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March 30, 2012

NBA to ante up first Kings arena payment; after that, who knows?

More on yesterday's surprise monkey wrench thrown by the owners of the Sacramento Kings into their proposed $391 million arena deal: Apparently the immediate crisis has been averted by a promise from NBA commissioner David Stern to pay the initial $200,000 in arena prep costs that the Maloof brothers were balking at coughing up for.

That's only the immediate crisis, however, as there's another $3 million that the Maloofs promised to pay when they signed a term sheet with the city at the end of February, but which they now say the team "should not be responsible for," according to team spokesman Eric Rose. "That has been the position of the Kings from the start."

If so, they might have wanted to mention it before, you know, signing an agreement to pay it. Sacramento Mayor Kevin Johnson was fairly cranky about the whole thing yesterday, issuing a statement saying that "we all agreed to a deal in Orlando, including the Maloof family, who looked an entire room in the eye and promised their commitment to Sacramento. In light of the Maloofs' promise, we fully expect all parties to live up to their commitments."

As for what on earth prompted the Maloofs to back away now, that's anyone's guess: Getting cold feet after smelling Anaheim TV riches in the wake of the Dodgers' sale? Worrying that someone will notice that the city's funding plan is a house of cards, and trying to head off any demands for more team money at the pass? Looking for a quick out if an arena can't be built by 2015 as planned? All reasonable speculation, and until someone figures out how to connect one of these to a Maloof, probably the best we're going to do for now.

COMMENTS

here they go again, as charlie finley said "contracts (agreements) aren't worth the paper they're written on (same for promises)"...

Posted by Paul W on March 30, 2012 01:02 PM

here they go again, as charlie finley said "contracts (agreements) aren't worth the paper they're written on (same for promises)"...

Posted by Paul W on March 30, 2012 01:02 PM

What I want to know, Neil, is that in past arena/stadium deals, how often have the governments involved thrown in over $6M for any expense before there's an actual contract? I find that ludicrous.

It seems to me there is a way to have a contract that can legally be terminated. Right now, the Maloofs are right -- there is no contract. In that light, it just seems ridiculous that the next item before the Council concerns a $6M contribution to an arena expense. Oh, and it may actually need to be over $9M, if the Maloofs hold this position permanently.

It's less than 1% of the project's total cost. They don't have the money? That's not a good sign.

And I don't like AEG much at all, but at what point do they look at the Maloofs and decide they don't want any part of them? I get the feeling that's next.

Posted by MikeM on March 30, 2012 01:30 PM

Here's a thought, how long before Kevin Johnson seizes the Kings and the city of Sacramento becomes the owner of the team? That can legally happen since the Maloofs agreed to a deal that was approved by the city council.

Heck the people of Santa Clara can make the same argument because the original referendum result is voided because the terms of that referendum have been changed. They don't need another vote.

Posted by Jessy S. on March 30, 2012 05:43 PM

Would anyone be surprised if the present 'disagreement' is nothing more than the Maloofs having an ongoing/worsening case of the shorts?

These guys look more and more like pretenders every day. The NBA really should be looking at ways to terminate their franchise agreement, IMO. They are an embarrassment to the league. Here I thought only the NHL had owners of this quality... and most of those are in jail.

All the statements made here about "house of cards" financing (from the city) for the project are legitimate concerns. But seriously, if your private sector partner can't come up with $200k... why would you take them seriously???

NEXT!

Posted by John Bladen on March 30, 2012 10:33 PM

The City has decided to use the $200,000 the NBA has forwarded to the Maloofs to fund the first two weeks of the pre-development work, and the Maloofs are insisting they never agreed to pay any part of predevelopment costs. So it sounds like April 13 is the drop-dead date.

I wonder how sincere the Maloofs ever were about staying.

www.sacbee.com/2012/03/31/4380419/amid-impasse-sacramento-puts-off.html

Posted by MikeM on March 31, 2012 04:47 PM

If the arena proponents are now saying that the terms sheet was "non-binding" then what was the Mayor doing leading the celebration of victory with Kings fans on March 6th saying "We did it!!".

No, I guess you didn't Mr. Mayor.

My take is that the Maloofs are broke, have little faith this plan will work but have been told by the NBA to go with the program. That worked up until checks have to be written. As George Maloof said regarding their $73.25M "investment"..."we can finance that". Well it appears they can't. $3.25M of that "investment" was to go towards the pre-development costs. There is probably no lender out there ready to provide that financing to a bankrupt family that is utilizing very speculative revenue sources as a source of repayment. They must have known this would be the case, so why did they "look everyone in the eye" in Orlando and agree to the terms sheet? Something stinks in Maloofville.

