Sacramento wins Kings back from Seattle, now just has to figure out how to pay for them

As it turned out, yesterday’s early reports were true: The NBA’s seven-owner relocation committee voted unanimously via conference call yesterday to reject the proposed move of the Sacramento Kings to Seattle, where they would have become the new Supersonics. The full NBA owners’ group will now vote on the matter in the next week or two, but unless something changes dramatically between now and then, it’s pretty much inconceivable that the remaining 18 owners will buck the unanimous recommendation of the committee.

This is clearly a big win for Sacramento Mayor Kevin Johnson, who responded to the announced sale of the Kings back in January by cobbling together a makeshift local ownership group and even more makeshift arena financing plan so he could tell the NBA that they could really truly get a mostly publicly funded new arena if they kept the team in town. (KJ busted open the exclamation point budget when he heard the news.) Whether it’s a win for Sacramentans depends on whether you think it’s worth saddling your city with $258 million in arena debt in order to keep an NBA team in town — plus whether you believe the city will actually raise that $258 million with new parking revenues, or if you expect that Sacramento will have to dip into its general fund to pay the shortfall, as the arena term sheet allows and as some simple math indicates looks pretty likely.

Partly thanks to that arena funding diceyness, not to mention the supposed allure of Seattle as a bigger media market, the media have largely painted the NBA committee vote as a surprise. And it is at least a mild surprise, especially if you consider earlier reports that the only person in the room who preferred the Sacramento bid was commissioner David Stern.

But if you think about it, Stern had a good argument for his side: Just about every owner in the NBA is going to want, at some point or another, to say to his hometown, “Cough up money for a new or renovated arena, or we’re hightailing it out of town.” And just as it doesn’t make very good blackmail if you don’t follow through on your threats (though that still can work sometimes), it also hurts your case if you try to shake down a city for arena money, then when they cough it up, you yank the team away anyway. Keeping the Kings in Sacramento may mean forgoing a big cable windfall in Seattle, but it also means keeping alive an arena-subsidy business model that has helped make many rich NBA owners even richer — and on top of which, it leaves Seattle open as a threat to shake in the faces of other mayors who might be slow to produce subsidies for their cities’ existing NBA franchises.

So what the heck happens now? The spurned Seattle group is, as you might expect, not pleased: Steve Ballmer declared himself “horribly, horribly disappointed” by the news, and Chris Hansen posted a message on his Sonicsarena.com site promising to “unequivocally state our case for both relocation and our plan to move forward with the transaction to the league and owners at the upcoming Board of Governor’s Meeting in Mid-May” (good luck with that) and noting that “we have numerous options at our disposal and have absolutely no plans to give up” — which you could read as a veiled threat of a legal challenge, or you could read as just something that you type when you don’t know what else to say.

The Sacramento arena plan, meanwhile, still needs official approval by the city council, which is going to require an environmental impact statement and all that jazz, as well as clearing the threat of a referendum challenge. (Even KJ warned last night: “There is still work to be done. We do not want to dance in the end zone.”) So it’s still possible that after all this, Sacramento won’t be able to get an arena deal finalized, and we’ll be right back where we started, with the Hansen/Ballmer Seattle group waiting in the wings. For the moment, though, the Kings will stay put, and Seattle fans will have to wait for a replacement for the Sonics. Congratulations, Sacramentans: You just won yourself a very, very expensive prize.


38 comments on “Sacramento wins Kings back from Seattle, now just has to figure out how to pay for them

  1. Sacramento just lost and lost big.

    The cost of this thing will drag down a city already running a deficit, already hugely in debt.

    Just to feed some ex-jocks ego.

  2. What about the Maloofs? Are they going to take the Ranadive offer or just hold on for a little while longer?

    Other winners: Downtown Sacramento developers. They get to make money with very little risk, thanks to to some heavy subsidies.

    What’s $258M for developers when the city struggles to meet basic needs- potholes, sewers, and keeping pools open?

  3. Lol, wasn’t it just the other day that the Maloofs were joking about how easy they were to get ahold of lately. None of that “ducking and hiding” that they’d done with the press before.

