Sacramento’s Downtown Plaza shopping mall was in decline and had become “a cancer in the center of our city” by the time the city and Sacramento Kings owners agreed to a deal to build a new arena at the site, a top city official said Monday in court.
Assistant City Manager John Dangberg made the comment during his testimony as the city’s first defense witness in a lawsuit challenging the legality of the 2014 deal.
The lawsuit, filed in Sacramento Superior Court by three city residents who opposed the deal, alleges the city secretly helped the prospective Kings owners buy the team by giving them rights to operate several thousand parking spots adjacent to and under Downtown Plaza and by giving them entitlements to build six digital billboards alongside freeways. Plaintiffs are asking the court to invalidate the deal.
City officials say they did nothing in secret, nor did they help the group buy the team. The trial entered its third week Monday. The plaintiffs have finished presenting their case. City attorneys said they will take much less time, and may conclude their case Tuesday. They have asked Judge Tim Frawley to issue a quick ruling so the city can sell bonds to help finance arena construction.
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The arena is under construction at 5th and K streets, at the east end of Downtown Plaza, which has been torn down. It is scheduled for an October 2016 opening. Kings officials say they expect to begin construction of an adjacent hotel tower in the next four weeks. That tower, which also replaces a portion of Downtown Plaza, is expected to include condominiums, offices, stores and eateries. The Macy’s store and nearby theaters remain open.
Dangberg, one of the key players for the city on the deal, said the shopping mall was dying. Stores were shuttering. If the arena deal had not come up, “we would have had to have conversations with someone else to try to fix this cancer in the center of our city.”
Dangberg and city arena project manager Desmond Parrington said giving the Kings control of 3,700 city parking spots and billboard entitlements helped the city negotiate a good deal.
Initially, Dangberg said, the Kings wanted the city to buy the plaza site, clear the land, approve it for new development, and then turn it over to the Kings for construction. The Kings also wanted the city to take the risk for project cost overruns. The city said no, Dangberg said.
Originally set at $448 million, the estimated arena construction cost has increased by $59 million, Dangberg said. The Kings are on the hook to pay that added amount, he said.
The courtroom debate Monday once again centered on what the value is for those parking spots and billboard rights.
The plaintiffs allege the parking lots are worth tens of millions of dollars. City officials testified Monday that a consultant analysis showed the garages were worth essentially nothing to the city because they were in a poor state of repair, and because an existing, long-term parking operations agreement severely limits the amount of money the city can collect per car.
The Kings notably have demolished nearly 1,000 of the 3,700 spots to make room for the arena and adjacent plaza. The team is expected to build new spaces there for premium ticket holders.
In debating the billboards, plaintiffs contend the city should have provided the public with an estimate of the value – or opportunity cost to the city – of letting the Kings build the signs on city land without paying the city any rent.
The city’s Parrington testified that he did note, in one staff report, that the city has collected $180,000 in annual rent per billboard from another private billboard advertising company, Clear Channel. Plaintiffs’ attorney Patrick Soluri said the city should have used that figure to provide an estimate of the “value” the city was giving up.
Parrington disagreed, saying the Kings’ potential use of the signage, and earnings potential, might be very different from Clear Channel’s. He said he did not want to “speculate” on how much rent the city could get.
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Under questioning from Soluri, Parrington offered the most demonstrative response of any witness so far when asked if he participated in any effort to hide anything from the public.
“No, if I was asked to do that I would have quit,” Parrington said.