Sacramento City Council Approves Financing Plan for Sacramento Railyards Development

Downtown Commons (DOCO) and Golden 1 Center in Sacramento, California, opened in 2016, where the former Downtown Plaza mall was once located. Golden 1 Center is the home arena to the NBA’s Sacramento Kings. DOCO is the surrounding mixed-use entertainment, retail, dining, hotel, and office district developed alongside it.

The City of Sacramento thought shoe-horning a sports arena into downtown Sacramento would be a driver of commerce. Instead it has mostly killed the shopping mall and restaurants surrounding it. 

The Sacramento Kings wanted to build another hotel where the Macy’s was located. Macy’s closed and the property was sold, but no hotel…

The premier Echo & Rig Steakhouse, inside downtown Sacramento’s Kimpton Sawyer Hotel, just permanently closed. “The closure comes amid allegations from former employees who say they were left with unpaid wages, bounced paychecks and missing contributions to their retirement accounts,” CBS News reported.

The nearby Railyard development has been moving ahead, despite opposition by nearby residents. The large project includes a new soccer stadium, hospital, hotels, and apartments.

The City of Sacramento has never leveraged its prime location on two rivers the way other cities have, and instead continues to focus on infill development. “The Railyards project will connect with Sacramento’s downtown office, retail, tourism, residential, and government centers to essentially double the size of Downtown Sacramento. The Railyards project is entitled for dense urban residential neighborhoods, a historic museum, a shopping and market district, a regional intermodal transit station, a county courthouse, a medical campus, a soccer stadium, pedestrian-oriented streets, shopping and entertainment complexes, riverfront access, and high-rise mixed-use buildings,” the City explains.

“After a 17-month delay, Sacramento’s City Council passed a financing agreement to spur development in the Railyards District, despite a contingent of opposition Tuesday evening,” the Sacramento Bee reported Wednesday. “Civic leaders have said the agreement, which would use expected increases in the district’s property tax revenues to repay developers’ costs for infrastructure projects like roads and utility connections, would help catalyze development on long-vacant land. The Railyards is one of the region’s most complicated and expensive properties, and for decades has been envisioned as a path to doubling the size of downtown and connecting disjointed sections of the city’s urban core.”

The funds would come from future property taxes paid by property owners within the Railyards District.

“The financing is called an Enhanced Infrastructure Financing District, or EIFD. It uses future tax growth to fund the project itself. It’s part of an overall subsidy package worth an estimated $222 million. The development includes a new soccer stadium for Republic FC, hotels, apartments, and a hospital,” ABC10 reported.

Enhanced Infrastructure Financing Districts are a California tax-increment financing tool created by Senate Bill 628. EIFDs replaced Redevelopment Agencies, which were dissolved in 2012 by the governor and legislature, to fund public infrastructure and related projects of community-wide significance without imposing new taxes or fees on property owners.

“Unlike redevelopment agencies however, EIFDs will only be able to collect tax increment from local government agencies which voluntarily agree to contribute those funds, and cannot collect tax increment from K-12 school districts, community college districts and county offices of education,” Kronick Law explained in 2014 when the law was passed.

“EIFDs are a fundamentally different system than was used for the formation of redevelopment projects, where if a city or county established that an urbanized area of their jurisdiction was blighted, the redevelopment agency would be allocated all of the tax increment of each of the local government agencies with a share of property taxes from that area.

No voter approval is required to form an EIFD, but a 55% affirmative vote is required for the EIFD’s issuance of bonds. This is less stringent than the vote requirement under the existing Infrastructure Financing District law, with a two-thirds vote required for both formation and bond issuance. Opponents of the bill have questioned the constitutionality of the reduced threshold for voter approval. It remains to be seen whether the lessening of the public voting requirements will actually make it easier to create EIFDs than infrastructure financing districts.”

Notably, back in 2011, when redevelopment agencies were on the chopping block, I reported that then-State Treasurer Bill Lockyer said at a hearing that he supported Gov. Jerry’s Brown’s proposal to remake redevelopment, and called redevelopment agencies “vampire agencies sucking blood from everyone around them.”

After Gov. Brown’s proposal, the Legislative Analyst’s Office reported, “Redevelopment agencies lack some of the key accountability and transparency elements common to other local agencies. Specifically, unlike other local agencies, redevelopment agencies can incur debt without voter approval.”