  4. Well, this did all happen late yesterday, and it’s only 8 am in California. If they haven’t said anything by day’s end, then we can criticize them for going all Maloofy on us.

  5. I’d have to think that another shoe will drop. The NBA will probably have to either outright promise Seattle an expansion team or make a Cleveland-style “If You Build It A Team Will Come” promise, guaranteeing an expansion team if no current owner is willing to sell to Hansen. If neither of those things happen then I’d think that the Maloofs and Hansen could win the right to sell and move in court.

    Either way, great job Sacramento. Turning a dead downtown mall into an arena will be worth the $258 million expenditure (gosh, do I hate it when people use the term “investment” to describe government spending) if the Kings stay and if residential/office/retail/entertainment space can be developed around it. And if the arena doesn’t spur development, then at least Sacto pols can say they tried.

  6. I’m sure glad I paid that parking ticket the other day. Sacramento just got a $50 head start to build this thing.

  7. I think what we’ll get here is the worst of all possible worlds: The Maloofs will hem and haw for a couple weeks, then agree to sell to the local group. We’ll then forge ahead with selling the parking bonds, and getting finer estimates for the arena.

    Then, when the EIR comes back, we’ll find about $50M in needed mitigation. Our current term sheet says we will leave open to negotiation who pays for that.

    Between needed mitigation, we’ll need to come up with $50M to cover the park bonding shortfall, $50M to cover the EIR mitigation, and another $50-$100M to cover the construction shortfall.

    KJ will then say we’ve simply come too far to back off now. There will be more relocation threats from ownership, who have been promised a new arena in time for 2016. If you think they can’t do that, I’d point out that most of these whales are from the Bay area, and would love to have a team in San Jose.

    In addition to giving away land, signage, TOT funds, and parking money, we’re still going to have to raise another $150M-$200M. And I think KJ will pull it off.

    All of this will only occur, though, only after Hansen-Ballmer have dragged this through court. How CAN you cancel a transaction that yields the current owners more money, without it being an antitrust violation?

    Hansen is right; this ain’t over.

  8. And by the way, all of Steinberg’s bullshit about AB900 is just that: Bullshit.

    This project was never going to qualify for the exemptions.

    We could all still be talking about this in May of 2015. Well within the realm of possibility.

  9. Maybe if the Maloofs want to spite KJ and Sacramento, they’d dump the team in Ranadive’s lap and let KJ and Ranadive figure out an arena deal that their economist, the highly reputable Beacon Economics, says won’t work. And let the taxpayers who cursed them pay the real bill while they sponsor skateboarding contests and sell hooch.

  10. “How CAN you cancel a transaction that yields the current owners more money, without it being an antitrust violation?”

    Not out of line if you own a franchise that requires the okay of the parent organization to sell. Doesn’t have anything to do with antitrust, it’s all about your ownership agreement. Buy a McDonald’s franchise and try to move it to another town.

  11. Senator Steinberg is getting termed out. Maybe he could go to work for Ranadive. He used to be the Maloof lobbyist and there he negotiated the 2006 arena deal for them in between his stints in the State Assembly and the State Senate. He also holds court at a British Pub in Sacramento that serves a very overrated breakfast.

  12. Can someone tell me why the Maloof’s have to sell the team? Couldn’t they just say “if we can’t sell the team to whom we want, we will just keep the team and accept the new arena”. That would then put this whole in a crazy place. And this $258 million figure for the arena is way too low. You can’t build an arena in CA for less the $400 million.

  13. If the Maloofs don’t want to sell, the NBA can’t make them. But the NBA can twist their arms a fair bit, and the lure of taking the money and running has to be tempting. (Or would be to normal humans with normal patterns of reasoning, anyway.)

    And $258m isn’t the whole arena figure, it’s just the city’s share.

  14. The Maloofs may not have normal patterns of reasoning but being pushed into a lower bid has to be aggravating to them. I’d really like to see what advice their lawyers are giving. I’m sure their counsel is working with Ballmer’s legal team. This might be an empty victory for Sacramento on multiple fronts.

  15. The Maloofs do not have to sell the team to the Sac group (or to anyone else, for that matter), and I think they are resisting hard right now.

