Kings Beacon Report

8/2/2019 Kings Beacon Report

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Christopher F Thornberg, PhD

Founding Partner

Beacon Economics

The Sacram ento Kings and the

Rail Yard Arena



Background and Bio

Beacon Economics

Christopher Thornberg is founding partner of Beacon Economics, LLC and an expert in the study of regional economies, real estate dynamics, labor markets and business forecasting.

Dr. Thornberg has established a reputation as one of California’s leading economic forecasters. He iscurrently chief economic advisor to the California State Controller's Office and serves as Chair of California State Controller John Chiang’s Council of Economic Advisors – the body that advises the state’schief fiscal officer about emerging economic issues.

Dr. Thornberg also serves on the advisory board of Paulson & Co. Inc., one of Wall Street’s mostsuccessful hedge funds. He has been involved in a number of special studies measuring the effect of

important events on the economy. These include the NAFTA treaty, the California electricity crisis, portsecurity, California’s water transfer programs, and the terrorist attacks of September 11, 2001.

Prior to launching Beacon, he was an economist with UCLA’s Anderson Forecast where he regularly authored economic outlooks for California, Los Angeles, and the East Bay. He also developed a number of specialized forecasts for various regions and industries. Previously he has taught in the MBA program atUC San Diego’s Rady School of Business, at Thammasat University in Bangkok, Thailand, and has held afaculty position in the economics department at Clemson University.

Dr. Thornberg holds a Ph.D in Business Economics from The Anderson School at UCLA, and a B.S. inBusiness Administration from the State University of New York at Buffalo.



Three Worrying Assumptions

Ticket Revenues

Assumptions for gate receipts unrealistically high No accounting for club seats cannibalization of non-premium ticket sales

Sacramento Fiscal Situation City’s finances are currently in dire shape

Critical funding needs not being addressed

Unrealistic expectations of the potential financial windfall could turn thisarena into a white elephant

Construction Time / Funding CEQA, infrastructure, historic preservation, permitting, taxpayer revolts

Will the arena be built by the 15-16 season? How will the almost-certain delays impact the financial viability of the

proposed arena?

Beacon Economics 2 www.BeaconEcon.com



Current Revenue Projections

Beacon Economics3

Current assumptions Almost a tripling of revenues between

this season and 15-16 Justifications; recovering economy, new

arena ‘bump’, 100% club seat sales

Realistic Estimates Use local economic situation,

(employment, home prices, local

spending)

Account for substitution effect, clubseats from regular seating

85% Club Seat Sales, league average

Results of Analysis

Best case scenario, annual revenuescome in $5 million below projections

Worst case, $15 million below projectionsRegular season revenues only

*1999, 2012 Adjusted for shortened season

Current Projections



Sacramento Fiscal Issues

Sacramento Current Budget Problems City revenues down $60 million from 08-09, current budget shortfall $40 million

Parks cut 75%, FTE employment in Fire and Police down to 1500 from 1900

Unemployment still close to 11%, and job growth still negative

Long term issues with pension benefits

Still facing overall economic uncertainty due to levy issues

Can the city truly afford this arena plan? $230 million based on monetization of parking revenues—will those revenues actually

be raised?

City no longer has redevelopment agency powers, which was going to be used for theinfrastructure development—how will this be funded?

City’s estimate of fiscal impact of arena, based on study that assumes 3.1 million visitorsper year up from 1.5 million now.

Study seems to use full visitor count, not accounting for 5 mile shift in location

Any net impact for new visitors? Only visitors from outside Sacramento help

Plenty of academic research that shows these studies highly overestimate the true impact

Slump in real estate restricts potential short run value of secondary development




Potential Delays

Voter Initiative Process

Sacramento Taxpayer Opposed to Pork (S.T.O.P.) initiativeto prevent any public funding from going to Arena

In 2006 2 measures, Q and R, were on ballot. Q said new sales taxes for arena, R for new revenues for any purpose

Q failed with 71% No, R failed with 80% no.

Rail Yards Still have to pass CEQA environmental review process

Possible issues with historic artifacts, landmark designation, ground contamination

Unlikely to get Governor’s sign off on expedited process;

against public funding for , no GHG, Silver Leed Certified No design plans or construction bids—still speculative




Case Studies

Stockton Close to being largest municipal bankruptcy—in part due to public

financing of ballpark and arena

San Diego Baseball Stadium Voters passed initiative to restrict public funding to $225 million.

City later agreed to $299 million

1998 start, but 2 year delay, opened in 2004 instead of 2002

Massive litigation was over public funding

Overall project $45 million over budget

Glendale, AZ Coyotes moved into Glendale Arena/ Jobing.com Arena owned by

the city of Glendale in late 2003.

Team has never made a profit since moving from Winnipeg in 1996and lost $54.8 million in 2008 alone

City currently pays $25 million to keep team in city




Economic, revenue & occupational forecasting

Economic impact analysis Regional economic analysis

Economic policy analysis

Real estate market analysis

Industry & market analysis

EB‐5 economic analysis

Our Services

To view or download this presentationplease visit: www.BeaconEcon.com

[email protected]

310‐571‐3399

For additional information visit www.beaconecon.com

Kings Beacon Report

Documents

Transcript of Kings Beacon Report