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Kevin Johnson to Maloofs: There will be no negotiations during critical Friday meeting

Apr 13, 2012, 8:58 AM EDT

NBA executives, Mayor Johnson, and Gavin Maloof meet

I wrote on Thursday about the recent developments in the Sacramento Kings arena situation, and namely the Maloofs’ recent actions that amount to a legal full court press designed to land the franchise in Anaheim. The quick and dirty to catch you up is this – the Maloofs, Sacramento, AEG, and the NBA came to an agreement in principle on a $391 million Entertainment and Sports Complex during All Star weekend. A few weeks ago, the Maloofs publicly refused to pay for pre-development costs totaling $3.26 million that were agreed upon during that time. The Maloofs are the only party that disputes that they agreed to the amount, and the dispute has landed at the NBA Board of Governors meeting, which is where we pick up.

The Maloofs pitched at the BOG meeting for about 90 minutes yesterday, and afterwards they disappeared through a side exit not to be found by reporters guarding the various orifices of the St. Regis Hotel in Manhattan.

Dale Kasler of the Sacramento Bee provided this report following the meeting:

In particular, the Maloofs have said they never agreed to contribute $3.26 million toward environmental studies and other “pre-development” costs, as the term sheet says. Spokesman (Harvey) Englander declined to elaborate on the Maloofs’ presentation, other than to say the topic of relocation didn’t come up. “They asked good questions and it was a very good meeting.”

Earlier, Englander said the family would present a “historical analysis of the transaction” to owners, and hoped to have a clear path set toward a deal by the time the meetings end on Friday. Englander said it could take days or weeks, however, to come to a resolution.

On one hand, if you take the statement at face value, it’s encouraging for Kings fans that the topic of relocation didn’t come up.  But the last part about ‘days or weeks’ is where the rub lies, as it reflects the Maloofs’ position that there is still more to discuss about a deal that was already supposed to be done. During this departure from the handshake agreement, the Maloofs’ actions have become increasingly adversarial and this has culminated in Sacramento business leaders asking commissioner David Stern to remove them as owners. From the city-side, nothing is up for grabs, and the parties opposite the Maloofs have stood united in maintaining that the major elements of the deal aren’t going to change.

So what exactly transpired during the closed door session at the BOG meetings on Thursday? We’re still flushing that information out, but David Stern apparently setup a meeting between mayor Kevin Johnson and the embattled family. This was announced mid-day Thursday after the meeting had concluded, by Maloof family spokesman Englander, no less:

“The commissioner said the mayor (Kevin Johnson is) flying out, taking the red eye, (and) suggested we meet with him. And we are,” said Englander.

Questions swirled once the vague itinerary of events was disclosed to the public. What did Stern and the owners tell the Maloofs? Did they tell them to go kick rocks, to take the deal that they had already negotiated? Did they tell the Maloofs that they could indeed try to make a change to the main elements of the deal after the fact? And under what pretenses would Johnson and the Maloofs be meeting?

Clearly, there had to be a plan other than to stick the two parties in a room only to see them storm out 20 minutes later.

After about six hours of radio silence, Kevin Johnson’s office released to PBT a letter they sent to the Maloofs regarding Friday’s meeting. In the letter, Johnson made it entirely clear that he does not plan on negotiating when the sides meet up. Here are selected excerpts and the entire text:

I understand that during today’s NBA Relocation Committee you and your team made a presentation. During the discussion, it was suggested that a meeting with me tomorrow might be beneficial. As has been my commitment throughout this process, I am always happy to meet in the spirit of open communication and partnership. However, in advance of our conversation, I believe it important to make clear several key points:

First, all parties agreed to a deal in Orlando on February 27th, codified in the term sheet subsequently approved by our City Council. At the time, George Maloof explained the Maloof Family’s reason for agreeing to the deal, saying to the Sacramento Bee that it is a “fair deal…worth taking.”

Any representation that a deal was not reached is simply not consistent with the perspective of every other party to the negotiation nor the actual statements of the family.

Second, throughout this process, we have worked closely with the NBA as a valued partner at your request, as documented by the following Kings’ public statements that the “NBA take the lead on this” while remaining “in very close contact with the league” and being “apprised of everything that’s going on.”

Third, and most critically, under no circumstances will the City make material adjustments to the current terms of the deal. Put simply, we have done our part. And there should be no expectation in tomorrow’s conversation that this deal is subject to further negotiation.

We take you at your word that you are committed to Sacramento as you’ve said repeatedly in recent weeks. The best – and only – way to demonstrate that commitment is to honor the “fair deal” as all other parties have done. Your handshake is your handshake. Your promise is your promise.

So let the games begin. The Maloofs’ statement that it could take days or weeks to come to a resolution reeks of haggling over the price of clear coat, and it remains to be seen how much negotiating the NBA is going to actually permit here. For example, negotiating over a small stipulated clause involving little to no dollar value is probably on the up-and-up. On the other hand, should the Maloofs say they want to pay $25 million and not the $73 million they’ve already committed – that would definitely be a non-starter.

