Okay, bankrupt Detroit paying for a hockey arena is nuts, but what can we do about it?

Hey, it must be “Let’s all boggle at bankrupt Detroit building an arena for the Red Wings” week: Yesterday’s Lansing State Journal article is followed up by an in-depth piece today at NextCity (you can read the whole thing for $1.99, or read an excerpt at Deadspin) on how “the Ilitch family—with its estimated $3.2 billion net worth—will get a new stadium, slated to open for the 2016-2017 season, built off the backs of taxpayers.” In a city, mind you, where police and firefighters may have their pensions cut to 16 cents on the dollar*.

All of this should be old news to readers of this site, though NextCity’s Bill Bradley does provide a nice precis. The more interesting bit (aside from the several quotes from yours truly, which is mostly going to be interesting if you’re related to me) comes in the section omitted from the Deadspin excerpt, where Bradley asks sports subsidy critics like former U.S. Rep. Dennis Kucinich (who held hearings on stadium subsidies back in 2007) and Seattle city councilmember Nick Licata (who testified at those hearings, as did I, and who was instrumental in passing Seattle’s Initiative 91 that requires that the city get a positive return on any sports venue investment) what the heck they think can be done about it. Kucinich first:

“Any time you’re talking about massive investment of public resources, it ought to be treated in the same way that a venture capitalist would treat it,” Kucinich said. “There’s no business in the world — no bank, no venture capital fund — that would give money to an entity without asking for anything in return. Negotiate a position in the same way that a venture capitalist would. You become a partner, not simply someone who is playing Santa Claus with taxpayer money.”

That’s certainly what Licata and the I-91 forces did, even if the math for “return on investment” turned out to be trickier than they had anticipated. And, it’s worth noting, even though the Sonics subsequently moved to Oklahoma City, Licata says he didn’t suffer any significant retribution at the ballot box from spurned basketball fans:

When he ran for reelection in 2009, the year after the Sonics had left for the heartland, his opponent, Jessie Israel, came out “aggressively” on the stadium issue. “[Israel] was younger than me, well connected, raised more money than I did and beat me up on that issue,” Licata said. “And I still won by a 14-point advantage. The folks who are strong advocates for professional sports teams are passionate and that passion translates into a lot of heat, but it doesn’t necessarily translate into a lot of votes.”

Still, the number of elected officials pushing a standard of “the public should get back something equal to what it puts in” remain few and far between, for reasons that I’ve covered elsewhere. (TL; DR version: Lobbyists!!!) And to change that is likely to require more organizing from both the local Licatas of the world and the Congressional Kuciniches — okay, you know what, hell with, I’m just going to quote myself:

Ending the scam that is stadium welfare very well may have to start with local leaders — like Licata in Seattle and [Frank] Rashid in Detroit — before there’s a better chance of real change in Washington.

“I think it has to be both at once,” deMause said. “Congress isn’t going to act until there’s a major public groundswell, which needs to happen locally because organizing takes place around this stuff on a local level. At the same time, local officials are always going to be at the mercy of teams threatening to move — even if only to the county across town with the elected officials dumb enough to fall for their scam — until there’s some federal restriction on companies playing off localities against each other.”

Things aren’t exactly going great on either of those fronts, but hey, there’s a first time for everything. Drops of water turn a mill.

*UPDATE: Or 94 cents on the dollar, or somewhere in between. See comments.

Seattle thinking NHL after NBA commish says no expansion team coming soon

My apologies for not updating you the weekend before last when new NBA commissioner Adam Silver declared that he’s in no hurry to issue new expansion franchises:

“My job is to ensure that 30 teams are healthy and competitive and so that’s what my priority is as opposed to expansion,” Silver said.

On the one hand, of course he’s going to say this — so long as there are team owners out there trying to get new arena deals by hinting at moving to vacant cities (hey there, Milwaukee Bucks owner Herb Kohl!), Silver would be foolish to start plugging those holes with expansion teams a minute before he has to. On the other hand, this has Seattle NBA fans who were hoping for a revived Sonics wailing and gnashing their teeth that no quick resolution is now likely.

