Kings’ ransom

Eight years ago, a billionaire family from Albuquerque kidnapped the Sacramento Kings. The “crime” attracted scant attention at the time; the purchase of the capital’s NBA franchise by the Maloofs was seen as a godsend for a team mired in debt and the Pacific Division’s cellar. But those possessing a modicum of knowledge about modern professional sports knew that one day the ransom demand would come.

Flush with cash earned from their Las Vegas casino and the family liquor-distribution business, the Maloofs, fronted locally by playboy brothers Joe and Gavin, plowed money into the Kings, nursing one of the league’s lowliest teams into perennial contenders. Sacramentans roared their approval, blowing the roof off Arco Arena, the Kings’ home court, where the decibel level is among the loudest in the NBA.

The Maloof Sports and Entertainment bankroll propelled the team to near-greatness. In 2002, the Kings were a heartbeat from playing in the NBA Finals before losing in overtime to the hated Los Angeles Lakers in game seven of the Western Conference Finals. National sports media embraced the Kings and their unselfish form of team ball. Purple-and-black Kings jerseys have been spotted as far away as Israel.

But now it’s time to pay the piper. This November 7, Sacramentans face a decision that will shape the region for years to come. Two measures on the ballot, if approved by voters, will establish a quarter-cent sales tax that will raise $1.2 billion over the next 15 years. Half of that money will be spent on various to-be-determined public projects. The other half, as much as $600 million, will be spent building a new downtown arena for the Sacramento Kings.

This, then, is the Kings’ ransom: $600 million. More than a half-billion dollars. Pay up, the Maloofs demand, or … Well, they never really say it out loud. But Kings fans have no trouble filling in the blanks.

Pay up, or some other city—Las Vegas, San Jose, Anaheim—will pay.

Pay up, or you’ll never see your beloved Kings play again.

Emotional blackmail
“The Maloofs, to my knowledge, have never threatened to leave. They’ve never said, ‘If you don’t do this, we’ll go elsewhere,’” says Sacramento County Supervisor Roger Dickinson, who worked closely with the Maloofs on the proposed arena deal. “On the other hand, we’re not blind, and we’re not deaf, and we know they’re being courted by others, including Anaheim, potentially San Jose, and Kansas City.”

Neither the Maloofs nor any member of the Kings organization agreed to be interviewed for this story. Although the Maloofs have not publicly threatened to move the team, they have repeatedly walked away from negotiations to build a new arena during the past six years. As this story goes to press, city and county officials are attempting to woo the Maloofs back to the table after their representatives stormed off over a disagreement about the number of acres and parking spaces provided for the proposed arena. Whenever the game doesn’t go the Maloofs’ way, they pick up their ball and go home.

Many Sacramentans fear the Kings’ days in Sacramento are numbered. California’s capital has always been paranoid about its perception by outsiders. The Kings have provided a much-needed boost of self-esteem since their arrival in 1985. For many, to lose the Kings is as unthinkable as losing a child, or a limb. That’s among the main reasons city and county officials spent the past several months feverishly hacking out a half-billion-dollar deal for a publicly funded arena.

But other Sacramentans just don’t get it. A half-billion dollars isn’t exactly chump change, particularly when it’s being raised by a tax that hits the area’s poorest citizens the hardest. Particularly when the region has needs—road and levee repairs, more law enforcement, better schools—that are more pressing than whether Mike Bibby sinks that 15-foot jumper with a split-second left in the fourth quarter. How dare we even contemplate spending so much money to pacify the billionaire owners of a sports team?

“This thing was cooked up in a backroom at a hotel casino in Las Vegas with no public input,” says Sacramento state Assemblyman Dave Jones, one of the arena deal’s staunchest opponents. Jones scoffed at the Maloofs’ recent exit from negotiations. “The terms keep changing. They don’t get better. They get worse. Something like this should have been put before the public. It should have had exhaustive public review.”

Rationally speaking, it’s hard to disagree with Jones. But our culture’s infatuation with sports is anything but rational. Some psychologists use social-identity theory—which suggests that people tend to pursue behaviors that enhance their self-esteem—to help explain our obsession with sports. When fans wear a Kings jersey or attend a game at Arco Arena, they become a part of the team. When the team wins, the fans are winners, too. Psychologists call this “basking in reflected glory.” The self-worth of fans—and, by extension, communities—becomes psychologically dependent on the team.

“I think that when fans are attached to teams, it becomes a badge of courage,” says Richard Lustberg, a nationally recognized expert in sports psychology. “It has an effect on the image a city has. How can Los Angeles not have a football team? They’re a big major city. Shouldn’t they be entitled to a team? It has a psychological impact on how a community feels it is viewed.”

Former Sacramento County Supervisor Sandra Smoley, who now serves as chairwoman for the Yes on Q & R campaign, says the Kings have given Sacramento an identity.