    Ultimately, I think they’ll do so. But get ready for some fireworks along the way.

    I fully expect a single-sentence statement from Rose, “We have decided to keep the team. We are looking forward to many more years at Sleep Train Arena.”

    They want Hansen to have this team. So much so, they’ll be willing to stall.

    Like I said earlier, we’ll still be talking about this in 2015.

  16. Why sell now if they have enough to meet payroll and run the team through next year? They have an asset that increased a lot in value in the last few months

  17. I do find it odd that the finance committee has not issued their recommendation of the sale of the team. My thought is they are trying to limit their legal exposure on a potential anti-trust suit..not from Hansen and Ballmer but from the Maloofs. The league probable wants the Hansen/Ballmer group to drop the offer (even though it is binding) & forego the 30M…for what? promise on expansion or maybe just to be considered the next time they need Seattle for leverage?

  18. JB, the finance committee is probably working with the Maloofs and Hansen to get them to mutually cancel their deal… And they’re probably getting a big, fat “F No!” as a response.

    The Maloofs continue to hold some leverage here, even being as broke as they are.

    They’re going to force the BOG to come up with legal justification for a rejection. They’re going to make them vote, and they’re going to make them “show their work.”

    The Friday deadline to make a down payment is really pretty significant here. If Ranadive somehow does not do that, I’m sure the relocation committee can then reconsider this decision.

  19. Let’s just say this thing drags out longer. Will JMA Ventures decide to throw in the towel and go with its much more viable alternative plans for the Downtown Plaza?

  20. Keith: Exactly.

    Neil: It`s true that the NBA would find it difficult to force them to sell the team if they don`t want to. On the other hand, they can also make it very difficult for them to keep the team if the BoG doesn`t want them to.

    Unless I`ve missed something recently, they still owe the NBA money and have significant payments “outstanding” relating to the PBP/STA/Your Name Here arena.

    Given what we know about the Maloof’s perpetual cash-shortness (casino owners! ROTFLMAO), I doubt they could meet any kind of cash call triggered by any party.

    I agree that Stern can’t send them a letter instructing them to sell the team. But so long as the Maloofs are in the league’s debt (and bad books), the NBA can certainly make their lives difficult – if not impossible long term.

  21. Hansen may be making a veiled threat. Or not.

    I’ve no doubt he’ll continue “in this process”. He is the most committed prospective owner to come along in any sports league for quite some time (witness the arena agreement he signed). But the worst possible thing he/Ballmer could do is try and bully the NBA into giving him “his way”. No shortage of egos on the NBA BoG, even by Ballmer standards.

    A ‘binding agreement’ (his words) is meaningless until any conditions precedent are met. He and the Maloofs may have agreed on everything… but absent NBA consent that fact is irrelevant. Keep in mind that this is a “sale and relocation”, not an existing owner applying to move.

    If Hansen and Ballmer ever want to own an NBA team, this is the time to express their great disappointment with the outcome but tell the Commissioner that they are still committed to bringing NBA basketball back to Seattle as soon as possible, whatever it takes.

    If you want to know what happens when a bull charges into a professional sports china shop, just google “Jim Balsillie + NHL”.

    Or give some thought to Donald Trump’s effort to force his way into the NFL in 1986.

  22. As far as I can tell, Hansen has a few reasons to not voluntarily walk away from the PSA he has. Actually, more than a few. About thirty million reasons, actually.

    The Maloofs will not, and probably cannot, sign any kind of deal with Ranadive before the BOG votes. If they do, that would probably represent a breach of contract with Hansen, and I bet there are penalties if they do that.

    No, the BOG has to find a way to legally reject Hansen as an owner, and right now, I don’t think they can find one. “Best interests of the NBA” is probably irrelevant in antitrust law.

    Hansen and the Maloofs will force the BOG to vote on this, and the pressure is on the BOG now to find a reason Hansen cannot own this team. This is exactly why the Maloofs hired an antitrust lawyer.

    As long as Hansen and the Maloofs do not back off on their PSA, the Maloofs will not sign one more piece of paper that also has the name “Ranadive” written anywhere on it.