Now after the city has committed $1.5M to this project for consultants and the RFP process, Councilman Cohn states that the city shouldn't authorize another dime until this dispute is resolved. Perhaps the city has identified where they will get the $6.5M as their contribution to the pre-development costs but it would be extremely foolish to commit these funds when there is no signed agreement with anyone in this taxpayer ripoff. Maybe the end game is that the NBA at their April 12-13 meeting will somehow say enough is enough with the Maloofs and force them to sell, but not sure that is even possible.

One other note. The lynchpin for arena funding is the raising of $230M from parking monetization. Should they adopt the "Parking Authority" model and sell bonds the actual bond amount will be much higher when you consider interest reserve, taking care of the lost parking revenue during the construction period and transaction costs and annual debt service probably approaching $25M with current net annual parking revenues of $10M. That presents a problem and potential risk to the general fund.

Bottom line is that this plan needs to implode sooner rather than later and it looks like that is where we are headed with this latest development.

Posted by Cal on March 31, 2012 05:14 PM

This "agreement" isn't exactly starting out on the right foot. I would be more than a little concerned if I was on the city council in sac.

Posted by JB on March 31, 2012 06:12 PM

I was a bit stunned to read in the Washington Post today that the only two teams that trailed the Nats in baseball TV ratings were the Dodgers and the Angels.

Granted, the Dodgers were imploding and the Angels are the Angels (often dull, but attracting 2-3 million/year to the park), but it really speaks of the amount of money that can be stealthily raised through what amounts to a tax on cable TV viewers--the local "sports" channel, often purchased whether you want it or not.

Washington/Baltimore's has scarcely anything on of note other than dreary baseball games, and that channel guarantees millions to the Orioles and Nationals.

If I'm the Maloofs and I own a mediocre basketball team, I'd probably go for the guaranteed cash in a large metro area too.

Posted by GDub on April 1, 2012 07:48 PM

I just returned from the STOP fundraiser. It consisted of a group of very concerned citizens who believe that Sacramento is entering a financial boondoggle with team owners that won't likely to be able to pay their share. This same group expressed shock and dismay towards city council members that they've known for years as members of the community- in going along with the arena scam.

Councilwoman Sandy Sheedy attended briefly and she said get's asked a lot as to why other City Council members are so quick to go along with this. She said there is a fear among councilmembers of being the one that get's blamed for this deal going nowhere or being the one that would get blamed for the loss of the Kings. And councilmembers want to give this deal chance. Councilwoman Sheedy believes that other Councilmembers think this deal will fall through anyway and that they don't need to step in and try to stop it. But the Councilwoman is worried that with each vote by the City Council approving various steps of the arena deal, the arena becomes harder to stop.

But back to STOP. The fundraiser attracted environmentalists, the Tea Party, Sacramento County Taxpayers Association, union members, along with self-described moderates- a broad coalition. It's a broad coalition that will reach out to talk radio, neighborhood associations, and others in the community that would like a vote on this issue in November. There's a lot of work that needs to be done but those of that were there are eager and we will find others that want to get involved.

stoparenasubsidy.com/stoparenasubsidy.com/main.html

Posted by jjo916 on April 1, 2012 09:06 PM

Cal and Jjo916, Thank you for your comments. I won't be redundant; I just think I'm on the same page as you two.

What's more, Jay said one thing in election bid regarding arena funding, and has done something else entirely now that he's in the Council. This bothers me, because I know people who voted for him because of his stance on arena funding during the election. He changed his mind, and that's a good enough reason to demand a public vote. It's not representative democracy when there's this large an about-face, so in light of that, there must be an election. It's just that simple.

Posted by MikeM on April 2, 2012 04:19 AM

Game on! Let the people vote!

www.sacbee.com/2012/04/02/4385385/city-attorney-approves-initiative.html?utm_source=dlvr.it&utm_medium=twitter#mi_rss=Latest%20News

Posted by jjo916 on April 2, 2012 04:23 PM

A reporter from Seattle tweeted this:

twitter.com/#!/ChrisDaniels5/status/186915780733054976

Posted by jjo916 on April 2, 2012 06:52 PM

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