VA gov: No money for VA Beach arena — yet

Apologies for being a bit behind on bringing you the latest news: First stories started breaking late on Friday night, in contravention of the usual news cycle (let alone my sleep cycle), and then I was out of commission a good bit of this morning recovering from last night’s trip to Saturn. Anyway, without further ado:

On the aforementioned Friday night, Virginia Gov. Bob McDonnell threw a sizable roadblock in the path of the proposed Virginia Beach arena, declaring that he would not include $150 million in requested state money in his new budget. Since Virginia Beach is already facing a steep enough climb coming up with its own $195 million for the project, that pretty much sinks the plan, for this fiscal year, anyway.

Not, though, probably forever. Here’s what state Virginia Economic Development Partnership president Martin Riley actually said in his statement on Friday announcing McDonnell’s denial of funds:

“Should the city have a detailed financing plan, or alternative plans, that provide more clarity on what the revenue sources are for building the arena and how they will be applied to retire the city’s debt obligation, this would certainly be helpful for the administration to receive,” Riley wrote.

To which McDonnell spokesperson Tucker Martin added:

“Virginia Beach officials were informed this afternoon that the governor’s budget amendments will not provide resources for this project at this time, as the VEDP analysis is ongoing.”

So basically this is less a “no” than a “Seriously, guys, you want us to hand over $150 million for a funding plan that’s put together out of Tinkertoys and chewing gum?” There’s nothing stopping Virginia Beach from coming back to the state in future years, and subsequent reports have even indicated that McDonnell could reconsider his decision during the legislative session that begins in January, if the city has its funding ducks in a row by then. All of which means it’s not all that likely that the Sacramento Kings would have time to put an arena deal in place in time to meet the March 1 NBA franchise relocation deadline, but really, that wasn’t very likely in the first place — even if you think that the Maloof brothers, unlike everybody else on the planet, take Virginia seriously as a relocation site, that would have been an awfully quick turnaround for an arena plan.

So, unless the Maloofs have an abrupt change of heart and decide they’re willing to sell their team to Seattle’s Chris Hansen, I’d lay at least even odds that the Maloofs decide to wait out 2013 and see what they can shake loose from Virginia Beach with a bit more time. Even if they don’t really want to move there, after all, it’s always good to get some extra bids to drive up your price.

15 comments on “VA gov: No money for VA Beach arena — yet

  1. I think it’s a very low percentage chance that VB ends up with an NBA team too… but it’s not zero, I guess. And it wouldn’t be the first time that a location thrown up for discussion more as a stalking horse than anything else ended up with a team…

    My biggest question remains how long the NBA will keep the Maloof Bros in the fold? IE: will they still be the owners when a new arena is built for the Kings, whether in Sacramento or elsewhere?

  2. The Maloofs really want to keep this team, and VB was probably their best chance to do so. Behind the scenes, the Maloofs have probably gotten back to Samueli to see if Honda is still a viable option. Barring Anaheim, the Kings are probably available to purchase.

    One bottom-line to this is that the Kings will probably be in Sac next year. However, that arena deal will be very difficult to revive, with AEG now for sale. Also, Sac still has an EIR to produce, and the parking deal won’t be easy to restart.

    I guess the longer it takes to get a new deal in another city, and the longer the Kings stay in Sac, the greater their odds of a permanent solution is. Well, as permanent and as iron-clad as any NBA arena deal gets, I guess.

  3. Any thoughts on why there’s no talks between Maloofs and AEG about moving to KC? The Kings came to Sac from KC and there’s a five-year-old arena just sitting there…

  4. Rather astonishing, isn’t it: the idea that cities would bid against each other to take these guys on as business partners? I guess having an NBA franchise in your town is a far more desirable thing than I ever imagined…

  5. Not that it’s the only reason, but Sacramento to Kansas City would be dropping from 20 to 31st in TV market rankings. It’d be a slight drop, but I guess Norfolk-VA Beach is even lower down the scale. However, the novelty factor of pro sports tickets/boxes would be higher in VA Beach vs Kansas City (already has Chiefs). I suspect the gov’t of Kansas City remembers being burned by the NBA before and is less likely to cough up money towards moving/paying off Kings debts.

  6. I’m kind of glad that VB came to their senses here (happy for them, that is). The reason the Maloofs would accept moving to a far smaller TV market is that VB was willing to pay all the moving expenses. What killed the deal in Sac was that the Maloofs needed to come up with $73M for the new arena, plus settle the existing $67M bond debt against the current arena. They just don’t have $140M to spend.

    So along comes VB, which was willing to pay that $140M for them. I suspect that would have compensated for the smaller market quite nicely.

    As long as the Maloofs have to come up with $140M to stay in Sac, Sac will never be the first option. The only way to make it happen is to allow them to not pay off their current debt, and contribute nothing to the new arena. The Council and the voters will not accept that (although I bet KJ would).

