I'm glad the Sacramento Kings are staying. I'm glad that
downtown will get a makeover. But I’m getting pretty tired of the seemingly endless discussions about the new arena. Enough already.
We need to get some perspective on the proposed arena. It’s not that big of a deal. It will not save the city if it is built. It will not destroy the city if it is built. Both sides are making exaggerated claims. Let’s explore some of those claims.
First, let’s take a look at the tricky concept of the “revenue multiplier.” Arena supporters argue that the revenue value of their project is far more than just the value of arena sales, because of the revenue multiplier principle.
The idea is that, when an individual or a business increases its spending, it creates a ripple effect on the local economy. For instance, if I spend more money at a restaurant, then the restaurant owner and waitstaff will have more money to spend. When they spend this money at local businesses, those businesses will in turn pump more money into the economy. This concept of the revenue multiplier has the arena supporters multiplying and multiplying their expected sales until they estimate billions of dollars in revenue coming from the arena.
The problem with this argument is that it is based upon the ridiculous idea that this is all new money being spent at the new arena. This is clearly not true.
I doubt that the new arena will significantly increase retail and restaurant sales in our region. There will just be more sales downtown—and less elsewhere. To look at the multiplier impact for downtown sales but not look at the reductions elsewhere is absurd.
Likewise, the anti-arena folks argue that we will not be able to fund schools, preserve the safety net or ensure public safety if we pour millions of dollars into an arena. Come on. The cost of the new arena is on average about $25 million a year. For some perspective on this figure, the annual Sacramento County budget is $3.6 billion, the Sacramento city budget is around $800 million, and the entire school budget for Sacramento County elementary and high schools is close to $2 billion.
The Sutter General Hospital expansion in Midtown cost $750 million. This is 50 percent more than the arena’s proposed cost.
Each year, our region loses more than $100 million because we have not done a good job of signing people up for food stamps. This money could make a huge impact on our local economy.
If the state increases or decreases hiring, or adjusts wages up or down, those changes would likely have more impact on our economy than the impact of a downtown arena.
I’d like to talk about some of these other important subjects in the year to come.