The Term Sheet is out, yippee!!! What’s in it?

There is a term sheet. So there is that. Now it's onto the bid, which, if you believe David Stern and I do not, Stern said he expected the variances in bid (i.e. more money from the Sac bid) to be eliminated. In otherwords: We're not making the Maloofs take less money for what they sold the team for. 

Are the Sacramento Kings worth 525 million in Sacramento? Probably not, but there is more than one way to skin a cat and the city almost certainly proved that today with the term sheet they released just a few hours ago. 

Kevin Johnson kicked off the festitivites with a series of tweet I will embed so you won't have a problem seeing them. After the jump I'll discuss the term sheet.

I apologize for all that, but didn't want any of it to get lost in the shuffle as some of these things are wont to do. Okay discussion of the term sheet after the jump.

 

 


 

First the term sheet itself.

First tidbit:

 

On February 26, 2013, the City Council authorized the City Manager to pursue 
negotiations with credible prospective buyer(s) of the Kings and to return to the City 
Council prior to the NBA’s April meetings. The City Council adopted the following 
principles to guide the negotiations:
 Protect the taxpayer
 Retire the existing city loan to the Kings
 New entertainment and sports center must be located downtown
 Long-term commitment to keep the Kings in Sacramento
 City will consider investing net value of its parking, land, and other assets
 Develop a public-private partnership
 Prepare for the economic reuse of the Natomas arena site 
On March 1, 2013, an investor group headed by Ron Burkle of The Yucaipa Companies
and Mark Mastrov of Fitness Holdings Worldwide, Inc. submitted a proposal to the NBA to 
a) acquire the Sacramento Kings, b) build a new Entertainment and Sports Center in 
partnership with the City, and c) keep the Kings in Sacramento on a long-term basis. Due 
to the longstanding need to replace the existing Natomas arena, the Mastrov-Burkle 
proposal included a commitment to develop a plan to finance and develop a new 
Entertainment and Sports Center (ESC) to serve as a premier regional entertainment and 
sports venue. The Mastrov-Burkle partnership now includes Vivek Ranadivé, founder and 
CEO of TIBCO, to form the current group (Investor Group) working with the City on the 
ESC proposal.
Prior to the NBA meetings in April, the Investor Group must come up with a viable finance 
and development plan for the Sacramento ESC. Due primarily to the limited size of the 
Sacramento regional media market and corporate base, the financing and development of 
a new arena will require a public-private partnership. Although several teams in large 
markets have privately financed multi-purpose facilities, a privately financed facility in 
Sacramento would not be economically viable given the limitations of the Sacramento 
market.
If nothing else, it illustrates exactly how the city, how the investors (shorthand for Burkle/Mastrov/Ranadive; I don't want to write their names out every time) and how we got here. I've been waiting for this deal. I've said a few times that I expect the term sheet to be similar to the one in 2012. In a sense, there are similarities. One is the city is kicking in about 258 million.  One major difference is that the NBA will not loan any of the money to the investors and that the arena will cost roughly 60 million more dollars this time around.
 
Environmental Considerations: The actions in this report are exempt from the California 
Environmental Quality Act (CEQA) under CEQA Guidelines (14 Cal. Code Reg. Section 
15000 et seq.) as they concern proposed business terms for future agreements. If the 
Council approves the term sheet for the ESC, the project itself will be subject to CEQA 
analysis.
This means that anything to do with CEQA is not going to happen until the project itself is happening. I.E. what's going on in Seattle essentially. (Which means little at this point as they can't move forward without a NBA team. It would start up again if they got an expansion team for instance. At whatever point that happened to happen at.) 
 
Development Revenue Sources
Amount

 
City contribution $258 million
Investor Group/Sacramento Kings $189 million
TOTAl $447 million
 
Another graph:
 
Development Revenue Sources Amount
City Contribution $212.5 million
Public Parking Finance Model 212.5 million
Parking Infrastructure Fund 1.5 million
Sales Tax Construction Rebate 1 million
Sheraton MOPA Funds 5 million
Land Sales 38 million
Subtotal: $258 million
Investor Group/Sacramento Kings $189 million
TOTAL $447 million

This is what the investors are giving up in this deal:

 