Right now, the argument is over $3.26 million in pre-development costs, or one year of Travis Outlaw’s salary. Before the Maloofs’ legal maneuverings started to resemble that of a family that wanted to get out of Dodge, I had surmised that the family’s argument over pre-development costs was really designed to extract a concession down the road.

And now it doesn’t matter if it’s up-front costs or back-end revenues, though, because Johnson is not negotiating. Sources in several different arena camps have made this much clear, and if it wasn’t clear Johnson’s letter was loud and clear. The only real question is – how much juice does Johnson have?

This is one of two things for him. One less settling possibility for Kings fans is that this is Johnson’s line in the sand, a way for him to say to his constituents that he wouldn’t back down. In this case Johnson believes (and he is right) that the city of Sacramento has done enough, and for better or worse he’s going to stand on that principle at least for now. So he draws the line in the sand with the hopes that the odds are in his favor, that the NBA and other owners will recognize that the city has done their part, and not allow the Maloofs to exit stage right.

Then there’s possibility No. 2, which is much more likely in my opinion, and that is that Johnson has already taken his cues from commissioner Stern. He isn’t gambling with the years of work completed by all of the various stakeholders. He isn’t gambling with all of the political capital he has spent on getting an arena deal done. He isn’t gambling with the political capital spent by all of his colleagues and he certainly isn’t putting the entire project on the line with a take-it-or-leave-it demand that isn’t rooted in reality.

In other words he knows that his price is firm, and he’s not buying the clear coat.

We’ll see later Friday who had the juice and for the Maloofs, if the juice of owning an NBA franchise is worth the squeeze.

  1. rayburns - Apr 13, 2012 at 9:43 AM

    the Maloofs, Sacramento, AEG, and the NBA came to an agreement in principal

    The key word is ‘principal’, because its obvious the Maloofs have none….

  2. allmyteamsareterrible - Apr 13, 2012 at 9:58 AM

    3 million dollars is literally nothing to these turds. I don’t understand the hold up.

    • echech88 - Apr 13, 2012 at 10:50 AM

      I think it is clear that ownership had decided long ago they wanted to relocate and all that has happened in the last year hasn’t changed that.

      I think the team should stay but I will say to play devil’s advocate that it would worry me as an owner to commit long term to a market that only mustered up an acceptable level of sponsorships once it was a life or death situation of the team leaving. What happens once the team is locked in long term again?

  3. smcgaels1997 - Apr 13, 2012 at 11:55 AM

    3 million is a lot to these turds…that’s the red flag..they are broke

  4. AlohaMrHand - Apr 13, 2012 at 1:47 PM

    i read today that George Maloof now says they are open to renovating Power Balance Arena instead of building a new facility.Excuse me?Why wasn’t this suggested years ago?More grandstanding by the Maloofs in their attempt to go to Anaheim.And if the city agrees they’ll just come up with another excuse as to why they can’t accept this deal.Its a joke

  5. nodaclu - Apr 13, 2012 at 2:38 PM

    Maloof’s just released their list of “demands” (remember, they are essentially the TENANT in this deal)

    • Kings have not agreed to putting up collateral for a new bond sale to extend the team’s existing city loan.

    • Kings want approval rights over arena designs and change orders.
    • Kings want city to pay all pre-development costs.

    • Kings do not want to be responsible for additional costs for change orders on arena.

    • Kings want to be allowed to continue to use Power Balance Pavilion in limited ways that would not compete with new arena.

    • Kings want more limited wording on whether the team can relocate before 30 years.

    • Kings want to approve the city’s arena management agreement with AEG.

    • Kings want priority in scheduling practices at the arena, and want to not be charged for using the arena for practices and other Kings events.

    • Kings do not agree to a 30-year lease. They want that issue negotiated further.

    • Kings do not want to be responsible for game-day arena expenses.

    • Kings want a say on arena naming rights and signage.

    • Kings want further negotiations on use of certain suites, clubs and restaurants.

    • Kings want to negotiate for parking alternatives if a premium parking garage is not completed nearby in time for arena opening.

    • Kings want to delete the term sheet section that subjects the arena to all city taxes.

    • Kings want agreement to include suitable office space for team at the arena.

    • Kings want to delete provision that says any new owner of team must assume obligations in term sheet.

    Read more here: http://www.sacbee.com/2012/04/13/4411932/kings-arena-deal-concerns-range.html#storylink=cpy

    Leave Maloof’s, and take your entitled attitude with you. You’re a disgrace to your father’s good name.

  6. jonirocit - Apr 13, 2012 at 4:17 PM

    They are eyeballing the tv deal with fox guys it’s plain and simple they know the lakers are getting a tv network and these guys wanna get closer to Vegas and want all the celebrity of Los Angeles . The sponsorships would have been there had they continued to win . If this new arena would have been proposed when the kings had c-Webb vlade and all the stars they would have had sponsors all over . The central valley needs the kings way more than Los Angeles needs a third team.

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