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KJ Flunks the TSE Exam

2011 September 5
by Skip Sauer

Did he — Kevin Johnson, ex-NBA star and current mayor of Sacramento — really flunk the test?  Unfortunately, I think he did. USAToday.com records his answers to a series of questions regarding the plans for financing Sacramento’s new arena.  First:

So what are we going to see from you Thursday when you deliver your report?

We’re going to release a report that shows a menu of options on the public financing side. We looked at 30 different things. We’re narrowing it down to 10 or nine or eight.

We’ve done our due diligence with experts looking at it. We’re programming with the Maloofs, the NBA, all the interested parties.

Oh dear, KJ.  Your “rules of the game” stated that taxpayers come first.  But your answer here doesn’t even mention them, and  puts the owners and the NBA befire other “interested parties.”  I can only presume that your statement here is accurate.  This is not unexpected, but coming right on the heels of the David Aldridge piece, it’s quite disappointing.  I sensed that the Aldridge piece might be part of a campaign — see the reference to Thursday’s upcoming report — and though I admit it was impressive, I think I was fooled.

Second:

Do you have a ballpark figure of how much will be publicly financed through user fees vs. the private sector?

You’ve got to identify how much public financing you can get on one hand and then see what makes sense for a private equity investment,so folks get a return on their investment. If there’s a gap, you have to problem-solve the difference. There’s no way it can all happen privately. There’s no way it can all happen publicly. Whether the split is 50/50, it’s too premature (to say) of those things.

That’s the worst part.  KJ is not working for his citizens, he’s working for the league, stating that first, you’ve “got to identify how much public financing you can get.”  He’s maximizing the subsidy to the Maloofs and the NBA.

I was fooled, shame on me.  But greater shame on Kevin Johnson, former NBA star, but currently the elected mayor of Sacramento.  What a grotesque statement of his priorities.

For public choice afficiandos, this is the reverse of the standard “revolving door,” where former governmet officials cash in by moving to the private sector and collecting favors from the bureaucracy.  You might think a multi-millionaire ex-NBA player would be immune to these pressures, but guess again.

2 Responses
  1. Scott permalink
    September 6, 2011

    I think that if arena development in Sacramento was in fact financially beneficial (i.e. profitable), there would be private investment groups willing to fund the entire operation so that they are able to benefit over the city. Since most of the talk is of the city owning the facility, there probably little private sector optimism as to the viability of the arena as compared to other investment opportunities (regionally or otherwise).

    Furthermore, KJ has been discussing that there is the potential of 4,000 jobs being added. If the facility costs $400m, that means that there is a cost of $100,000 per job. I wonder if there is a cheaper way to generate jobs in the region, assuming that the $100,000 figure is not all going to local resident salaries and the labor performed is in fact worth that amount.

    Sacramento is my hometown and I am very sad to see it having to go through this, but I am not sure if a city going through a regional recession should be taking on such an endeavor. I think it may have been best for the Maloofs to have saved their early 2000′s revenue from Webber jerseys and playoff tickets for a rainy day instead of claiming that they cannot generate revenue from Sacramento basketball. They should (and might?) understand that small markets will have cyclical profitability based on their team’s success. While having space for vendors and box seats may make more profit, I am not convinced that they would be taking a loss if they merely provided a good product and sold out the current arena.

  2. michael c permalink
    September 8, 2011

    4,000 jobs is almost certainly not a net improvement. Even if the project was just $400M (unlikely) and did create those jobs for the arena, they would take from other areas a large number of other jobs supported by that same entertainment cash flow stream. Some number of jobs at the old arena would be lost, area restaurants, theaters, and entertainment competitors, plus the large number of cuts to public employees as Sacramento’s budget deficit means dollar for dollar cuts elsewhere (libraries, roads, etc) for every public dollar contributed to the arena.

    Why “merely provide a good product and sell out the current arena” to make a small profit, when one can hold cities hostage for half-a-billion dollar subsidies? I live in the area and would love to see the Kings stay, but the Maloof’s rent-seeking rhetoric and the obvious disregard for the taxpayer exhibited by KJ makes me certain I will be happy to see them go.

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