Category Archives: Sacramento Kings

Sacramento arena projection: JOBS! JOBS! JOBS!

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It’s time to play “What’s Wrong With This Arena Impact Report,” with your special guest, University of the Pacific Business Forecasting Center director Jeff Michael! Take it away, Sacramento Bee:

The planned construction of a new Kings arena in downtown Sacramento should provide a significant boost for the area’s economy and job market, a University of the Pacific forecaster said today.

Although the region’s job growth will remain modest this year, the effect of arena construction should begin to be felt sometime next year, said UOP’s Jeff Michael in his quarterly forecast.

Michael, director of the university’s Business Forecasting Center, said California and the Sacramento area are experiencing another year of moderate economic growth this year. Prospects should improve statewide in 2014, he said, and the arena effect in Sacramento will bring a spark to the region’s otherwise “tepid job growth.”

I bet you’ve already spotted the problem here, but to make it easier, let’s make this multiple-choice. Is it:

  1. The Sacramento arena financing plan still hasn’t been approved by the city council, so it’s uncertain at best whether the project will get underway and start hiring people until well into 2014.
  2. Sacramento is paying for the arena out of future parking revenues (and probably hotel taxes as well), yet Michael fails to take into account the opportunity cost of the lost economic activity that would arise if the city were spending that money elsewhere (or lowering taxes with it).
  3. Even if the arena does start construction soon, and does front-load the 6,000 construction jobs that the city is promising, the short-term effect on unemployment may be fairly modest. The unemployment rate in Sacramento County is 9.2%, out of a labor force of 679,939. That would mean the arena could put one out of every eleven unemployed county residents to work — assuming they’re all trained construction workers, of course. If not, then the project would have to bring in workers from elsewhere, not helping Sacramentans any. And, of course, those jobs would disappear once the arena was complete — but the construction bills would keep on going.

And the answer is: all of the above!

Now, for your bonus question: When Michael wrote that the arena project “has the potential to accomplish broader city goals and help other city assets like the Convention Center,” what is the appropriate response?

Oh, I’m sorry, the correct answer was “shake your head sadly, with just the faint hint of a bitter laugh.” But we have some lovely parting gifts.

Kings buying arena site, only not yet, so wait, what’s this headline for again?

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The owners of Sacramento’s Downtown Plaza mall have confirmed that they’ve sold the property to the new owners of the Kings for a new arena, and also that they haven’t sold the property to the new owners of the Kings, and, um, well, yeah. The main news here is, though, that it looks like the owners of the mall are going to sell the site to the Kings, which has been expected for some time now, and, hmm, there actually isn’t that much news here at all, is there? We don’t even know what the sale price will be for the land, once it’s sold.

Instead, let’s turn to how downtown development in Sacramento is expected to boom as a result of the new Kings arena, according to a downtown developer — oh, just forget it.

Kings sale to Ranadive finalized, now they just need … what was it … oh right, arena funding

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That didn’t take long: Chief Sacramento whale Vivek Ranadive announced last night that he’s reached an agreement to buy the Sacramento Kings from the Maloof brothers, just two days after the NBA rejected the Maloofs’ sale to Chris Hansen’s Seattle group. Ranadive agreed to kick in an extra $6.5 million, bringing his payment to $347 million (actually $200 million in cash to the Maloofs, with the rest in debts to the NBA and city of Sacramento that he’s assuming), for a total franchise valuation of $535 million — $10 million more than his group had previously offered, and $90 million less than Hansen’s proposed team price.

So for all those who were asking whether there’s anything the NBA could do to force the Maloof brothers to sell, the answer is either 1) no, but they can twist their arms pretty hard by telling them this is the best offer they’re going to get, 2) no, but the Maloofs were only saying they wouldn’t sell to Ranadive because they were hoping to convince the NBA to approve the Hansen sale, or 3) no, but once Hansen was off the table, the Maloofs felt they had to settle for whatever they could get.

Either way, the question of who will own the Kings has apparently come to a conclusion, leaving us to return to the question of when and how Sacramento will finalize the deal to give the Kings $334 million in subsidies toward a new arena. There are still several loose ends to be tied up, plus there’s the little matter of the Sacramento council actually voting on a financing plan, as opposed to the rough description of a financing plan that they approved in March. (Not that there’s any chance of the council voting it down after winning the Kings back, but they still need to write it down on paper, which will require resolving some of the handwavy math involved.) And there’s still one group threatening a referendum, plus another filing a lawsuit against the deal for understating the level of subsidies.

