SEATTLE – So now what?
That’s the question people in Sacramento, and Seattle, are asking after leaders in the Northern California city unveiled a $447 million Arena Plan. Leaders hope it’s enough to convince NBA executives to keep the Kings in Sacramento.
It’s clear the "City of Trees" has public momentum in what NBA Commissioner David Stern has called an ‘unprecedented’ battle for the franchise.
The non-binding Term Sheet, unveiled by Sacramento City Manager John Shirey late Saturday, calls for the city to contribute $258 million of the cost for a new downtown arena. Investors, including billionaire Ron Burkle, 24-Hour Fitness Founder Mark Mastrov, and Tech Executive Vivek Ranadive, would contribute $189 million. The City says it would finance its portion through land transfers, and a parking revenue backed by bonds.
The Term Sheet says “due primarily to the limited size of the Sacramento regional media market and corporate base, the financing and development of a new arena will require a public-private partnership” because “a privately financed facility in Sacramento would not be economically viable given the limitations of the Sacramento market.”
The Term Sheet does not indicate whether the land needed for the arena has been acquired, or future plans for the Kings Current Home at Sleep Train Arena. The City believes a sale of the land near the Arena would help fund the new building at its preferred Downtown Plaza site.
The Term Sheet needs Sacramento City Council approval, with a vote scheduled to take place on Tuesday. Leaders hope the approval will convince the NBA to reject the signed deal between Chris Hansen’s Seattle-based investment group, and the Maloof Family, to buy the franchise and move it to the Emerald City this fall.
There has not been formal opposition to the plan, as of yet.
However, it’s clear there are skeptics. New York-based author Neil Demause, who penned the book “Field of Schemes,” calls the arena plan “bizarro math.” Demause wrote on his website, fieldofschemes.com “In order to help fund a basketball arena, the city will divert $9 million a year in future parking revenues to a non-profit, which will use the money to pay for the arena, then take whatever’s left over and repay the city for its $9 million in — wait just a cotton-pickin’ second here -- Unless the Sacramento city manager really thinks that you can make money magically multiply by shuffling it back and forth really fast between two cups, then, the only thing really new about this deal is the introduction of a non-profit shell corporation to actually sell the bonds and collect the parking revenues.”
Demause claims the deal is similar to a poorly managed parking deal with the Yankees of Major League Baseball.
Critics have also provided KING5 with a telephone survey of Sacramento voters in January 2012, which show opposition to public financing of a sports arena. That poll, by EMC Research, asked 400 voters whether the city should create a public private partnership to finance a new downtown arena. Fifty-one percent said they opposed such a plan. Forty-three percent approved of the concept. Yet, a whopping 71 percent of the same voters, said they opposed privatizing downtown parking operations for 50 years to provide funding for an arena. Only 22 percent approved of such a plan.
Those are numbers which could also likely provide more fuel for Chris Hansen’s group as he tries to close the deal with the NBA.
Both sides are expected to make formal presentations to NBA owners at a meeting in New York City on April 3.
Hansen’s group still has a head start on the Sacramento effort.
His group has already purchased $56 million worth of land in Seattle’s SoDo neighborhood, and the City and County approved arena financing deals last October. His New Arena Design has also been given preliminary approval by the Downtown Design Review Board, and it’s expected that his group will work out a Key Arena remodel plan soon. The City has already held dates for an NBA team this fall. The mandated economic and environmental reviews are already well underway.
Sources tell KING5 Hansen’s group will make a strong pitch to owners about the long term economic vitality of the Seattle region, and the corporate support for an NBA return, as part of their pitch to approve the Kings Purchase Agreement.
Just last week, the Washington State Employment Security Department reported the Seattle/King County/Snohomish County unemployment rate has dropped to 5.9 percent, the lowest number since 2008. The City is also home to Eight FORTUNE 500 companies, and another FORTUNE 500 Company (Boeing) is a major employer. Seattle-Tacoma is the 12th largest TV Market in the country, and could be fertile ground for a regional sports network. The Los Angeles Lakers recently signed a $200 million a year deal for TV rights, and a deal, at even half that figure, would help the Seattle owners pay down their immediate debt.
By contrast, Sacramento’s unemployment rate jumped to 10.3 percent in January, according to the Bureau of Labor Statistics. It is the 20th largest TV Market in the country, when factoring in the cities of Stockton and Modesto. Stockton is in the middle of bankruptcy proceedings, and has an unemployment rate at 15.5 percent, according to the BLS. However, the Market does have home court advantage in this case, and Sacramento argues the Arena project would retain up to 800 jobs and create between 2,300 and 6,500 new ones.
It’s unclear if the Sacramento group can even match Hansen’s purchase agreement. The Seattle group already put down a $30 million deposit for 65 percent of the franchise, which would be valued at $525 million. Forbes says the planned acquisition immediately helped propel the NBA franchise to the 11th most valuable in the league, with a one year change in value at 75 percent.
The NBA would have to reject the deal, and open the door for the Maloofs to sell the franchise to the Burkle-led Sacramento group. However, multiple sources, in both Seattle and Sacramento, said the Maloofs “hate” Burkle for business dealings which date back several years, and would likely not sell the franchise to him. The previous counter offer, submitted last month, was short by more than $100 million, according to a source.
Michael McCann, an NBA TV contributor, and the Director of the Vermont Law School Sports Law Institute, says the Sacramento Arena deal is “compelling but also non-binding and complicated and hard to know impact without knowing what Mastrov (and others are) offering for team.” He added that the “complexity of it in terms of how it raises revenue and refinancing of debt etc "could" mean it might be vulnerable to legal challenge.”
McCann added that it might be too early to understand just how the Arena deal fits in.
“It helps (Sacramento) and probably surprises (the) NBA in terms of public dollars pledged. But again, hard to know impact without knowing other pieces.”
The NBA Board of Governors is not scheduled to vote on the deal, and possible relocation to Seattle, until April 18 and 19.