Sacramento City Council approves arena term sheet 7-2

Mercifully, the dozens of public speakers at tonight’s Sacramento City Council meeting were done by 9. That left an hour for the City Council to discuss last Saturday’s term sheet on its merits. The evening culminated with an expected 7-2 vote to approve the term sheet, which the City and the ownership bidding group will present to the NBA in New York next Wednesday, April 3.

The two dissenters were Council Members Kevin McCarty (District 6) and Darrell Fong (District 7). McCarty was concerned about the lack of detail about the economic impact of the plan, and wanted to see a real report to that effect. Fong was harsher, asking for the same and also questioning some of the revenue backfill assumptions. Both wanted to see a deal more along the lines of what Seattle was offering, which is a roughly 40% public share. The Sacramento deal rates at 58% public, though if the $70 million in outstanding loans being repaid can be counted as a private contribution, it’s closer to a 50/50 split. Fong also cited San Diego as an example where as part of the deal, Padres owner John Moores was committed to developing much of the surrounding area in the Gaslamp Quarter. The whales have promised to make some further investments downtown and in Natomas if the construction moratorium is lifted. It’s up to the City to hold ownership to that promise.

The vote was almost upstaged by news from Monday that Qualcomm CEO Paul Jacobs is joining the ownership group, making him the fourth “whale”. I figure that Qualcomm will get first dibs on a naming rights deal, which makes some sense if the Chargers eventually move into a newer stadium in San Diego or some other market. New head whale Vivek Ranadive brought Jacobs in. So if you’re tracking it, the white knights coming to save Sacramento come from Silicon Valley, LA, San Diego, and the East Bay (which Mayor Kevin Johnson was quick to point out). When including the local minority shares, practically every part of the state is “represented” within the group.

Sacramento City Treasurer Russ Fehr came out strongly in support of the deal terms, repeatedly saying that backfill revenue estimates were conservative and weren’t based on radical changes such as huge parking rate increases. While some parts of the plan such as the 5% ticket surcharge can be achieved comfortably, there was still a very vague explanation on the parking revenue passthrough that should net $3 million. CM Fong also pointed out that no one had consulted the county on the possessory income tax part of the backfill, only saying that the projected $898,000 comes from an estimate tied to last year’s Railyards proposal. Detailed financial terms will undergo much greater scrutiny when the time comes, and the term sheet is nonbinding (as opposed to Seattle’s binding proposal), so things can and will change just as they did for the 49ers stadium project in Santa Clara.

Opponents to the term sheet were all grouped to speak first and were severely outnumbered by supporters, most of whom wore white “Crown Downtown” T-shirts. They all raised their arms in the air, which – no, was not some Nazi deal – was the group mimicking KJ when he got the phone call that the deal was done.

Arena supporters rise in unison to celebrate the vote and Mayor KJ

Arena supporters rise in unison to celebrate the vote and Mayor KJ

What’s next? The Seattle and Sacramento groups will make presentations a week from today, followed by the NBA’s Board of Governors meetings two weeks later. All along, I’ve said that NBA commissioner David Stern played this to perfection. He may have even played it too well, getting two cities to pony up at least $200 million for arenas in states where only a few years ago, this was considered impossible. Now the other team owners have the tough task of determining which bid is the most sound and beneficial to the league as a whole. That won’t be easy.

The more I look at this, the more I think that the real wildcard in this debate is something that isn’t even being discussed: local TV deals. Seattle’s a larger market, but a NBA team will be the fifth pro franchise in the area which could limit TV money. Seattle’s predominant RSN is ROOT Sports Northwest, run by DirecTV/Liberty Media. Sacramento is technically a mid-market (#20) based on size, but historically has lagged in terms of local TV revenue from Comcast SportsNet California. It wouldn’t surprise me if both bidders had already established talks with their respective RSNs to figure out how much more revenue they can get. If Seattle can get $10-20 million more per year or Sacramento can keep it competitive, that might be the deciding factor. All these histrionics, and it could come down to a factor that isn’t much in their control. Sounds about right.

—–

P.S. Readers who are following my articles about the Kings here or my tweets covering the news may think I’m needlessly slagging the Sacramento plan. I suppose it comes from a relative place of security. The A’s are not in danger of moving out of the Bay Area anytime soon, and if Bud Selig intended to create the kind of bidding war situation now on display in Seattle and Sacramento, he’s failed miserably so far. I’d like to see more cities hold fast to the idea of minimal public contributions and let more teams pay for the majority of new stadia. It seems like with the Kings arena and the 49ers stadium we’re regressing from earlier progress with AT&T Park and Staples Center. I certainly don’t want to see Sacramento lose the Kings, but I also think they should be able to secure the best deal possible, whatever that is. There have been plenty of privately funded arenas built over the last several years (Staples, Nationwide Arena in Columbus), yet time and time again it’s the leagues that have the leverage.

