http://www.sacbee.com/101/story/71447.html
Arena push may be pricey
Obscure provision of $70 million loan could put repayment in doubt.
By Terri Hardy and Mary Lynne Vellinga - Bee Staff Writers
Published 12:00 am PST Saturday, November 4, 2006
As the relationship between arena negotiators and the owners of the Sacramento Kings has deteriorated, supporters of a new sports and entertainment complex in the downtown railyard have repeatedly said they will press forward with the plan even if the team owners don't participate.
But documents show pushing forward with that idea could cost the city $70 million.
Tucked inside thick loan documents approved by the Sacramento City Council in 1997, the provision may mean the city's NBA hopes are tied to the Kings, unless the team decides to leave town on its own.
The stipulation would allow the Kings to walk away from repayment if the city or county helps finance an arena and then offers better terms to another major league sports franchise playing or planning to play in the Sacramento area or Yolo County.
"It's somewhat like an option or first right of refusal," City Attorney Eileen Teichert said Friday.
The documents are silent on when the provision is triggered, and that would be a question for lawyers and courts, Teichert said.
City Councilman Steve Cohn, an opponent of arena ballot Measures Q and R -- and who voted against the city loan -- said Friday he's worried the trigger could be set "even by putting something on the ballot."
But Teichert dismissed that concern, saying the provision would be "in no way triggered either by the Measure Q or tax Measure R on the ballot without agreement with the Kings."
And she added that provision would not kick in if the measures pass or fail.
City Councilman Rob Fong, one of the lead arena negotiators and proponent of arena ballot Measures Q and R, said city and county officials involved were mindful of the provision during talks.
His take on when the clause would take effect: "The arena has to literally be up and running, and the Kings are not the tenant."
John Thomas, president of Maloof Sports and Entertainment, said he wasn't aware of the provision. "This is the first time I'm hearing about it," he said Friday.
On Tuesday, voters will be asked to decide on Measures Q and R, which would raise the sales tax in Sacramento County by a quarter cent to fund a new arena and community projects.
Although preliminary agreements were hammered out between the city, county and the Maloofs in August, rancorous negotiations since then have kept the sides from a final deal. Talks continue through attorneys on both sides, but little progress has been made.
City Treasurer Tom Friery, who helped put together the 1997 loan deal, said the provision was included to protect the city.
Lawyers at the time warned that the city would face a lawsuit if the loan provisions "did something to cause fiscal jeopardy to the team or Arco Arena," Friery said.
Nearly 10 years ago, then-Kings owner Jim Thomas told the city he was losing money and thinking about moving the franchise to another state.
The council approved a $70 million loan to allow Thomas to pay off a restrictive private loan that had required almost all the Kings' profits to go to the loan instead of reinvesting in the team.
In return, the council wanted an ironclad agreement that the Kings would stay in town for the 30 years of the loan.
Their legal counsel, however, warned them that if the team was forced to stay under certain conditions the city could be sued.
During the latest arena talks, Friery said he briefed negotiators about the provision.
"I'm not an attorney, but I did offer that it was important that they make sure they were aware of the potential of creating a condition whereby the Kings wouldn't be the primary user of a facility, and that could cause an issue," he said.
Assemblyman Dave Jones, D-Sacramento, who's leading the opposition to Q and R, said the provision "is essentially a ticket for the Kings to get out of town."
Jones said the provision could hamstring the city from pursuing any arena deal not involving the Kings as long as the team is still in town.
He said the non-compete clause covers any "direct or indirect" action the city takes to build an arena, from investing public lands to granting land entitlements to private developers willing to build an arena with their own money -- a strategy similar to the one originally employed to build Arco.
About the writer: The Bee's Terri Hardy can be reached at (916) 321-1073 or thardy@sacbee.com.
Arena push may be pricey
Obscure provision of $70 million loan could put repayment in doubt.
By Terri Hardy and Mary Lynne Vellinga - Bee Staff Writers
Published 12:00 am PST Saturday, November 4, 2006
As the relationship between arena negotiators and the owners of the Sacramento Kings has deteriorated, supporters of a new sports and entertainment complex in the downtown railyard have repeatedly said they will press forward with the plan even if the team owners don't participate.
But documents show pushing forward with that idea could cost the city $70 million.
Tucked inside thick loan documents approved by the Sacramento City Council in 1997, the provision may mean the city's NBA hopes are tied to the Kings, unless the team decides to leave town on its own.
The stipulation would allow the Kings to walk away from repayment if the city or county helps finance an arena and then offers better terms to another major league sports franchise playing or planning to play in the Sacramento area or Yolo County.
"It's somewhat like an option or first right of refusal," City Attorney Eileen Teichert said Friday.
The documents are silent on when the provision is triggered, and that would be a question for lawyers and courts, Teichert said.
City Councilman Steve Cohn, an opponent of arena ballot Measures Q and R -- and who voted against the city loan -- said Friday he's worried the trigger could be set "even by putting something on the ballot."
But Teichert dismissed that concern, saying the provision would be "in no way triggered either by the Measure Q or tax Measure R on the ballot without agreement with the Kings."
And she added that provision would not kick in if the measures pass or fail.
City Councilman Rob Fong, one of the lead arena negotiators and proponent of arena ballot Measures Q and R, said city and county officials involved were mindful of the provision during talks.
His take on when the clause would take effect: "The arena has to literally be up and running, and the Kings are not the tenant."
John Thomas, president of Maloof Sports and Entertainment, said he wasn't aware of the provision. "This is the first time I'm hearing about it," he said Friday.
On Tuesday, voters will be asked to decide on Measures Q and R, which would raise the sales tax in Sacramento County by a quarter cent to fund a new arena and community projects.
Although preliminary agreements were hammered out between the city, county and the Maloofs in August, rancorous negotiations since then have kept the sides from a final deal. Talks continue through attorneys on both sides, but little progress has been made.
City Treasurer Tom Friery, who helped put together the 1997 loan deal, said the provision was included to protect the city.
Lawyers at the time warned that the city would face a lawsuit if the loan provisions "did something to cause fiscal jeopardy to the team or Arco Arena," Friery said.
Nearly 10 years ago, then-Kings owner Jim Thomas told the city he was losing money and thinking about moving the franchise to another state.
The council approved a $70 million loan to allow Thomas to pay off a restrictive private loan that had required almost all the Kings' profits to go to the loan instead of reinvesting in the team.
In return, the council wanted an ironclad agreement that the Kings would stay in town for the 30 years of the loan.
Their legal counsel, however, warned them that if the team was forced to stay under certain conditions the city could be sued.
During the latest arena talks, Friery said he briefed negotiators about the provision.
"I'm not an attorney, but I did offer that it was important that they make sure they were aware of the potential of creating a condition whereby the Kings wouldn't be the primary user of a facility, and that could cause an issue," he said.
Assemblyman Dave Jones, D-Sacramento, who's leading the opposition to Q and R, said the provision "is essentially a ticket for the Kings to get out of town."
Jones said the provision could hamstring the city from pursuing any arena deal not involving the Kings as long as the team is still in town.
He said the non-compete clause covers any "direct or indirect" action the city takes to build an arena, from investing public lands to granting land entitlements to private developers willing to build an arena with their own money -- a strategy similar to the one originally employed to build Arco.
About the writer: The Bee's Terri Hardy can be reached at (916) 321-1073 or thardy@sacbee.com.
