The biggest question here is. “Did the public officials promoting this deal merely overlook the obvious discrepancy clarified by this column, or did they misrepresent it?”
We will probably find out soon enough, but again, it is important that others are examining these public policy issues so that when we finally vote on it, we will be doing so with access to the proper amount of information to make an informed decision.
An excerpt.
Daniel Weintraub: Arena deal exaggerates payments by Kings
By Daniel Weintraub -- Bee Columnist Published 12:01 am PDT Sunday, July 23, 2006
Sacramento's civic leaders were giddy last week with news they had brokered a deal with the NBA's Sacramento Kings to build a downtown arena that would keep the team in the state capital for another 30 years.
The centerpiece of the deal was described as the Kings' commitment to pay 26 percent to 30 percent of the arena's cost, with the rest of the money coming from a quarter-cent sales tax that the voters will be asked to approve in November.
But for people who are skeptical of using public money for private gain, including sports venues, the folks promoting this deal got off to a bad start, because their description of the Kings' contribution is wildly inflated. The project's promoters either don't understand basic economics, or they are trying to fool the public. Either way, their misrepresentation of the terms should raise questions about the entire arrangement.
The Kings will not be paying anywhere close to 30 percent of the cost of building the arena. They won't be paying even half that much.
Here's the problem: The deal's sponsors are comparing two very different kinds of numbers. One is the upfront cost of building the arena, which will fall entirely on the taxpayers. The other is the Kings' contribution to the project, which will be spread over 30 years.
Anyone who has ever bought a house and didn't pay cash knows that you cannot simply add up a stream of monthly payments over 30 years to equal the cost of the home you are going to buy.
You have to figure in the interest.
