Sacramento now wants 85 million from the Maloofs for a new arena? Woohooo!

I’m hoping to make this brief, but with all the reports flying around today I wanted to make sure that people got where I stood.

A) I’m not surprised by the amount that Dale Kasler of the Bee reported in today’s paper.

B) Second, read Rob McAllister’s yet again fine piece (something you’d expect from a journalist of his caliber) on Cowbell Kingdom why Seattle isn’t the swellest alternative of all time.

 

If the Maloofs got more than 400 million dollars in a sale of the Kings, I’d be shocked. Whatever the purchase price will be, you can bet your booty it will include the loan from the city of Sacramento to the then Jim Thomas owned Kings in 1997, the debt the franchise owes to the NBA itself (which is a significant amount as Tom Ziller pointed out on Sactown Royalty this morning), and the fact that the Maloofs will want to also probably get as much money as they can after the transfer of debt in a transaction such as this. If you lose the cache of owning a NBA team, you might as well have a significantly stronger bank account to do it.

There are a lot of moving parts in getting a new arena deal. There is the parking lots, the selling of land, the NBA/Kings share of an arena. whatever share an operator like AEG would pay, and other things like the supposed “hotel surcharge”, fan surcharges for Kings tickest among other things in that area, and other small events like the bricks being sold to individuals. (Which you can bet I’ll be buying one as part of the EC Inc propaganda to make sure all people in Sacramento are really miserable. Just one though; I don’t want the city to implode in gravitas anger.)

Before you go lecturing Seattle fans on how to act, there are Seattle fans who get the situation well. Remember that before lecturing them on the who’s, what’s, and whatever else exists out there. I don’t particularly care for how a few of those Seattle fans (and the media especially) is acting like a NBA team is in the bag, but I don’t have to either. What’s important is what has always been important regarding a new arena in Sacramento: The financing gets figured out. (Note: As I was writing this, Pete Nussbaum of SuperSonicSoul notes that a potential new arena would cost 500 million dollars at the proposed location.) UPDATE: Ryan Lillis of the Bee writes that Seattle won’t build an arena without a “NBA tenant.” This is even better news for Sacramento Kings fans.

That’s it folks. Nothing more, nothing less. As SactownRoyalty reader ElRonToro posted yesterday, Steve Cohn has good points. Like, listening to suggestions (in this case suggested by ElRon) that a modified lease with an opt-out has a lot of potential to work for both parties for many reasons. I’m not going to go on & on here because really it’s not my point to share. But it is worth noting it nonetheless. There are smart people working on this issue because, and Steve Cohn, who has been on the Sacramento City Council since 1994 (when I was a freshman in high school), knows this as well as anyone else intimiately involved in this deal.

What happens on the February 28th vote at Sacramento City Hall when most of the meats and potatoes is decided on the arena process? Here’s how I see it as it currently stands.

1) The NBA/Kings have to kick in the 85 million (land + 60 million) as Sacramento is requesting.

2) AEG hasn’t really changed their part of the process, but if they aren’t part of it I’m not sure how a deal gets done.

3) Sacramento has to get a remarkable figure for these parking lots, and the higher the number gets the easier it is for everyone to get this deal done.

4) Whatever sneaky sidestep that will be a part of this process, hopefully Kevin Johnson and the rest of the City Council has the resources to address that.

5) A sneaky sidestep doesn’t include how to replace the 9 million or so that was going to the general fund. Without that, the City Council will not approve this no matter what. If you want a new arena, root for that general fund money to be replaced with the Council being convinced that it will work.

6) Any payment of the current loan to the Kings will not likely provide any of that 9 million general fund money.

7) The hotel tax, the bricks, the user fee’s for the arena, and all of that will need to be reasonable to A) encourage involvement in the arena and B) not discourage fans by ridiculous prices that they simply cannot afford consistently. What’s the point of having an arena that only a select few can access at any given juncture?

