CRUZ - Ahead of a critical City Council vote Tuesday, the Golden State
Warriors' Development League team has agreed to strengthen its
investment in a $5.4 million, seven-year deal with the city to relocate
According to restructured financial terms revealed Friday, the Santa
Cruz Warriors will prepay four years of rent on a temporary
30,000-square-foot arena to be built between downtown and the beach. The
city will use the $532,000 to pay down a city loan underwriting the
Just a week ago, the team had agreed to pay a full seven years of
rent at $133,000 per year, but city negotiators decided to credit the
team for three years of rent if the Warriors increased their capital
investment - from $600,000 to $1.4 million. That money is separate from
City Manager Martín Bernal said the new agreement reduces the city's
overall risk by increasing security on the loan, the amount of which has
nearly doubled since the team first publicly announced its relocation
plans in April. Receiving four years of rent up front, in addition to
collecting annual loan payments of $250,000, better secures the city's
investment, he said.
"In case we had a worst-case scenario and the Warriors decided to
leave and default on the loan, what we wanted to have was more
collateral," Bernal said.
The team, formerly called the North Dakota Wizards, hopes to host its
first home game in late December in a facility constructed on an
employee parking lot belonging to the Santa Cruz Seaside Co., which owns
the tourist magnet Beach Boardwalk nearby. The facility at 140 Front
St. will have 2,950 seats for games, and when floor seats are added,
4,000 for concerts or other events.
COMPLEX NEW DEAL
City and team officials said there is a tentative deal with the
Seaside Co. to relocate Boardwalk employee parking to 220 spaces in
downtown garage with underused permit capacity and provide shuttles to
the beach. The Warriors also will make $35,000 in annual lease payments
to Seaside Co. and paint a Boardwalk logo on the arena floor six feet
from center court - a sponsorship the team values at $50,000.
As for collateral, the Warriors agreed to cover $529,000 in prepaid
construction expenses if the city releases loan funds over time to cover
those costs while the team pays down the overall loan. As the
facility's owner, the city agreed to credit the Warriors $1.85 million
for the value of the leasehold interest, the city's share of a Kaiser
Permanente naming-rights deal and assets within the facility.
With the expedited rent payment schedule, that brings to $2.9 million
the amount the city views as collateral against its $4.1 million loan
from a public trust fund. That fund, created by the sale of property,
can only be used for capital investments, and contains only $6.1 million
as of June - just a third more than the Warriors loan.
"By shifting rent payments from the back end of lease to prepayment,
by acknowledging some money we have already expended and not requiring
city to fully extend the loan amount, I personally thought this was a
better way to structure it," said Jim Weyermann, president of the Santa
"I tried to respond to reduce the overall perceived
at-risk position of the city, though my personal view is the money is
not at risk."
Original estimates for the facility were $2.8 million. But sandy
soil, fire safety requirements and other construction-related issues
necessitated a sturdier structure than originally planned - all of which
raised costs from to $5.4 million. The facility would come down in
seven years unless the team and city agree to extend the arrangement
while pursuing a permanent structure.
There is no change in the city's intent to collect concessions
revenue, including from wine and beer sales, and apply it to the loan.
Revenue from renting the arena out for UC Santa Cruz sports teams,
concerts or other events will also go toward retiring the debt.
If debt on the loan remains after seven years, the city has agreed to
split it with the team. The minimum the city can hope for is repayment,
but there is the possibility for the city to make money on a separate
admissions tax, any increases in hotel and sales taxes and sharing in
merchandise and ticket sales once the loan is repaid.
Still, Bernal said, "This isn't a money-making scheme for the city.
The goal is to see whether we can have a better, more modern facility to
revitalize this area and see if we can create a connection between the
downtown and beach area. This could catalyze that."
There is another minor change separate from the loan: The city will
defer general plan and water and sewer fees of $147,000, with the
expectation that a $1 facility use surcharge added to each ticket will
cover them. As is usual for publicly owned facilities, Bernal said the
venue will be exempt from traffic impact fees, which could total close
to $1 million.
NOISE, PARKING CONCERNS
Even if council members agree to the new financial terms, they must
OK a special use permit for the property, which is zoned multifamily
residential. The council will hear concerns from Beach Hill neighbors
over noise, parking and traffic created by the team's 24 annual games
and other events.
The city's Planning Commission heard those complaints Thursday before
voting unanimously to recommend approval of the project.
underlined the importance of key conditions - that the team encourage
parking in downtown lots or on-street spaces, that Beach Hill residents
get the option of year-round parking permits and that noise be monitored
by the city.
"We absolutely want them to park downtown," Weyermann said. "If we
can't park people and get them in and out, they won't come back."
He said the team will promote off-site parking through the Internet,
advertising and direct mail to season ticket holders and possibly
provide face painters, balloon makers or street musicians, to create a
"Disney-like entrance" that makes the walk toward the arena more
pleasant. Noise will be reduced by insulated metal walls, and fans must
be out by 10 p.m.
Richard Andrews, former president of the Beach Hill Neighborhood
Association and a city parks and recreation commissioner, said he felt
the Planning Commission listened to citizen concerns. But many are still
worried about noise.
"I think the neighbors are very suspicious of the whole project,"
Andrews said, adding that they expect to report rowdy fans. "Some of us
feel we are going to have to go through that process."
Follow Sentinel reporter J.M. Brown on Twitter @jmbrownreports
HOW THE MONEY WORKS
Here are some details about the revised 7-year financing deal on the
proposed Kaiser Permanente Arena for the Santa Cruz Warriors:
• City: $4.1 million public trust fund loan to Warriors
• Warriors: $1.2 million capital investment, plus $200,000 for items outside budget
• Devcon Construction: $100,000 capital contribution
$5.6 million (though project is estimated now to cost $5.4 million)
HOW THE LOAN GETS REPAID:
• At least $1.75 million in loan payments by the Warriors ($250,000 annually for seven years)
• $1.15 million to $1.5 million in estimated concessions and non-Warriors event rental
• $532,000 in rent payments by the Warriors ($133,000 annually for four years)
At least $3.4 million to $3.75 million, with any balance to be split by the city and Warriors after seven years
• $35,000 paid annually by Warriors for city's lease of Santa Cruz Seaside Co. lot at 140 Front St.
• Free team sponsorship for Seaside Co. of $50,000 value in lieu of additional rent
• Boardwalk employees will be shuttled to downtown garage, where city gives up 220 spaces in underused permit parking garage.
IF YOU GO
Santa Cruz City Council
7 p.m. Tuesday
: Council Chamber, 809 Center St.
Post a Comment
Please leave a comment on any post. Comments that are slanderous, libelous, or are in other ways abusive may be removed by the moderator. Comments remaining posted do not necessarily reflect the point of view of the owner of this blog. Thank-you for reading.