In 2005, AEG started construction of an arena in Downtown Kansas City. The arena already had a naming rights sponsor, hometown telecom Sprint, a year earlier. Thanks to that deal and Kansas City’s need for a new arena to replace the aging Kemper Arena, the Sprint Center was built on spec, without a real major league tenant. The funding breakdown for the $276 million facility was as follows:
- AEG provided $54 million upfront
- The NABC (National Association of Basketball Coaches) gave $10 million
- Sprint’s naming rights deal was $2.5 million per year for 25 years, reduced to $1.7 million if no NHL/NBA franchise moves in
- New $4 rental car fee
- $1.50 per room/night hotel tax
As of 2009, debt service was being paid off thanks the higher-than-expected tax revenues. AEG was running the venue profitably despite not having a team tenant. Ironically, it could be Kansas City, the city from which Sacramento lured the Kings, that provides a blueprint. That’s not to say it’s a good financing plan for other cities to emulate, but thankfully it hasn’t crippled KC the way the Coliseum deal has crippled Oakland and Alameda County. One hurdle Sacramento faces as far as the taxation part goes is that one potential source, airport passenger facility fees, has already been sworn to SMF’s airport modernization project otherwise known as “The Big Build.”
Mayor Kevin Johnson’s plan is to have an arena and entertainment complex in Sacramento, with or without the Kings. So far ideas have included creating a six-county authority from which one or more taxes could be raised, and the usual mixed-use mega development from which proceeds could help fund the arena. Sacramento has never done a large, modern, publicly financed venue on its own. Raley Field was done by Yolo and Sacramento Counties and West Sacramento. ARCO Arena/Power Balance Pavilion was privately financed. The hard slog will be in formulating the financing pie. It’s safe to assume that the cost will be at least $400 million not including the land (Orlando’s new arena cost $380 million in construction alone).
Sprint Center’s being on spec is rare and unusual, especially when compared to other arenas throughout the NBA and NHL.
Ownership status of arenas throughout the NBA and NHL. Privately owned arenas in bold.
Notice a pattern there? The top list has ten arenas shared by two or more teams. and almost all of them are privately owned and operated. Such a business model allows the operator to work as hard as possible to fill its schedule and maintain a modern. competitive venue. Now there’s some talk in KC about whether AEG really wants a team at Sprint Center, since it could cost the operator prime concert dates. That’s not the way AEG operates Staples Center, where the company has to juggle the Lakers, Clippers, NHL Kings, Grammys, Pac-10 hoops tourney, and numerous concerts. For Sacramento to pull off an arena deal, it will need to partner with someone who doesn’t have a hidden agenda. Sacramento may have numerous choices, all of them somewhat problematic. It’s unclear how much cash the Maloofs could put up towards an arena. Would they relinquish the right to operate the arena to company like AEG in order to become a tenant? If AEG or another company were to build the arena, could they partner with the Maloofs, or would they want someone they’re familiar with in the captain’s chair, such as Ron Burkle? What role does Chris Webber play in any of this?
It’s not just about getting an arena deal done. It’s about getting a good arena deal done. All of the moving parts, different parties, and divergent goals are guaranteed to make a deal difficult, though not impossible. If KJ can get contributions from a team owner, a separate venue operator, and a big naming rights sponsor, he’ll be off to a very good start. Then he can start to frame discussions around whatever public contribution will be required. It’s an issue that he has chosen to become a plank in his economic development platform, and his second term probably rides on the project’s success or failure.
newballpark.org 
Well done ML….Good analysis of all the arenas in NHL/NBA.
Sacramento faces major problems to get this done.
1. Creating a 6-county authority will not help the cause one bit. Public money from general funds of these counties will not fly with their taxpayers one bit….It will go down big time, this brings me to my next point.
2. ML is correct they need a private partner who is willing to put $$ in without having control of the team…Henry Samueli was perfect in Anaheim because he owns the Ducks and just wanted a team in the arena in general. He was not concerned about controlling it a la Larry Ellison in San Jose and Steve Ballmer in Seattle….This man does not exist in Sacramento, he only exists in Anaheim.
3. If KJ could have done this before then why did he wait until the Kings were about to leave? It is because he knew if the Kings left his re-election bid would have tanked completely amongst the problem Sacramento has in general.
4. Naming rights will be tough without a local based sponsor to fork over $$ for it. Sacramento is not known for big corporations who are based in the city. They are known for more mid-size companies and branches of larger companies.
5. The Maloofs need to put in 100M at least themselves, they do not have this kind of money as evidenced by previous arena failures in Sacramento.
In conclusion the Maloofs are going to be stuck in Sacramento for years to come in a decaying facility because they did not make the correct business decision and take the $$ from Samueli that was on the table.
This arena situation is very similar to Oakland in that both cities do not have the $$ themselves help subsidize it and do not have corporate bases with guys like Samueli to help get it done.
Unless the NBA contracts or relocates teams and start carving up bigger markets teams like Sacramento will suffer for years to come and they will never have a good revenue sharing model.
Good luck Sacramento and KJ….You are going to need it. But on the bright side the Kings will be in Sac for years to come as Samueli will not be waiting for them in 1 year.
I think it’s pretty clear that the Maloofs don’t want to put up a dime for construction. They want a sweetheart lease and to keep all the revenue generated by Kings games.
Aside from getting the Maloofs to sell, I don’t know what the solution is for that.
What changes over the next year that Samueli changes his mind? It’s still a good business move.
Wow, I didn’t know that Madison Square Garden was 20 years older than any other NBA facility. Ouch.
I remember reading articles in the offseason that suggested that “the mystique” and legend of MSG would recruit the elite free agents to play there.
But the Knicks haven’t won a title in Lebron/Wade’s lifetime, so the luster of history wouldn’t mean much. To a player in your 20s, you probably enter MSG and think, “man, everything in here is a hell of a lot older than every other place I play.” And that’s a tough sell.
ML, what’s your prediction for how the NBA shuffle will play out?
Do you predict the Kings will stay put? Will the Hornets stay put? Do you foresee any franchise movement in the next 5 years?
Kinda OT but have you guys seen that Overstock.com is now advertising on ESPN now? Who would’ve thought they’d be sports sponsors
@nsj – I think they still move next year after Sacramento can’t get the deal together. As for other franchises, it’s hard to say.
@ML- Do you think that that Anaheim’s offer will still be there in 1-year?? If I was Samueli I would offer far less at that point or not at all considering the Maloofs backed out of their deal.
Why wouldn’t Samueli’s offer still be there (unless he gets another team to move there, which is going to lead to just as many if not more problems than the Kings would)? Either he wants a team there or he doesn’t.
@Brian- My thing is why would Samueli step up like he did if there is “competition”??
I think he brought Anaheim to the forefront with his offer and with so many teams suffering the NBA, some team is going step in.
This would in turn screw over the Maloofs as in that case why would Samueli back them if another team steps up??
I would be pissed if I was Samueli as his offer was incredible and the Maloofs screwed the pooch.
@Sid – Samueli knows how this game is played. If he really wants the Kings he’ll be patient. Takin an offer off the table out of spite will reduce his chances to get a team down the road since it also hurts the league’s leverage against Sacto.
Sid, I am sure Samueli knows the context. If it was up to Maloofs alone, the moving trucks woud be packed.
OK.
As long as another team does not step up then I can see you guys being correct.
I will say though the NBA said that they would approve a move to “another market” if nothing is finalized in Sacramento 1 year from now.
When they say “another market” it makes me wonder if that is Anaheim…