Meanwhile, for folks who just want some kind of new sports arena built in Seattle, they don’t care what sport it’s for — beats me who these people are, but apparently they exist — focus has turned to attracting an NHL team, with several potential owners rumored to be interested, including former Microsoft CEO Steve Ballmer. The NHL has been more open to adding a Seattle expansion team, and there have even been rumors of an expansion announcement coming in the next few weeks, but then you run into the problem that Chris Hansen’s arena plan is contingent on getting an NBA team. Presumably someone (Ballmer?) could simply copy Hansen’s plans, crossing out “basketball” and writing in “hockey,” but given that Hansen’s numbers didn’t seem too likely of turning a profit anyway, and his whole arena plan only made sense as a way of fulfilling his personal ambition of owning a new Sonics franchise, it’s tough to see why anyone would want to do this.

But hey, why worry ourselves over where to find half a billion dollars for an arena when there’s the nickname of this phantom NHL franchise to argue over? Go, Kraken!

No, Hansen’s Seattle arena wouldn’t really cost Seattle $731m

Cleveland Stockmeyer, one of the Seattle attorneys who unsuccessfully sued the city to block Chris Hansen’s proposed arena deal, is back with a report on what he says Seattle’s losses would be from the project. And it’s a whopping big number:

In the newly-released report, a group called Sonics Without Subsidies claims Seattle is giving away more than $731 million in subsidies for Hansen to build his SoDo arena — and they’re asking city leaders to change the deal.

$731 million is, needless to say, unexpectedly high for a project that will only cost $490 million to build total, that will only involve $200 million in public spending, and that after tax revenues and rent payments are shuffled back in forth, I’ve estimated previously would leave taxpayers with at worst a $21 million loss. So where does Stockmeyer’s hired economist come up with $731 million?

The answer, it appears, is it depends on what you mean by “loss.” Seattle’s Initiative 91, passed back in 2006 by city voters, requires that the city turn a 2.7% annual profit on any investment it makes in a pro sports facility. Under Hansen’s deal, the city would take out $200 million in bonds, which would be repaid entirely by Hansen, so there would be no cost to the city. But — here’s the catch — if you count the $200 million as a city expense, then city is getting stiffed its 2.7% annual return on investment. If you do the same math for the missing annual return on tax credits and property tax breaks Hansen would be receiving, then subtract the $92 million in land value that the city would be getting back in the deal (Hansen would buy the arena land and give it to the city), voila! $731 million!

In other words, notwithstanding the scary headlines, the “gross shortfall” that Stockmeyer’s report refers to isn’t actually money that Seattle would be giving the Hansen; it’s money that Hansen would have to give Seattle in order for the city to turn the kind of profit that I-91 required, if you count bond sales that the city doesn’t have to pay off as an “investment.”

None of this should be news to the Seattle media, since it’s exactly what Stockmeyer in his lawsuit earlier this year, though he didn’t put a dollar figure on it then. And the shoddiness of I-91’s “return on investment” formula has been established for even longer; as I wrote in July of 2012, when it was Hansen who was using bizarro math to claim that the city would rake in a ton of money from the deal:

The problem here is that I-91 was crappily written, assuming that the city would put up cash up front, and not considering that it might have to borrow money and then pay back both itself and bondholders. As a result, you have Hansen arguing that a deal in which every penny of taxes and rent payments supplied by the arena — even by his own numbers — would get poured into paying off annual bond payments is a net positive return for the city.

