This is all a sad state of affairs. If the Kings go, don’t think the city will just pick-up an expansion team to fill the void. … that would be an additional cost of $100 to $300 million payed to the NBA and its owners.
Saturday, April 14, 2012
Arena Effort Dead
Yesterday Mayor Kevin Johnson admitted “Is the deal as we know it dead? Absolutely.” According to the Sacramento Press, The breaking point for Johnson, he said, was the Maloofs’ refusal to put up collateral for the city’s refinance of their loan. I personally can’t believe this was not in the agreed upon in the March 1st framework… but apparently it wasn’t. In addition, the Maloof’s also refused to pay $3.26 million in pre-development costs for a building they would not own. This doesn’t sound all that odd to me. Why as a renter of a new building (Maloof’s) would they also pay for the pre-development costs? Those costs are traditionally picked up by the owners which in this case would be the city.
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Every small business owner I have ever met had to pay fees to open their business, even if they were a tenant, and had to pay for their own tenant improvements. But none of those tenants had the right to receive income from advertising on the side of the building (like the Maloofs did, they were going to get 50% of the naming rights money) or to make money off the parking lot (like the Maloofs did, they were going to get parking revenue on Kings game days) or the right to not pay fees if not enough people used the parking (like the Maloofs did, if their parking income went below a threshold they didn't have to pay the city surcharge that would have backfilled some of the lost parking revenue.)
The new business model for NBA teams is apparently "The city pays for everything, the team makes all the money." Seattle demanded by public vote that any future arena deal be fair and equitable to the city, with the end result that they won't get an NBA team until the business model changes.
I agree that it is utterly ridiculous that the Maloofs weren't expected to put up any collateral at all for this new loan--of course, what do they have to put up? The plan would have cost them their only tangible asset, the existing arena. I don't think they could use their 2% of the casino as collateral (can cities own casinos?) or their Wells Fargo stock--and the only other thing they own is a 52% share of the Kings. While that IS something that could be used for collateral (we're due a $25 million share of the Kings if they leave town) I don't think the NBA would be happy with a city owning majority interest in an NBA team, because they would no longer be able to blackmail that city into providing new arenas with the threat of the team leaving town.
The Warriors are looking for a new home and their owners actually have money.
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