“The Kings have put Sacramento on the map,” she says. “When they’re playing in the NBA playoffs, it’s Sacramento, Sacramento, Sacramento. They show pictures of the Tower Bridge. They keep saying ‘Sacramento.’ It’s the same for the Monarchs. The fact that they were in the WNBA finals again has put Sacramento on the map. Both teams are hugely important to Sacramento having an identity.”

The Kings also have fostered Sacramento’s sense of community, says Dickinson.

“Rightly or wrongly, sports bring us together. It’s a common thread,” he says. “You can be a millionaire or a pauper, but when your team is in the playoffs, or trying to get there, or even just playing, it’s something you’ve got in common. You can talk about that with anybody. It gives you a form of sharing that all too often in civic life these days is absent.”

According to a CSUS poll taken earlier this year, 53 percent of the region’s residents identified themselves as Kings fans. Of these, 83 percent said they would be disappointed if the Kings left the area. Fear of that disappointment, of losing the thread that binds the community together, that confers its status to the outside world, is the lever NBA teams use to pry better deals out of the cities in which they operate.

“It’s fun having an NBA franchise here, but it’s a business, and we can’t forget that,” Jones says. “It’s also a monopoly. The NBA purposely limits the number of franchises in order to drive its profits up and pits cities against each other to have an NBA franchise. It’s a classic monopoly, and if we’ve learned anything from our history, it’s that monopolies don’t act in the best interests of the public. You and I can’t start a franchise. They won’t let us. It’s a rigged game.”

The prize for winning this fixed contest is membership in the “elite 26,” the number of cities that have NBA teams, says Lustberg. “There are certain fans that, no matter how good or bad the team is, they’ve been dining on a certain degree of entertainment,” he says. “If that’s going to be taken away from them, a certain degree of emotional attachment is going to be ripped away. When that is taken away from you … you are no longer part of the club.”

Getting booted from the club isn’t pleasant, as the citizens of Baltimore learned when their NFL team, the Colts, bolted to Indianapolis in 1984. Fans in Cleveland were run through the same wringer when the Browns relocated in 1996—to Baltimore. Professional sports history repeats itself, often. The Oakland Raiders moved to Los Angeles and back to Oakland in the space of a decade. The Kings came from Kansas City to Sacramento in 1985. Now Kansas City, with a brand-new shimmering glass arena, is on the short list of teams enticing the Kings.

“Wouldn’t that be ironic if they wooed back the team they lost?” Smoley asks.

Two of the most infamous defections occurred in the late 1950s, when a pair of major-league baseball teams, the Brooklyn Dodgers and the New York Giants, relocated to Los Angeles and San Francisco, respectively. Lustberg, who lives in New York, says the moves still reverberate all these years later.

“A certain generation in New York has never gotten over it,” he says.

Let’s make a deal
In mid-July, Dickinson and Sacramento City Councilman Rob Fong met Joe and Gavin Maloof at the Palms hotel and casino in Las Vegas. The Palms is the centerpiece of the Maloofs’ hedonistic empire, where patrons can blow paychecks on slot machines and fantasy rooms; rub elbows with mega celebrities such as Britney Spears, Paris Hilton and Eminem; or take a luxurious dip in the hotel swimming pool, recently remodeled for $40 million.

However, there were no such amenities for Dickinson and Fong on this particular trip. Talks between the Maloofs and city and county officials had broken down earlier in the year; in early July, Fong met with NBA officials in New York in an effort to get negotiations rolling again. At the Palms, there was no smoke-filled backroom, as some arena opponents have suggested, just frank discussion in a fairly nondescript meeting room, much like you’d find at the Radisson or the Sheraton, recalls Dickinson.

“One of the great misdirection plays is to refer to us going to Las Vegas and the casino and getting bamboozled by the sharks,” he says. “First of all, there was no deal made in Las Vegas; that’s just nonsense. In fact, we left Las Vegas without a deal.”

The plan Dickinson and Fong brought to the table was nothing if not ambitious. The proposed arena, to be paid for primarily with public funds, would be one of three anchors for the long-planned redevelopment of the Union Pacific rail yards in downtown Sacramento. The sports and entertainment facility would cost in the neighborhood of $500 million to $600 million; the entire rail-yard redevelopment would be financed with $4.5 billion in separate private and public funding. It would include the project’s second and third anchors, a regional “intermodal” public-transportation center and the “central shops,” a restaurant and retail district composed of seven restored historical buildings. The arena would serve as a catalyst to jump-start the rail-yard redevelopment.

“We have 240 acres that afford us an unparalleled opportunity compared to anywhere else in the country,” Dickinson says. “I believe very strongly that if we locate a sports and entertainment facility in the rail yards, we will accelerate dramatically the pace of development and the investment of private capital. That will create an extension of our existing downtown that will make us one of the most attractive places in terms of urban vibrancy anywhere in the country.”