Investor Group’s Contribution:
 $189.7 million for ESC construction
 5% ticket surcharge on all ESC events (remitted to the City)
 Capital Repair Fee of $1 per ticket on all events to the Capital Repairs Reserve Fund6
 Responsible for all predevelopment expenses 
 Responsible for arranging or providing a project completion guarantee 
 Responsible for all ESC project cost overruns 
 Responsible for all ESC operating expenses and routine maintenance and repairs
 Responsible for all ESC capital repairs, replacement, and improvements 
 Responsible for all operating risk
 Reimbursement to City for all customary police, traffic control, and other municipal 
services on event nights 
 ESC profit-sharing with City:
o 15% of first $10 million
o 30% of next $5 million
o 50% of anything over $15 million 
o Guaranteed annual payment of no less than $1 million 
From the city's end:
 
City Contribution:
 $258 million for ESC construction
 Sources:
o $212.5 million from public parking self-financing, parking infrastructure fund, and 
construction sales tax rebate
o $1.5 million from the City parking infrastructure fund
o $1.0 million from construction sales taxes generated from the ESC project
o $5 million from the Sheraton Master Owner Participation Agreement (MOPA) 
proceeds
o $38 million from land transfers to In1997 City Lease-Revenue Bonds (Loan):
Here's a pretty important part of this:
 
1997 City Lease-Revenue Bonds (Loan):
Existing bonds will be retired. City will issue new 30-year bonds to retire existing bonds upon 
the Investor Group providing satisfactory security and collateral for the loan which may include 
an ESC lockbox on revenues among other items to be determined. The Investor Group would 
have the right to utilize proceeds of the sale of the 85 acres of land at the site in North Natomas 
as well as other sources to pay down the current balance of the 1997 bonds and reduce the 
principal amount of new bonds to be issued. Furthermore, a 5% ticket surcharge will apply to all 
events held at Sleep Train Arena and the revenue from that will be used to retire the 1997 
bonds.
That means we are paying 5% every time we go to an event at STA. Ticket surcharges are likely going to eat up a lot of the ticket decreases that could be coming. There's going to be a lot of them moving ahead. I hope you're okay withthat. (I am, FWIW.)
 
Event Parking Revenues in City Garages (excluding Downtown Plaza Garages):
All parking revenues at non-Downtown Plaza City garages during ESC events will be retained by
the City.
Downtown Plaza Parking Garage:
The City will transfer operational control of the remaining spaces in the Downtown Plaza parking 
garages (estimated at approximately 2,700 spaces after demolition of spaces for ESC 
construction) to the Investor Group through a long-term (i.e., 35-year agreement plus two 5-year 
extensions) parking management agreement. At least 1,000 spaces shall be reserved for 
premium parking for ESC events. (The City is not required to build any additional parking 
structures for the ESC.)
Downtown Plaza Develop

No more going DT, driving into the Plaza and watching a movie while getting your ticket validated. (See what they did to you, Mom? They're practically encouraging you to take Light Rail more often!)

 

Downtown Plaza Development:
The City commits to work with the Investor Group to secure the necessary entitlements to allow 
for the potential development of up to 1,500,000 square feet of office, retail, housing, and hotel 
uses around the ESC on the Downtown Plaza site. The proposed development would include 
approximately 475,000 square feet of office, 300,000 square feet of retail, 250 hotel rooms, and 
600 units of multi-family housing development. The preliminary costs estimates provided by the 
Investor Group are just over $500 million.
Keep in mind there is a total of 1,188,000 sq. ft as it is now. Essentially, with so much of the arena taking up what makes up most of the current mall, the idea is to make it go vertical rather than east-west in nature. A vertical shopping mall in Sacramento. Who knew?
 
Also, John  Shirey (the city manager) mentioned this several times during at least the two town hall meetings I attended the last several days. (I'm sure he mentioned it Friday night too. I just wasn't there.) Shirey clearly intimated that would be the type of idea.
 
Now, there is some detail that you don't have to get from the website because I've put it here. I won't discuss it here quite yet, but read it if you want a more nuanced understanding of how the city plans to utilize it's non-profit corporation with regards to the parking and bonds.
 