Individually, none of these are likely to derail the deal; taken together … probably still none of them are likely to derail it, but there are enough different ways this could go sour that it adds up to a significant possibility. And there’s also still a very real chance that the plan is approved, but then the parking revenues that would be used for arena funding fall short, leaving the city to cobble together money from hotel taxes and possibly the general fund. Sacramento officials may have won the Kings back, but they still need to figure out how to pay for them.

NBA votes 22-8 to keep Kings in Sacramento, will figure out who owns them later

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David Stern is talking right now about the NBA’s decision on the fate of the Sacramento Kings, which you could be watching here right now if the stream hadn’t just crashed. Instead, let’s let Chris Daniels of KING-TV take it away:

So it sounds like: The NBA rejected the move, as has been long expected, and is effectively rejecting (for now, anyway) the sale of the team, too. And because the Maloofs don’t want to sell to the Sacramento buyers, it means nobody’s buying the team for the moment.

Basically, then, the “everybody is unhappy” scenario from this post. There will be much, much more once the Stern press conference is over, I’m sure — and then probably much, much more tomorrow, and then even more next week and the week after that and OH GOD I’M NEVER GOING TO BE ABLE TO STOP WRITING ABOUT THE SACRAMENTO KINGS EVER EVER AM I?

[UPDATE: The press conference is now streaming properly at KIRO-TV's site.]

Your last-minute Kings-to-Seattle NBA vote rumors

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Okay, here we go: Today is the day that the NBA owners are set to meet and vote (unless they decide to put it off again) on whether to approve the Sacramento Kings‘ relocation to Seattle, and on whether to approve the sale of the Kings to Seattle-area owners Chris Hansen and Steve Ballmer. The last 24 hours has seen a flurry of unnamed-source-based reporting on what’s likely to happen today:

  • Aaron Bruski of NBCSports.com wrote a long article on how Microsoft CEO Ballmer is alienating NBA owners with his “scorched earth policy,” and needs to back off or risk being shut out of not only the Kings talks but any possible future expansion plans.
  • Tim Montemayor of San Francisco radio station KGO says that it’s not Ballmer that’s the problem, but rather his and Hansen’s alliance with the Maloof brothers who currently own the Kings — or as Montemayor called them, “that family” — that’s jeopardizing their bid, because the NBA so hates the Maloofs. But Montemayor says that starting this week, Hansen and Ballmer have begun to heed that warning, and could instead accept the offer of an expansion franchise starting play in 2014-15 if they back off of trying to buy the Kings.

This is all rumors at this point, mind you, but it does point to a potential face-saving solution for all involved: Sacramento gets to keep the Kings, Hansen and Ballmer get their shot at a Seattle team sooner than later, and the NBA gets both of its new arenas. Okay, not all involved: The Maloofs would still be out $65 million. But it’s pretty apparent that nobody is in the Maloofs’ corner on this one, and their chances of winning a lawsuit against the NBA would be pretty slim.

There would still be two potential major holdups: First off, the Sacramento arena deal is getting shakier by the minute, with one group announcing yesterday that they’d launch a petition campaign for a referendum to kill the city’s arena funding, and another suing the city on the grounds that it illegally undervalued the public cost of the project when it presented the plan. If either of these measures succeed in tripping up the project — or if the city finance plan just falls apart before the Sacramento council can approve it, which still seems very possible — then the whole NBA plan to keep the team in Sacramento likely goes with it, though I suppose there would be plenty of time to turn around and tell Hansen and Ballmer, “Screw an expansion franchise, you can have the Kings after all for 2014.”

Problem #2, meanwhile, is the Maloofs, who don’t actually have to sell the team at all if they don’t wanna. So we could conceivably come out of today with the NBA having ratified the status quo: The Maloofs still in charge of the Kings, Sacramento still proposing a shaky arena plan and some new owners who the Maloofs don’t want to sell to, and Hansen and Ballmer waiting impatiently on the outside looking in. That rock-paper-scissors option is looking better and better…

NBA votes on Kings’ fate tomorrow, still who the hell knows what’ll happen

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There’s no real new news today on the Sacramento Kings sale-and-relocation saga, but I know you people want your fresh comments section, so let’s recap where things stand going into tomorrow’s NBA owners’ meeting in Dallas.

