PHOENIX — Sacramento is planning to convert existing short-term debt into long-term bonds next month to finance its share of an arena for the Sacramento Kings basketball team.
The city is targeting the week of Sept. 21 to sell fixed-rate taxable bonds to retire $299 million of short-term debt it issued earlier this month to finance the Golden 1 Center downtown.
The city is to pay for $255 million of the project that broke ground late last year, while the Kings foot the rest of the bill for the $500 million-plus facility. The financing had been the subject of a lawsuit challenging the legality of the bonds, but a Sacramento court ruled in July that the plaintiffs had failed to make a convincing case.
Stadium bonds have drawn fire from critics who say the major sports facilities they fund tend to be overwhelmingly for private use that becomes essentially government-subsidized. A new stadium for Major League Baseball's Atlanta Braves faced a similar legal challenge last year, and those bonds finally came to market this week after surviving legal wrangling all the way to the Georgia Supreme Court.
Sacramento has contended that the Kings would eventually leave the city if the team could not find a successor to its current Sleep Train Arena, which opened in 1988. The new Golden 1 Center is scheduled to open in October 2016, and Sacramento Treasurer Russell Fehr told The Bond Buyer that the city's general fund will receive more than adequate lease payments from the team and tax revenue to make the deal work.
"We only need $4-5 million in new revenues," Fehr said Tuesday, noting that the team is slated to make payments to the city starting at about $6 million per year and rising to around $18 million annually in coming years. "We think the plan is pretty conservative."
In addition, Fehr said, the city also has another "hedge" in that it will be collecting property tax revenues from the development around the new facility.
Fehr said he was glad to see the project moving toward completion after several years of planning and delays.
Sacramento Mayor Kevin Johnson, a former National Basketball Association star, expressed similar sentiments in an earlier statement.
"Six years ago, we set out to accomplish what many thought would be an impossible task at an impossible moment: to finance a new arena with no new taxes and no net impact to our general fund," Johnson said in the statement. "Against all odds, and in the face of endless obstacles, we prevailed."
