Railyard stadium, entertainment deal in works. How will Sacramento incentivize development?

Sacramento Mayor Darrell Steinberg will present the city council next week with a deal to develop a soccer stadium and entertainment district at the railyard, the product of years of efforts by officials and, recently, months of intense negotiations.

For the public, the proposal represents movement on an expansive and long-awaited project that could extend the city’s urban core. The 240-acre railyard district has been largely undeveloped since railroad operations moved out in the 1990s, and the prospect of building out the area with housing, entertainment and even a Major League Soccer franchise have been discussed for years. But financing remained a monumental hurdle.

“To say that it has been a long road to get here is absolutely an understatement,” Republic FC Chairman and CEO Kevin Nagle told a crowd of city officials and local dignitaries at a news conference Thursday morning. “We’ve had close calls. We’ve been right at the finish line.”

The stadium itself will be privately financed. The Sacramento Republic FC — majority-owned by the Wilton Rancheria — will finance and manage the development under a joint venture called “Indomitable Ventures,” a reference to Republic’s nickname, “The Indomitable Club.” Nagle will remain an owner and become managing partner.

The property owner, Downtown Railyard Venture, would sell the land for the stadium to Indomitable Ventures and develop a 3,600-person music venue nearby.

The city estimated the financing and construction of the stadium at $175 million, plus $42 million for related infrastructure, totaling more than $217 million.

The city’s plan would support the project with reimbursements for infrastructure costs. It relies upon the expected growth in property taxes as the land is developed, and mirrors the city’s agreement with the UC Davis development, Aggie Square.

Steinberg called it an “appropriate city contribution.”

“There’s no revenue,” he said, “if you don’t have the catalytic project.”

‘It would send a signal’

Steinberg emphasized that the city will not write a check for the project from its general fund — a commitment he made years ago, during previous talks about the soccer stadium.

Instead, the city will offer an expanded infrastructure financing district to include 220 acres in the railyard. Over time, as the land is developed and the property taxes rise, the growth in the property taxes will be used to reimburse the team and Downtown Railyard Venture for spending on infrastructure needs like water, sewer and electric.

Indomitable would be reimbursed with up to approximately $42 million of that return, and Downtown Railyard Venture would receive $50 million.

The city would also purchase two parcels west of 7th Street for $14 million, to build out the area around Sacramento Valley Station. The sale would be financed with funds from the sale of the Sheraton Grand Sacramento Hotel. The infrastructure finance district would also be used to reimburse the city’s spending on those two parcels.

Critics, Steinberg said, may argue that those property taxes would otherwise funnel into the city’s general fund. But, he said, “there is no property tax revenue if there’s no project.”

“This is tried and true,” he added.

The framework for the deal, Steinberg said, has largely existed for years. But the city’s agreement to expand the infrastructure financing district from 31 acres to 220 acres — something he said the city had always contemplated — was “essential” to finalizing the deal.

Officials emphasized that the city — which faces a projected $77 million budget deficit in the upcoming fiscal year — will receive sales tax, hotel tax, if a hotel is built, and every other form of users’ taxes for the area.

“It’s a way to incentivize development,” said City Manager Howard Chan. “There really is no downside for us.”

The city will waive reimbursement for certain services like police, fire, emergency services, traffic control and code enforcement for stadium events for 10 years, capped at $300,000 annually, with adjustments for inflation.

Steinberg said he believed the infrastructure finance district mechanism could be used far more broadly — across the whole city, even.

“It would send a signal,” he said. “We ought to be putting some portion of the growth in the city back into economic development.”

An extension of downtown

Backers of the project believe it will create jobs and extend Sacramento’s downtown core — a district that has struggled with the pandemic-era commercial real estate market, and the popularization of remote work. Proponents referred to Thursday’s announcement as the largest boost to downtown since the construction of Golden 1 Center and Downtown Commons.

Beyond the 12,000-seat, expandable soccer stadium and Downtown Railyard Venture’s planned music venue, officials believe the district could also add housing, restaurants and retail.

Kaiser Permanente plans to break ground on a new medical center in the district in early 2025, and expects to finish construction in 2029.

The city estimated that the stadium project would generate 525 jobs directly and 325 indirectly. The entertainment venue, it said, would likely generate 225 jobs directly and 165 indirectly.

“We have to make this a destination district,” said Denton Kelley, CEO of Downtown Railyard Venture. “This is going to be a great regional asset.”

The city said the stadium would likely be completed in late 2026, and the entertainment venue in 2027.

The project will go before the council Tuesday evening.

“Today represents why it is so important to be ambitious about our city,” Steinberg said. “This is Sacramento. We never give up.”