8) Speaking of the parking structures, a sneaky benefit of leasing these structures away is that the city of Sacramento will also be able to settle the debt on these parking places. This is also why the general fund is so important: It allows an out for politicians to say they got a reasonable deal out of what is typically considered by many as a “financially losing” deal.

9) Back in September, I came to the conclusion (based on what I was hearing) that to get an arena started half of the total cost (I based this on the then 387 million figure) which was just under 194 million. Now the cost is rumored to be 405-410 million and I would say that 3/4 of that cost will have to be feasible within a year of the start of arena construction. Three quarters of 410 million is 307.5 million, and let’s round up to 308 million. 308 million is a lot of cheddar to pony up and I’m betting that the city can get it. Let’s be conservative and say the city of Sacramento only gets 150 million to use on the arena itself after the debt is payed off. AEG’s share has been estimated at about 50 million dollars, and the Kings/NBA are also being asked for 60 million. Right there you are at 260 million. There will be a sale of public lands (something I’m not actually fond of but I never thought the parking structures alone would cover the city’s share of this) that Dale Kasler estimates to be around 40 million. Now you are talking 300 million.

While this isn’t far from over, let’s remember that this comes down to the NBA and AEG. If both are willing to put up money for an arena, then there is no way Sacramento is losing the Kings. AEG has a lot of sports properties around the world, and in fact operates Key Arena right now. If a new arena is being built in Seattle at the proposed location (East of Safeco Field), that could cut into AEG’s profit margin of whatever Key Arena is generating for them. That’s another reason AEG would have to invest in this project besides protecting the current investment that AEG CEO Philip Anschantz has in Staples Center/Lakers/LA Kings (NHL team).

This comes down to the NBA, and the bet/gamble that Kevin Johnson has made that the NBA will be willing to ensure that it remains the biggest form of entertainment in a region sorely devoid of one. A region that has potential for smart growth (and not just astronomical growth), a region that has potential for a far more significant total economy than in years past, and the potential to remove a problem ownership group without actually taking direct control as the NBA already has done with the New Orleans Hornets.

There are a lot of benefits to staying in Sacramento, but it will all depend on how the NBA see’s Sacramento versus alternate locations (Anaheim and Seattle among them). I personally am rooting for the best parking structure deal the city can get in hopes that the land the city currently owns could be sold down the road for a significantly better profit, but you gotta do what you gotta do to get something of this magnitude and significance when you are Sacramento.

Three points made in Kasler’s piece that need to be read:

A source, who wasn’t authorized to discuss the matter publicly, said NBA Commissioner David Stern’s top lieutenants are involved in the talks. They include Joel Litvin, president of league operations, and Harvey Benjamin, executive counsel for business and finance.

These aren’t just run of the mill guys doing an “aw shucks” routine. They are essentially the Kings ownership group negotiating committee, and just those names alone suggest the NBA is serious about getting something done in Sacramento. You get the sense that Stern and the NBA Front Office people (like Litvin/Benjamin) finally understood how difficult the city of Sacramento had with the Maloofs over the years. The adults are in the room in otherwords. Adults are good. Childish Ed Hardy wearing split decision loser families are not so good. But I’m not writing this to be anti-Maloof.

From Kasler’s piece:

“Everyone is having to stretch here,” said Assistant City Manager John Dangberg. “The city’s going to have to stretch, the NBA’s going to have to stretch. We’re all going to have to go a little further than we’re comfortable with.”

Yuh. But there is enough motivation here to finally get a real done with actual motivated adults on both sides of the table. When has this happened in any of the previous Sacramento arena attempts?

I’m not especially optimistic that a deal gets done, but I am optimistic that what will happen is Sacramento’s best shot at getting something solved in this area. The solution just may not be up to what the NBA expects. I’l finish with what Kevin Johnson said in Kasler’s piece that is the same thing we’ve always known throughout this process:

“I feel like the city can do its part, and then the negotiations will be between the Maloofs, the NBA and AEG to see if we can get a financing plan together,” Mayor Kevin Johnson said last week. “But it won’t be because we haven’t done our part.”

Couldn’t have said it better myself.