Skip to content

Future of NBA arena subsidies, market comparisons to decide Kings’ fate

Mar 4, 2013, 11:37 PM EDT

Stern-2-650x315

As Sacramento Mayor Kevin Johnson has been advertising for the past month, we did indeed get confirmation of the identity of his ‘whales’ at his State of the City address on Thursday.

Reiterating parts of his four-part plan that included bringing together a local ownership group, finding big equity investors (whales), putting together a downtown arena deal, and demonstrating the value of the Sacramento marketplace – Johnson would announce that 24 Hour Fitness founder Mark Mastrov and billionaire Ron Burkle would put in a bid to keep the Kings in Sacramento.

“With all due respect to Seattle, I do hope they get a team someday, but let me be perfectly crystal clear, it is not going to be this team,” said Johnson.

Johnson also announced that former Kings great Mitch Richmond would join the local ownership group and that the city’s proposal would include an option to return WNBA basketball to Sacramento.

Sources close to the situation told PBT that the framework of the offer delivered to the NBA on Friday was very close to Seattle’s $341 million offer for a controlling 65 percent interest in the club. NBA spokesman Tim Frank confirmed delivery of the offer on Friday, the day of the deadline.

Over the next month Sacramento will continue to iron out the details on a public subsidy and arena deal locally with the Sacramento City Council, which will ultimately vote on a term sheet to be delivered to the Board of Governors in time for their April 18-19 meeting.

Sources tell PBT that the Sacramento offer will be conveyed by the group to the NBA’s joint committees in charge of reviewing the situation on or around April 1. It is expected that Seattle’s group will also meet with that committee around that time, though no meeting has been publicly acknowledged.

According to sources, the two issues that will drive the conversation is the league’s strategy for securing arena subsidies in the future, and the impact each market will have on team revenues and the league’s financial model as a whole. Also under consideration are timelines to deliver an arena, ownership groups, and the precedent the league could set by blocking an owner from selling to a group of their choosing.

The league blocked a sale of the Minnesota Timberwolves to a group headed by boxing promoter Bob Arum in 1994, but a well-placed source told PBT that the league views this transaction as “unprecedented,” citing that never before has the league relocated from a city that has supported its team both at the gate and with public subsidy dollars.

The Maloof ownership group reportedly has “little to no leverage” in NBA’s decision-making process. They also reportedly owe the NBA in excess of $100 million on a line of credit they’ve used throughout their ownership. If called in, the family’s financial woes could give the league an opening to use the ‘Best Interests of the League’ clause, similar to the way Major League Baseball removed Dodgers owner Frank McCourt.

Sources do not expect the Maloof family to push back on the league’s decision to back either Sacramento or Seattle, citing the prohibitive costs of an antitrust lawsuit, and the potential for the family to lose a chance to cash out in Sacramento or Seattle.

The issue of market comparisons between Sacramento and Seattle is cloudy, but sources expect Sacramento to be competitive in that area because it has one major sports team in their No. 20 TV market, while Seattle could have six major sports teams in its No. 12 TV market. We will cover this in a bit more detail later in the next few weeks.

While details about Sacramento’s ownership group are a bit hazy at this time, it has been expected that Mastrov would be the front man. The more private Burkle reportedly would focus on the development of the Downtown Plaza location. Sources indicate the duo will share in the ownership of a potential deal, though it’s unclear what those percentages will be. Both owners have been vetted by the NBA, and Mastrov finished second in the Golden State Warriors bid that recently went to the Joe Lacob group.

While Seattle’s Chris Hansen-Steve Ballmer group has enormous wealth, another well-placed source speaking to PBT under condition of anonymity said the league is happy with both ownership groups and not to expect a deal to hinge on any comparison between them.

If a showdown comes to the owners’ deciding vote, some sources hinted at a scenario in which the league tells the Hansen group that they’re going to choose Sacramento – allowing the Hansen group to bow out gracefully and avoid a divisive ownership vote.

Should the league favor Sacramento, sources say the work the city has done to fight for its team and the narrative it will give the league to sell to future cities in arena negotiations will have played a critical role in the NBA’s decision-making process.

Seattle’s deal contains a greater percentage of private funds due to local initiative-91 requiring public funds to return a guaranteed profit, which is a trend the league wants to avoid.  On the other hand, Sacramento’s deal fits the public-private model the league is selling to cities, with a larger public subsidy going toward a new state-of-the-art building in a downtown revitalization effort.

We will cover that issue in greater detail in the coming weeks.

In order to keep their team, Sacramento will need eight votes out of 29 other owners to block the transfer of ownership to Seattle’s Hansen/Ballmer group.

Latest Posts
  1. Timofey Mozgov’s local commercial is an absolute gem (video)

    Mar 26, 2015, 2:30 PM EDT

    Indiana Pacers v Cleveland Cavaliers Indiana Pacers v Cleveland Cavaliers

    Timofey Mozgov in a backward jersey? Timofey Mozgov in a backward jersey

  2. Tim Duncan bet on basketball, according to his girlfriend

    Mar 26, 2015, 11:02 AM EDT

    Tim Duncan, Mitch McGary AP

    Spurs big man apparently earned $100 by making 3-pointer against Thunder

  3. Pelicans-Rockets nearly had a very screwed-up ending (video)

    Mar 26, 2015, 10:25 AM EDT

    Anthony Davis, Alexis Ajinca, James Harden Anthony Davis, Alexis Ajinca, James Harden

    Referees miss blatant out of bounds call, clock momentarily stops before restarting

  4. NBA Draft prospect matchups to watch in NCAA Tourament this weekend

    Mar 26, 2015, 9:47 AM EDT

    Northeastern v Notre Dame Getty Images

    The best matchup of the weekend may be Jakob Poeltl vs. Jahlil Okafor.

  5. Report: LeBron James frustrated with Kevin Love for not fitting in

    Mar 26, 2015, 9:08 AM EDT

    Cleveland Cavaliers v Atlanta Hawks Cleveland Cavaliers v Atlanta Hawks

    That might be fair, but what about all Love’s reasons for being frustrated with Cavaliers?

  6. Five Things We Learned in NBA Wednesday: Kevin Love seems to be fitting in just fine suddenly

    Mar 26, 2015, 2:29 AM EDT

    Kevin Love, Zach Randolph AP

    Lionel Messi was hanging out at the most entertaining NBA game of the night.

  7. Chase Budinger and Jordan Clarkson exchange clutch points that harm their teams (video)

    Mar 25, 2015, 11:30 PM EDT

    Jordan Clarkson, Gorgui Dieng AP

    Lakers win and hurt their draft position, Timberwolves win and help theirs

  8. James Harden dunks on Omer Asik and Anthony Davis (video)

    Mar 25, 2015, 10:45 PM EDT

    James Harden, Nick Johnson James Harden, Nick Johnson

    Those are no slouches defending the rim against the Rockets star

  9. Report: Mark Price leaving Hornets for UNC-Charlotte

    Mar 25, 2015, 8:35 PM EDT

    Charlotte Hornets v New York Knicks Getty Images

    Hornets in thick of playoff race, but this chance for Price to become head coach

Featured video

Where does Steve Nash rank all-time?
Top 10 NBA Player Searches
  1. K. Durant (7195)
  2. K. Lowry (6361)
  3. R. Rubio (5885)
  4. P. George (5729)
  5. A. Davis (5695)
  1. D. Howard (5574)
  2. L. Aldridge (5554)
  3. G. Monroe (5496)
  4. D. Rose (5463)
  5. D. Cousins (5426)