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April 12, 2012
Kings owners appeal to NBA on arena deal; Sacramento businesses appeal to NBA on Kings owners
The owners of the Sacramento Kings are meeting with NBA officials right about now to explain why they've backed away from the arena deal they just agreed to back in February. The Maloof brothers' hope, presumably, is that the rest of the league will either come down on their side and demand that somebody else (the city of Sacramento, AEG, statistically probable alien creatures) pay the $3 million in pre-development costs that the Maloofs say they won't pay, or that the NBA itself cough up the dough.
Meanwhile, a group of Sacramento business people is firing off a letter to the NBA demanding that the league find new owners for the Kings, as this lot appears to be broken. (Paraphrasing here.)
As SBNation's Tom Ziller notes, the NBA doesn't really have the leverage to wrest the team away from the Maloofs, since they're still making payroll and all. Yet as Ziller doesn't say outright, the league could do the next best thing: Tell the Maloofs that this is the best deal they're going to get, and if they don't take it, nobody's getting any approvals to move to Anaheim or Seattle or nowhere, see?
The NBA owners' meetings wrap up tomorrow, so it's reasonable to expect some kind of decision by then, though not necessarily reasonable to expect a public statement on said decision. The Sacramento city council meets yet again next Tuesday, though, to decide whether to move ahead with the deal or kill it, so push is going to have to come to shove pretty soon.
Hopefully the NBA does exactly that and essentially paints the Maloofs into a corner. Sacramento has done everything that was asked of it, probably to the surprise of the Maloofs, and now they're trying to reneg on the deal (which the NBA itself helped broker). It's obvious to anyone the Maloofs had no intention of staying in Sacramento (and that they are barely hanging on as owners) and Sacramento called their bluff. Time for them to either pay up or GTFO of the NBA.
It's not just the $3.26M they want to renegotiate. They want to start over on the deal completely.
I really don't think the way you do this is to fire off this particular letter to that particular governing board. I think it's very likely to have the opposite effect of what you think it will. These 25 business leaders didn't sway anyone in their direction with this letter.
Anyway, the Maloofs have responded to this letter:
This isn't ending the way I expected it to... But it is ending. I can see this ending up the same way as the Clippers moving to LA, with a "Forget you, we're moving anyway"-response. That would end with a lawsuit I cannot see the NBA winning.
it's time for a local government to draw a line in the sand and hold the owners of a pro sports franchise to some sort of accountability.
give in on this, who knows what's next?
Just to clarify a few things. The Maloofs, the city, AEG and the NBA entered into a "termsheet and handshake" agreement. These are in no way binding and imply that the parties will go back, have their operations, logistics, finance, legal, tax, etc., people review the terms and see if they work. Thousands of these are signed without a deal ever occurring.
Unfortunately, Mayor Johnson chose to make this into a political victory party, in spite of knowing that the termsheet was just a PR move meant to get something done before the established deadline. Not surprisingly, when the real numbers started being discussed, the Maloofs found that the deal called on them to make more payments than they wished for and that the method of city financing was questionably legal and for sure subject to a voters petition to block it.
In short: there still isn't enough money in Sacramento to keep a basketball team. Someone has to lose money.
plidge, I think you nailed it.
The Council was foolish to approve something that was not yet a contract. Very basic error, I'm surprised that someone like a Yale lawyer (yes, our Council has one of those) would go along with it.
One thing I've noticed is there are no remedies specified in the term sheets if the arena isn't completed by Sept 2015. That by itself should have put the brakes on everything. Just that one notion could itself take weeks to negotiate.
Here's the letter:
It was the last day before the deadline, so I'm not surprised that they announced something where not all the i's were dotted.
I *am* surprised that the first thing the Maloofs decided to balk at was one thing that was actually spelled out in the term sheet: the $3 million in predevelopment costs. It's like sitting down to negotiate a prenuptial agreement and saying, "Whoa, whoa, who said anything about getting *married*?"
I think the three best guesses are 1) the Maloofs were hoping all along that the Sacramento deal would fall of its own weight and they could move; 2) the Maloofs got cold feet when they realized that the parking revenues weren't worth the paper they were penciled in on; or 3) the Maloofs are pushing back now so that can get an upgrade on the March 1 plan. None seems like great strategy, especially in terms of courting public opinion (and NBA favor), but then, these guys haven't shown themselves to be the best strategic minds.
