Virginia Beach to ask state for $150m for arena to lure Kings

Laugh all you want, but Virginia Beach is still taking seriously its chances of building a new arena to lure an NBA team (presumably the Sacramento Kings), with Mayor Will Sessoms last night formally directing his staff to ask the city council to ask state officials for $150 million to help build the thing.

Actually, only $70 million would go to the arena, according to WAVY-TV sports director Bruce Rader, with the other $80 million going to pay the Kings’ NBA relocation fee and to compensate them for playing at Old Dominion’s arena while the new one is being built. This could mark a new trend in sports deals — we’re not asking you to subsidize the arena, we’re just asking you to subsidize the team! — except that we still don’t know whether the city is going to be asked for additional subsidies for the arena itself, since the full finance plan is still a mystery. [UPDATE: Sessoms now says the city would be putting in $195 million; it’s only where the money would come from that’s a mystery.]

As far as the state’s concerned, is there any way that $150 million could be a reasonable expense to lure an NBA team? An economic impact study last month projected $11 million a year in new tax revenues for Virginia, which would just about barely pay for a $150 million lump-sum payment in present dollars — but that was based entirely on numbers provided by the arena developers, so should probably be taken with a large grain of salt. Would it be too much to hope that the Virginia legislature would have the good sense to authorize an actual independent economic impact study before voting to shell out arena money? Mm, yeah, probably.

19 comments on “Virginia Beach to ask state for $150m for arena to lure Kings

  1. This appears to be a win-win. I haven’t working in the VA Beach area since 2004, but back then it was clear that a sports franchise would be a great fit. Lots of sports fans (especially NFL/NBA) there and the beach area was exactly the type of place that could be rejuvenated by a new arena.

    The state may only get $11M/year in additional sales tax revenues (or maybe even less, who knows?), but even if the VA Beach area gets developed to the level of Glendale, AZ I’d consider it a success.

    As for the NBA, this is a great setup. Get the Maloofs out of Sacto and get D.C. out of the SEC division to rebuild that market. If things work out in the future get an expansion team back to Sacto if the city can get an arena built. Add one more expansion team in Seattle and we’re good.

  2. I pretty much fully expect the two governments involved there will NOT take the report with even a tiny grain of salt. I’d bet this will be little more than a rubber-stamp to approve this.

    Then the ball will be in Seattle’s court. The biggest question there is will they allow the Maloofs to continue to own a large piece of the team. They currently own 43% of the team, and control the team with the cooperation of other owners. Maybe if Hansen offers them 30% with the option to buy more later, the Maloofs would agree to that.

    Between VB, Anaheim and Seattle, I just don’t think the Kings can stay in Sac much longer.

  3. Which is mind boggling when you consider that Sac bent over backward to provide the Maloofs with $270 million toward an arena. Most owners would sell their own mothers into slavery to get that kind of a deal.

  4. The Sacramento well has been somewhat poisoned since Maloof arena replacement plans have kept blowing up for at least half a decade. The public support is waning and until they’re committed to putting a decent product on the court (need deeper pockets) the fans have been turning away, even since before this more recent dip. If the Maloofs want to keep running the show they need to find a new stage.

  5. MikeM,

    Seattle is a non-starter for the Kings. The Maloofs aren’t selling and Hansen wants to own.

    Anaheim could happen but only as a last resort (and maybe not even then). The worm is turning against big TV rights plus the Honda Center is a dump. (It would be a bottom 4 NBA arena.) Before going to Anaheim I could see the team trying to squeeze $50+M out of Sacto to help with an Arco Arena renovation.

    I do agree that the team is probably gone, but I have to think that Virginia Beach is the destination.

  6. I’m still boggling at Ben using “Glendale” and “success” in the same sentence.

  7. Ben, not likely that they’d even try to squeeze the city for money to upgrade Arco. The city has already told then in no uncertain terms that it’s a non-starter. Hell the Maloofs themselves said the same thing 3 years ago.

  8. “I’m still boggling at Ben using “Glendale” and “success” in the same sentence.”

    Fits right in with the idea that Virginia Beach is a sure winner. I spent a good chunk of my life in the city and I wish it could work, but it would be a Glendale-style “success” – at best. The corporate presence and/or significant number of “1 percenters” required for selling suites and high-priced tickets is almost non-existent, the transient nature of the region’s population (military bases everywhere) will always make it hard to generate a consistent fan base and using the Constant Center as a home for several years is a non-starter.

    If you still believe in the nonsense about becoming a “major league” city via sports team subsidization, then this all makes sense. I mean, who doesn’t now think of Oklahoma City as “major league”?