  23. “the pressure is on the BOG now to find a reason Hansen cannot own this team.”
    If he wants to own the team the BoG determined should stay in Sacramento, they might be open to that. But I bet their guard is up after that Clay Bennett thing.

  24. I hope the NBA get’s sued here. Pushing a business to sell to a lower bidder not of their choosing doesn’t seem very legal to me. I don’t think some BS agreement not to sue the NBA holds water either. And, the leagues’ monopoly status forces these cities to bust their budgets to get a team. I wonder if Ballmer and Hansen don’t care about “angering the NBA”- as they used Seattle to shakedown Sacramento.

  25. Someone pass this news onto Edmonton’s Mayor Mandell: with Seattle out of the running to compete for the Oilers franchise and little elsewhere to mount any competition maybe they can reiterate to Daryl Katz that this project is still short $100M and it would be nice, since all of his other demands have been met, if maybe he could help fill that gap and get this project going.

    That is, if everyone is sincere about seeing this thing break ground.

  26. For the record, David Aldridge claims that Hansen can’t and won’t sue:

    “Sources maintain that legal action against the league is a near impossibility, given that the NBA requires prospective owners to sign agreements that prohibit them from taking legal action if their bids are denied. A source with knowledge of Hansen’s group’s plans said Sunday that the group had never thought about taking any legal action if it lost.”

    http://www.nba.com/2013/news/features/david_aldridge/04/29/kings-likely-staying-in-sacramento/

  27. Neil, there are some rights you simply cannot sign away. Courts have ruled on that.

    If it’s an antitrust violation, I think Hansen could sign that agreement 1,000 times, and he still wouldn’t be bound to it.

  28. At this point I’m assuming after the owners vote against the Seattle group, the Maloofs are going to demand that 20 million gap between the two bids be filled, and that if the gap is filled the team is sold, and if it isn’t then the the team is off the market. I don’t think they care where the Kings end up, they just want the most money humanly possible, and Hansen/Ballmer were going to give them what they wanted. If the Kings group matches, then the Maloofs will take the deal. If not? I’m betting they stay owners, the arena deal crashes, and they tell Stern to go fuck himself for even thinking they should take the shittier bid, much less trying to force them to.

    No matter what, at this point I think it’s all over for Hansen/Ballmer until the NBA decides to expand, or the Bucks attempt to build a new arena runs into serious problems (which it will, so stay tuned on that one).

  29. Follow the money—and the influence. Kevin “Teen Chaser” Johnson is married to Michelle Rhee, who is currently in very serious trouble over a cheating scandal and subsequent cover-up, and fabricating items on her resume.

    Rhee is also very closely connected to the very richest individuals in the country, including Eli Broad, the Koch Brothers and the Walton (Walmart) Grandchildren. They’re all very close to Rhee—having paid her over $11 million dollars in just the past three years—and she may have gotten their help in all of this, just by picking up the phone.

    I wouldn’t be surprised if she “came to the rescue” behind the scenes, when her hubby was about to receive a big PR black eye for “losing” the team.

    It’s good to be a shill for billionaires—or to at least be married to one—when you’re desperately trying to hold on to your city’s team.

  30. I wonder if Michelle Rhee was involved in the lobbying too. I kind of want to know but part of me doesn’t.

  31. “Neil, there are some rights you simply cannot sign away. Courts have ruled on that.”

    True, but no-one has an inalienable right to own an NBA team. The National Basketball Association is not a free and open body that offers membership to any and all comers. It is a private and highly exclusive club (at least as far as owners go) and is not required to extend an offer of membership to any individual regardless of their background, wealth or enthusiasm.

  32. “Pushing a business to sell to a lower bidder not of their choosing doesn’t seem very legal to me”

    It may not seem legal to you, but then, this is not “a business”. The Sacramento Kings are a franchise of the NBA, not an independent business.

    If you’ve ever been involved in a restaurant or other franchise operation, you will know that the franchisor absolutely gets involved in any sale and must approve the buyer (new franchisee). They also have the right to buy you out of the ‘business’ (franchise) you have operated and possibly even built, lock, stock and deep fryer if they don’t like the way you are operating it.