Though forward-looking, the planned development is freighted with serious impediments. For one, ownership of the 240 acres is currently in limbo. Atlanta-based developer Thomas Enterprises’ purchase of the rail yards from Union Pacific has been in escrow for more than a year, with no signs of closing soon. For another, because of the escalating costs of running a modern professional sports team, the Maloofs are seeking as much control over the development of the arena and the surrounding area as possible, a factor that continues to make negotiations volatile.

“There were two issues [that have stalled negotiations],” remembers Fong. “One of them was who was going to have control over the construction and the design. Of the two days we were in Las Vegas, we spent a day-and-three-quarters on that.”

Some have called the Maloofs’ terms excessive, including the demand for more parking and more acreage that led to the most recent break in negotiations.

“The arena is designed to suck every dollar inside,” Jones says. “That’s why the Maloofs want to have the pubs and the restaurants and amenities they are hoping to put in this arena. That’s why they’ve insisted on a deal point that says that they get to identify incompatible uses around the arena. That’s why they want an 8.5-acre footprint and a total of 18 acres that they control to keep other businesses out.”

However, such criticism ignores or plays down the main reason why team owners insist on such deal points: Running an NBA team in the era of multi-million-dollar player salaries—Mike Bibby alone earns $11.5 million this year—has become incredibly expensive.

According to Forbes, the Sacramento Kings, valued at $345 million last year, rank 13th in the NBA, right smack in the middle. That’s more than double the $156 million the Maloofs paid for the team in 1998—a nice return on investment, if they sold the team today. But they’re not selling the team, and that’s not the whole story. The Kings collected $54 million in gate receipts during the 2004-2005 season. The team paid out $64 million in player expenses. Without advertising revenue, food and souvenir sales and parking fees, the Maloofs would be $10 million in the hole.

“When you start looking at the kinds of dollars you have to generate to operate a building, to pay the operating expenses, including the salaries of the team, you’re running into tens and maybe hundreds of millions of dollars,” Dickinson says. “Even when you look at ticket prices, which here are very steep obviously, those dollars raised with tickets sold don’t begin to approach the kind of dollars you need to cover operating expenses. What you really have to depend on is major corporate donors and supporters and TV contracts to raise the balance of the money.”

That’s the rub for teams in so-called second-tier markets like Sacramento. Although the Kings enjoy regional corporate sponsorship from the likes of Raley’s and Wells Fargo, there’s a shortage of companies willing to shell out money for luxury suites and television advertising—the staples of more financially successful franchises such as the New York Knicks and Los Angeles Lakers. While the Kings have never opened their books to the public, the organization has stated that it has lost money, about $1 million, four out of the past eight years, and made money, about $1 million, four out of the past eight years.

That goes a long way toward explaining—but not necessarily justifying—what opponents view as a lopsided, unfair deal favoring the Kings. In Las Vegas, Fong says, the second most important issue concerning the Maloofs was the various payments the team would be required to make. For example, since the city and county would own the proposed arena, the Kings would be required to pay rent, a possessory tax and other additional fees. The Maloofs wanted the process streamlined.

“We had all of these different categories of things, where we said, ‘We want you to pay this, this and this much of this,’” Fong says. “Ultimately, the way we ended up getting to a deal was we collapsed all those things into essentially what we’re calling the rent payment.”

The tentative terms of the agreement reached between Sacramento and the Kings calls for the team to pay $3 million in rent annually for the next 30 years, the length of the lease on the new arena. The payments automatically would increase by 2 percent annually; rent paid over the life of the lease would total approximately $122 million. The Maloofs are required to pay $20 million in upfront capital repair costs. In addition, the team must pay off the existing $72 million loan provided by Sacramento to the Kings in 1997.

The estimated total cost of a new arena comparable to facilities recently constructed in similar markets such as Memphis and Indianapolis is $470 million to $542 million. The Kings pay $142 million of the total ($120 million in rent plus $20 million up front), which, when discounted to reflect present-day value of the 30-year lease payments, amounts to 12 percent to 14 percent of the cost.

That leaves the public on the hook for 86 percent to 88 percent of the arena’s cost, an amount that opponents describe as outlandish but is only marginally more than the upper range of recent deals reached in markets similar to Sacramento. According to the 2003 report on the proposed sports and entertainment district conducted by the consulting firm Turnkey Sports, “An analysis of the NBA markets most comparable to Sacramento shows the public sector has provided public funds and financing in the range of 75 percent to 85 percent of the overall costs of the arenas.”

