Investing public dollars in private ventures is not risk-free. Consider the case of the NBA Sacramento Kings.
The city of Sacramento borrowed $273 million to build the Golden 1 Center, where the Kings play. That deal required the city to take out a loan six years ago. Revenues from city parking service the borrowing, principal and interest.
What could go wrong? In brief, the answer is the COVID-19 pandemic. Gov. Newsom’s shelter in place mandate to slow the spread of the novel coronavirus hammered the city’s service economy. Basketball fans stopped watching the Kings play in their publicly funded sports arena.
Meanwhile, leisure and hospitality business revenue in the downtown area near the Golden 1 Center dried up. Enterprises cut hours and closed permanently. Loans via the U.S. Small Business Administration’s Paycheck Protection Program have been a lifeline for some downtown business owners.
It gets worse. According to a Sacramento Bee columnist, citing another reporter at the city’s only daily paper that Chatham Asset Management, a hedge fund, owns, “the city owes $18.4 million annually on the arena. City parking revenues were budgeted to cover $5.3 million of that cost, but they may fall short.” https://www.sacbee.com/news/local/news-columns-blogs/marcos-breton/article251503138.html
The city services that its General Fund support are at-risk. The culprit is the debt that the city is on the hook for to finance the Golden 1 Center.
City residents did not vote to invest in the Golden 1 Center. Rather, former Sacramento Mayor Kevin Johnson, who starred for the NBA Phoenix Suns, steered this financial deal through the City Council for approval.
We return to the current moment. What happens if or when parking revenues that help the city to pay its Kings debt do not recover? The city might have to withdraw money from its General Fund to cover the debt on building the Golden 1 Center.
General Fund monies support a range of public services, from libraries to human services, fire, parks and police. Disparity reigns supreme, say progressive groups. According to the People’s Budget Sacramento coalition, the city’s police and fire departments comprise nearly two-thirds of the $678 million General Fund. https://www.peoplesbudgetsac.com/
Faye Kennedy is a Sacramento resident active in the Poor People’s Campaign.
“Yes, let hope the city of Sacramento will not have to use its General Fund to cover its arena debts,” Faye said in an email. “We need funds to support services for the unhoused (motel vouchers, food, warming and cooling centers, triage centers, community navigators and safe parking sites), more affordable income-based housing, rental assistance, youth services, parks and libraries and specific new libraries in underserved communities.”