’s $258 million contribution to the new $447.7 million arena proposed by billionaire Ron Burkle and two other investors trying to keep the Kings from moving to Seattle.
Most of the rest of the city’s share would come from giving the Burkle group parcels of city land worth an estimated $38 million. Burkle could sell the property or develop it himself.
The clever officials in Sacramento, perhaps having seen the disaster that Chicago made of privatizing its parking operations, have decided to set up a non-profit agency and securitize the city’s future parking revenues via a bond offering. But there is a broader question about whether the city can afford to put any money toward a sports stadium. Here, in black and white, is how the city’s financial condition was described in a recent bond offering (emphasis mine):
Due to a variety of factors, including the continuing housing downturn, high unemployment, and increasing pension costs, the City is undergoing, and will continue to be subject to, significant financial stress. The Adopted Budget for Fiscal Year 2012-13 projects that overall General Fund revenues will be $367.5 million, as compared to $359.9 million in the Fiscal Year 2011-12 Amended Budget.
In connection with the adoption of the Fiscal Year 2012-13 Adopted Budget, the City addressed a projected $15.7 million funding gap. The five-year forecast for the City’s General Fund shows the on-going gap between expenditures and revenues will continue to grow by an additional $14.7 million over the following three fiscal years.
Sacramento’s regular budget has a $15 million funding gap. So why not securitize those parking revenues and close the budget shortfall? Why use it to support a billionaire’s sports project?
This isn’t the first time that Sacramento officials have flirted with sports money. Bloomberg reported last year on another failed deal that Sacramento was involved with:
But the story in California’s capital, a city of 2 million with a perennial inferiority complex borne of being overshadowed by the Los Angeles and Bay Area media markets, is not about the details of the deal or the wiles of mercurial owners of National Basketball Association teams. It’s about the foolishness of city officials who pin urban renewal hopes and taxpayer dollars on sports complexes despite the public’s declining willingness to pony up the cash.
News articles over the weekend quoted fans who feel betrayed by the Maloofs, but these feelings are hard to quantify. Some residents are no doubt upset, but others openly question whether this is the best use of public resources, especially at this time. Although the economy isn’t as bad in Sacramento as in some other California locales, it’s still depressed, and city finances are stressed.
This is not rocket science. There is only so much money to support government operations. The first priority for muniland is always a balanced budget. So when hard economic times come, cities can afford to retain police officers and teachers. Sports stadiums provide little support for collapsing communities. Sacramento should smarten up.
Sacramento Bee: Budget gap at Sacramento City Unified School District down to $5.6 million