  9. Dan, the problem is that the Maloofs cannot afford to contribute their $70M, even if that was a loan (which it was). It looks to me as though if the Kings went to VB with roughly the deal we’re seeing here, the Maloofs wouldn’t have to put up any cash at all. The fact that the proposal is that the State of Virginia pays the Maloofs $80M to pay moving expenses makes 100% of the difference.

    Sac: Borrow $70M to stay in Sac, then pay off the existing loan balance of $65M.

    VB: We pay you $80M to settle your existing debt and pay relocation fees. As a consequence, since the Sac loan is paid off, you can now sell the existing arena. Surely a company like Live Nation would pay $20M for Sleep Train.

    See the difference?

  10. Live Nation would prefer to rent a publicly owned facility rather than own it themselves. I think that tends to be the stumbling block the Maloofs have, the missing leverage of “hey, you and the tax payers own this NBA/hockey arena and we’re the only one that can fill it appropriately”. The burden of owning the facility is something NBA owners try to put on the public as part of the current NBA/NHL arena model, with the owners paying for exclusive use rights or first priority in booking.

  11. Mike, the $80m wouldn’t be to pay off the existing arena debt. It’d be $30m to pay relocation fees to the NBA, and $50 million to cover lost revenues for two years of playing at Old Dominion.

  12. Neil beat me to it. There is still no indication how the Maloofs propose to pay off the $70 mil they owe Sacramento.

  13. Well, yeah, I know what they said; that it’s to help relocate and to help with their financial losses for the first two years.

    I read that too.

    But at times, you just have to read between the lines. It was going to cost the Maloofs $135M to move 4 miles south, or they can collect $80M for moving 3,000 miles east. We could have said that money was for hair tonic, it still makes more sense to collect $80M and move 3,000 miles.

    I guess that’s yet another problem with arena subsidies; they only work once. When they ask the city for a second arena, things can get dicier.

    In any event, I have my doubts that the Virginia legislature will go along with this. If anything will kill this, I’d say that’s the most likely cause of death.

  14. You’re leaving out not only that in Sacramento they’d be getting two extra years of revenue from an actual NBA arena, but that in Virginia Beach we don’t know what they’d be expected to pay in rent (or share in revenue) with Comcast/Live Nation. Until we know that, it’s all apples to oranges.

  15. No fair, Neil.

    Look, the Glendale arena was a success in a development sense. It’s unlikely that WestGate happens if not for that building. The news reports cite layoffs of city workers, but I would be curious to know how many workers the city even had pre-arena. I’m guessing that even with the layoffs, it there has been a net increase to the city payrolls.

    A true development failure would be something like Portland or St. Louis, where almost nothing to speak of has been developed around the arena/ballpark.

  16. There are so many articles now about the Kings’ declining attendance in Sacramento that it wouldn’t surprise me in the least if the Kings made as much money in the 8,600 seat arena in Virginia as they do now in Sacramento. They claim about 12,500 per game, but you’ll be hard-pressed to find anyone who believes that number.

    The weird part is that they lead the league in road attendance. But that can be explained by playing 3 home-openers for other teams, plus playing in Utah where Fredette is still a huge draw. Plus, two of their home games so far involve road teams that are popular in this area, the Lakers and the Warriors; games against those two teams routinely sell out.

    Anyway, $42M to compensate for 2 years of low attendance is far beyond the call of duty. I don’t think they’re making money in Sac now, which is even more reason to not spend $135M to move 4 miles south. Playing in an 8,600 seat arena won’t change their profits. We haven’t seen the proposed TV deal either; I’d bet they’ll make way more in VB than they do here.

    By the way, talking about a “Sacramento-Stockton-Modesto” market is also ridiculous. Downtown Sacramento to Downtown Modesto is 80 miles. Sacramento’s closer to Berkeley than it is to Modesto. I think Modesto is closer to Oracle Arena than it is to Sacramento.

  17. The Bee has a pretty funny editorial on this subject today. In a nutshell, it was “Try to keep the Kings, but don’t overbid.”

    Um, okay. What was over $250M raised from selling City-owned property towards a $391M arena? That wasn’t an overbid?

    (Not to mention that they probably wildly overestimated the value of the bids they’d have received for their parking operations.)

    From what I’ve read so far from the Virginia news sources, this idea of a State subsidy isn’t taking off. I think Donnelly will try to sell it to the legislature, but he won’t put his entire career on the line to get this done. I’d call the State’s contribution to this pretty imaginary at this point.

  18. Where do the Maloof’s get the money to pay off Sacramento? Easy, they stiff Sacramento.

    The collateral behind the loan is a $25M interest in the team and the arena. The Maloof’s mail a check for the aforementioned 25M and the keys to the arena. Then they pocket 55M from the grant they receive from the State.

    The one political hangup is that the Norfolk, Hampton Roads area is about 20% of the population of the state. Will they rest of the state buyoff?