That was a dumb argument, and Hansen himself later backed away from it. Stockmeyer, though, seems to be deliberately confusing people about what his economic study means. To repeat: Hansen would be paying off Seattle’s bonds, and (mostly) repaying his tax breaks, but he wouldn’t pay it back and then give Seattle extra money to turn a profit on the deal as well. Whether you think this is a good deal is open to interpretation — Stockmeyer clearly doesn’t think so, two city councilmembers voted against it, and I’m on the record as being pretty meh about it, though “meh” is still better than most arena deals from where I sit. But it’s not a $731 million “subsidy” or “tax break,” no way, no how.

Bettman reportedly “pushing” for NHL expansion team for Seattle

Chris Hansen’s public reputation may be in the toilet after his Sacramento secret-referendum-funding controversy, but approvals for his Seattle arena plan are proceeding apace, with two more review meetings planned this week. And now Chris Daniels of KING-5 TV is reporting that the NHL could be interested in placing an expansion team in Seattle:

Sources with intimate knowledge of the situation, believe the NHL is now watching the status of the project, and gauging corporate and fan interest in a potential expansion franchise.  Hansen has been seeking a partner who could be a tenant in a new building.  Sources say NHL Commissioner Gary Bettman has been quietly pushing owners to award a franchise to Seattle, perhaps as early as next year.  The NHL has denied that any talks have taken place, and sources suggest nothing has been finalized.

That would be more than a little weird, since 1) Hansen’s deal to build an arena doesn’t kick in unless he gets an NBA team, which doesn’t appear close to happening anytime soon, 2) an NHL team would have to play in Key Arena until a new arena is built, 3) Key, though renovated in the ’90s, has already been deemed unacceptable by the NBA, and 4) is one of those buildings where hockey would have to be shoehorned in, with only 9,000 unobstructed-view seats in hockey configuration. That’s a potentially long time to be stuck in a tiny-capacity arena, even if it did get upgrades to host an NHL team.

Or if you’d rather not worry your little minds over this, just go look at a slideshow of new renderings of what Hansen’s arena might look like, if and when it ever gets built. Giant projections of Gary Payton! Happy computer-rendered people carrying pennants! Because that’s totally what people do at basketball games!

Seattle arena lawsuit dismissed, as Hansen agrees to pay fine for Sacramento referendum funding

Yesterday was good news, bad news for would-be Seattle arena builder Chris Hansen: The environmental lawsuit against his would-be Seattle arena was unanimously tossed out of court, and then he agreed to pay a $50,000 fine for failing to report $80,000 in campaign contributions to the group trying to hold a referendum on a Sacramento Kings arena. Campaign contributions, by the way, that Hansen now insists were made without his knowledge or consent:

I agreed that a portion of the funds paid to Loeb could, in the future, be used for political purposes if a broad-based political committee, consisting of other donors and independent of STOP, were established to oppose the effort to build an arena in Sacramento. It was never my desire or intent to either directly fund signature gathering or to be the primary financial sponsor of the opposition’s efforts…

Without my knowledge or consent, Loeb & Loeb advanced $80,000 to GoCo consulting to collect signatures to qualify an initiative that would require a public vote on a new arena. At this time, a broad-based political committee had not yet been established, and I neither directed nor authorized Loeb & Loeb to make this expenditure on my behalf.

So Hansen did give money to his lawyers to give to the referendum campaign, he just didn’t tell them to hand it over yet. Hansen also claims he didn’t know about the donation himself until the public uproar began over where the money had come from, and he promptly stepped up to report it afterwards. And he intends to “take steps to prevent any signatures collected by GoCo from being submitted to the opposition.”

How much of this is true, there’s no way of knowing — though it’s worth noting that his initial defense, that he got “caught up in the heat of battle,” doesn’t completely jibe with this new explanation. But clearly Hansen is scrambling to do damage control, either to make up for his lawyers’ screwup, his own, or both. Now he just has to hope that David Stern is listening.

Chris Hansen would’ve gotten away with it too, if it wasn’t for those meddling kids

After days of speculation over who the mystery funder was who’d given tens of thousands of dollars to the campaign to hold a public vote on the Sacramento Kings arena deal — the conduit for the donation was the law firm of the Maloof brothers, ex-owners of the Kings — late on Friday the mask was pulled off to reveal … would-be Seattle NBA owner Chris Hansen?!? Ruh?