  • The league’s relocation committee voted not to revote yesterday on its original unanimous vote two weeks ago to reject moving the Kings to Seattle. So presumably that means they’re sticking by “nuh-uh,” which the rest of the owners will almost certainly stand by.
  • The NBA finance committee still hasn’t weighed in on the separate matter of whether to approve the sale of the Kings to Chris Hansen and Steve Ballmer’s group, which could conceivably happen even if the relocation is rejected. The Seattle Times, citing “sources,” says that “representatives of each city will make presentations before the board of governors on Wednesday,” and the finance committee could meet after those and before the full league vote.
  • The league could always decide to postpone tomorrow’s vote to give themselves more time to reach consensus, or the two groups vying to own the Kings time to throw more cash on the table.

The number of plausible scenarios is still pretty large — I feel like we really need a flow chart to contain them all, but let me attempt here:

  • NBA approves the sale of the team and its relocation: The Kings become the new Sonics, Kevin Johnson busts a gasket, and everybody finally goes home. Odds: Not very likely, given that relocation committee vote.
  • NBA approves the sale, but not the relocation: Hansen et al. either end up with 65% of the Sacramento Kings, or 20% of the Kings if they go with the backup purchase plan that the Maloofs revealed last week. Then the new co-owners bide their time to see if Sacramento’s arena deal collapses: If yes, they take the team to Seattle in a year or two, if no, they’ve at least had time to make some friends in the NBA owners’ club and can lobby them for a Seattle expansion team sooner than later. Odds: Possible, but requires everyone to wait years more for resolution, which may not please either Hansen or the NBA.
  • NBA rejects both the sale and the relocation, and the Maloofs accept the Ranadive offer: KJ is happy, Hansen is steamed, and the Maloofs eat $65 million in purchase price. Odds: Also possible, though the bit about the Maloofs leaving $65 million on the table seems like a reach, especially since they’ve been saying all along that they’d sooner keep the team than sell it to the Sacramento “whales.”
  • NBA rejects both the sale and the relocation, and the Maloofs say “Fine, we’re not selling, then”: Everybody is unhappy! KJ has to decide whether to offer his arena deal to the hated Maloofs! And either Hansen or the Maloofs or both could presumably try to sue, though good luck with that, given that NBA bylaws explicitly give the league the right to make the final decision on where teams play and who gets to be in their little club. Odds: Sounds kinda crazy, but the way things are going with this team, crazy would be about par for the course.

Add it all up, and … I still can’t predict. It seems like while the NBA still makes out pretty well under any scenario — there’s really no way to do badly when you have two cities and two ownership groups competing to throw money at you for a team that just a year ago was considered the least-valuable in the league — whatever they do, somebody’s going to be outraged and maybe even litigious. Pushing back the vote again would be one way of dealing with this, but it’s not like the decision is going to get any easier in another two weeks. Maybe they could try a simpler decision-making process?

Hansen ups Kings bid by $48m, wristwatch, keys to car

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The Sacramento Kings bidding war escalated again on Friday, when would-be Seattle owner Chris Hansen increased his bid for 65% of the team from $358 to $406 million, making for a total valuation of the franchise at $625 million. Oh, and he also matched the would-be Sacramento owners group’s offer to forgo any revenue sharing dollars that the team might be eligible for. [UPDATE: According to ESPN "sources," he also also offered to pay a $115 million relocation fee to the NBA if his bid is accepted.]

For those scoring at home, Vivek Ranadive’s Sacramento bid is for $341 million, which would put the total value of the team at $525 million. And for those who have trouble with math, that puts Hansen’s valuation of the team at $100 million more than Ranadive’s — not to mention more than double what Forbes estimated this team was worth just a little over a year ago, before this bidding war started.

I’ve covered elsewhere why I don’t think Hansen stands much chance of making his money back on this deal (especially when you factor in his likely arena costs), but either he knows something I don’t know, or this is just turning into one of those eBay auctions where everybody tries to one-up each other in the closing seconds. But unlike eBay, there could be no winner here: First the NBA has to decide on whether to approve Hansen’s purchase offer, then the Maloofs — remember the Maloofs? — have to decide whether, if Hansen is rejected, they’ll accept $65 million less from Ranadive’s group for their majority share of the team, or whether if Hansen’s bid is rejected they’ll just say “Screw it, we’ll keep the team for now,” as they’ve apparently vowed to do.