Okay, Neil, we have Kevin Johnson, the rest of the Council, the Maloofs, Think Big, the NBA, Ron Burkle, and Henry Samueli.
Of these parties, which do you think has shown any kind of strategic thinking?
I'll give you my answer right here: Henry Samueli. The quiet work he's done there has been masterful. The Maloofs have had this very silent partner, getting done what needs to be done. And the BoG was very close to approving the deal last year.
The BoG has to have noticed what's going on in Anaheim.
Now the Maloofs have this "backstab" to show the BoG today. Which way do you think that swayed the fence-sitters? The Maloofs had to laugh pretty hard when they saw that letter, don't you think?
In general, I don't think members of the BoG like to be told what they can and cannot do with their personal property. They're all putting themselves in the shoes of the Maloofs today.
A bird in hand is worth two in the bush. That's simply axiomatic.
What is the status of needing League Approval to move a franchise in the wake of Al Davis' anti-trust suit against the NFL?
KJ is now flying to NYC in an attempt to get this deal back.
Neil, I hope you're physically at these meetings. If not, what are we paying you for?
Great summary right here:
Everyone has warts. Everyone. STOP; KJ; The Maloofs; The NBA; the BoG; Samueli; EVERYONE.
Highly entertaining read.
Losers. Hope this deal is finished. Thank god. Sell the team you goofs.
Most sports leagues (including the NBA) have a significant amount of 'flowery' language in their franchise agreements for just this kind of eventuality (an owner who brings the league into significant disrepute and who appears either unwilling or unable to effectively fund his club). The Maloofs may not have missed payroll or any of the so-called "major" transgressions that would entitle the NBA to revoke (expropriate, really) their franchise.
However, if the league believes the Maloofs are reneging on an agreement that, while not binding, was negotiated in good faith (and at least partially with NBA funds...), they certainly can exert pressure in a number of different ways.
If they can't get them to accept a reasonable deal, they are fully entitled to force the (cashless) Maloofs to post a hefty bond to cover "relocation option evaluation" before even considering a move, and require cash upfront payment for the difference in market values before the Kings could move (similar to Raiders II).
In addition, if Anaheim is the maloofs preferred destination, they may find the league awards both LA clubs significant territorial indemnification, also payable before the Anaheim Kings play their first game. This might (as Mike says) play into Samueli's hands, as he has that kind of money (the Maloofs, it appears, can't find enough for a chinese takeout these days). But it won't necessarily be cheap for the Broadcom convict (oh, pardon me, he plead no contest and paid a hefty fine, as I recall) to enter the NBA that way.
I wouldn't put the Maloofs in the catbird seat just yet. If the league wants them out, the former casino magnates might just have opened the door for them.
The Sacramento City Council could pump its shotguns and shoot this deal dead in its tracks. But since they seem to be waiting for this deal to drop dead on it's own- ironically, it's still alive. The Maloofs could kill it by wiggling out of the term sheet, AEG could kill it by just walking away, another owner could buy the Kings from the Maloofs and may move them somewhere else, California's environmental laws could kill this thing, no state money for freeway improvements could kill it too. But since one of these deal killers has taken on prominence, it keeps going. Very odd to see a crappy deal get by on its own ineptitude.
Wow, it is truly amazing what's happening now. The Maloofs hired an economist to analyze the deal, and he concluded that this arena deal places both the Kings and Sacramento at risk -- so they're backing out of the deal.
The arena deal is really, truly dead now.
What a long, strange trip. And I don't think it's over yet.
Well the arena deal with them as owners may be at risk, but I don't know if they'll be owners much longer. Remember they owe the league and city 162 million dollars and something tells me they wouldn't be able to pay that back...
This has been one weird morning. Maloofs scheduled a presser and lots of people expected that they'd announce an intention to move. As expected, they trashed the deal for a new arena. But then George Maloof said that after all this time a Power Balance Pavilion renovation is on the table!
Why not, I guess? Expand the concourse, add some skyboxes and turn the ground floor into a club level for VIPs. PBP does have tons of parking, and it seems that there is no limit to what fans will pay to park nowadays (which, I am guessing, is why the Coyotes have sparked interest all of a sudden and is part of the reason why the Dodgers sold for so much).
