Sacramento has done much to deserve the Kings, and Chris Hansen potentially will do much to inflate NBA values. Will the NBA miss the chance to exploit both?
No action was taken Monday after the NBA relocation/finance committees met by teleconference, nor did the league comment about the meeting regarding the future of the Kings, according to several media outlets. So it’s hard to say whether the shock has worn off from the weekend blitz by Chris Hansen, or owners were dancing, or despairing. And we may not know after Wednesday.
It would be no surprise to learn the Board of Governors will postpone a final decision once more on whether keep the Kings in Sacramento or move them to Seattle after what one national writer described as Hansen’s attempt at a “hostile takeover.”
But any delay seems unlikely to be about the breathtaking money that Hansen and partner Steve Ballmer are heaving toward the Maloofs and the NBA, and whether it will help coax the Kings to Seattle. It likely won’t.
The only question would seem to be what to do with Seattle.
The NBA’s commissioner-presumptive, Adam Silver, is already on record with his soaring embrace of staying put by citing values such as “community,” “continuity” and “brand building,” instead of the crass pursuit of money in the newly enlightened NBA. This heretofore under-appreciated epiphany, suffused with altruism, magnanimity and a generosity of spirit, must have started July 3, 2008, the day after the Sonics were granted permission to decamp to Oklahoma City.
So if Silver and the outgoing commissioner, David Stern, are in agreement that Sacramento deserves to keep the team despite whatever Seattle has to offer, and despite whatever the future holds for the Sacramento arena project, then, for the uncreative, that’s pretty much it. The Maloofs will be obliged to take the offer from the group led by Vivek Ranadive at $341 million, and tell Hansen/Ballmer that their $406 million is no good in the California capital.
Such a decision has two additional sinister benefits for the NBA. It keeps the Seattle market empty for use in extorting other municipalities who get sideways with NBA teams over lease issues (see Los Angeles and the NFL), and it also discourages private developers from taking on so much of the financing burden, as Hansen has done with his proposed arena in Seattle.
The NBA and all sports leagues have always craved direct public subsidy, such as Sacramento provided with its $258 million in future parking revenues for an arena proposed for downtown — and as Seattle, King County and the state of Washington have supplied to the NFL, MLB and NBA (remember the
$100 million $73.4 million in bonds for KeyArena in 1995 that Stern always forgets about?).
The $200 million public portion for Hansen’s deal in SoDo is a lease-purchase that is scheduled to be repaid from arena revenues, not
public taxes new tax assessments, and Hansen has personally guaranteed to cover annual revenue shortfalls for the first five years.
Such private risk-taking is not how it’s done in the NBA. But that’s how it had to be done in Seattle to get around anticipated significant public opposition to subsidy. The favorable terms allowed a majority of city and county council members to vote for a memorandum of understanding that sent forth Hansen in pursuit of the only available free-agent (no lease) team, the Kings. So in a way, Hansen’s bid is being done in by his own generous hand.
But the negative this week to a yes/no outcome is to leave millions on the table for each team. How dumb is that?
Remarkable a feat as it was to get Seattle’s project so far so fast, including purchase of all the land, Hansen’s first task pales compared to the epic national fight for the Kings led by Mayor Kevin Johnson and shepherded by Stern.
In hindsight, the deck was stacked in favor of the Kings, based on the NBA actions in 2010 to save its franchise in Katrina-ravaged New Orleans. Rather than see the flailing Hornets go bankrupt or sold out of town by its contemptible owner, George Shinn (worse than the Maloofs), the NBA purchased the team from him for $310 million and held it for two years until selling to Tom Benson, owner of the NFL Saints, for $338 million.
Creation of a “ward of the state” generated heaps of hoops controversy. But in the end, the NBA is still in New Orleans, shakily, and owned by a local good guy. Its chances of survival were enhanced by new collective bargaining agreement that Stern bet wisely he could obtain after another lockout he knew was coming in 2011. In Stern’s own forecast last year, he said the new CBA, with its reduced player compensation and increased revenue sharing, will allow nearly every team to break even in two to three years.
If that’s true, and Hansen has to believe it is, the pool of candidate teams available to move shrinks dramatically. Hansen is well aware of that too, which is why he threw down another $75 million Friday on the purchase price. Yes, it was a move of desperation, but not necessarily of foolishness. He figures that over 30 years, he’ll make it up in $20 craft beers to many thousands of Seattle Amazon employees all making $100,000-plus.
The one dubious move Hansen offered was the one Saturday. In the likely event of denial of relocation, he and the Maloofs devised a “backup plan” in which Hansen becomes, for $115 million, a 20 percent partner of the Maloofs, who would operate the team in Sacramento for another year. The time and money would, in theory, provide financial help and resolution for the arena project.
Um, no. There may be a legal strategy in there, but to me, it’s too Clay Bennett-ish. Hansen may be a prince of a guy, but because he partnered with the Maloofs, every franchise move he makes becomes toxic to Kings fans. Since the NBA established with Bennett and Seattle from 2006-08 its willingness to stand by while a conscience-free ownership strips the team in preparation for relocation, a game ticket would scarcely be sold.
As I wrote May 1, better to sell to Hansen directly on a one-year term, primarily for getting rid of the Maloofs. Hansen will need the promise of a team — Kings or expansion — but the year buys time to make sure both cities’ arena plans clear obstacles, as well as learning more about the chances of a new TV deal after 2015-16 that will produce revenues that justify expansion. The NBA will begin TV negotiations, according to Sports Business Journal, this summer.
Over the weekend, the NBA just learned all of its franchises were worth more than anyone believed. They learned how eager Hansen is to join the club. To not find a solution that exploits that passion would display an appalling lack of foresight for a league that previously has displayed a sophisticated eye for extortion.
The solution doesn’t have to cost Sacramento its Kings. And it doesn’t require a reinvention of the wheel:
The league, which has already owned and operated another team for two years, offers to buy out the Maloofs at the local, Ranadive price of $341 million, and forgives the $70 million-plus loan the franchise owes the league. It’s close enough to the original Hansen offer to tell the Maloofs to beat it.
Then the NBA appoints an administrator to oversee the team, as it did in New Orleans, and a contingency sale to Hansen. In less than a year, the arena situations will be known. If Sacramento sees arena success, Hansen must sell to Ranadive and buy an expansion team, both for predetermined prices that cover the estimated loss of revenues because of a 31st partner. If Sacramento fails, the team is relocated for a predetermined fee.
Is it awkward? Yes. But I think most people would take awkward over ludicrous. Given what has been learned over the weekend about the value of NBA franchises, any solution that fails to accommodate both groups, which include some of the smartest, richest people astride the planet, would be the acme of foolishness.