Two City Hall players offered dueling views in court Tuesday on whether city negotiators buried secret sweeteners in a partnership deal with the Sacramento Kings to build a downtown arena.
Testifying in Sacramento Superior Court during the second day of a lawsuit challenging the 2014 arena deal, former City Council member and deal opponent Kevin McCarty said he felt the city was giving away too much, and not getting enough return on its investment in the half-billion-dollar arena deal.
The city put $255 million worth of cash and land value into the deal for a $507 million arena, now under construction downtown. McCarty said he felt the city should have told the public more about the dollar value of two other elements of that deal – several thousand underground parking spots the city agreed to let the Kings operate, and the right to build six billboards on city property.
“I kept saying we should tell the public the value of these elements,” McCarty said. “The city should be truthful and transparent.”
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McCarty, now a state assemblyman, testified that representatives of Kings investors told him they were overpaying for the team and wanted the city to add more to the deal. He said he figured the parking spaces and billboards were connected to that request.
But when attorney Brenda Aguilar-Guerrero, representing the city, asked whether he’d ever heard from anyone with the city or the Kings investor group “that there is a secret deal,” McCarty said, “No one has ever said that to me.”
Earlier in the day, Assistant City Manager John Dangberg offered a different view of the deal, saying the city did not help the group buy the team, and made it clear in numerous documents and discussions that it was giving the Kings the right to manage underground parking spots at the arena site, and to set up billboards.
Dangberg said the city did not assign a value to those assets because, even if they are of value to the Kings, giving them away did not cost the city any money. He did acknowledge a potential “opportunity cost” on future revenues for the signboards.
Dangberg argued that putting those assets in the deal helped the city leverage other important deal points. One key deal point, he said, was the agreement by the Kings that the team is responsible for any arena construction cost increases or overruns.
That has turned out well, Dangberg said, now that the estimated arena construction cost has grown from $448 million to $507 million. The Kings must pay the entire added $59 million. “That was the biggest issue for us by far ... to protect for cost overruns,” Dangberg said.
At one point during McCarty’s testimony, Judge Tim Frawley interjected, asking McCarty several questions about his sense of the value of the underground parking spots, and whether he accepted a city consultant’s report that said the garage was of no real value to the city.
McCarty said he took a simple approach. “I find it preposterous that it was worth negative dollars; otherwise, why would the Kings investors want it?”
The lawsuit was brought by three Sacramento residents alleging that the city committed fraud by secretly helping the Kings investors buy the team. The trial continues Wednesday with testimony expected from Kunal Merchant, a former chief of staff to Mayor Kevin Johnson and now an executive with the Kings.