Election Day -- time to send the Maloof’s packing
The first Tuesday in November, election day. There are many more important issues than two sport industry measures on the ballot in Sacramento. Measure R would increase the sales tax in Sacramento County by a quarter-cent for 15 years, without specifying what the money raised should be used for. Measure Q advises the county supervisors that up to half of that money (about $600 million of a total of $1.2 billion) should be used for a "sports and entertainment facility" -- which is to say, an arena for the Kings. Regardless, later tonight the NBA, Joe and Gavin Maloof (the owners of the Sacramento Kings) and those who supported the Kings, will be forced to deal with the simple reality – the Kings have no future in Sacramento.
So why is it a near certainty that Sacramento voters are going to overwhelming vote NO?
In early August, -- this was the lay of the land. The recent agreement the City of Sacramento reached with the Maloof brothers, the billionaire owners of the Sacramento Kings, is a hallmark arena building deal – one of the worst in a very long time.
The Maloof’s have agreed to pay 26 percent of the proposed Sacramento Kings arena’s $542 million cost. Taxpayers will decide in November’s election if they’re prepared to accept a quarter-cent sales tax that will last for 15 years to offset the $470 million taxpayers they’re being asked to invest in the future of the NBA in their city. The proposal has enflamed many Sacramento residents – wondering why two charter members of the Billionaire Boys Club are going to taxpayers with their hands open demanding hundreds of millions of dollars in taxpayer dollars.
"I think the game is rigged," Dave Jones a former Sacramento city councilman now serving in the state Assembly, told The Sacramento Bee earlier this week. "The NBA is a monopoly. They purposefully limit the number of franchises. By reducing supply, they drive up their profits. And they pit local governments against each other to fund sports arenas."
"When the market is rigged like that, there is no point in playing. Sports is supposed to be fair, it's supposed to be about letting the best person or the best team win based on a fair competition. This isn't fair. It's a rigged game. And I think you walk off the court when the game is rigged like that."
The deal the Maloofs reached includes an immediate $20 million payment for a capital repair fund and another $4 million a year over the term of the team's 30-year lease. The Maloofs also agreed to pay the city the $71 million remaining on an outstanding loan they inherited when they bought the franchise in 1998. The outstanding loan repayment isn’t part (nor should it be considered) of the Maloofs investment in the new arena.
"The Maloofs can say what they want, but this is not a terrific deal," said Andrew Zimbalist a sport economist and a professor at Massachusetts’ Smith College, who has been critical of public subsidies for sports.
"It's worse than an average deal. The typical financing package these days in the NBA is somewhere in the neighborhood of 70 percent public, 30 percent private."
In mid September, giving the Maloof’s everything except the kitchen sink proved to not be enough for the ravenous charter members of the billionaires’ boys club. Joe and Gavin wanted the kitchen sink.
The Maloofs playing a version of “Deal or No Deal” that even Howie Mandel and the producers of the hit NBC show couldn’t have dreamed up, are walking away from what is the worst arena/stadium agreement ever forced upon any municipality. The Maloofs reached an agreement with the City of Sacramento in August, whereby taxpayer dollars would contribute $470 million of the reported $542 million cost to build a new sate of the art arena for the NBA Kings. Not only are taxpayers being forced to cover 74 percent of the estimated arena cost, a clause in the agreement forces taxpayers to cover any and all arena cost overruns.
"There are no more negotiations; we've already discussed all the issues," Joe Maloof said in a phone interview with The Sacramento Bee. "They know what we need. We've told them."
The Sacramento Bee reported on Thursday September 14, the Maloofs' were upset with parking, the size of the arena site, and on what, if any, kinds of retail or housing also would go into the sports and entertainment zone.
Not a great deal has changed in the last six weeks. If anything, according to The Sacramento Bee, what is the worst arena/stadium proposal ever considered by tax-payers has gone from bad, to terrible to unimaginable. The Sacramento Bee reported last week, Sacramento politicians had maintained final design of the arena would be determined by the City, not by the Maloof’s and the Kings. There is a very important caveat voters would have never known if it wasn’t for the hard work of The Bee. The Maloof’s have relentlessly worked the political backrooms trying to wrestle control of the arena, but have a clause allowing them to walk away from any arena design they don’t approve. In essence if you can walk away from the deal if you don’t like the design, you have that final say.
Joe and Gavin Maloof collectively are worth billions of dollars. In July of 2000, the Maloof family sold the operating interest in the Fiesta Hotel Casino for over $185 million. The family immediately re-invested the money into the construction of the Palms, a $285 million hotel casino just off the Las Vegas strip with a 42-story tower and 447 guestrooms. The Palms, which opened for business on November 15, 2001, features outstanding customer service, unique architecture, and award winning restaurants, entertainment, nightlife, and amenities. In just four years of operation, the Palms has become the hottest property in Las Vegas with thousands of visitors daily. The Palms is currently undergoing an expansion that will include additional rooms and amenities for use later this year.
Voters it would appear have had enough, and are going to send a resounding message to the Maloof’s. The Sacramento Bee reported Saturday, in the latest polling the paper conducted on the two ballot measures that will likely determine the future of the Kings in Sacramento -- 67 percent of those surveyed said they planned to vote "no" on Measure R, up from 58 percent in the earlier survey. Measure R would raise the county sales tax by a quarter cent. It does not specify how the money would be used.
Only 21 percent said they would vote "yes" on R, a figure statistically no different from the 23 percent in favor in September.
Cheryl Katz, vice president of the polling firm Baldassare and Associates, described voters' dislike of the arena funding plan as "phenomenally high."
