Sacramento Kings, Turner Construction Partner with City of Sacramento to Keep Arena Construction Taxes Local

Program will Ensure Estimated $1,000,000 in Tax Revenues Stays Within City
by Katie Cracchiolo

SACRAMENTO, Calif. – The Sacramento Kings announced a new partnership today with the City of Sacramento and Turner Construction to localize sales and use tax revenues collected in relation to the construction of the new downtown entertainment and sports center (ESC) at the Sacramento Downtown Plaza.

Under the terms of the program, an estimated $1,000,000 of the sales and use taxes paid by the Kings, Turner and qualified subcontractors would be directed to the City of Sacramento. These tax revenues are typically incurred during the lease or purchase of large-value items such as steel, concrete, seating, glass and audio-visual equipment.

“Our commitment as a city is, has and will always be to protect city taxpayers in the development of the new entertainment and sports center,” said Sacramento Mayor Kevin Johnson. “This program is a great example of how we are taking concrete steps to honor that commitment.”

“This program is a no-brainer for the Kings,” said Kings President Chris Granger. “We recognize and appreciate the extraordinary investment that the City is making in the future of our franchise, the arena and downtown as a whole. This is just one in a long line of benefits we plan to provide to the people of Sacramento.”

Normally these tax revenues would be disbursed across a broad array of municipalities, depending upon each contractor’s business location. Through this program, however, the Kings and Turner will require that construction contractors designate the downtown ESC job site as the contractor’s business address and report all use taxes to the job site. This will ensure that the entire local share of the sales and use taxes paid is received by the City of Sacramento versus going to a county or statewide pool.

The program is the result of state legislation approved in 1999, allowing contractors to self-accrue their taxable transactions and report taxes directly to the State Board of Equalization. As a result, assuming that contractors purchase $100 million worth of materials, the city will receive the entire local share of its 1 percent, or $1 million from the State Board of Equalization. Conversely, if these funds were allocated by the Board of Equalization to a Countywide or Statewide pools of sales and use taxes, the City would receive only $320,000, or $11,000, respectively.

In order for the contractor to self-accrue, the contract value must have a value greater than $5 million. Implementing this partnership will not increase a contractor’s taxes or out of pocket expenditures.

The city will work closely with MuniServices, a tax consultant who has been instrumental in implementing the retention of these taxes to the City of Sacramento. MuniServices has prior experience working with the Sacramento International Airport expansion and the City of Santa Clara and the construction of the new 49ers stadium.

Pending City Council approval on May 13th, construction of the new downtown entertainment and sports center is set to begin this summer, starting with the demolition of the east end of the Downtown Plaza mall.