Either way, I am jut kind of bummed that it looks like I won't get that third Bucks game per season in Southern California.
Ben, you're missing one point: There are so many bridges burning in Sacramento right now that my eyes are burning. You have Think Big, KJ, the Council, AEG, Goldman-Sachs, David Taylor, Turner Construction, ICON, the NBA, the voters, the parking companies who spent money to bid on the parking, environmental consulting firms, Downtown Partnership...
On that list, who will now trust the Maloofs ever again? It's going to be 10 times as difficult to assemble a set of term sheets to reno PBP.
Sorry. The reno idea was just put out there to show the world how sincere they are about staying. That is to say, they are not sincere.
There are now just two alternatives left:
1) New owners willing to outbid Samueli who will keep the team in town (good luck with that), or
2) Samueli (going with the "bird in hand" theory).
That's just the way it is.
Mike, I agree.
Never say never, but it's hard to see anyone in Sacramento agreeing to anything with the Maloofs after this.
It's getting harder by the day (hour?) to believe the NBA hasn't (finally) had enough of these clowns too.
Of course, they could be trying the "McCourt" press... make such arses of themselves that the NBA buys them out at an impressive premium... That worked for Ross Perot once upon a time also. But then, the Kings aren't a legacy franchise like the Dodgers.
Here's the list of items the Maloofs want to change in the term sheets they "agreed" to:
That is a very large list.
It's so large, I won't paste it here. I can boil it down to one sentence: What's left is "build us an arena."
They even want a city tax exemption. Really.
I'd say you're back to square one once David Stern says the deal has collapsed. But that's just one Mike's opinion.
The Arco Arena reno is just a final smokescreen. They'll ask the city to fund a renovation of their privately owned arena. After they burned the city this week the city will of course balk because they'd never get taxpayer approval to HELP the Magoofs now. The Magoofs will use that as a cover to call for a move after the 2012-13 season and the NBA being tired of dealing with them will approve it. Anaheim Royals will begin play in 2013-14. The Maloofs never intended to stay in Sac and are going to make damn sure they don't. Sacramento's only hope at this point is that either the relocation committee next spring denies the move (which I see as doubtful), or that the Maloofs go bankrupt in the next year, which is possible but still not likely.
Really is a sad turn of events for Sacramento Kings fans. The city did everything the NBA asked and the Maloofs still fucked them.
Dan, I just fail to see how they stay around for next season. Read the pdf and see what you think:
It sure looks like 2012 to me.
Be careful on that last slide, though. That's some funny shtuff right there.
Mike, seeing as the move deadline is March 1 and we're far beyond it without any league sanctioned extension they have to stay in Sac for 2012-13. But it'll be a lame duck year. Which frankly is just going to be pathetic.
Dan, I just don't know. The wording on page 4 seems quite unambiguous to me.
Wow! Just wow!
This has to rank among the most farcical of botched arena deals ever. Last month, my money would have been on the deal dying because the parking bids wouldn't have covered the City's commitment.
Mike, pg 4 was referring to if a plan didn't come to fruition before the deadline in March. A plan in this case DID come to fruition and the March 1 deadline passed. Hell Stern was still somewhat supportive of the city's position, this plan failed SOLELY because of the Maloofs. I don't see the NBA rewarding them for torpedoing their own stadium plan by moving them this year. They'll have to suffer through a year in Sac being reviled by every fan they meet (assuming they bother to go to games anymore).
Honestly, I think this deal is 5-feet under right now. Stern has to sit-back and view the whole situation, I think the owners should try to block any move possible that the Maloofs are trying to make.
Unless the Maloofs are trying to relocate to Seattle, I don't see the NBA or owners giving in this year and could possibly be willing to go to court over this.
They have Ron Burkle and his local Sacramento investors who were contacted by AEG to make a deal, they could do this deal but the NBA can't force the Maloofs to sell just for the fuck of it.
In the end though, I don't think after the huge victory the NBA got from Tom Benson buying the Hornets that they would want this black-eye from the Maloof Brothers as being two cheapskates to move from a good market like Sacramento to Anaheim.
Plenty of other teams like the Bucks, Pacers & Hawks who have ownership issues and attendance issues that would have to relocate to a place like San Jose or Anaheim.
I'm back! Did I miss anything?
