Friday, May 15, 2009

Did Schwarzenegger Open the Door for LA to Return to the NFL? Evan Weiner

May 15, 2009

10:45 AM EDT

(New York, N. Y.) -- Has California Governor Arnold Schwarzenegger accidentally opened the door for the return of a National Football League team to Los Angeles with a proposal to sell the Los Angeles Memorial Coliseum and other state properties to help close the state’s multi-billion dollar deficit? The answer could very well be yes because in many ways it has been the Los Angeles Memorial Coliseum Commission that has been a major impediment in the league’s plan to place a franchise in the Los Angeles area to replace the two teams, the Coliseum-based Raiders and the Anaheim-based Rams, which departed the area after the 1994 season.

The Coliseum Commission believes that the National Football League should only consider the Coliseum as the venue of choice in Los Angeles and since the Coliseum Commission has enormous clout in both LA and in the state capital in Sacramento, it has been able to get in the way of attempts to build other football facilities in the Los Angeles area.

The City of Industry is studying a proposal put forth by Ed Roski, who failed to land an NFL expansion franchise in LA in 1999, to build a stadium village complete with commercial and residential properties. In April 2008, the California State Senate blocked an attempt by the City of Industry to divert $820 million in property tax revenue from government services and use it for development subsidies. Although the Coliseum Commission was on the sidelines on the issue, it can be deduced that it had a heavy hand in the State Senate’s action.

Los Angeles County Supervisors led the charge against holding a legislative hearing about the City of Industry’s request. The Coliseum is sacred ground in Los Angeles.

Meanwhile towns around the City of Industry have expressed concern about having a football stadium within their backyards. Walnut is suing and asking for another environment impact study of the stadium and Chino Hills officials want to know how the stadium will impact traffic going through the city on game day. Another group, Citizens for Communities Preservation is suing Roski’s Majestic Company in an attempt to block the stadium. Diamond Bar has no problems with Roski’s plan.

The Coliseum Commission is no doubt watching how the court cases will unfold.

Governor Schwarzennger’s proposal also includes the sale of the Cal Expo grounds in Sacramento and that could close the door on that city’s efforts to build an arena for the National Basketball Association’s Maloof Brothers-owned Sacramento Kings franchise from getting a new arena. The league brokered a deal with Cal Expo officials to use part of that land to build a new arena along with a village of housing and commercial property surrounding the new sports facility.

The Maloof Brothers, have been seeking a new arena for the better part of the 21st century. The team’s previous owner was seeking a new building in the 20th century. In 1996, then Kings owner Jim Thomas proposed building a Major League Baseball stadium and an NBA Arena in the city but by 1997, the idea fell apart and Thomas began threatening to sell the team because the franchise was losing money.

Sacramento city leaders, fearing that Thomas might move the team to Anaheim or some other city, loaned him $22 million to help ease his financial burden. Thomas then sold the franchise in 1998 to the Maloof Brothers.

In 2001, Sacramento Mayor Heather Fargo put together a task force to study whether Sacramento should green light an arena and entertainment center in the city’s downtown area and, by November 2002, there was some sort of commitment to the plan. But the Maloof Brothers pulled out of the proposed venture within a year because they did not want to get stuck with a debt service bill. When the issue was revisited in 2004, the Maloofs were unhappy when a city councilman offered a resolution that would cap municipal spending for the proposed $350 million arena at $175 million. The Maloffs were not impressed with putting up $175 million and the spending cap.

Apparently the NBA’s spending cap on salaries was fine with the Maloofs but a municipal spending cap on an arena was unacceptable.

In 2006, the Maloofs and the city seemed to have struck a deal for a new arena that would have secured the franchise for decades if voters said yes in a November 2006 referendum The city, through the general tax, would have put up at least $470 million for the arena and parking. The city would own the building, but all of the revenue generated for all events held inside the building would go to the Maloof brothers. Not only that: The siblings would keep all the money earned from selling the naming rights to the city owned arena.
The Maloofs would pay off Thomas' old loan, which they inherited after they purchased the team. Additionally, they would pay $4 million in annual rent, an amount that could easily come from naming rights. They will also have to kick in $20 million for arena repairs. The Maloofs walked away from the deal however.

The Maloofs and the city fought over development surrounding the arena, the city wanted commercial and residential building to ring the new facility to spur downtown development but the Maloofs, who would get just about every nickel of revenue inside the building, wanted the land for an 8,000 space parking lot. The Maloofs wanted the big parking lot because they would keep all of the money generated from the lot. The Maloofs wanted the same parking deal they had and still have at the old arena.

That might not seem like a deal breaker until you do the math. Assuming the Maloofs fill the lot and charge $10 a car, that would mean $80,000 a night multiplied by 41 and you get more than $3 million annually from parking alone just from Kings events. The Maloofs would also get parking money from non-Kings events at the building, so the parking lot issue was a deal breaker.

The NBA got involved in 2007 by hiring John Moag, the man who convinced Cleveland Browns owner Art Modell to accept a Maryland offer for a new Baltimore stadium in 1995. Moag went to work and eventually crafted a proposal for a new arena-village at Cal Expo

Now that Governor Schwarzenegger is planning to sell off the property, it might be back to the negotiating table for the NBA, Moag and the city or the Maloof Brothers may finally call it a day in Sacramento and either sell the team to someone who might want to keep it in small market Sacramento with limited revenue streams from cable TV and corporate support, sell the team to a group who might move the franchise elsewhere or just move the team to another city.

Schwarzenegger may have opened one door for a franchise and closed another with his proposal of selling state properties.

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