Section 2: City Sources of ESC Capital Funding
Public Parking Financing Model
Working with the City’s team of investment bankers, the City has developed a public parking financing 
model using the parking, Transient Occupancy Tax (TOT), and other revenue streams. The structure 
of this public sector model would involve establishing a non-profit corporation under Section 115 of 
the Internal Revenue Code (IRC). The non-profit corporation would be separate from the City and 
have a board of directors appointed by the City Council.
In this model, the City would transfer its off-street parking assets and/or operations (i.e., City-owned 
parking garages and lots) to this new corporation and appropriate on an annual basis revenues equal 
to net on-street and enforcement revenues. This structure would enable the corporation to issue a 
combination of tax-exempt and taxable revenue bonds that would generate proceeds to fund a major 
portion of the Entertainment and Sports Center (ESC) project. The revenue bonds would not be a 
debt obligation of the City. Other revenue streams, such as TOT, would provide debt coverage and 
enhance the ratings of the bonds resulting in lower interest rates. The financing structure would 
generate surplus net revenues from the corporation that would be used to backfill the General Fund. 
In this model, the new corporation would be responsible for off-street parking operations. Existing 
City parking staff, a private operator, or a combination of the two would operate the garages. With 
respect to the control of rates, the City Council could identify parameters for future rate increases; 
however, the corporation’s Council-appointed governing board would be ultimately responsible for 
setting rates for off-street parking garages. In the City’s financial analysis of this model, only those 
limited increases for off- and on-street parking identified in the original Walker Parking Consultants 
report were included in the public sector model (refer to the study prepared on November 23, 2011 by 
Walker entitled “City of Sacramento: Market, Financial and Condition Assessment of Parking Assets”
from the December 13, 2011 Council meeting). The corporation’s ability to make significant rate 
adjustments is limited by its relatively low market share of downtown off-street parking. On-street rate 
increases will likely be driven by off-street parking rates.
As with any financing, there are potential risks to the City associated with this approach. To minimize 
risks, staff used conservative (Walker) parking revenue growth projections for the term of the 
agreement with the corporation. In a scenario where parking revenues are not sufficient to make the 
debt payments of the corporation, the City’s TOT would be used to make those payments. That risk 
would be mitigated by using conservative assumptions and establishing various debt and rate 
stabilization reserves as a part of the financial transaction. Furthermore, the model provides upfront 
capital for investments in technology and operational efficiencies to enhance the net parking revenue 
available for debt service payments. 
The upside potential is equally important to recognize. As the city grows, parking demand increases
resulting in increased parking revenues that would accrue to the City General Fund.

Now, here is the various parcels of land the city is using:

 

 

City-owned Land Transfers
The City owns several properties that could generate revenue for the ESC. Under the proposed 
Term Sheet, these properties would be transferred to the Investor Group and it would be responsible 
for providing the cash equivalent land value toward the development of the ESC. CBRE was retained 
by the City to determine the value of City-owned land assets. Based on their recent update dated 
February 26, 2013, the value of the land assets listed below is estimated at $37.98 million. The value 
of the Natomas property is based on the assumption that the current development moratorium is 
lifted.
One-Time Revenues Value Estimate
Natomas – City Parcel (100 acres) $19,990,000
3rd Street and Capitol Mall (Lot X) 9,970,000
2nd Street and O Street (Lot Y) 470,000
Haggin Oaks at Business 80 (approx. 60 acres) 3,920,000
800 K Street (includes multiple parcels) 1,600,000
4th and J Street 2,030,000
TOTAL $37,980,000
Essentially, a whole lot of development opportunity for those with vision. I'm fairly sure between them the investors have some ideas already. (Which is why this thing could easily pencil out for them even at an inflated cost of purchasing the Kings franchise. Without those parcels of land, especially in Downtown, this deal isn't nearly worth the cost of the franchise.)
 
So essentially that's the cost to the city. Oh damn. (You can read that as: The city wasn't able to do anything with it, and this is a heck of a lot better than taking a vote to the citizens increasing taxes to pay for an arena.)
The sources of City funds include Master Owner Participation Agreement (MOPA) funds. The MOPA 
funds were set aside for Downtown development projects from proceeds after the sale of the 
Sheraton Grand hotel. The MOPA funds are intended to facilitate planning and implementation of 
projects in downtown Sacramento and the ESC project is an eligible use of those funds. Use of the 
MOPA funds requires approval from both the City of Sacramento and CIM and David S. Taylor 
Interests per the terms of the agreement. The City has received that approval.

