Will The NBA Finance A Kings Arena?

PurpleHaze · Jul 9, 2007

http://cbs13.com/topstories/local_story_191001906.html
ReportingSteve Large

(CBS13) SACRAMENTO Rumors are running rampant - whisperings the NBA could be funding a new Kings arena. But is there any truth to the speculation?

It’s never happened before, The NBA itself, financing an arena for one of its teams. A person close to the negotiation process tells CBS13 it could happened in Sacramento.

NBA commissioner David Stern may be putting his leagues' own money on the line to finance a new Kings arena.

CBS13 has learned that the league is considering funding a new home for the Sacramento Kings after spending seven months looking for other financial sources for the project. Stern announced the NBA's involvement in the search at a press conference in December

Assemblyman Dave Jones, who has actively campaigned against a publicly financed arena, says the move would make sense.

“They have the money to do it. They make tons of money, providing professional basketball and it’s a business like any other business. So if they want a building, they should invest in it just like any business does,” says Jones.

The NBA says it will announce its new financing idea in a couple of months, but its keeping its post Arco plans private until then. Meanwhile one new idea for a location for the arena is at Cal Expo. It has 400 acres, and it’s centrally located.

(© MMVII, CBS Broadcasting Inc. All Rights Reserved.)

VF21 · Jul 9, 2007

If the NBA finances the arena, which I proposed a couple of months ago as a possible solution, I'm willing to be they won't locate it at CalExpo. That would make no sense whatsoever, considering the associated infrastructure problems with that location.

My guess would be it'll be located right next to the existing Arco Arena.

PurpleHaze · Jul 9, 2007

VF21 said:

I agree. Even though the NBA does not have direct experience financing an arena they are not so stupid as to put it at Cal Expo with its low lying flood plain and horrible freeway bottleneck problems.

BMiller52 · Jul 9, 2007

If This Happens Stern=god. Thank You Stern. Please God Let This Be True!!!!!!!!!!!!!!!!!

kennadog · Jul 9, 2007

Interesting, but I'm wondering how that would work. Stern is an employee of the team owners. I'm wondering if the other owners will agree to spend NBA money on an arena in Sacramento? Would have to be a loan, I would think, but on much more favorable terms than a conventional bank loan to make it work. I do hope they can come up with a plan that can realistically work.

They would be stupid to put it at Cal Expo. At least stupid, if they do the due diligence to find out why that would be an awful place to put an arena. (My reasons are in another thread and I don't want to repeat them here.) The only reason, I can see why they might not put it where the current Arco is, is because I suspect, if they tear down Arco, the franchise owners could probably sell the land for a considerable sum. That could be the "equity" investment needed to reduce the amount of funds that would need to be borrowed to build the arena.

The other thing about Cal Expo, I would suspect, is the deal might be a long term ground lease. Then they don't actually have to buy the land either. A lease may be economically attractive, if the annual lease payments are quite a bit lower than debt service on a loan to buy land outright.

I'm keeping my fingers and toes crossed for a good outcome.

JB_kings · Jul 9, 2007

Interesting idea. But it is a pandora's box if they go that route. All the other cities looking for new arenas will pull their deals off the table if this is true. Cal Expo is just another money grab for those with their hand out. The land that makes the most sense financially is next to Arco. And lastly, you know what I would do if I were the NBA? I would explore how they can build this thing so that zero tax dollars go to the city to operate the building. That's because those bufoons don't deserve a nickel.

VF21 · Jul 9, 2007

JB_kings said:

I think the NBA might be able to do some kind of financing agreement that gives them a part interest in the arena without making it entirely their venture.

Bottom line is if it gets Sacramento the much-needed new arena AND a place for Kings/Monarchs to continue to play well into the future, I am totally for it.

Emma · Jul 9, 2007

This may get the NBA a new cash cow.

If they choose to fund Basketball specific arenas they could get around public financing hangups in other major cities as well as in China.

Awesome idea. Just have to create a realistic model for NBA Arena Financing.

Didn't the NFL also pony up some dollars to help fund a couple of their teams? San Francisco? (Oops, I mean Santa Clara).