    Aldridge is partially right. Hansen (or anyone) can sue, of course. He really can’t win, however. In the incredibly unlikely event that he does file a claim, the NBA will simply hold up their constitution and bylaws and show that the Maloofs cannot sell absent NBA permission, and will likely also present the allegedly binding sale agreement itself as evidence… This will, of course, also contain a condition relating to NBA approval of the transfer of ownership.

    If that condition is not and cannot be met, any agreement between the parties is null and void. Hansen and Ballmer can sue if they like… but they’ll never get into the owner’s club if they do. They could also jump up and down, stamp their feet and hold their breath until they turn blue, or even say bad things about Janet Reno (again). These actions will do exactly nothing to advance their cause.

    If the Maloofs are forced to sell for less than they otherwise might have gotten, they could file action against the NBA for that lost revenue. That is a long, hard road to travel, but as ‘ex franchisees’, they might actually make it to court in a decade or so. If that happens, the NBA would defend that action in much the same way they would defend any Hansen/Ballmer action.

    The Maloofs cannot sell what they do not own. And they do not own the Seattle Supersonics. The NBA itself does. The price they will be paid for the Sacramento Kings will be a very good price for that franchise in Sacramento. They can hardly claim to have suffered a loss because they have been prevented from selling something they do not own.

  33. “The Maloofs cannot sell what they do not own. And they do not own the Seattle Supersonics. The NBA itself does. The price they will be paid for the Sacramento Kings will be a very good price for that franchise in Sacramento. They can hardly claim to have suffered a loss because they have been prevented from selling something they do not own.”

    It does not matter. The Maloofs HATE Sacramento so much that they will make them suffer so much until they get what they want. Here’s MikeM’s nice piece from yesterday to refresh your memory:

    “As far as I can tell, Hansen has a few reasons to not voluntarily walk away from the PSA he has. Actually, more than a few. About thirty million reasons, actually.

    The Maloofs will not, and probably cannot, sign any kind of deal with Ranadive before the BOG votes. If they do, that would probably represent a breach of contract with Hansen, and I bet there are penalties if they do that.

    No, the BOG has to find a way to legally reject Hansen as an owner, and right now, I don’t think they can find one. “Best interests of the NBA” is probably irrelevant in antitrust law.

    Hansen and the Maloofs will force the BOG to vote on this, and the pressure is on the BOG now to find a reason Hansen cannot own this team. This is exactly why the Maloofs hired an antitrust lawyer.

    As long as Hansen and the Maloofs do not back off on their PSA, the Maloofs will not sign one more piece of paper that also has the name “Ranadive” written anywhere on it.”

    Also here’s a headline from the Sacramento Bee the other day in case you missed it:

    “Mayor cautions Kings fans: Don’t ‘dance in the end zone’ yet ”

    http://www.sacbee.com/2013/04/29/5381123/source-nba-committe

    That’s right, Kevin Johnson realizes that this isn’t over for Sacramento. Quite the opposite, Sacramento is now back to being stuck with the Maloofs until further notice.

    “But he said pivotal work remains, most notably convincing the Maloof family to sell the team to a group seeking to keep the franchise here….Johnson said the Sacramento group – led by Silicon Valley software executive Vivek Ranadive – would speak with NBA officials in the coming days, but that he was unclear how the process of negotiating a deal with the Maloofs would play out.”

    So it’s groundhog day in Sacramento once again, trying to convince the Maloofs to sell to a group that prevented them from doing what they wanted to do.

    How did that work out for Sacramento last time?

    Oh boy, Sacramento thinks they have won but when the Maloofs are your prize, well…you know how that works out better than we do.

    One last thing. For those that scream about the Maloofs finances, unfortunately, they have figured out how to pull off Donald Sterling’s “put a lousy team on the court and still make a profit” trick. So I wouldn’t hold my breath on the Maloofs selling to Sacramento no matter how much “arm twisting” they do to get them to sell. Remember, the NBA can reject relocations all they want, but they CANNOT FORCE owners to sell to people they do not want to sell to either.

  34. The NBA does not need to find a “legal reason” to reject Hansen. In fact, they do not need to reject him at all.

    The fact that someone disagrees with your position on an issue is not evidence that they do not understand what you are saying. Try to keep up.