The Sacramento-Seattle Fight over NBA Franchise

 

So it is another day of reckoning for sports. The National Basketball Association (NBA) owners are supposed to decide who might be the new owners of the Sacramento Kings franchise and whether the franchise stays in Sacramento or is allowed to move to Seattle for the 2013-14 season. The owners’ decision will be final until, well, until the franchise is in financial trouble again or the local Sacramento government isn’t able to produce a new, publicly funded arena with all of the revenue generators needed to keep the franchise flush with money.

The decision hasn’t even be made, and already, Sacramento Mayor Kevin Johnson and the city council are being sued for not being transparent on Johnson’s arena plans. Just what those plans entitle in terms of how the building will be funded seems to be cloaked in mystery. There is also a movement to get the arena plan before the voters. The Sacramento electorate said no to a new arena in 2006.

NBA Commissioner David Stern is getting praise in Sacramento from rabid Kings fans for doing his job, which is to try and keep the team in the city and extract as much public money as humanly possible to aid the construction of a new Sacramento arena. He is being pillared by Seattle basketball fans for trying to keep the Kings in Sacramento and deny Seattle a chance at landing the Kings franchise. Stern is a villain already in Seattle for helping Clayton Bennett move the old team, the Seattle SuperSonics to Oklahoma City in 2008.

Sacramento residents may be big losers even if the Mayor Kevin Johnson and the city council get the chance to “save” the team and keep them in the city in a new arena. Sacramento already has some major fiscal problems that need to be ironed out. Municipal swimming pools are shut and public employees have lost jobs, yet Mayor Johnson wants to build an arena with public funding knowing full well that there are examples of miscalculations by politicians in Cincinnati, Indianapolis St. Paul, Glendale, Arizona and other locales in venue costs have forced job cuts, the sale of municipal properties and job cuts to pay down the debt of the buildings.

But, having an NBA team makes the capital of California a big-league city and consequences be damned.

Stern has had a simple formula for the success of an NBA franchise and it applies to Major League Baseball and the National Hockey League as well. You need government support. In Sacramento, he has that with a former NBA player Johnson as the point man as mayor for a new arena. You need a great local cable television contract (helped by the 1984 Cable TV Act, which basically opened the door for sports channels to exist on basic cable television and have all customers pay in a group bundle for what few watch), but that’s where Sacramento may have a huge problem. You also need corporate support (and companies that can afford high price tickets and then write off 50 percent of the tickets cost as a business deduction). Sacramento is a government town and doesn’t have Fortune 500 companies growing on every block of the business district.

Johnson has to give away the store because Sacramento is very limited in cable television and corporate money. Johnson and the city legally, thanks to the 1986 federal tax reforms, can give Kings owners up to 92 percent of every dollar generated at all events in the new arena, which allows Sacramento to keep eight percent or eight cents on every dollar to pay down the building debt. The actually lease agreement between potential new “local” Sacramento owners and the city have not yet been announced.

Other taxes could be needed to cover the debt on the building.

The cable television monies needed to keep Sacramento in the middle of the pack in NBA total-team revenues may be a significant problem and one that needs to be addressed. No one is going to start a local, regional Sacramento sports network on cable. Sacramento is part of Comcast’s Northern California sports network. Comcast does have a cable deal with the Kings present ownership, the Maloof brothers, but if new Sacramento owners are looking at Brian Roberts and hoping for Los Angeles Lakers or New York Knicks type local cable dollars, they are fooling themselves. Comcast has to renegotiate deals with the San Francisco Giants and the Oakland A’s in the near future and the Giants will be getting a significant bump in local cable television revenues.

Sacramento is a small piece of the Comcast sports network for Kings basketball, and the franchise just isn’t worth all that much to Comcast. If it is true that the proposed Kings ownership is willing to give up NBA revenue sharing, they better hope that they get the 92 percent and are able to sell high-end seats to well-heeled lobbyists and other customers, because the money will more than likely not be made up by Comcast dollars for a beefed-up local cable television deal.

Mayor Johnson has been the chief architect of keeping the Kings in town. But, Johnson will not be in office forever, and the chances are he will be long gone when the finances of this arena become problematic. Whatever the fiscal problems are, someone else will have to clean up the mess. Johnson will take a bow for saving the team, but others will pay the price down the road. There is a documented history of stadium/arena fiscal failure nationally.

Pundits are criticizing the Seattle group of Chris Hansen and Microsoft CEO Steve Ballmer for continually raising their offer to the Maloofs for the team or finding other ways of getting the team. David Stern didn’t want to see a bidding war for the team. The owners have seen the value of their teams jump every time Hansen upped his purchase price. But, Seattle didn’t listen to Stern in 2007 when he told city leaders to keep the SuperSonics, they would need to build a new facility. Not all of Hansen’s planned Seattle buildings will be publicly funded.  That could be a problem for owners accustomed to be showered with public money.

Seattle has corporate money led by Microsoft, Starbucks, Costco, Amazon and Boeing. The cable television market is bigger than Sacramento, and Seattle corporately is wealthier. But, the Seattle market let the NBA down in 2008. Bennett left Seattle for a building in Oklahoma City that is heavily financed by the public.

The NBA expanded in 1966 adding teams in Seattle and San Diego. The league wanted a strong West Coast presence for national television purposes and to get big television dollars. The NBA team was Seattle’s first major league team.

Sports is a business and at time a nasty business. The Sacramento-Seattle fight for an NBA team illustrates that perfectly.

Evan Weiner’s e-books, “The Business and Politics of Sports, Second Edition” is available at www.bickley.com and Amazon.com and his e-books, “America’s Passion: How a Coal Miner’s Game Became the NFL in the 20th Century” and “Peach Baskets to Dance Halls and the Not-so-Stern NBA” are available at www.smashwords.com, iTunes, nook, kobo, Sony reader and Diesel. Weiner can be reached at evanjweiner@gmail.com.

 

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