Circa_1985_Fan · Jul 9, 2007

I dont see the NBA financing this thing...why would they do it? This is Dave Jones's wet dream come true. But come on, does anyone actually think that we'd get a FREE arena?? Why does it make sense??

Circa_1985_Fan · Jul 9, 2007

ryanandty said:

Nope, that still is in limbo, and it would have been privately funded, but not at all by the NFL in any way, if I remember right. The Niners still have no future home.

Emma · Jul 9, 2007

Circa_1985_Fan said:

Not free. Like paying for a house someone must pay twice for it after interest. It may be a Maloof sports / Sacramento / other NBA owners 35/50/15 joint venture. Since Sacramento is a proven and reliable market the risk vs. reward analysis seems promising.

Circa_1985_Fan · Jul 9, 2007

ryanandty said:

I just dont know how it would work, but I guess if we're going to be the guinea pig for this, thats fine with me.

VF21 · Jul 9, 2007

Circa - Why start shooting it down before we've even heard any kind of ideas? It's so rare we get any glimpse of good news, I'm gonna just enjoy it for a bit.

PurpleHaze · Jul 9, 2007

JB_kings said:

Hopefully, if this "rumor" is true the NBA will look seriously at land options in Yolo (West Sac), Placer, and El Dorado counties. As bad a Sac City has been in all this Sac County is just as lousy. I would love it if an adjacent county got the big arena prize even though the existing Arco location probably would be the most logical and expedient choice.

uolj · Jul 10, 2007

Let's say that the NBA basically does pay for the majority of the arena. Based on the way Stern tends to work, I'd imagine there would be some (likely monetary) benefit for the league beyond the obvious "keeping teams in good cities is good for the game" stuff.

If they own the arena straight out, could they make a profit on non-(W)NBA related events? If I remember correctly it didn't work out so well for Paul Allen in Portland, although I'm not sure how similar this would be.

Anybody else have any ideas on how this could be worth it for the NBA if they went that route?

kennadog · Jul 10, 2007

uolj said:

Yep, Paul Allen went bankrupt on his arena ownership. A whole heckuva lot richer than the Maloofs.

Well in my above post, I said it might be a loan? That would guarantee payback with interest, with a lien on the property as security. Maybe even a lien on the franchise as extra security.

Maybe to sweeten it, they could share in some of the revenue, too. The one thing I'm sure of, is the league is not going to just give money away.

Another way to do it, would be a conventional lender with the league insuring the loan (backing in case of foreclosure)?

There's probably multiple financing scenarios for the really creative mind, which is what I assume Stern has researching the possiblities.

Circa_1985_Fan · Jul 10, 2007

VF21 said:

I know, I know

It just seems WAYYYY too good to be anything true or realistic, ya know?? Cautious optimism I guess should be in play, but after the road we've been down the last few years, its hard to really get a good feeling about ANYTHING.

Bricklayer · Jul 10, 2007

Thsi sounds like a pipe dream. A particularly delusional pipe dream.

If it did somehow happen I would think it would have to be on some pretty amazing terms -- the NBA is not a charity, and its not going to "donate" hundreds of millions of dollars or whatever to a little berg out in the Central Valley whne its got other markets chomping at the bit.

So some of the types of things that might happen...
1) land is free/donated
2) massive tax breaks/or even no taxes
3) NBA builds its building, no lease
4) zoning concessions in surrounding area
5) all concessions, parking etc. 100% to the league/Maloofs
6) ditto with all non-NBA related events
7) then with overhead largely eliminated some sort of revenue sharing with the Maloofs allowing the league to make back its money in some reasonable period of time

cfechter · Jul 10, 2007

Bricklayer said:

I'm going to have to disagree with you here, Brick. If the NBA financed the arena, they would not be "donating" the money to anyone. They would set up some sort of parntership with the Maloofs as a profit-making enterprise, lease the building back to the Kings, to the shows that come into town, etc. Of course they would keep all income from running the building if they in fact owned it. Why would the government be entitled to any of it?

I do agree that tax breaks would probably be given by the county in the form of reduced or eliminiated property taxes on the property. County governments routinely make deals with large employers to help entice them to come and stay. In this case, it would be to help keep one of the things that defines our community. I also agree that zoning considerations would probably be given in this case as well.