Aside from agreeing that this is a clusterf*ck of historic proportions, I don't have much to add here. It is interesting that Stern mostly defended the Maloofs in his statements, though whether that's because he's secretly plotting to move the Kings to Seattle or because he's secretly plotting to move the Maloofs to the bottom of the ocean is really tough to say.
Nah, Neil, you didn't miss a thing. I'm not sure why the Maloofs held their first press conference in what appeared to be a Wendy's, though. What was that?
I'm not a fan at all of government subsidies for sports arenas, but even I feel a little sad about this. The worst part is, they have one full season of lame-duck certainty. This is it; they're not coming back. I think this has to be a very rare situation. We will know for over a year that they're leaving. It's certain. I cannot envision the miracle that would turn this around.
They're going to average 2,500 people per game next year, with 90% of those in attendance rooting for the road team. Yup, the Kings will be on an 82 game road trip. You just know they'll win about 14. Weirdest season ever.
Then they'll win the lottery for some other town. Nice kick in the teeth. Thanks.
Strange, sad day. I'm glad it's over. I'm sad it's over, too.
the Magoofs presented EXACTLY what they needed in 2006...basically ALL revenue generated by the Arena that they control...popcorn, peanuts, parking, balloons, beer, hotdogs, hats...
in order to even break even with the Kings...
except Sacramento thought they could swing an arena downtown on the cheap...without voter approval and deny the Magoofs those things needed in 2006..
Break even?! The Kings are making money now despite their old dilapidated arena. They don't need those things to turn a profit, they just wanted those things to turn even more of a profit. And their ultimate goal was to get the city to provide them with all of it.
MikeM is right. There really is a sadness about all of this. I opposed public involvement in this deal from the get-go. What's sad about this is that some good fans living in a region with economic problems worse than those found in much of the US were sold a tiny bit of hope but only to be jerked around by the Maloofs and local politicians at least twice. The NBA should just leave Sacramento at the end of the season- no lame-duck season, refund the season ticket deposits for 2012-13, pay back the $65 million and not let the door hit them on the way out.
But then if the Kings do leave, with the Maloofs as owners or not- the next battle is for that loan to the Kings to get paid back. And if Anaheim tries to get in on the action, expect the state legislature (I'm looking at you, Darrell Steinberg) to get involved. We may have a messy divorce on our hands.
I'll say it again. Just let them go.
According to Arash Markazi's twitter reporting of the presser, Stern's words defended the Maloofs int he most narrow manner possible. According to Mr. Markazi it was clear that Stern felt that it was the Maloofs that are the problem. My uneducated guess is that Stern knows how reluctant owners are to block a fellow owner's move, so he wanted to avoid looking bad by acting like the Maloofs have to find a deal that works in Sacto.
From all the economic analysis I heard of the deal it the economics work out better for the city not to do this deal and it is at best risky for the team. Though it is hard to say what the indirect income or PR of having a team could make up for the direct costs of the deal to the city.
For anyone thinking they might restrict an owner moving, it will be extremely unlikely to try an stop as long as they are not moving within 100 miles of another team, even then they may let it go. In the end the more cities trying to attract teams the more money the owners can get from their own city or other cities. With Sacramento being one of the smaller media markets in the NBA and a couple options in play being double the size approval should be easier than normal. Seattle would be approved pretty quick if they insure the planned arena gets built, Anaheim seems will have some hesitation but there are also other options as well.
I find myself scratching my head about the "PR value" of a team. It hasn't won a championship since 1951, so it isn't giving cities a reputation for sporting excellence. How many people remember that it played in Kansas City or Cincinnati--or more important--that it LEFT those cities?
I think the problem is that people see sports teams as "rich"--which they are in a sense, but they probably pay out most of their cash to performers, administrators, and collective luxury living costs. NBA teams are basically a shiny version of a carnival coming to visit your town, so the idea of them paying for anything becomes somewhat unrealistic.
Best to let them leave, they really won't be missed.
This deal was very risky, but mostly for the City. The Maloofs did us a favor.
Plus, the Maloofs seem to really want to leave. Why ignore that?
I think season ticket sales will fall over 50% this summer. Is there some provision that allows emergency relocations if sponsors go away and ticket sales collapse?
I am having fun reading fan website suggestions. They are not sure if they should boycott. Pages and pages o wild theories. And I cannot hide this feeling: that arena deal is better off dead.