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Monday, February 27, 2012

Sacramento Pays Kings Ransom to Keep NBA Team

Posted by on Mon, Feb 27, 2012 at 2:44 PM

The Sacramento Kings and their namesake city have struck a tentative deal on a new downtown arena, meaning if Seattle does manage to snag an NBA franchise, it won't be theirs. But the terms of the Sacramento arena proposal do highlight what a kick-ass deal Seattle negotiated with its prospective franchise owner.

According to news reports, Sacramento taxpayers will put up to $250 million into the new arena, with team's owners forking over only $75 million. By comparison, Seattle's contribution is capped at $200 million, with mystery money-man Chris Hansen promising $290 million, plus all cost overruns. Sweet.

Seattle's arena proposal is also structured to have no negative impact on general fund revenues, with debt service on 30-year-bonds paid through a combination of rent and arena taxes (admissions, sales, B&O, property). Sacramento's contribution, on the other hand, will be raised by leasing out city-owned downtown parking garages... garages that already contribute revenue to the city's general fund. A portion of this lost revenue will be made up through ticket surcharges, but not all of it, and there are no guarantees.

Yeah, yeah, I know... the Seattle arena deal can't possibly be as good or as airtight as Mayor Mike McGinn says it is, which is why he's convened an Arena Review Panel to comb through the details. Their first meeting is Wednesday, 5PM at City Hall, and it's open to the public. So if you have your doubts, get off my ass in the comment threads, and show up in person.

 

Comments (32) RSS

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1
The problem as I see it is there's no such thing as an "air-tight deal" with a corporation. They're inherently disposable. If they don't hold up their end of the deal and the city sues, they'll no doubt find they're suing an empty shell that has already had its assets sold off. And unlike a private company, the state can't reasonably default on its debt, so we'll be stuck paying for it.

Corporations exist to socialize risk and privatize profits. They wouldn't be proposing this deal if it the government wasn't going to get screwed by it.
Posted by Orv on February 27, 2012 at 2:52 PM · Report this
2
If we get a team, I think it's going to be the Hornets. They have an out on their lease after this year and the team is owned by the NBA. It's the easiest team to buy and the easiest team to move.
Posted by arbeck http://www.facebook.com/arbeck on February 27, 2012 at 2:52 PM · Report this
Will in Seattle 3
All we are saying

Is give Hockey a chance
Posted by Will in Seattle http://www.facebook.com/WillSeattle on February 27, 2012 at 2:54 PM · Report this
Fnarf 4
So there's no possible way that "admissions, sales, B&O, property" taxes could ever be used for something else, right? They'd just have to throw that money away, so they might as well give it to the billionaire. Right?
Posted by Fnarf http://www.facebook.com/fnarf on February 27, 2012 at 2:56 PM · Report this
ScrawnyKayaker 5
Hooray! We might get a less shitty deal in billionaire welfare than some other city. So we should totally go for it because, um...11-year-old boys!
Posted by ScrawnyKayaker on February 27, 2012 at 2:59 PM · Report this
Joe Szilagyi 6
I'm predicting the Sonics will be playing at Key Arena in November of this year, as the new arena and the NHL ramp up quickly.
Posted by Joe Szilagyi http://www.zombo.com on February 27, 2012 at 2:59 PM · Report this
rob! 7
Points for the headline, Goldy.
Posted by rob! http://www.youtube.com/watch?v=QZBdUceCL5U on February 27, 2012 at 3:00 PM · Report this
Goldy 8
@4, There won't be admissions, sales, B&O, and property taxes on the arena, if there's no arena.

@1, The key to the deal is that the teams' commitment to meet the city's debt service would be a "senior tier obligation," meaning the city comes before other creditors. The value of the franchises themselves end up securing the debt, if indirectly.
Posted by Goldy on February 27, 2012 at 3:00 PM · Report this
9
@8: I'm not convinced that will hold up. Senior tier doesn't mean much if there are no assets to go after. The NBA ultimately has final say over the franchise rights -- they can pretty much give or take them at will -- so it's a stretch to say that's an asset the city can seize in the event of a default.
Posted by Orv on February 27, 2012 at 3:04 PM · Report this
rob! 10
With the possible exceptions of Ms. Daudon and Ms. Drago, I don't see anyone among the members of that "Arena Review Panel" with the sophistication to do the job that they have been charged with (or what should be their job).