What stinks about the way the NBA does business is that it expects local governments to finance arena projects for them and it expects that the local governments to allow the teams to keep all income from operating the arena. Why should a local government pay that much money to allow a private enterprise to run a business? I admit that I know nothing about arena finance, but I'd imagine that if I had no debt service payments to worry about, I could make a pretty freakin' penny off of running an arena.

The NBA/teams have the financial wherewithal to finance arenas themselves, they just choose not to. If a team had to borrow $300,000,000 to finance an arena and they got a 10% interest rate, the annual debt service payments would be slightly over $31,000,000. Guess what, that's only 1/2 of the Kings annual payroll - so if you're the NBA, you could choose to pay the players 1/2 of what you currently pay them, use the rest for debt service on financing/building arenas. (Edit - I don't know how difficult it is to get a $300,000,000 loan, nor do I know what the rates could be on a loan of that size/risk level, I'm just throwing numbers out there).

Of course, they would never agree to it and it would never happen like I suggested, but why should I, as a taxpayer, be asked to finance a project for a business enterprise that could sustain itself?

kennadog · Jul 10, 2007

As far as I know, no city has ever just given money for an arena. And Sacramento gave no money for Arco I or II. It's either in the form of a loan (like bond funds) or a specified rent/lease gets paid. A city is not likely to take the risk on profit sharing. Especially since they would also have to share the losses then (or at least get zero), which the Kings have had in many years. They need the guaranteed money of loan payments or rent, which has to be paid despite the profits or losses. That's exactly what almost every other business venture does. Pay rent, loan payments or both.

Ryle · Jul 10, 2007

cfechter said:

I'm going to have to disagree with you here, Brick. If the NBA financed the arena, they would not be "donating" the money to anyone. They would set up some sort of parntership with the Maloofs as a profit-making enterprise, lease the building back to the Kings, to the shows that come into town, etc. Of course they would keep all income from running the building if they in fact owned it. Why would the government be entitled to any of it?

I do agree that tax breaks would probably be given by the county in the form of reduced or eliminiated property taxes on the property. County governments routinely make deals with large employers to help entice them to come and stay. In this case, it would be to help keep one of the things that defines our community. I also agree that zoning considerations would probably be given in this case as well.

What stinks about the way the NBA does business is that it expects local governments to finance arena projects for them and it expects that the local governments to allow the teams to keep all income from operating the arena. Why should a local government pay that much money to allow a private enterprise to run a business? I admit that I know nothing about arena finance, but I'd imagine that if I had no debt service payments to worry about, I could make a pretty freakin' penny off of running an arena.

The NBA/teams have the financial wherewithal to finance arenas themselves, they just choose not to. If a team had to borrow $300,000,000 to finance an arena and they got a 10% interest rate, the annual debt service payments would be slightly over $31,000,000. Guess what, that's only 1/2 of the Kings annual payroll - so if you're the NBA, you could choose to pay the players 1/2 of what you currently pay them, use the rest for debt service on financing/building arenas. (Edit - I don't know how difficult it is to get a $300,000,000 loan, nor do I know what the rates could be on a loan of that size/risk level, I'm just throwing numbers out there).

Of course, they would never agree to it and it would never happen like I suggested, but why should I, as a taxpayer, be asked to finance a project for a business enterprise that could sustain itself?

One thing I do know is that the SF Giants pay 20 million a year in loan payments to pay off their new ballpark.

hiero · Jul 10, 2007

VF21 said:

ya exactly. cal expo is in a horrible horrible situation for adding even more traffic. Why they wouldnt build in the area surrounding arco I dont know.

Bibby's Tattoo's · Jul 10, 2007

I just saw a news flash saying that the NBA is denying financing for a new arena, but that they will announce their finacing idea before the season starts.

Mike0476 · Jul 10, 2007

Fox 40's Jim Crandell brought up this story tonight and said he spoke with someone he referred to as the number one guy to speak to on the arena. I already forgot the name he mentioned. Crandell said he was told there was no truth to the story.

Arena Skeptic · Jul 11, 2007

I just don't see it happening this way.