Although Sacramento would own the proposed arena, Maloof Sports and Entertainment would operate it and collect the revenue from all events held at the facility, including non-sporting events ranging from concerts to truck pulls. Again, while this has been categorized by opponents as grossly unfair, it is not dissimilar to existing arrangements between NBA teams and other second-tier markets. The same applies to cost overruns for the project, for which Sacramento and the public are held responsible.

In short, cities have to pay to play in today’s NBA. In Sacramento, whether that’s right or wrong has been left up to voters this November. While the numbers underlying the proposed arena deal are murky and complicated, Measures Q and R present a relatively simple choice: Do Sacramentans vote yes and commit to $1.2 billion in new taxes over the next 15 years, or do they vote no and take the chance that the Maloofs will pull up stakes, taking the Kings with them?

Will they stay, or will they go?
“I like the Kings and the Monarchs. I enjoy them. I think many people in the community do,” Jones says. “But from an economic standpoint, there’s really no benefit. On the other side of the equation, you have the terrible, terrible costs of this bad arena-tax deal that’s being foisted on the public.”

According to the CSUS poll, 59 percent of the respondents said the Kings don’t need a new arena. If a new arena is built, just one-third, 34 percent, said it would be acceptable to fund the facility with a combination of public and private money. Slightly more than half, 53 percent, believe the Kings will relocate within the next three years.

Proponents of the new arena deal argue that it’s good for Sacramento because it will jump-start the $4.5 billion rail-yard redevelopment project and provide as much as $600 million—half of the $1.2 billion raised by the quarter-cent sales tax—to the county and cities, which may use the funds to meet their most pressing needs: flood control, libraries or law enforcement. Former Sacramento state Assemblyman Darrell Steinberg, who acted as an attorney for the Maloofs during preliminary negotiations on the arena deal, hopes these factors will persuade voters to support Measures Q and R.

“If you’re going to build community, you better believe first and foremost your obligation is to care for those less fortunate and help give people a hand up,” he says. “But it’s not either/or. Community building is also about recognizing that economic development is important, especially infill. We’re fighting sprawl in all the outlying areas. This could be the ultimate infill project.”

Steinberg believes it would be difficult, if not impossible, to match the $600 million in public funding to the county and cities provided by the measures if they pass. But Jones argues that Measures Q and R offer little benefit to the public, a fact demonstrated by nearly every objective economic study conducted on the subject. To him, the promises of an economic boost and increased public funds—assuming any funds are left after paying the arena’s cost overruns—are failed attempts to sweeten an incontrovertibly sour deal.

“For me, this is not about meeting these other needs,” he says. “It’s about building a basketball arena. They’re trying to dress this thing up as something other than what it is. It’s about a basketball arena. That’s why this sales tax is on the ballot. What it’s going to do is elevate an at least $600-$700 million arena over every other community priority we might have.”

Former Sacramento City Councilman and County Supervisor Grantland Johnson agrees with Jones that the claims of any public benefit from Measures Q and R are merely pie-in-the-sky.

“I’m so disappointed in the elected leadership. They can’t point to anything but subjective, emotional, psychic benefits,” Johnson says, adding that if Sacramento has to depend on the Kings for its identity, the city has much more serious problems than whether it needs a new arena. “I think this is fundamentally a bad deal,” he continues. “They were so anxious to get a deal, they would take any deal. It appears that they never established any bottom line of where they would just walk away.”

If the measures fail, will the Kings leave town? Jones thinks it’s doubtful.

“I think it’s really speculative,” he says. “Certainly, people other than the Maloofs have been running around raising that specter. It would be unfortunate. I think it’s fun having them here, but I don’t think it makes a difference from an economic standpoint one way or the other.”

Johnson thinks the Kings will leave if the measures don’t pass.

“The history of these sports franchises is that they tend to milk communities, then move on,” he says. “That’s the threat, the gun placed to our head. Even if the Maloofs have never said it, the proponents say it, and I have to believe they have a basis for saying it.”

Dickinson maintains that Sacramento negotiated the best deal possible. He believes that siting the arena in the rail yard—called into doubt by the Maloofs’ recent departure from negotiations—is crucial to the deal. Despite economic studies that say otherwise, he and other supporters think the new arena will act as a catalyst for billions of dollars in new investment. And whether we like it or not, the Kings are an integral part of Sacramento’s identity.

“For those people who say we don’t care, we would just walk away, that we didn’t make a good enough deal,” Dickinson says, “then you explain, if this team leaves, to the tens of thousands of kids who’ve never been to a game but wear the jerseys and the shorts and the T-shirts and the hats and run around saying, ‘I’m Bonzi Wells’ or ‘I’m Brad Miller’ or ‘I’m Mike Bibby.’ You explain to those kids why their home team is no longer around.”

Isn’t that a kind of ransom?

“Is that an advantage to the people who run pro sports?” he says. “Yeah, of course it is.”