Cooperation. Who knew it worked?
 
County Possessory Interest Tax
On February 28, 2012, the Sacramento County Board of Supervisors approved a resolution 
supporting a financial contribution from the County for the ESC. The Board agreed to contribute new 
possessory interest tax (PIT) revenue generated by the ESC. The County has agreed to contribute 10
the same source of revenue for this project. The PIT revenue from the ESC is approximately 
$600,000 per year. The funds will be included in the financial structure in order to increase borrowing 
capacity for the development of the ESC. 

If you're looking at 35 years for 600K per year, that's 21 million coming from the county on this project. That's not insignificant, but when you consider that the county isn't getting use from those lots anyway at nighttime, it's probably not nearly as terrible a deal for them when you get right down to it. And it's not like 21 million was necessarily going to come from those lots if they do not build an arena.

 

 

Annual Backfill Revenue Sources Post-ESC 
Completion
City Parking Revenues $3,000,000
Ticket Surcharge on ESC Events (5% surcharge) 3,700,000
City Parking Revenues from ESC Events 625,000
ESC Generated Possessory Interest Tax – City 898,000
ESC Taxes (Sales/Utility User) – City 300,000
City Profit from ESC Operations 1,000,000
Downtown Plaza Garage Possessory Interest Tax 39,000
Investor Group Land Acquisition Property Tax 98,000
TOTAL $9,660,000
Frankly, I don't think it will be nearly as hard to backfill this as people might think. Sacramento experienced a lot of growth that spiraled a bunch of directions a decade ago, but now much of that direction is now being concetrated in Downtown whenever possible. As a result, you could see the value of the parking soar above modest estimates might include. If the city is not reaching to meet this goal but is looking for the bare bottom estimates (as they do), making this goal seems like a reasonable risk to take.
 
Let's make this clear: It's certainly a risk. But can the city afford not to? I say no. Others say there are alternatives. Great. Give us some. In the meantime, we are stuck with a decrepit and decaying downtown with little reason for outsiders to invest in it. That's not exactly what we are interested are we? Who is going to put significant investment in something if the city doesn't entice them to put significant investment in the first place?
 
That's the problem with the anti-subsidy people. They have a point, but aren't seeing how this fits with the larger picture. And remember, we aren't talking Kings games only here; We're talking a lot more events (possibly 4 times more) than just the Kings. The chances the city doesn't benefit from this are slim unless those acts bypass Sacramento. With a new venue, why would they want to bypass Sac? We aren't Stockton for instance.
 
For those wondering what will happen while construction is going on? Here is your answer:
Prior to the start of construction of the ESC, the City expects to receive a lump sum payment from the proceeds of the Public Parking Finance Model that will backfill the loss of annual parking revenues to the General Fund during construction.

The highlighted point ultimately is what it is, but it's important to remember they are looking for every dollar they can to get this deal done.
 
The proposed ESC will be owned by the City and leased to the private Investor Group. The value of the private operator’s right to possess the property (the leasehold interest) is subject to payment of the possessory interest tax. Valuing possessory interests for property tax purposes is a complex process and subject to a number of variables including the lease and any sublease structure, term of the lease, rights conferred on the lessee, market value of those rights, and a number of other factors. Ultimately, the Sacramento County Assessor’s Office will determine the possessory interest tax amount through their valuation process. Only the City portion of the possessory interest tax would be used for backfill the General Fund.

 

Same thing for this paragraph:
 
The proposed ESC will be owned by the City and leased to the private Investor Group. The value of the private operator’s right to possess the property (the leasehold interest) is subject to payment of the possessory interest tax. Valuing possessory interests for property tax purposes is a complex process and subject to a number of variables including the lease and any sublease structure, term of the lease, rights conferred on the lessee, market value of those rights, and a number of other factors. 
 
Ultimately, the Sacramento County Assessor’s Office will determine the possessory interest tax 
amount through their valuation process. Only the City portion of the possessory interest tax would be used for backfill the General Fund.
This is a big deal in my mind:
 
City Profit from ESC Operations
Under the proposed term sheet, the Investor Group has agreed to profit-sharing with the City. Under the terms of the profit-sharing agreement, a minimum $1 million would be paid annually into the City’s General Fund. 