The main reason, as many of you have already pointed out, is that this would set a horrible precedent for the NBA. You have to look at what the NBA is: It's an association owned by the teams, not the other way around. So the other 29 teams will invest in Sacramento so it can have a team, if Las Vegas is willing to put up an NBA-ready arena at no cost to the other 29 teams?

Not likely.

Cal Expo is a bad location...

Putting an arena there would likely require a vote of the legislature, and since we have a huge budget issue in this state, that's not likely...

Not to mention the governor...

Also, the article uses two terms recklessly: "Financing" and "Funding." If the NBA guarantees repayment, that means they're arranging financing, but Guess Who gets to pay for it? "Funding" is a different story. To use the two terms interchangeably is confusing, with the net result being a misleading story (unintentionally misleading, I hasten to add).

I really, honestly think major league sports in this town is in trouble until we get major corporate headquarters here, in town. If we had a Chevron relocate here, that would help. What has changed since 1987? Just look at the payrolls, and the construction costs. When it was "just" $70 million for the building and "only" $5 million for the payroll, we could do this with little corporate presence. Now they're talking $70 million for the payroll! The ANNUAL payroll now costs what the BUILDING used to cost.

The building? That would have totalled close to $1 billion in the railyard (and, frankly, it'd cost just the same at Cal Expo).

I hope they can work this out too. But if it involves a public vote of any sort, forget it. Sad, but true.

Q&R lost not only because it was a badly run campaign, but also because there will always be natural resistance to public funding for a facility of this nature. Overcoming the natural resistance will be extremely difficult; the poorly run campaign turned a nearly sure-fire loss into a rout.

That's why I think it has to be almost entirely privately funded.

Nothing personal.

VF21 · Jul 11, 2007

PurpleHaze said:

http://cbs13.com/topstories/local_story_191001906.html
ReportingSteve Large

(CBS13) SACRAMENTO Rumors are running rampant - whisperings the NBA could be funding a new Kings arena. But is there any truth to the speculation?

It’s never happened before, The NBA itself, financing an arena for one of its teams. A person close to the negotiation process tells CBS13 it could happened in Sacramento.

NBA commissioner David Stern may be putting his leagues' own money on the line to finance a new Kings arena.

CBS13 has learned that the league is considering funding a new home for the Sacramento Kings after spending seven months looking for other financial sources for the project. Stern announced the NBA's involvement in the search at a press conference in December

Assemblyman Dave Jones, who has actively campaigned against a publicly financed arena, says the move would make sense.

“They have the money to do it. They make tons of money, providing professional basketball and it’s a business like any other business. So if they want a building, they should invest in it just like any business does,” says Jones.

The NBA says it will announce its new financing idea in a couple of months, but its keeping its post Arco plans private until then. Meanwhile one new idea for a location for the arena is at Cal Expo. It has 400 acres, and it’s centrally located.

(© MMVII, CBS Broadcasting Inc. All Rights Reserved.)

I wonder if Ch. 13 is going to bother to follow up on this and let their viewers know their initial report was apparently in error...

And I also still wonder if I can get a refund on that old Beta video unit I had that never did work right.

PurpleHaze · Jul 11, 2007

VF21 said:

I wonder if Ch. 13 is going to bother to follow up on this and let their viewers know their initial report was apparently in error...

They did already in another report.

http://cbs13.com/topstories/local_story_191194312.html

Elektrik · Jul 11, 2007

PurpleHaze said:

If that is your reasoning then Natomas would be equally as horrible...and not really centrally located. Downtown anyone?

PurpleHaze · Jul 11, 2007

Elektrik said:

Centrally located is not the only point we've repeatedly discussed before here. We've also gone over a lot the pros and cons of "downtown." Natomas-Arco area has one of the best north-south-east-west freeway connections of any stadium or arena anywhere in the county. I'm not sure anyone can point to a single place where a major north-south interstate freeway (I-5) and a major east-west interstate freeway (I-80) come together virtually right next to a big city sports complex.

NewMonkey · Jul 11, 2007

PurpleHaze said:

Now that you mention it, Downtown Sacramento! Highway 50 and I-5 intersect a few miles south of the railyard, as do I-5 and I-80, for that matter. There's pretty much zero chance the arena gets built in the railyard, but I think the potential traffic problems in that area are overblown.

Will The NBA Finance A Kings Arena?

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