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Think Big Sacramento Releases 100-Day Report with EB-5

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Think Big Sacramento Releases 100-Day Report with EB-5

Think BIG is a regional initiative launched by Sacramento Mayor Kevin Johnson to facilitate construction of a new entertainment and sports complex (ESC) that promotes job creation, economic growth, cultural development and civic pride across the greater Sacramento metropolitan area.

EB-5, a federal funding program allowing foreign investors to provide low-interest loans in return for green cards was one potential arena funding source highlighted in the long-awaited Think Big Sacramento Committee report, which was revealed to the public at a Sacramento Press Club luncheon.

While not a solution in its own right, the EB-5 program, could buy time, allowing publicly owned land to increase in value for sale at a higher rate, according to officials. Both of those options are parts of the “menu of options” the Think Big Sacramento group was tasked with providing earlier this year.  More than 120 business leaders, a few Kings fans and most of Sacramento’s media gathered for the presentation of the 50-page report detailing financing options to build an entertainment and sports complex in Sacramento’s railyards.

Many of the 72 members of the region-wide committee known as Think Big Sacramento and Sacramento Mayor Kevin Johnson, including co-chairs state Senate Pro Tem Darrell Steinberg of Sacramento and State Senator Ted Gaines of Roseville, were present to speak and to hear from arena finance expert Dan Barrett about various ways to build an arena in a challenging economy.  And Barrett had to do that within strict parameters set by the mayor to acknowledge that the public is in no mood for new, broad taxes.

Think Big Sacramento Arena

Think Big Sacramento Arena

The Nexus Report – so-named because each financing method on the menu has a direct connection to the new complex – identifies three main revenue categories: private investment, public participation and user fees.

Among the many options discussed in the report were the sale of city property, the introduction of ticket surcharges and public-private partnerships for lease-back payments and private investment money.

What was new was a proposed funding mechanism called EB5 – a federal program that allows foreign investors to provide low-interest loans in return for green cards.  The EB5 program has been around for 20 years, and it has been a successful means of getting up-front investment capital for public projects.

According to the U.S. Department of Citizenship and Immigration Services, the EB5 program is a pathway for an immigrant investor to “gain lawful permanent residence for themselves and their immediate family.”  The program requires a minimum capital investment of $500,000 to $1 million, and the projects funded must “create or preserve 10 full-time jobs for qualifying U.S. workers” within two years.

“EB5 is a mechanism, not a source,” Jackson said. “Its a loan – the money has to be paid back, so it doesn’t really solve the problem.”

If the market isn’t quite right to sell public property, EB5 funding can bridge the gap until actual revenues start to flow from what is now being called the Entertainment and Sports Complex, or ESC for short, according to Chris Lehane, Think Big executive director.

“It allows us the flexibility to move forward with the project,” Lehane said.

Intermodal Transportation Facility

Intermodal Transportation Facility

EB5 funding works something like a “bridge loan” in residential financing: a short-term, low-interest loan that makes money immediately available for initial construction.

“It isn’t a silver bullet,” said Barrett, founder of Barrett Sports Group, a sports management consulting firm. “Multiple revenue streams are still going to be required to make (a new arena) a reality.”

One of those “multiple streams” discussed in Thursday’s report comes from the income potential of parking opportunities in the downtown area.

“The city has a few options (on parking),” Jackson said, “and depending on which way (City Council) decides to go, we could get a good amount of money from it.”

Parking options under consideration include selling the city parking inventory to a private party, or leasing the city’s parking assets to a third party and collecting lease payments.

“A public-private partnership with parking would give us money up front,” Jackson said, “and we could maintain control long-term. That puts less pressure on (the city) having to get bonds to help pay for the (sports) complex.”

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