And if that happens, then … beats me. There’s been all sorts of speculation about lawsuits, but Hansen would be firebombing his relationship with the NBA if he did so, on the off chance that he could win an argument that his right to buy the Maloofs’ team trumps the NBA’s right to approve its franchise owners. And if the Maloofs were to sue the NBA for refusing to approve their high bidder, they’d be in for potentially even rougher sledding, since NBA teams all agree not to sue the league, and the Maloofs knew the rules about conditions for selling your team when they went into this business.

What Hansen and the Maloofs alike are clearly hoping at this point is that the NBA will decide that the easiest way out is to just let Hansen buy the damn team, and then figure out later whether it’ll stay in Sacramento or move to Seattle, based on how Sacramento’s arena plans work out. It’s not clear whether the NBA is ready to go that route, but if money talks, Hansen just gave the other 29 NBA owners 48 million more reasons to listen.

NBA to Sacramento Kings buyers: Show us your Benjamins

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The NBA owners are set to vote in Dallas next Wednesday on what the heck to do with the Sacramento Kings, and if you’ve been following closely, you’ll know that it’s actually two votes: One on whether to approve the team’s relocation to Seattle, and one on whether to approve the Maloof brothers’ sale of the team to Seattle-area buyers Chris Hansen and Steve Ballmer. And while the league’s relocation committee voted unanimously last week to recommend rejecting the move to Seattle, its finance committee still hasn’t weighed in with a recommendation on the actual sale.

And even after the city of Sacramento came up with $334 million worth of cash and other goodies toward an arena, and the would-be Sacramento buyers agreed to give up any future revenue-sharing money, that doesn’t mean the NBA is going to stop leaning on Vivek Ranadive and his Sacramento partners to sweeten their offer:

With an NBA vote on the future of the Sacramento Kings just a week away, a source says the league is encouraging a Sacramento business group to put 100 percent of its $341 million team purchase offer into an escrow account in hopes of persuading the Maloof family, team owners, to sign a deal with the local group.

A league source familiar with the situation said NBA officials are suggesting the private investment group led by Silicon Valley entrepreneur Vivek Ranadive make the move to prove it has the wherewithal to sign what has been described as a back-up offer to purchase the team.

What appears to be going on here, if the Sacramento Bee’s unnamed sources can be believed and I’m reading between the lines properly, is that the NBA really really wants the Maloofs to withdraw their offer to sell the team to Hansen and Ballmer, instead sell to Ranadive et al., thus absolving the league from having to pick one buyer over the other. And the best way to make the Maloofs happy, apparently, is to present them with the purchase price in the form of briefcases full of cash.

If Ranadive’s group balks at putting the full amount in escrow, then things get interesting. Do the Maloofs threaten to make things ugly for the NBA if their sale is rejected? Do Hansen and Ballmer? Does the NBA tell the Seattle group, “Fine, go ahead and buy the team, but we’re not going to let you move it?”, thus setting up Sonicsgate: California? Does the league just put off voting on the sale — because hey, can’t do anything while the finance committee is still thinking about it, right? — until after next week, while voting on the relocation request? Are you getting yet why the NBA is hoping the Ranadive group will just cut a deal with the Maloofs and save them all this agita?

Further complicating matters: The relocation vote is a straight majority, while a sale requires a three-quarters supermajority for approval. Which seems like it likely won’t be an issue, given that the unanimous relocation committee vote probably indicates that commissioner David Stern is insisting on reaching league consensus before any official votes are taken. But it does raise at least the possibility of even more craziness before this whole long saga draws to a close.

New Kings owners promised to forgo revenue sharing to keep team in Sacramento

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The proposed deal to keep the Kings in Sacramento by building them a new arena already looked pretty bad for local residents, who’d be stuck paying off $258 million in arena costs through largely uncertain means, while also giving up maybe another $76 million in free billboards and parking spaces. But now it’s clear that in order to wrest the team back from Seattle, the prospective Sacramento owners have managed to screw over themselves as well:

In a move that surely strengthens their bid for the Kings, the investors trying to keep the team in Sacramento told the NBA they’d stop taking revenue-sharing dollars earmarked for the league’s struggling franchises.

