Two home games remain for the Sacramento Kings, before they presumably fire up the moving vans and head south for Anaheim, whose city fathers welcome to soon-to-be Royals with open arms, a much more updated arena, and a much richer and larger fanbase. One real hangup remains: the Maloofs owe the City of Sacramento $67 million of a loan they inherited from former owner Jim Thomas, plus a $9 million prepayment penalty on that loan.
Sacramento has gone so far as to write Anaheim a letter informing them of the Maloofs’ current debt obligations in an effort to influence Anaheim away from the franchise. So far, that letter has ony drawn scorn from the Maloofs, who don’t want Sacramento interfering in “business matters.” Anaheim approved $75 million in relocation costs and improvements plus a practice facility for the team, which just about seals the deal. On the Kings website there are no efforts to sell season tickets for the 2011-12 season, and the only promotional item is Fan Appreciation Night on the 13th, the final game in Sacramento Kings history against the hated Los Angeles Lakers. Thomas was seen last Friday in one of the Maloof brothers’ courtside seats, probably to see the team he brought to Cowtown play for the last time.
That leaves the matter of outstanding debt, which the cash-strapped Maloofs have promised to pay but haven’t said how they would do it. If they default, they will lose the arena and the 183 acres that surround it, plus Sacramento would get a $25 million stake in the Anaheim Royals. Chances are that the Maloofs don’t want Sacramento to have any stake in the team, so it could offer up the arena, land and a smaller cash payment to settle up. Two weeks ago, San Jose and Santa Clara County settled an ongoing debt issue in part by transferring real estate from the City to the County. It’s not hard to see the Maloofs offering the same kind of deal, since a) they won’t need the arena after they leave, and b) It’s a good asset the City could get for a song, warts and all.
Assessed value of the entire property comes to $61.7 million, with $45 million of that in the arena and practice facility. The assessed value of the arena may be overinflated due to the state of distress that the arena is in and the renovations it needs going forward. The assessed land value is a mere $16.7 million, or $91,000 per acre. Right now, even with that pittance of a land value, for a revenue-needy city such as Sacramento it may as well be worth nothing. There will undoubtedly be some in city government who feel that way. Then again, there are serious long-term strategic opportunities should Sacramento move to acquire the arena.
The uncertain future of redevelopment makes acquiring the land a risky proposition. To fund any improvements to the land, the City would have to create a redevelopment district from which they could collect tax increment after the land was flipped to a developer. (In short, this is the practice of landbanking.) As attractive as the land may have been 10 years ago, it’s not the least bit attractive right now – unless someone is dying to build right now. Given Sacramento’s horrendous housing market, that seems highly unlikely – though that hasn’t stopped recent Sacramento arena proposals from including a large infill housing development component. In any case, should redevelopment agencies cease to exist after this summer the City would have to rush to approve the deal and the creation of the redevelopment district.
The point of accruing tax increment would be to fund improvements for the arena, whose leaky roof and outdated, cramped quarters are pushing the Kings to vacate their premises. If Sacramento is to have any hope to attract a future NBA franchise, at least $250 million in improvements would have to be in order. That would include the following items:
- Fix the roof
- Dig 20-40′ further down (a la Oracle Arena) to create a more spacious, flexible event floor
- Add a club concourse and seating
- Add another suite level and revamp suites
- Redo the seating bowl and replace seats
- Replace scoreboard and signage
If Sacramento were not to worry about getting a replacement team, it could opt for a more modest ($50-100 million) spiffing up of the arena, which would focus on must-fix items such as the roof and the back-of-the-house. The City could immediately turn management of the venue over to a dedicated operator like SMG, AEG, Global Spectrum, or SVSE. The purpose of the arena would be to continue to attract concerts, ice shows, and other non-team entertainment to the region. The arena could have enough improvements to be once again included in the NCAA basketball tournament rotation. All of this has some significance, as the closest large indoor venues to the City are the 8,000-seat UC Davis Pavilion and 11,000-seat Stockton Arena. Those venues are 20 and 50 miles away from Sacramento, respectively. The outdoor Sleep Train Amphitheatre is 30 miles north in Wheatland and ony operates in the summer. Those distances would leave an entertainment black hole in the capital city if the arena were not to continue operating. Even with the mistrust of Maloofs and the need for cash, it may be an offer that Mayor Kevin Johnson and the City Council can’t refuse.
The future of basketball in Sacramento looks bleak, to put it mildly. Even if it were to get a brand new arena deal done in the next six months, there’s no guarantee they’d ever get a NBA franchise anytime soon. That’s Mayor Johnson’s strategy at this point, and it may be the only sound one if you hold out any hope for major pro sports in Sacramento. Johnson could turnaround and pitch the ARCO site to the A’s, but the gloomy market there makes funding a $400 million ballpark extremely difficult, let alone an arena renovation. There are forces who want to forego ARCO and build an arena downtown, as expensive and complicated as it sounds. It’s going to be tough to get a good deal in place, and I don’t envy the decision makers up there one bit.