It's mostly a bunch of community boosters and do-gooders unfamiliar with the wiley ways and means of billionaires.
Posted by rob! http://www.youtube.com/watch?v=QZBdUceCL5U on February 27, 2012 at 3:21 PM · Report this
11
Senior tier doesn't mean much if there are no assets to go after.
WHOMP. Thank you , @9.
Posted by gloomy gus on February 27, 2012 at 3:29 PM · Report this
DOUG. 12
The NBA Is using the now vacant Seattle market to leverage other cities into bending over and building new arenas. Fuck David Stern and his tactics. When he dies we should try to get a new team. Hopefully that will be soon.
Posted by DOUG. http://www.dougsvotersguide.com on February 27, 2012 at 3:30 PM · Report this
Supreme Ruler Of The Universe 13
Kent, to use a more prosaic example, had one of these sweetheart air-tight deals for developing half a block of its downtown. It was supposed to be a mixed use, parking-retail-residential. Builder got all these tax breaks and loans...and then defaulted. They left a 4 story, open air eyesore construction of rebar and concrete slabs up for five years that only recently got razed to the ground (to make way for a new builder).

So, in this game nothing is airtight. I mean, ask yourself. If there is so much money to be made, why don't they just go ahead and build a private stadium, like every other business on earth and keep all the money for themselves?!

I mean, if some guy opens a bakery, does he have to hold a press conference to announce a "public private partnership"? If this guy is a zillionaire, then heck, start his own basketball league, build all the stadiums and charge admission.
Posted by Supreme Ruler Of The Universe http://www.you-read-it-here-first.com on February 27, 2012 at 3:33 PM · Report this
Fnarf 14
@8, all of the economic activity generated at the arena will be diverted from other uses, so yes, those taxes would exist otherwise.

The idea that arenas create money out of thin air has been conclusively disproven time and time again. There is possibly a small positive effect, but it is tiny, about the equivalent of a small store. I don't see the city looking for ways to give $200 million to any small store owners.
Posted by Fnarf http://www.facebook.com/fnarf on February 27, 2012 at 3:37 PM · Report this
15
@Supreme Ruler

Because the City/County can get a better interest rate on the bonds versus what private financing can get.
Posted by arbeck http://www.facebook.com/arbeck on February 27, 2012 at 3:38 PM · Report this
Goldy 16
@9, The only way to the break the lease is through bankruptcy, and while yes, the league gets to determine whether a team relocates or not, the franchise itself still has value. The Hornets, now owned by the league, (and the most likely team to move to Seattle) are worth $285 million according to Forbes. That's an asset. Plus, there would be an NHL team as well, the average value of which is now $240 million according to Forbes.

Those assets exist. If they get liquidated in bankruptcy, the senior creditors get paid from the proceeds before anybody else.
Posted by Goldy on February 27, 2012 at 3:40 PM · Report this
17
@9: Just because a team is losing money doesn't mean it doesn't have value. Even the NBA's bottom-feeders are worth hundreds of millions:

http://www.forbes.com/sites/kurtbadenhau…
Posted by bigyaz on February 27, 2012 at 3:41 PM · Report this
slade 18
So a review panel is costing the city time and money even though they have been (behind the seens) working on this train wreck for how long?

more mono rail crap that will tell us what a good deal it is? is the enviromental impact study back from france yet?

Name the basket ball team the Monorails and name the Hockey team windows 7?

Its a private party for some Rich freaks who want to spend as little as possible to already traffic burdened area that is failing due to piss poor city politics and deaf dumb blind State over site? Seems the Alaskan way Tunnel is the mayors major accomplishment as he was against it and it was voted down once? as well even our beloved Governor Sea-Hag was telling Seattle to lead follow or get the hell out of the way as the rest of the state and the nation don't move as slow and stupid as Seattle dose.

In the mean time the Seattle Storm is able to make ends meet where the freaks of the NBA cant?

Posted by slade http://www.youtube.com/user/guppygator on February 27, 2012 at 3:44 PM · Report this
rob! 19
If you turn out to be wrong about this in the years down the road, Goldy, I think you should commit now to wear for one month, in public, a T-shirt with generous splashes of gold puff paint that reads "I was the bitch-boy cum dumpster of the billionaire house-of-cards sports franchise pimps."

Or words to that effect.
Posted by rob! http://www.youtube.com/watch?v=QZBdUceCL5U on February 27, 2012 at 3:55 PM · Report this
20
@Fnarf

No one is saying that money is being created out of thin air. What we're arguing over is whether the team owner/developers should finance the entire cost themselves or the city should help them by securing bonds. If the owners financed the entire thing themselves, they would also pay back their debt by admissions and sales taxes (they wouldn't be called taxes, but for all practical purposes they are the same). The difference would be that they would have to raise these fees because the interest rate on their loan would not be nearly as favorable as the one the City/County could secure.
Posted by arbeck http://www.facebook.com/arbeck on February 27, 2012 at 3:59 PM · Report this
Fnarf 21
@20, the team owners would collect sales tax and B&O tax? Fascinating. So Chris Hansen and Co. ARE the government of Seattle, is that what you're saying?

Why should the City give its bond carrying capacity, which is finite, to these billionaires? What's the public benefit of letting them borrow on our security? What if the people of Seattle think that favorable borrowing rate should be reserved for something else, like city services and infrastructure?

