The Sacramento Kings arena has revenue questions both for today and in the future

Golden 1 Center, home to the NBA Sacramento Kings, was built in 2014 with great fanfare. Russ Fehr, Sacramento City Treasurer at the time, wrote that the Arena would have a “significant catalytic effect on the economic growth and development of Downtown Sacramento”. A group started by the arena developer claimed that this arena would “bring over $7 billion of economic impact to the region over the next 30 years”. On their web-site, this group continually wrote about the arena bringing in “$100 million in revenue annually for downtown and $157 million a year in economic activity for the region”.

Setting aside the fact that the numbers above never remotely came to fruition, the city also had to issue $280 million dollars in bonds in 2014-2015 to help pay for the construction of the arena. Let’s fast-forward to this week. Sacramento’s debt manager recently announced that at the end of 2024, a city assessment will need to be done to figure out how the city will pay off the arena’s bond debt.

– Newsweek

As the Sacramento Business Journal wrote this week, the city may be forced to dip into their general fund to pay off the bonds that are due. Similar to what the city had to do in 2021-2022 when arena revenues were again down to a point where the revenues did not pay off the yearly bond payment.

You may wonder how exactly the city gets revenue from the arena. The answer is that Sacramento relies on revenue from downtown city parking garages and meters. The original governance documents signed between the city and the Kings projected that by 2029-2030, revenues from parking would have paid off the city’s bond debt. Now? The City Treasurer says that they may need a “change in that plan”.

— City of Sacramento

— City of Sacramento

— City of Sacramento

Why are revenues not covering the bond payments? Several reasons. COVID-19, higher costs from the arena and higher costs from parking garages. In fact, arena operational expenses are 33% higher today than in 2018. To make matters even worse, the city expects revenues to continue to be short for 2025, 2026 and 2027. So, this won’t be changing that soon.

Don’t say that you weren’t warned, though. Field Of Schemes, the best stadium site on the internet, wrote then in 2013, about his concerns with this funding plan through parking tickets and garages. Others seemed to be happy that this funding plan did not involve new taxes. But please keep in mind that before the arena project was started, the city was using parking revenues for something that they were doing. Therefore, taxpayers were paying for this arena through this funding plan.