With the big City Council hearing on the Warriors basketball deal coming up this week, I thought it would be useful to review how this project evolved and explain why the City Council has been trying to create a workable deal for the community and your city government.
The Warriors organization approached the City almost a year ago and told us they believed Santa Cruz would be a good location for their recently acquired minor league basketball team. They were looking for proximity to the primary Warriors team in the Oakland. However they also had hopes of locating in a community that has enough separation from the Bay Area that the Development League team might build its own local following. They were also looking for a community with a lively interest in sports in general and basketball in particular. And they were looking for a community that would be excited about the idea of this new enterprise coming to town.
After some initial conversations, the City Council agreed to begin serious exploration of the concept. Both the Warriors and many city officials at first hoped that the Santa Cruz Civic Auditorium would be the right venue for the new team. However, upon closer examination, it was found that the Civic could not work because the size of the floor is completely inadequate for a professional basketball team. (The Civic would have required a very expensive major remodeling. And that remodeling would have changed the Civic so much that many other activities that have traditionally be housed there could no longer be accommodated.) This led to an exploration of the idea of creating a temporary arena on an open piece of land somewhere in the community. (“Temporary” in this context means a steel-supported tent structure that can function for at least seven years.) Four different sites were initially considered, each with unique challenges. Upon further examination, the City and the Warriors organization determined that the Seaside Company employee parking lot on Front Street a block south of Laurel, adjacent to the river levee, was the most workable site.
The Seaside Company agreed to join in the conversation to see if there might be a way to accommodate the arena in this location. Their only significant stipulation was the replacement of their parking in a nearby location. With a possible site identified and some initial commitments to explore the project in depth, negotiations and planning began in earnest. The City Council authorized the City staff to negotiate with both the Warriors and the Seaside Company and set parameters to limit the city’s commitment and exposure to financial risk.
The Warriors negotiations led to a framework in which the City would loan money from our Public Trust Fund to finance construction of the facility. The Warriors would use those funds to take the lead on constructing the facility to their basketball specifications and in conformance with City rules. At completion, the facility would be owned by the City. (The source of the loan is the Public Trust Fund, which the City Council created many years ago to reserve funds from the sale of City land for significant one-time capital projects. By using this fund, we are protecting our annual operating budget from any burden.) The financial arrangement demonstrates sufficient revenue streams for the Public Trust Fund to be repaid and provides substantial guarantees of loan repayment. It should also be noted that the Warriors have committed to an investment of their own funds in excess of one million dollars to develop the facility (even though the city will be the owner). This is in addition to all the loan payments they will make over the next several years to restore the Public Trust Fund.
This financial model was used to create a real sense of partnership between the Warriors and the City.The Warriors benefited from this approach knowing that the City was making a real commitment in light of the Warriors up-front investment. The City benefited by getting commitments for many revenue streams that will pay for the facility AND benefit our City’s General Fund (the fund that pays for basic city services for the community). Another benefit for the City is that the Warriors have agreed to manage the day to day operation of the facility thereby protecting us from the potential burden of funding operational costs out of taxpayer funds.
At my request, the basic financial terms were reviewed by a volunteer committee of local finance experts including the County Treasurer and three local bankers. They scrutinized the broad deal terms and stated that they felt the package was fiscally responsible. The City’s negotiations with the Seaside Company have been challenging because we have been asking Seaside to give up an important employee parking lot (heavily used in the summer) without them receiving direct compensation from the City. The City has taken the position that we should provide replacement parking for the Seaside Company employees and cover any additional costs for shuttling employees from a different location—but that we would not be able to pay “rent” beyond those actual costs. The Warriors stepped in to make this arrangement work by agreeing to provide compensation directly to the Seaside Company—without any cost to taxpayers.
In the meantime, the project has also moved forward as a normal development project subject to city regulations and planning procedures. The Warriors engaged the services of an architect to design the facility in great detail. The City required studies to be conducted on traffic, noise and parking. The City also followed the state mandated environmental review procedures. City planning staff, as it does with all development projects, scrutinized the plans and instructed the architect on needed modifications. A final set of plans was completed and presented to City Planning Commission along with the Planning Department staff’s list of conditions on the project. These conditions addressed many community and neighborhood concerns pertaining to traffic, parking and noise.
I want to be clear here that the City did extend itself to expedite formal consideration of this project. The Warriors were very clear from the outside that they were trying to meet a timeline for the start of the NBA Development League season in December. The City was equally clear that we could not guarantee completion of the project on a specific timeline but that we would do as much as possible to move things along quickly. However, our commitment to work quickly did not include any commitment to shortcutting city procedures.
The Planning Commission held a public hearing on the project last week. It heard from residents about particular worries they had as to how the project would impact their neighborhoods. The Commission improved on the staff’s proposed conditions in order to address those neighborhood concerns and then recommended approval on a 7 to 0 vote.
I have also taken the time to meet with neighborhood residents twice in the past few weeks to more fully understand their concerns and listen to their suggestions about improving the project and reducing impacts. I will continue correspondence and conversations right up till the Tuesday City Council hearing to address as many of their remaining concerns as possible. I will be proposing some additional conditions on the project that I believe will make a real difference in terms of neighborhood parking and traffic impacts and in terms of ensuring that we deal with noise issues vigorously and appropriately. I also plan to introduce language to improve the security aspects of the operation of the facility. I hope to include a provision for secure “valet” bike parking to encourage locals to ride to the arena. I believe the Council will also adopt arena blackout dates so it will not be used on the busiest summer weekends (to avoid new traffic snarls). I will also support language to make sure that no concerts will be allowed in the facility at this time. If such concerts are to be approved in the future, I believe that should only happen with additional public discussion, additional conditions and another city council hearing.
This has been a tremendously challenging project for everyone involved. However I think it has been worth the work because the project presents some excellent opportunities for the community. I believe it can revitalize and activate a section of the community that needs improvement. I believe we can create a facility that will have uses for the community that extend well beyond Warriors basketball. I believe it will create new jobs and new revenue to support community services. It will bring something new and exciting to the center of our city— and improve our Downtown area. Finally, it provides us a low cost way to temporarily test the idea of whether it would make sense for the City and other potential partners to create a permanent modern event center in Santa Cruz.
I have been working hard with many people throughout the community to see if we can bring this project to fruition in a way that will be of great benefit to the community. I think we’re almost there and I hope we can finish the job at our council meeting on Tuesday evening.