14 thoughts on “Sacramento City Council approves arena term sheet 7-2

  1. I was pretty certain that Kings were gone. I am a lot less certain now.
    .
    I think you are correct in a general way, and probably specifically. The decision will not come down to just an arena plan, it is how that arena plan impacts the revenue of the team AND what other sources of revenue will look like over the next 5-10 years (longer, but it’s not easy to realistically plan 5 years ahead let alone 15).
    .
    Assuming Sacramento got the message, and all evidence points towards this being true, that they had to beat Seattle’s offer rather than “come close.” That takes care of the short term franchise value boost. Sustaining that value is dependent on the long term revenue streams. RSN, premium ticket sales, sponsorship potential, etc. all play a role in this.
    .
    Looking strictly at demographics, it’s hard to argue that Sacramento has a shot. But adding in market saturation (and considering that the Seattle group probably needs to bring in a direct competitor in the NHL to make it all work), it definitely is an interesting question.
    .
    What if the plan is a new RSN to broadcast the Sonics and the Seattle Sasquatch Hockey Club? How does that impact revenue projections? It’s really, really complex.

  2. If you are looking for sustained revenue streams than Seattle would be the route to take. You have the entire state, Pacific NW, Hawaii, and Far East to market to so long as it’s done right and the team remain competitive most years. One would be a fool to think that you would just be getting corporate sponsors from the Seattle/Tacoma areas. I think we get caught up on county,city lines and RSNs when it comes to comparing other teams potential revenue streams to the A’s/Giants/Dodgers.

    Look at the sellouts you see on TV: Seahawks, Sounders, and most Huskies games. We all know that the old Sonics drew well for close to 25+. Even a bad Mariners team will outdraw a good A’s team. The snag was the arena deal, and you had an ownership group that never had any intention in keeping the Sonics on Seattle.

    Having wasting 5 minutes of my life typing that I still hope Sacramento gets this done. Like ML said the NBA played this game perfectly.

  3. Wow I really think Sacramento would be a better market for the A’s. They’d get much more support than they are getting in the Bay Area. Sacramento A’s!!!

  4. We were bound to get “A’s to Sacramento” nonsense sooner or later. Sacramento Rivercats!

  5. Hawaii?? Hawaii already gets LA RSNs (FOX Sports West/Prime Ticket) on most cable tiers. Bunch of Lakers fans there.

  6. @Mike2 – One minor flaw in your argument: For the 23 years that both teams were in their respective locations (from the 1985 through the 2007 seasons), Seattle has only exceeded Sacramento’s capacity twice (in the 1997 and 1998 seasons). Since ARCO/SleepTrain is larger than the Key by a couple of hundred seats, the gross attendance between the two cities also lies (slightly) in Sacramento’s favor.

    This is made much more stark by the fact that most of the Kings history in Sacramento has been made up of absolutely crappy teams, while the Sonics were frequently in the upper echelon of the Pacific division.

    Regrettably, fans coming to the games no longer means much in pro sports.

  7. The point I was trying to get across was the marketing aspect. You have an entire state to market and try and get corporate sponsors from vs CA where the market is over saturated with teams vying for fan support and corporate dollars.

    Plus I do know about Hawaii RSN’s. I lived there for several years while my ex was stationed in the Navy. For three years I enjoyed coming home, cooking on the lanai and watching my A’s, Lakers, and LA Kings play while I was cooking dinner or heading to the beach for an evening swim.

  8. Man a Sacramento Kings new arena + a potential Sac A’s, if lew Wolff were to sell, would be really good money maker for the capital… I do believe the kings are getting better as a basketball team, not on the G.S Warriors level but they are getting there…so good team + New arena = everything paying for itself…this is why I push hard that The Oakland raiders get winnii fast. City of Oakland would be eager to throw money at the Raiders once they win + demand a new stadium or they leeave to l.a…yes ml owners still have leverage…in fact the NFL is struggling with California, but they just got to make the mount Davis deal go away…the NFL is going to have to throw Oakland a bone

  9. It is obvious the NBA is going to let the Kings move to Seattle. KJ doesn’t know it but he already lost long before he got these “whales” to jump in.

    When the Maloofs called Stern telling them they intending to sell, two things could have happened:

    1. Open bidding process much like the Warriors sale.
    2. The NBA tells the Maloofs whom to sell to.

    In this case it is obvious the Maloofs were told to sell to Hansen-Ballmer. If the NBA was serious about keeping the team in Sac they would have done an open bidding process.

    The Maloofs must be laughing at this considering the NBA told them to sell to the Seattle group.

    Some strange stuff and KJ somehow thinks he is a god and a hero…This is too entertaining.

  10. @ Sid: are you saying Stern and his cronies are pulling a charade here?
    It would be cruel if you ask me. Maybe I am wrong but letting KJ, Burkle and other rich guys exhausted their time on non-winning bid is really cruel. I don’t know how the BOG will vote but dragging rich guys through the muds for nothing is not a good idea.

  11. It’s pretty evident that the NBA is encouraging this bidding war so that in the end, there will be an expansion franchise, most likely in Seattle.

  12. Don’t know if the Kings are moving or not. After Sac managed to match Seattle’s offer I’d say it’s 50-50 whether it happens. But today’s development of Hansen buying 7% of the team in addition to the 65% he’s already agreed to buy isn’t a good sign for Sac despite the good news they’ve had this week.

  13. Yeah I just saw the news on Hansen buying the additional 7% of the Kings. Well played on his part if it is true and other minority owners can’t negotiate until after the bankruptcy judge makes a ruling in mid-April.

  14. Hanson made a bid, which members of current ownership group have right to match. KJ and his whales were already aware of the Hanson bid (the 7%), and will shortly have a counter bid. So even that part is not “done”.

    What’s interesting is that Hanson previously stated the auction on the 7%, and the right of first refusal, was a non issue. Yet here he is making a bid. It must have some legal teeth, and Hanson knows it.

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