Amid a lawsuit and a state investigation, Hansen and an Orange County political action committee filed documents revealing Hansen contributed $100,000 to the petition drive on June 21 – a month after the NBA board of governors vetoed his plan to buy the Kings and move them to Seattle.

Hansen apologized for the donation on Friday and said he wouldn’t give the anti-arena effort any more money. But the revelation seemed likely to damage the petition drive – and Hansen’s own efforts to bring the NBA back to Seattle.

Or as Deadspin put it more succinctly:

So it turns out that the guy who tried to buy the Kings and move them to Seattle is kind of a giant scumbag. Huh, how about that.

Hansen immediately said that he regretted the donation, explaining that he got “caught up in the heat of battle.” (Forgetting to file his campaign finance paperwork until threatened with a lawsuit was, no doubt, part of the fog of war.) But that’s not likely to help mend bridges with the NBA, which had previously said nice things about Hansen and hinted at him eventually getting an expansion team, but which is now almost certainly going to take him off their Christmas card list now that he’s funding opponents to their hard-won $334 million arena-subsidy deal. And some Seattle columnists (okay, one Seattle columnist, but one who’d previously praised Hansen’s arena deal) are saying that that city’s council should take a hard look at whether it wants to be partners on an arena plan with a guy who resorts to secret campaign donations.

It’s a huge, huge shooting-yourself-in-the-foot moment for Hansen. And it makes me wonder whether it’s possible that there’s another explanation for how Hansen expected to spend $400 million on a new arena plus $521 million for majority ownership of the team plus a league relocation fee: Maybe the guy’s just nuts. Or, more specifically, maybe in the “heat of battle” he loses track of sensible financial decisions the same way he loses track of campaign finance laws, and can’t resist throwing in a few more million for the chance of walking away with the prize.

Yes, Hansen is a successful investment titan, but it’s not like those folks are immune to doing dumb things based on not much more than hoping everything will turn out okay. That his Seattle NBA plan came down to similar wishcasting is a possibility, anyway, not that at this point we’re likely to find out — at least, not unless he sends David Stern one hell of a fruitcake.

Last-minute Coyotes subsidy vote gets last-minute Seattle buyer move threat

The Glendale city council is set to meet tonight to discuss the proposed $15 million a year Phoenix Coyotes lease subsidy, and just in the nick of time, here comes a move threat to ensure that the council members keep their heads focused in the right place, by NHL standards. Chris Daniels of KING 5 TV reports that two “New York based investors,” Ray Bartoszek and Anthony Lanza, met with Seattle officials two weeks ago to discuss buying the Coyotes and moving them to Seattle:

McGinn said they were serious enough, that it led to a conversation between him and NHL Commissioner Bettman.

“I let him know of the situation here, and that we were supportive of bringing the NHL to Seattle,” McGinn said. “We have Key Arena, so we talked about the potential of them being in Key Arena, while we continue to work on a new arena plan.”

NHL Deputy Commissioner Bill Daly would not characterize the discussions between McGinn and Bettman, and told KING5 the conversation was “like any number of conversations the Commissioner has all the time with a variety of people.”

So who exactly are these guys? Bartoszek is a billionaire former oil trader who tried and failed to buy the New York Mets a couple of years ago, and ended up with a minority share of the New York Yankees instead. Lanza, according to his official bio, “has varied experience in the security industry, both domestically and internationally, as a project consultant in business development for both 3DRS International, NSM Surveillance, and Spear International,” which sure sounds like a long-winded way of saying “doesn’t actually have a job.” His dad used to be COO of Lockheed Martin, though, which I guess gives him some cred as a Seattle local, if you squint hard enough.

