News of billionaire Chris Hansen striking a deal with the Seattle City Council hit the wire late Monday night, as the sides have agreed to a framework on an arena deal that moves them a few smaller hurdles away from becoming an NBA-ready city (courtesy of Chris Daniels of King 5 in Seattle).
In a bit of twisted irony, the city that had its team stolen away will now set its sights on any available team, and there is no team that is more available than the Sacramento Kings, who nowadays have a different rumored destination every week.
This most recent news solidifies Seattle’s place on the top of that list, though they still need the Maloofs to sell, and they still have to outdo Sacramento. Neither task should be considered a slam dunk, or even likely at this point.
The idea that Sacramento could lose its team, of course, is a black eye for the league as the city has supported its team in every conceivable way, including where it counts financially and at the ticket gate. The only reason we’re having this discussion is because the Maloof family, internal squabbles aside, doesn’t want to be there.
Their roots are in New Mexico, Los Angeles, and Las Vegas, and being broke in relative NBA owner terms they’re looking for a short-term infusion of cash, which they hope to find by moving the team to another city that will both build them an arena and also let them keep the profits from it.
Cities such as Virginia Beach, Louisville, Vancouver, Kansas City, and the like are potential candidates if anything because they’re willing to pay to be on the NBA map. But the math starts to get fuzzy because the markets are smaller than Sacramento, and the Maloofs end up no better off than they were in Sacramento over the long haul.
That, and the NBA doesn’t really want those markets, at least not at the expense of Sacramento, where the league enjoys the No. 20 sized TV market without interference from other sports leagues. When you factor in the public relations hit of moving the team – it’s hard to see the league supporting a move and to date we have not.
Even when considering a larger market like Anaheim, the league isn’t falling all over itself to allow a move. The NBA blocked the Maloofs’ relocation attempt last year after Sacramento mayor Kevin Johnson raised over $10 million in untapped sponsorships at the drop of a hat and promised a viable arena deal. Things seemed to be moving along reasonably well and a deal for a new arena was agreed to in principle during All Star weekend in Orlando.
But that was before George Maloof created a how-to-guide for burning bridges in Sacramento. He torched the deal live on public television in a tirade for the ages, and any goodwill that was leftover at the league offices was probably lost. Commissioner David Stern has used measured words in describing the arena situation since then, and none of them have painted the Maloofs in a flattering light.
In fact, the commissioner would probably like to see the family sell the team, but as usual the issue comes down to money, antitrust law, and the other 29 owners that one day will be negotiating with both the league office and their home city about something.
Aside from not wanting anybody to tell them what to do, owners want the right to move their teams to the cities they feel they can make the most money in. Leagues don’t like to allow this as it creates a number of problems, and the courts have found that the intersection of those opposing ideals lies in the concept of a relocation fee. Relocation fees are the amount that a league can charge to indemnify parties that are damaged by an owner’s decision to move.
The law is much more detailed than this, and the case law that has been favorable to relocating owners isn’t an exact match to the situation in Sac, but one thing is clear – neither party wants to land in court over this.
And that’s why the Kings arena situation has been allowed to play out, to the detriment of the league’s image, and as an affront to the other 29 owners that one day will have to negotiate with their municipalities.
While it’s unclear right now what impact the Maloofs’ apparent bad faith dealings in Sacramento will have on other team owners seeking public subsidies, a small shift in public sentiment could cost the league and its players tens of millions of dollars and a large scale shift could put the billion dollars the league has received in subsidy back on its balance sheet.
But even with the Maloofs’ name now toxic inside the league and out, to the point it’s being pulled off the signage at the Palms, the league cannot afford a bad ruling in an antitrust case. Aside from treble damages the Maloofs would seek, which are significant, a bad ruling would be held over all sports leagues’ heads by owners wanting to play franchise free agency.
The best hope for the league has always been to see the issue play out on its own, with the Maloofs realizing that they have no options besides going back to the city with its hat in its hand, or selling the team outright.
And with Seattle standing in the on-deck circle and doing what they need to do to land itself an NBA franchise, the question on everybody’s mind is whether or not Hansen will be able to drastically overpay for the Kings.
The Maloofs owe about $70 million to the city of Sacramento and well over $100 million to the NBA, and a sales price in excess of $400 million is needed to give the 43 percent stakeholders an easy way out of Dodge. Considering the franchise is valued at $300 million by Forbes, which is a generous valuation, Hansen would need to hope that the bump of moving to a larger market in Seattle and owning land near the arena would justify the Maloofs’ likely asking price.
But more importantly, when you factor in a relocation fee, which sources tell me will be assessed to give Sacramento buyers a fair shot at buying the team, Hansen could be looking at $500 million or more to buy the Kings. After paying $300 million and counting to build an arena, that’s approaching a billion dollars to get in the game.
It’s possible that the man known for his patience will wait for a less toxic situation to pop up, and it’s fair to wonder now if the league would reconsider expansion now that multiple cities have expressed interest in NBA clubs.
As for Hansen’s involvement with the Kings, he said weeks ago that he had not made an offer to purchase the Kings after a local report emerged saying otherwise. If he decides to make a play for the team, and assuming the Maloofs are ready to cry uncle, it probably puts Sacramento on notice that it’s time to formalize an offer to buy the team.
Sources on the city’s side have indicated that they have more than one buyer lined up, and ultimately Seattle’s progress could force some sort of endgame here. If the goal is to sell for the Maloofs, then they will likely have squeezed the best sales price out of Sacramento that is possible, and anything close to a Seattle offer (after the relocation fee) will likely be supported by the league.
If the Maloofs still don’t want to sell, they’ll continue to play the dating game with other cities and the league will continue to deal with a public relations nuisance. The family will not get a different arena deal in Sacramento, and any talk of renovating the unrenovatable Arco Arena with public funds has been met with collective laughter both inside and outside of the city.
Even if the Maloofs can find a sweetheart deal somewhere else, it’s unlikely that they’ll have the clout to force a move the league doesn’t want. Sure, they may have some antitrust law on their side, but they probably can’t afford the lawsuit and even if they win, they’re left in a place where they’re not wanted. They don’t have the fortitude of antitrust victor and deceased Raiders owner Al Davis. And other than George, they want to be wanted.
In Sacramento, the framework for a deal exists not just for the Maloofs but for any owner that wants to pick up the ball and run with it.
The deal that was struck between the city, arena giant AEG, and the NBA is still considered a good deal by each of those parties, and the only thing that would theoretically change are the owner contributions. In a concept the Maloofs cannot come to grips with, if a new owner wants to pay more for arena construction they can enjoy more of the profits.
Unlike anywhere else in the country, including Seattle, an agreement can be reached in Sacramento under the current terms and design could start within about a month according to sources.
As usual, though, the story goes right back to the Maloofs and whether or not they’re ready to face the music. They can’t do nothing, as Arco Arena is dilapidated and barely up to NBA code. They’ll eventually need to do more than polish the concourse floors. Eventually, they’ll either need to take the Sacramento offer, try to make something out of nothing in an unlikely move out of town, or sell the team.
And when the music stops and the only thing left to do is sell, will Hansen or any other buyer want to drastically overpay for this particular franchise to the extent that Sacramento can’t match the offer?
Until these questions are answered or the Maloofs are nudged out the door with greater efficiency, Sacramento Kings fans have to endure the same fears that plagued Sonics fans before their team was ultimately ripped away. And that’s just not right.