Details on Kaiser Permanente Arena agreement between Santa Cruz and the Warriors

There were a number of comments about the details of the impact of the Kaiser Permanente arena deal in my first post about the Santa Cruz Warriors last week.

There were a number of great points brought up and enough to say that I decided to respond in a fresh post. Here are some of the major points of clarification.

  • In my initial post, I wrote that the Kaiser Permanente Arena would have 4,000 seats, citing the figure given in a Silicon Valley/San Jose Business Journal article by Lauren Hepler. However, as GsoM commenter BlazFraz noted, that figure isn't entirely accurate. A more recent report by Tom Jones of the Central Coast News reports a 3000-seat capacity, which is closer to the seating chart I obtained from the Warriors.
  • The agreement for the temporary arena is a seven-year deal, based on the approved Santa Cruz City Council agreement and is a somewhat unique public-private partnership between the City and the Warriors. Financially, the final agreement called for a $5.4 million total budget with the city putting up a $4.1 million loan and the Warriors putting up a capital contribution to cover the remaining balance.
  • The whole agreement has been structured such that the City's loan is repaid as soon as possible and with the combination of prepaid rent from the Warriors, the Kaiser Permanente sponsorship, and a combination of other smaller elements in the plan, nearly $3 million of that $4.1 million is guaranteed to be recovered by the City in the first few years of the agreement. When you add in additional revenue from usage fees and other city events, there should be little problem in recovering the entirety of the loan.
  • For those concerned, the city's contribution "does not obligate the General Fund in any way", according to the agreement. In other words, this arena deal is not taking money that would otherwise go to things like road, police, fire, building funds, etc.
  • In addition, UC Santa Cruz has expressed interest in using the facility for basketball and volleyball games, which would generate further revenue though the specifics of that are not included in the agreement.
  • There's also the added value of Santa Cruz having a facility with which to attract major events like conventions, which the existing Santa Cruz Civic Auditorium is insufficient to host. While concerts have also been something mentioned, there will initially be limits on that pending a noise study.

Ultimately, this deal is beneficial for all parties involved:

  • The temporary arena agreement allows the Warriors to put up an arena quickly with less expense to them than a permanent arena would incur.
  • The loan agreement is structured such that there is minimal long-term risk to the City, financially or physically: should the Warriors leave town for any reason, the space can be far more easily repurposed than a permanent arena would be.
  • UC Santa Cruz gets a facility to host games, conferences, or other events that it – nor the city – previously had.
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