I wasn’t the only skeptic.

Golden 1 Arena/DOCO

Officials originally promised that the city’s general fund  would not be used under any circumstances.

Most of the city’s share was financed by issuing about $273 million in lease-revenue bonds in 2015 (maturing over 35 years, to 2050). These were mostly a mortgage on the city’s parking operations.

The primary repayment sources are:

• City parking meter and garage revenues included five city garages and parking meters. Parking rate increases and “modernization” were expected to generate enough growth to cover a substantial share.
• Sacramento Kings lease/rental payments, starting around $6.5 million per year and escalating.
• Other elements in early plans included limited hotel-tax or other revenues, plus redirection of some existing parking-related funds once prior garage debt was paid off.
• Annual debt service has been around $18 million – $22 million range. The city is responsible for a large portion of this (historically described as roughly $10 million of the annual payment from parking in some reports), with the Kings covering the rest via lease payments.
• Total principal + interest over the life of the bonds has been estimated north of $600 million –  at roughly $626 million.
• Per-resident public cost was estimated at $500 for Sacramento residents at the time of approval and was approved by the City Council, not voters.

In 2023, the city had to divert $5.7 million from the general fund over the prior two years to cover the parking-revenue shortfall and avoid default. Even pre-pandemic, some shortfalls versus projections had appeared. Critics, including then-Assemblyman Kevin McCarty who is now-Sacramento Mayor, who had opposed the original deal, has noted that taxpayers were not fully protected as promised.

Economists view public arena subsidies as poor investments for cities due to substitution effects and opportunity costs. Parking revenues have recovered substantially largely aided by parking rate increases. The parking fund has been able to cover the city’s scheduled share without further general-fund draws in at least some recent years. 

Railyards Project

Upon seeing the news that the Sacramento City Council passed a financing agreement to spur development in the Railyards District, my gut reaction was “Of course. Another $825M, because Sacramento has been so astute in ‘investing’ (public finds) in public projects. DOCO has been a financial loss. The public subsidy side has clear costs and shortfalls over original promises. The most successful downtown projects and events come from the Sacramento Convention & Visitors Bureau – big concerts, festivals, events, Farm-to-Fork…”

The Sacramento Regional Business Leaders Council quickly replied, offering a correction, and noting the EIFD:

@KATYSaccitizen @grok please educate Ms Grimes on how this EIFD works, how the tax revenue is only generated after private investment has been made, and how private investors are taking the upfront risk to build city infrastructure.

— Sacramento Regional Business Leaders Council (@regionbiz) November 12, 2026

I did remember that the state had passed legislation creating EIFDs to replace the dubious Redevelopment agencies, but many were suspicious at the time that EIFDs would just be “redevelopment-light.”

The EIFD legislation allows EIFDs to overlap the boundaries of former redevelopment projects, but an EIFD cannot be formed until the state issues a finding of completion for the redevelopment project.

Any EIFD debt or obligations in overlapping areas are also subordinate to the former redevelopment agency’s enforceable obligations, and property tax in those areas must first satisfy those obligations.

And as Sacramento Regional Business Leaders Council correctly note, “An EIFD does not spend existing public money or raise any taxes. Private developers front the capital to build the public infrastructure (roads, utilities, etc.). Only after their investment creates higher assessed property values does the resulting tax increment begin flowing to reimburse those costs. If development lags or values fall short, the developers absorb the loss. The $825M is projected future increment over 50 years, not current outlays.”

After watching the City of Sacramento make a mess of the downtown arena project, and businesses coming and going like a revolving door, the Railyard Project is a different animal, thanks to EIFDs. The actual railyard location, which has been an eyesore for years, will connect with downtown Sacramento, expanding the size of Downtown Sacramento significantly.

I don’t expect EIFDs to remain static as in the 2024 California legislative session, the Legislature passed and Governor Newsom signed two bills which both amend Enhanced Infrastructure Finance District (EIFD) statutes. One of these bills, SB 1140, also contained an amendment to Climate Resilience District (CRD) statute.

SB 1140 streamlined the EIFD creation process by reducing the number of public meetings and allowing an initial consolidated mailed notice to satisfy the 10-day mailed notice requirements in advance of each public hearing. This measure also clarified that projects intended to improve air quality may be financed by both EIFDs and CRDs, and made other related changes, according to the California Association for Local Economic Development.