The whole scheme is predicated on the assumption that the ONLY thing that matters is giving these billionaires what they want. Let 'em build their own.
Posted by Fnarf http://www.facebook.com/fnarf on February 27, 2012 at 4:29 PM · Report this
Ph'nglui mglw'nafh Cthulhu R'lyeh wgah'nagl fhtagn 22
"Here, we're going to increase your tax base. The only catch is, it will cost you the taxes you make."

Ha ha ha ha ha fuck you.
Posted by Ph'nglui mglw'nafh Cthulhu R'lyeh wgah'nagl fhtagn http://youtu.be/zu-akdyxpUc on February 27, 2012 at 5:29 PM · Report this
23
@8, all of the economic activity generated at the [arts] will be diverted from other uses, so yes, those taxes would exist otherwise.

The idea that the arts create money out of thin air has been conclusively disproven time and time again. There is possibly a small positive effect, but it is tiny, about the equivalent of a small store. I don't see the city looking for ways to give $200 million to any small store owners.
Posted by Reader01 on February 27, 2012 at 6:18 PM · Report this
Baby Blue 24
Holy crap! Sacramento just got a new Arco Arena not that long ago. Why do they need a new one already? Such madness and waste for these sports teams.
Posted by Baby Blue on February 27, 2012 at 6:33 PM · Report this
25
Goldy I just want to thank you for continuing to cover this despite all the bullshit burying these comment threads.
Posted by algorhythm99 on February 27, 2012 at 6:35 PM · Report this
26
I assume the main reason goldy/stranger is pro-stadium is because b-ball teams are good for inner-city youth; am I right? Dont the seahawks already fulfill that noble cause?
Posted by greggg on February 27, 2012 at 6:43 PM · Report this
Supreme Ruler Of The Universe 27
@15

Financing? This guy is supposedly a Hedge Fund Manager.

He should be able tap into more financing than the combined cities of the West Coast -- and at negative interest rates.

That is, if he is what he says he is.

Posted by Supreme Ruler Of The Universe http://www.you-read-it-here-first.com on February 27, 2012 at 7:48 PM · Report this
28
@8 When the City was in danger of losing the Sonics they studied the impact of Key Arena on finances in the area (Key Arena Subcommittee report, ~2004 or 5.) One of the conclusions in the report was that entertainment spending in the region would not necessarily decline, but would be shifted to other activities. To the extent that those activities occur in Seattle (and King County for that matter) the City will lose revenue.

Another conclusion of the Subcommittee report was that Key Arena was viable long term - assuming that subsidised facility was not built in the area that would directly compete with it. Construction of this new facility will remove some portion of events that currently book the Key, and therefore impact the Seattle Center budget.

Finally, tying the City's bonding up with a new facility will limit the ability to create enough political will to fund re-developing Seattle Center outside of these bullshit 'pubic-private' disasters like the glass museum. And, frankly, the high end estimate for redeveloping Key Arena to meet all of the Sonics' requests was ~$200 million. That deal fell apart over how much the Sonics ownership would contribute, and that question largely revolved around who would pay to retire the ~$53 million in outstanding debt on the remodel/lease. But now the City is willing to partner in a larger deal that was demonstrated by the previous analysis to cut their own throats.

This is not free, will have direct impact on Seattle Center, and impact on other revenue streams (that are arguably fuzzy.)
Posted by Action Slacks on February 27, 2012 at 7:52 PM · Report this
Queen of Cups 29
I thought the Kings played out of LA...
Posted by Queen of Cups on February 27, 2012 at 8:44 PM · Report this
30
Funny, @29. They're all kings in California.
Posted by floater on February 27, 2012 at 9:59 PM · Report this
slade 31
Mcginn is a freak and so are his buddies? left alone to his obvious crack habit he would push Seattle into the sound and move to New Hampshire where he will eat toxic mushrooms and play grabby feely games with his pals?

I see more for lease signs in the future and more ignorance that should have could have been totally avoided? another parasite sucking money and power to his friends as he crys one day about being broke and the next wants us to sign Mega-checks for crap.
Posted by slade http://www.youtube.com/user/guppygator on March 1, 2012 at 11:35 AM · Report this
slade 32
To make it worse I had him as a better pick for mayor?
Like Hillary Clinton in North Korea? We give mega tons of food for some promise that will inevitably end up like all of these stories that start like this? um! I will give you a cheese burger if you don't carry a gun?

Its like how many wars has North Korea been involved in since the end of the Korean war?

what happend to trade? investments? joint ventures?

no! none of that? we will help feed them and repeat the same crap that been going on for 50 years?

Mcginn sucks like Hillary
Posted by slade http://www.youtube.com/user/guppygator on March 1, 2012 at 11:42 AM · Report this

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