A Sacramento Kings move to Anaheim could open door for new NBA franchise in Newark
WEDNESDAY, 02 MARCH 2011 14:38
BY EVAN WEINER
THE BUSINESS AND POLITICS OF SPORTS
If you listen to the sports radio talk shows, as painful as that can be at times, there seems to be a resentment that basketball players such as LeBron James, Chris Bosh, Dwayne Wade, Carmelo Anthony, Chris Paul and Dwight Howard are manipulating the system using impending free agency as leverage to force trades or collude to play with other big time players.
In the CNN-SI Truth and Rumors section, Howard is leaving Orlando for the Los Angeles Lakers as a free agent or maybe he will join the Brooklyn Nets.
The New York Knicks flagship radio station, WEPN which along with New York newspaper sports sections led the cheerleading for the Knicks pursuit of Anthony ran a promo pushing Chris Paul to the Knicks when Paul becomes a free agent after 2012. It seems the NBA's major market teams can somehow fit stars into big cities despite the presence of a salary cap just like Major League Baseball, which has no salary cap but significant revenue sharing.
But no one ever talks about the ultimate free agency — franchise relocation.
The prevailing thinking is that the NBA's big stars want to go to big markets. LeBron James and Chris Bosh didn't go to a big market; they went to Miami where they joined Wade. Anthony ended up with the Knicks. Will small market NBA owners look to big markets like Los Angeles, Chicago and New York (Newark) if they cannot make it in Sacramento, Indiana, New Orleans, Memphis and Charlotte to name a few struggling markets?
The National Basketball Association has approved a number of moves in the past decade. Michael Heisley left behind Vancouver, Canada for a new arena in Memphis in 2001. George Shinn took his Charlotte Hornets basketball team to New Orleans in 2002. Two years ago, Clayton Bennett failed at his attempt to get a new Seattle arena for his SuperSonics basketball franchise and literally went home — his home — to Oklahoma City.
Memphis, New Orleans and Oklahoma City are small markets and there seems to be a feeling that the small markets cannot work over the long haul in the NBA.
The Maloof brothers, the owners of the Sacramento Kings, apparently are very interested in moving their basketball business from California's capital to a very crowded professional and college market in Anaheim, California which is south of Los Angeles. The Maloofs have received permission from the NBA to pursue a transfer to the arena close to Disneyland and will tell league officials in mid April if they intend to move south.
Anaheim is a much wealthier market than Sacramento and potentially oozes TV money, which is extremely important.
The Maloofs are negotiating with Anaheim officials and could be speaking with the big bosses from Rupert Murdoch's FOX Sports West about the huge hole in programming at the regional cable network starting in the fall of 2012 when Jerry Buss's Los Angeles Lakers join forces with Time Warner and form a potentially high revenue English- language Lakers channel and a Spanish-language Lakers channel.
In the David Stern world of success, a franchise needs three components — strong government support (Anaheim is pushing to get the Maloofs to sign a deal with Henry Samueli and share the city owned arena with Samueli's NHL Anaheim Ducks franchise), a strong local cable TV contract (FOX Sports West will have an opening for programming) and strong corporate support.
Newark has an NBA franchise at the moment but the city's arena will have an opening, presumably in 2012-13 when the present NBA franchise moves to Brooklyn. New Jersey Governor Chris Christie has spoken to Stern about that opening, so presumably there is strong government support for a Newark NBA franchise. The Comcast-Time Warner and New York Mets owned SNY regional cable network has no professional (NHL-NBA) games during the winter and could use programming. New Jersey has not shown strong corporate support for the Nets or NHL Devils and that might be a problem. The New York market oozes TV money too despite two Major League Baseball teams, two NFL teams, three National Hockey League teams, two NBA teams and a few of Big East basketball teams.
That leads to this question. For an owner, is being a big fish in a small pond better than being third fiddle in a super market like New York or Los Angeles?
The Maloofs are exploring that question.
If the answer is yes, the Maloofs move could open the door for Christie to recruit a disgruntled NBA owner once Mikhail Prokhorov takes his Nets through the Holland Tunnel and the Brooklyn Battery Tunnel (or whatever it will soon be renamed) to Brooklyn in two years. There are some financially-challenged franchises in the NBA which may trigger an owners lockout starting July 1. The suspects include the NBA-owned New Orleans Hornets, Charlotte, Memphis and Indiana.
Sacramento and Charlotte were once model NBA franchises. Both businesses had phenomenal success complete with sellouts and rabid fans. But both cities didn’t have the proper facilities to maximize revenues complete with luxury boxes and club seats along with restaurants in the arena. Shinn never got a new arena and left. The city built a new arena for an expansion team and that team has not been embraced.