Whether this pair is actually serious about buying the Coyotes and moving them to Seattle, who knows? The team would have to play at Key Arena at least at first, until Ch

ris Hansen’s SoDo arena is completed; and since that can’t begin construction until Seattle has an NBA franchise, something that’s likely at least a couple of years away, you’re talking about at least four or five years of an NHL team playing in an arena that would have to have hockey shoehorned into a basketball setting, leading to seating plans along the lines of what the New York Islanders will be dealing with in Brooklyn. Which, admittedly, might still be preferable to playing before empty houses in Glendale, but it’s still an awfully big gamble for a pair of sports novices — not to mention for the NHL, which might be better off getting a bidding war going between Seattle, Quebec, and maybe some other cities if it decides to finally move the Coyotes out of Arizona.

For now, though, Bettman and Daly can remain noncommittal, leaving the Glendale city council to imagine the moving vans instantly pulling up should they reject the Coyotes’ lease subsidy demands. According to the Phoenix Business Journal, there are three members of the council solidly in favor of giving the Coyotes what they want, and three solidly opposed — leaving the deciding vote in the hands of Glendale Mayor Jerry Weiers, old “Glendale is not your cash register” himself.

The PBJ notes that as a state legislator, Weiers sponsored a short-lived bill to kick back state sales tax revenue to local governments to be used for sports subsidies. That’s certainly the kind of thing that elected officials might consider to be “Coyotes-related revenue streams” — no, not every dollar spent within two miles of an arena is because of the Coyotes, but they can pretend it is — but it’s also solidly in the jurisdiction of the state legislature, not Glendale, so it would require kicking this whole Coyotes mess into the state’s lap. Which I suppose would be one way of Weiers getting out of this pickle: Hey, I came up with a plan to keep the Coyotes, it was up to the stupid state to approve it!

We may get some hints of where all this is headed at the council meeting tonight. I doesn’t look to me like there’ll be any streaming video of the meeting; if I’m wrong about this, I’m sure I’ll be quickly corrected in comments.

NBA to Sacramento: Build an arena, or we could still move the Kings

Vivek Ranadive completed his purchase of the Sacramento Kings on Friday, and the NBA celebrated as only it knows how — by threatening to move the Kings anyway if a new arena isn’t built within the next four years:

Hours after Vivek Ranadive and his partners completed the record-setting purchase of the franchise from the Maloof family, NBA Commissioner David Stern revealed that the Ranadive group must meet “a series of benchmarks” for a new arena – or risk losing the Kings to another city.

If deadlines are blown, Stern told The Sacramento Bee, the NBA has the option of pulling the Kings out of Sacramento and arranging for the team’s sale to new owners.

It’s a bit of a bizarre notion, approving the sale of a team to new owners but reserving the right to unsell it if an arena deal doesn’t go through, but as we’ve been over time and time again, the NBA controls its franchises, and it can pretty much do what it wants with them. (Especially if Ranadive agreed to it in the sale agreement.) You have to hand it to David Stern & Co.: They’ve managed to play this whole Seattle-Sacramento battle for maximum leverage and profit, with the likelihood now that they’ll get two new arenas plus two sky-high franchise sales out of the bargain. (There’s already rumors of Seattle getting an expansion franchise by 2015, along with … Omaha?) It’s almost like they’re professionals at this!
What are the chances of the arena deal falling apart? Well, the campaign for a voter referendum on the financing plan has kicked into gear, though it faces an uphill battle getting the 33,000 needed signatures, and then of course Sacramento voters would need to vote to rescind the arena deal, too. While knowing that the NBA would likely yank their team if they do so.
And anyway, an arena will be great for Sacramento, because tech jobs! Because Ranadive runs a tech company, see, and his partner Paul Jacobs has promised to “bring as much technology as we can”! And that turns into jobs because, because… well, even the Sacramento Bee says that “what the group’s tech orientation means for Sacramento is uncertain,” but c’mon, tech jobs!

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

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

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…