The momentum is "all negative," she told The Bee, pointing out that previously undecided voters have joined the "no" column on Measures Q and R since the last poll.
"It's unusual to see a measure this lopsided," said Katz. "You have a virtual supermajority, two-thirds, in opposition to Measure R."
The sheer gall of the Maloof’s killed whatever goodness the pair once had in the Sacramento marketplace. After demanding more from taxpayers in mid-September, the Maloof’s made a terrible public relations move. Joe and Gavin appeared in an ad for Carl's Jr. (hamburger chain) that depicted them as billionaires washing down their burgers with a $6,000 bottle of wine.
"The Maloofs are like spoiled brats," Carol Navarro, a retired state worker interviewed for the poll, said she likes the idea of a new arena for shows and concerts. "They want everything and they don't want to put forth anything. They just want to suck us dry."
According to the poll 60 percent of the respondents claimed they liked basketball and the Kings. It’s the Maloof’s they don’t like and want nothing to do with. The Kings have enjoyed 313 consecutive sellouts at 18-year-old Arco Arena. The Kings are starting their eighth straight year of sellouts.
During his season opening press conference, NBA commissioner David Stern was asked how he felt about today’s Sacramento vote.
“I think that the issue considered by owners is not necessarily history, but prospective success and I think it is fair to say that the current arena, which has been very successfully operated by the Maloofs and supported by the fans, is not the arena of the future. That’s been acknowledged by the city, by the developers and the fans. So I’m … we remain quasi-optimistic that we are going to see some movement upon the arena-front, whether that is before or after the election, I can’t say, but what I will say is that the arena development deal between the arena and the developer and the city doesn’t seem to be any place yet and in the absence of that deal having yet to be made. I think it puts the Maloofs in an untenable position because they are not in a position to be asking the developer to do certain things if he doesn’t even have an agreement with city to do all that the city had told them that they would do,” Stern told the media
“I was under the mistaken impression that the deal between the developer and the city had been achieved and was done. We’ve learned in the course of the on-again, off-again public and private negotiations that no such thing is true. And so, in the absence of the deal between the city and the developer, I mean, I don’t know what, what any fair minded citizen of Sacramento is being asked vote on. I would love to see them support an arena development, but I would tell that that they’ve got to make sure that the city gets with it to see whether the deal can in fact be done. Right now, there’s no deal in place. So, and we would love to see both a deal and a successful ballot initiative,” Stern concluded.
If indeed the Maloof’s are heading for a loss at the ballot box today, what does it represent for the future of the Sacramento Kings:
The Kings and the NBA are very popular. The Kings have enjoyed 313 consecutive sellouts at 18-year-old Arco Arena. That’s more than 17,000 tickets sold for each game the last seven and a half seasons. The NBA has a future in Sacramento. The arena may indeed by outdated and not offer the amenities most NBA teams enjoy.
The Maloof’s are a cancer. The boyish behavior makes little if any sense. Who in their right mind would agree to appear in a burger chain ad eating burgers, while drinking from a $6,000 wine bottle? The Maloof family owned the Houston Rockets from 1979 to 1982, gaining majority control of the Kings on July 1, 1999. If the Maloof’s want to remain involved with the NBA it can’t be with a team based in Sacramento.
There has to be a method to their madness. Charter members of the Billionaire Boys Club, Joe and Gavin are far too intelligent to knowingly have made as many dumb mistakes as they have in orchestrating the demise of their proposed arena deal. Mark it down, the Maloof’s will move the Kings to Las Vegas and that move will be announced as early as February’s NBA All-Star Weekend in Las Vegas.
David Stern continues on message. There will not be an NBA franchise in Las Vegas until the Las Vegas sports books end betting on NBA games. You have to believe the wheels have been in motion for some time in Las Vegas. The Maloof’s are too smart, have made too much money to not have a back-up plan in place. It’s more than likely the Maloof’s have an agreement in place with their fellow Las Vegas Casino and sports book owners to end betting on NBA games.
The NBA isn’t done with Sacramento. Robert Johnson paid a $300 million expansion fee when the Charlotte Bobcats became the 30th NBA franchise on December 18, 2002. The NBA originally expanded to Charlotte in 1987, with the Charlotte Hornets (and the Miami Heat) joining the NBA in time for the 1988-89 season. The NBA awarded the expansion franchise to George Shinn. The Hornets moved into the 24,000 seat Charlotte Coliseum. Shinn became embroiled in an alleged rape case. Shinn and then partner Ray Wooldridge moved the team to New Orleans after failing to get the public financing for a new arena. Long gone where the days of 21,000 season ticket holders, but the NBA believed in the Charlotte market. Stern and company understood it wasn’t the Charlotte market but the owners of the team in that market. Its well worth noting as soon as George Shinn left town voters supported a new arena for an NBA franchise, Bobcats Arena that opened last year.
The optics of why Maloof’s and Shinn couldn’t get their arena deals done is as different as night and day. However, the argument is very similar. A good NBA market, owners who no longer have the support of ticket buyers and taxpayers, lets expand to Sacramento, collect an expansion fee in excess of $300 million and let the Maloof’s move the Kings to Las Vegas once they’ve taken care of the gambling issue.
So again, here is the end result of today’s failed vote – the Kings will move to Las Vegas, the NBA will expand to Sacramento, and a new owner will accomplish what the Maloof’s couldn’t accomplish or really weren’t interested in – a new arena.
For Sports Business News this is Howard Bloom. Sources cited in this Insider Report: The Sacramento Bee