By making the promise, the ownership group led by Vivek Ranadive would forfeit $15 million or more in annual assistance from the NBA’s wealthier clubs. Ranadive’s pledge, to take effect once the team moves into its proposed new arena, bolsters his argument that the Kings can prosper in Sacramento.

This was originally reported by Sports Business Journal, which is paywalled, and the Sacramento Bee article is all “Yay, this means our bid is even harder for the NBA to pass up!” so many questions remain unanswered, like:

  • How likely is it that the Kings would be getting revenue sharing checks in a new arena? The Kings get a reported $18 million a year now, but that would presumably go down once revenues from a new arena are factored in. Unless the new costs from the owners’ private arena debt would offset that — the revenue sharing rules are, as these rules tend to be, insanely complicated, so it’s hard to say without seeing the Kings’ actual projected revenue numbers, and probably the numbers for the rest of the league as well.
  • Are the new Sacramento owners agreeing to give up all revenue sharing for all time, or just sharing under this plan? The current CBA runs through 2021, at which point the revenue sharing formula will likely be revisited, because it always is. Would the Kings be eligible for Revenue Sharing 2.0 money, if it existed?
  • Will this hurt the Kings’ payroll, or just the owners’ bank balances? There’s a reasonable body of opinion that says that revenue sharing doesn’t do much to encourage small-market teams to spend big on players, especially considering the NBA’s salary cap structure. Which, of course, is something we’ve certainly seen in other leagues.

It’s probably not a huge concession: Even if you figure the Kings would be potentially eligible for, let’s say, half what they’ve been getting while drawing flies at Sleep Train Arena, $9 million a year isn’t all that much in the grand scheme of NBA revenues. You do start to wonder, though, why Vivek Ranadive and his pals are agreeing to match the crazy price the Seattle group was offering for the Sonics, plus make this concession as well. Just because they’d be getting $300 million or so in arena subsidies doesn’t necessarily make this a good deal for them — unless there are additional subsidies hidden in the as-yet-unrevealed arena lease, it’s entirely possible that this could turn out a lose-lose for all concerned. Except for the NBA, because they never lose.

Hansen mulls buying Kings anyway, keeping them in Sacramento — for now

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Just when you thought the Sacramento Kings saga couldn’t get any more wacky, yesterday Reuters issued an anonymously sourced report that, if true, indicates that jilted buyer Chris Hansen may be about to open a whole new can of crazy-ass:

The idea, this source said, would be for Hansen to persuade NBA owners to support his efforts to buy the team, even if they do not immediately allow him to move it.

Under the NBA’s rules, a decision to relocate a team is separate from a decision to sell a team. So under this scenario, the league could support its committee’s recommendation against moving the Kings to Seattle, while still supporting the Hansen group’s efforts to purchase it.

The league could require Hansen to work in good faith with the city of Sacramento to try to keep the team there, setting a deadline for the construction of a new arena and working to keep attendance high at the games.

But if the arena wasn’t built according to the schedule, or if attendance slipped at the games, Hansen could apply again for permission to move the team – and it could be more likely to be granted, this source said.

This gambit should be familiar to Seattle basketball fans, as it’s essentially the Clay Bennett Maneuver: Buy a team, promise a “good faith” effort to keep it in town, then when arena negotiations stall, hightail it out of town to where you really wanted to be in the first place.

USC sports business professor David Carter tells Reuters that this could be a graceful way for the NBA to avoid the public uproar over moving a team, while still getting into the Seattle market once the Sacramento arena deal hits a snag. Which sort of makes sense — except that when the entire plan is spelled out in the newspaper before it’s even started, then you end up facing public uproar over calculatingly playing a city that you don’t intend to stay in just in order to duck a public uproar. Kingsgate, anyone?

Also, Hansen would be running the risk that Sacramento would call his bluff and actually build an arena, at which point he’d be stuck with a team in a city he doesn’t want to own one in. (Though he works in San Francisco, so it’s not like it’s that far a commute.) I suppose at that point he could always sell the team and ask his new NBA buddies for a different one that he could put in Seattle. Because that’s how it works in the sports biz.