Sacramento has had a long history of flirtation with Anaheim.
For years various Kings ownership groups have sought public funding to replace the privately funded Arco Arena, which opened in 1988, and build a new arena for the city's NBA franchise. Now, Sacramento Mayor Kevin Johnson, a former NBA player, and city officials are scrambling to put together a proposal that pleases the Maloof brothers.
Johnson and city elected officials and business leaders have about six weeks to accomplish the nearly impossible. Get funding for a new arena and do it in an economically stressed climate in California.
A little background is necessary.
In 1996, the Kings owner at the time, Jim Thomas, proposed building both a Major League Baseball stadium and an NBA arena in the city, but by January 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 $82 million to help ease his financial burden.
Thomas sold the franchise to the Maloof brothers in 1998.
In 2001, Sacramento's 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, partly because they didn't want to get stuck with a debt service bill. When the issue was revisited in 2004, the Maloofs were unhappy that a city councilman offered a resolution that would cap spending at $175 million for the city and $175 million for the Maloofs.
Apparently a salary cap on NBA players' payroll is fine for the brothers, but a municipal spending cap for an arena is unacceptable.
In 2006, there was another arena proposal on the table and Sacramento officials appeared to have deliberately used language that made it unclear what voters are being asked to approve. The two-part referendum called for a quarter of a cent general tax hike for 15 years and then asked whether voters would like to see the estimated $1.2 billion in proceeds go to building an arena and other community projects.
Why didn't Sacramento politicians mention that the tax increase in question is in fact a sales tax hike?
The answer seemed to be that the arena referendum had to be worded in such a way because it was never going to get the two-thirds approval needed under California law to pass a sales tax increase. Officials need just a simple majority, a 50.1% plurality, to win a general tax hike.
The politics of sports is at its best extremely messy, and politicians generally go to great lengths to keep stadium and arena building proposals off the ballot. In 2006, Sacramento city officials seemed to have reached a new high — or low, depending on one's viewpoint — in making sure they do right by the Maloof brothers and the NBA. They were determined to build an arena despite the language in Proposition 218, which calls for a two-thirds majority on specific tax increases like arena and stadium projects.
If you looked at the details of the proposed lease between Sacramento and the Maloof brothers, it was clear that the Maloofs would be walking away with a windfall, but that's how the government–sports franchise partnership works and you can't fault the Maloofs in this deal. Sacramento was so desperate to hold on to its only major league team that it was willing to give away the store if voters say yes.
The city, through the general tax, would have put up at least $470 million for the arena and parking. Sacramento officials thought it would have cost as much as $542 million for both, and there also would have been a cost of between $35 and $51 million to pay off the debt service on the loans that will be taken out for the construction. 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 in 2006 from naming rights. The brothers would also have had to kick in $20 million for arena repairs. It was a sweet deal for the Maloofs and a rotten one for Sacramento.
The Maloof-Sacramento "agreement" fell apart because the Maloofs did not want an "arena-village" sprouting up around the arena and wanted lots and lots of parking.
The Maloofs and the city began fighting 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 have now 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 has become significant and a deal breaker.
The two questions on the November 2006 ballot were sounded defeated but there is never surrender in the "arena-game." Stern took over the negotiations in 2007 and nothing happened. The NBA recently walked away from the bargaining table leaving the Maloofs to look elsewhere. Still Sacramento Mayor Kevin Johnson is looking to get an arena done and the NBA has a history of going back to failed cities. Charlotte, Memphis, New Orleans, Minneapolis, Salt Lake City and Toronto among others were failed basketball cities. Dallas, Houston, Philadelphia (the Warriors moved to San Francisco in 1962 abandoning the town. Syracuse moved to Philadelphia in 1963.) and Chicago failed to support NBA or ABA franchises.
In April 2005, NBA Commissioner David Stern threw a hissy fit when New Jersey officials would not commit to building an arena for Nets basketball in Newark.
"New Jersey blew it," Stern said before a Nets playoff game. "We practically begged them, and the New Jersey politicians did not step up." Stern was irate because New Jersey politicians said no to public funding for a Newark building.
Newark, Seattle, Louisville, Kansas City, Pittsburgh and Vancouver could be in the mix if an owner decides his present market does not work financially. The Maloof's decision to become a small fish in a large pond could have some major reverberations. Newark might be a free agent destination, not for Dwight Howard or Chris Paul, rather an NBA owner.
Evan Weiner, the winner of the United States Sports Academy's 2010 Ronald Reagan Media Award, is an author, radio-TV commentator and speaker on "The Politics of Sports Business." His book, "The Business and Politics of Sports, Second Edition is available at www.bickley.com, Barnes and Noble or amazonkindle. He can be reached at email@example.com