So the city is supposed to get a minimum of a million dollars guaranteed. So that's it not looking for profits from the ESC (it wants that certainly) to backfill the general fund certainly. I'm not a lawyer but a lot of that could have to do with trying to avoid lawsuits by knowingly funding an arena with the general fund as a backstop.

Next:

 

Downtown Plaza Garage Possessory Interest Tax
Under the proposed term sheet, the Investor Group would have operational control of the remaining 2,700 parking spaces in the City-owned garages under Downtown Plaza. Given that the Investor Group would have operational control of this City asset for the term of the agreement, they would be required to pay Possessory Interest Tax. Only the City portion of the possessory interest tax would be used for backfill of the General Fund.
Possesory interest tax is possessory interest tax. And the city just does not get all of that.
 
Investor Group Land Acquisition Property Tax 
The City would transfer the City-owned properties to the Investor Group that are currently valued at approximately $38 million. Once controlled by the private Investor Group, it would be required to pay property tax. Only the City portion of the property tax would be used for backfill of the General Fund.

 

Some of the advantages of the proposed ESC development at Downtown Plaza include:
 Preserves Key Benefits of 2012 Railyards Deal
o Strengthens City efforts to save Kings, a major employer with 800+ local jobs
o Expands the City’s civic attractions through a new ESC 
o Project would create between 2,300 and 6,500 new jobs and result in anywhere from 
$380 to $847 million in income and revenues1
o Preserves the City’s Intermodal property in the Railyards for transportation uses and 
preserves the area for future transit-oriented development
o Protects Natomas from risk of blight from team leaving immediately.
o Honors City’s core tenets of protecting the taxpayer, protecting the City General Fund, 
and keeping the Kings in Sacramento
 The 2013 ESC proposal provides new economic benefits to City
o Closer proximity to City economic development priorities of K Street, Old Sacramento, 
and Capitol Mall
o Utilizes revenue streams that benefit City and developer (e.g., using City land for 
development, etc.)
o Simultaneously resolves arena and Downtown Plaza revitalization issues
o Benefits previous City investments in K Street (Convention Center, 700 K, etc.)
o Provides higher level of private investment ($189 million) compared to prior proposal in 
Railyards ($132 million)
o Generates potentially larger stream of tax revenue for City services as a result of ESC 
and additional private development by Investor Group including:
 Property taxes
1
Note: Based on estimates from both the CRA Redevelopment Construction Jobs Calculator model and the City of Sacramento 
Construction Project Economic Impact Calculation Tool, which was developed by Center for Strategic Economic Research (CSER), and 
utilizes the IMPLAN input-output model. The CRA model looks at overall economic impact in the region and beyond while the City 
model just looks at local impact within the City.
 
There is a whole comparison of things between the 2012 and 2013 term sheets, but I won't bother with that. Really, the differences is that AEG is not part of this, the NBA isn't loaning the investors (as opposed to the Maloofs) any money this go around, and the arena is more expensive. There are a few other differences (namely the non-profit to monetize the parking) but nothing too dramatic to really alter the NBA's opinion of the deal. If anything, the NBA has to be thrilled in the upgrade in the location from the Railyards and the less headaches it causes.
 
The city does not have to give away as much parking asset's this go around as they would have had to do in 2012 (or use bonds), and the city does not have to sell the land to raise the cash either. Both major big time benefits you cannot overlook.
 
 The parties shall work cooperatively and make commercially reasonable efforts 
to open the ESC by September 2016 and shall promptly after the date hereof 
agree upon a schedule of milestones regarding CEQA, permits and other 
important events such as to meet such timetable.
 
The City agrees to assign the appropriate planning, engineering, building, safety 
and other staff to enable the parties to achieve such timeline.
Well, I guess September of 2016 is the goal to get the new ESC. The timeline? It's doable. Tight but doable. Depends on how quickly everything can start really. I'm assuming that once the NBA approves Mastrov-Burkle-Ranadive as an ownership group, construction on an arena can start. Of course, that's a fairly large assumption that the NBA approves that tandem guaranteed at this point. 
 
The Investor Group shall be responsible for project pre-development expenses; 
provided, that, for the avoidance of doubt, the Investor Group shall have no 
obligation to reimburse the City for any pre-development expenses incurred by 
the City prior to the date hereof.