    The Maloofs want to keep the team, and a deal like VB offered would have facilitated that. So I’d say that if KC, Seattle, Vegas or Louisville offered a VB-like deal, that’s option 1. Option 2 is to sell the team to the highest bidder.

    It’s going to take a while for this to play out.

    If Sac had offered the Maloofs to contribute $0 to the new arena, plus forgive the current debt, there’d probably be construction going on outside my window right now (yes, I work that close to the proposed site).

  7. It’s not that big a drop, chefjoe:

    The 2009 US CMA listings have KC at 29 and Norfolk-VB at 36 (2.1m vs 1.7m). Sacramento was 25th on that list at just over 2.1m.

    Mike: Why should Sacramento have offered the McGoofs that kind of deal? They’d be letting them out of the deal they signed for the present arena plus paying “their” share of the new one… would the next step be “Glendale” like, offering to pay the team to play in the arena built for them?

    The best result all round might be for roadblocks to continue to be erected in the arena process in Sacramento and for the NBA to prevent the Maloofs relocating, ultimately leading to a forced sale (or revocation of the franchise for insolvency).

    I feel sorry for Sacramento basketball fans, but they’ve put up with clown-like ownership for too long.

  8. Dave: It is astonishing indeed. If logic and reason were at play, any prospective partner should run away from these guys laughing

  9. Maybe the Maloofs are hoping for a Shin-New Orleans Hornets style purchase by the NBA league as a whole … with the NBA covering/forgiving all debts ?
    The Maloof family only owns like 53% of the Kings too… imagine the fun times the minority owners must be having (well, beyond Bob Cook’s bankruptcy 7% share). is what I was going by John, but the numbers are pretty close.

  10. I don’t think they should make an offer like that. I am saying VB did, and that’s what it will take to keep them. If they cannot get an offer like that, they will sell. They have to.

    I thought they rejected an overly generous offer in Sac. But eventually, they will need cash. That’s when they will sell. And I think they will sue if the NBA forces them to sell to someone who will keep them in Sac.

  11. I thought the offer they got from Sacramento was pretty good too.

    On what grounds do you believe they could successfully sue the NBA if they aren’t allowed to move?

  12. Wow, 9 of 11 presumably intelligent VA Beach council members voted to continue talks on building this thing. The Comcast/Spectacor partner must be giving them a lot of nice indications of how easy it would be to get a team there.

  13. John, they would sue if they were forced to accept a smaller amount of money for the team. I party A from Anaheim offered $400M and party B from Sacramento offered $350M, and the NBA ordered the Maloofs to take the $350M offer, they’d sue the NBA for the difference.

    If they don’t care where the team plays when they own the team, they won’t care where the team plays when they sell it, either.

    Anyway, I see that VB has voted 9-2 to proceed with this plan anyway.

    There’s a very good article on sactownroyalty that explains the Maloof financial position. It explains pretty well why the Maloofs may not be able to afford to sell the team. I think it has one key error: The Maloofs do not own 100% of the debt; the “team owners” do. If the Maloofs owned 100% of the debt, they’d be underwater by $30M or $40M. No links — I hate going into moderation.

  14. The more I think about VB’s 9-2 vote to proceed, the more amazed I am. What are they thinking? Or, are they thinking at all?

    Unreasonable optimism, I’d say.

    Why can’t they see that they’re bargaining against themselves here? No other City would pay for a team’s relocation expenses. That’s way beyond the call of duty. Have you ever heard of such a thing, Neil?

  15. Let’s ask a question of why we should build an arena when there are 2 30 miles apart that can not sell out for concerts or other events. Second they say that that the arena will make a couple of thousand jobs. ( no way) I have been in the entertainment business for over 30 years. That data is incorrect. Also I can bet that when they say it will cost 350 million the final cost with change orders etc. will cost the city over 500 million. Third they say it will provide more than 250 events a year. Let’s do some math NBA season home games 40 plus maybe 12 playoff games now we are at 52 events. Concerts maybe maybe 25 at most a year remember I have over 30 years in this business now we are at 77 events. Maybe an acc tourney another 5 days now we are at 82. Now it is summer time what about farm bureau live are we going to put all of there events into the new arena or are they going to compete for the same events that would create ticket price increases. So if that happens Va. beach has another failed property to along with the sportsplex.Sorry I was not finished the remainder of events would likely be a pbr rodeo a monster truck show once again taking away from the oceanfront monster truck show. Maybe the circus. Now we are at 91 events The math does not work. Example one of the busiest arenas in the us is the staples center which has 2 nba teams and an NHL team along with a wnba team does an average just over 250 events a year. So is Va. Beach going to add another nba team along with a wnba team and NHL team to get the events they have stated. Let’s look at another one of the busiest arenas on the eat cost Madison square garden in new York city they have a nba And wnba team they also host the men’s big east tournament and a NHL team they average around 325 events a year. I just do not see how we will do the number of events they are stating along with the jobs and money coming from the nba. The Nba had 16 of 30 teams who lost a minimum of 9 million dollars each. The only teams that made money are in big markets. Okc lost money last year as well.