 

This is the CEQA stuff in case you're interested.
 
As required by law, the City retains the sole and independent discretion as the 
lead agency to, among other things, balance the benefits of the ESC project 
against any significant environmental impacts prior to taking final action if such 
significant impacts cannot otherwise be avoided, and determine not to proceed 
with the ESC project. No legal obligations to approve the project, the permits for 
the project, or the transaction will exist unless and until the parties have 
negotiated, executed, and delivered definitive agreements based upon 
information produced during the CEQA environmental review process and on 
other public review and hearing processes, subject to all applicable governmental 
approvals.
 
The City shall assist the Investor Group during the CEQA process, including 
working with the State of California (State) to qualify the project under AB900; 
however, the City shall not be required to incur costs in doing so.
 
One thing that will certainly interest KingThere shall be no restriction on the ability of the Kings at any time to use the practice and training facility built into the ESC. s fans:
 
Yes, kiddies, there will be a practice facility inside the actual arena. I know, what a novel concept eh?
 
Kings TeamCo, Kings ESCCo, and the City shall enter into a lease agreement for 
the ESC, containing the following principal terms and other terms to be 
negotiated:
1. Kings TeamCo shall enter into a 35-year non-relocation agreement, as 
described above. 
2. The lease shall be for a term of 35 years and provide Kings TeamCo with two 
five-year options exercisable by Kings TeamCo to extend the term.
3. Except as otherwise provided herein, Kings TeamCo shall control and retain 
all revenues relating to Kings Events and the Team’s operations, including 
revenues from the sale of tickets, broadcast and other media rights, Team game 
day inventory, such as rotating and other customary temporary signage 
(including a reasonable allocation of LED signage to be agreed upon), on-court 
promotions, seat backs, pole pads etc., and other revenues typically retained 
100% by an NBA team.
4. With respect to sales of suites and other premium seating, Kings TeamCo shall 
receive the value of tickets (to be agreed upon) to Kings Events; additional 
revenues from such sales, net of expenses (to be agreed upon), shall be divided 
50% to Kings TeamCo and 50% to Kings ESCCo.
5. Kings ESCCo shall have the exclusive rights to sell arena signage and naming 
rights. The parties shall agree on the number of exclusive categories. The Team 
shall contribute an agreed upon level of game day team inventory to such salesand the revenues from such sales, net of direct expenses, shall be divided 50% to 
Kings TeamCo and 50% to Kings ESCCo.
6. Kings TeamCo shall retain 100% of net food, beverage, and merchandise 
revenues generated by Kings Events.
7. Kings TeamCo shall be responsible for game-day operating expenses for 
Kings Events.
8. Kings ESCCo shall be responsible for Annual Operating Expenses of the ESC, 
as described below.
9. Kings ESCCo shall retain all fees related to the distribution of tickets in the 
primary market (i.e., any Ticketmaster convenience fees/rebates).
KingsTeamCo is Burkle and KingsESCCo is Mastrov/Ranadive by the way.
 
Except for City Events and Kings Events, Kings ESCCo shall receive all 
revenues from all other events. 

Ron Burkle is an invester. He doesn't kick in money unless he thinks he's getting something back. Remember what I wrote a year ago? Yeah, still applies. That's what this guy does. He buys low (and that's possibly what he's doing among other things), builds up the property and then blows out the berg with a ton of money. Can't say you weren't warned.

 

The Kings shall include “Sacramento” as the first part of the Team’s name. For 
example, the Team must be named the “Sacramento _____.” The Kings may not 
include any other geographic, city, county, or state reference in the Team name. 
The Kings shall reasonably reference Sacramento in public statements (whether 
marketing, advertising, or otherwise).
I'm confused on why this is in here, but I'm assuming it's something to do with like the Warriors, instead of being the San Francisco Warriors (which they were once upon a time when they first moved to the Bay from Philly in 1962), they are the Golden State Warriors. Still, I'm not sure what else the  Kings could have attached to the name other than  Sacramento. It's probably a standard clause if nothing else. I just find it funny so I thought I'd include it.
 
The Kings shall request that the NBA host the NBA All-Star Game at the ESC 
within three years after opening. The roles and responsibilities of the City and 
Investor Group shall be determined in the definitive legal documents.
I don't remember if this was part of the 2012 term sheet or not, but I love that it's part of this 2013 term sheet. Goals are good. The All-Star game is a nice goal.
 
Operating Profit shall be the difference between: (a) all revenues retained by 
Kings ESCCo relating to the operation of the ESC (as described above), 
including but not limited to: rent, concessions revenue, merchandise revenue, 
premium seating revenue, naming rights revenue, sponsorship revenue, 
Downtown Plaza ESC event parking revenue, ticketing handling fees and rebates, 
facility fees (except those earmarked for Capital Repairs Reserve Fund), interest 
income, handling fees, etc.; and: (b) all unreimbursed event expenses and Annual 
Operating Expenses paid by Kings ESCCo relating to the operation of the ESC 
(as described above)
Before you trip out about the naming rights revenue, keep this in mind:
 
Operating Profits shall be allocated by the Kings ESCCo on an annual basis as 
follows:
 First $10,000,000 (escalated annually by CPI) to be allocated 85% to Kings 
ESCCo and 15% to City.
 Next $5,000,000 (escalated annually by CPI) to be allocated 70% to Kings 
ESCCo and 30% to City.
 Remainder to be allocated 50% to Kings ESCCo and 50% to the City. 
The minimum annual payment to the City shall be no less than $1,000,000 
(escalated annually by CPI)
Oh, and the best for last.
 
EXHIBIT 2
PRELIMINARY PROGRAM DESCRIPTION
Basketball Capacity (Minimum) 18,500
Suites (Standard/Super/Mini/Other) 50 to 70
Party Suites 4
Loge Seats 192
Ledge Seats 80
Club Seats 1,430
Courtside Club Seats 330
Space Type Gross Square Feet
Classification 1: Spectator & Arena Bowl Facilities 145,916
Classification 2: Premium Facilities 58,110
Classification 3: Circulation 188,322
Classification 4: Food, Retail, & Spectator Facilities 104,250
Classification 5: Team Facilities & Practice Facility 49,879
Classification 6: Administration 25,463
Classification 7: Media Facilities 13,977
Classification 8: Event Facilitates & Operations Support 88,083
Classification 9: Parking TBD
Estimate of Gross Building Square Footage (G.S.F.) 674,000

18.5 K Screaming maniacs. I love it. Now all we need to do is keep our team and we're set.

Remember what I said about the mall going vertical on the West End? Well, think about the current size of the mall, and then look at the square footages the agreement has in building office space, living spaces and retail on the West End. (Well, I'm assuming it's on the West End.)

But, Sacramento can't benefit from a new ESC right?

My general opinion of the term sheet, upon first blush, is that the risk to the general fund exists, but is not nearly as cavernous as it might be in other circumstances elsewhere. That's important to the council who wouldn't vote for it otherwise.

The city and the investors have a chance to make money. When you invest something, you want a return, right? That's called money. Or resources, but usually money works. Money = power = world domination.

It's amazing what happens when adults sit down at the table, take advantage of the issue at hand, and move on from there. That's what happened here even if it's not shaped in that way for the public narrative.

The game isn't over kiddies, and don't begin to think that the game is over until the NBA officially announces anything. Because it's never over until the final buzzer is definitely sounded with all plays no longer being capable of counting. There has to be no shot at the buzzer after it sounds that could go in. In order for Sacramento to even have a strong enough chance to be realistically considered, a term sheet had to be there. David Stern's presser several weeks ago in Oakland suggested that he felt the variance in the bid from the investors that was submitted on March 1st would be there by April 3rd when the NBA meets again to start figuring out where they really stand on the issue. (Or, informing everyone on the BOG how they think the vote should go.) 

We're most of the way there. The question is where the BOG stands. I've said ti before: What's in Sacramento's favor will always be there throughout this process. That hasn't changed. If the owners are there, they are there. That's what Sacramento can control. I'm confident that Sacramento can win this  particular fight and get on with the next phase of our lives. Because, after all, isn't living well what this is all about?

I was going to do a profile, but I won't bother now. I think it's a mere formality and is almost certainly going to pass at least 6-3 if not 7-2 or possibly 9-0. As such, there's no reason to break it down if it's so likely to pass as many believe.

So, have a good weekend, eh?