April 15, 2012
By Katy Grimes
Ding, dong, the arena deal is dead. The free market won.
Despite the failure of 13 years of efforts to build a publicly funded new sports arena in Sacramento, the-arena project-which-wouldn’t-die may have finally croaked–thanks to Mayor Kevin Johnson, City Councilman Rob Fong, and state Sen. Darrell Steinberg, D-Sacramento.
But according to taxpayers, it’s good riddance.
Sacramento politicians have repeatedly tried to force a publicly financed arena deal down the throats of the taxpaying public, as well as on the privately-held team owners. But this time, they crashed and burned.
With overstated revenue projections, grossly overstated projected attendance numbers, and practically giving away city-owned parking garages to sweeten the finances, neither city officials nor local news media ever performed due diligence to expose the bad business deal it would have been for taxpayers. Media was in the bag, along with rabid sports fans–at any cost. It was a typical government involved project, with bad numbers, pie-in-the-sky plans, lots of hype, and no accountability.
It was reported over the weekend that Steinberg was angry over the deal. “Regardless of where you stand on the arena the facts are clear: The city stepped up and the Maloofs did not,” state Senator Darrell Steinberg said in a statement. “Sacramento deserves partners who will live by their word. I stand with the Mayor and the city to do everything possible to protect Sacramento’s interest. I hope the NBA and its owners do not allow this kind of bad behavior to occur without consequences. I look forward to meeting with Mayor Johnson and city officials to consider next steps.”
Since when does a politician get to threaten a private business?
Negotiations finally ended this week. The Maloof family, the owners of the Sacramento Kings, pulled out of the latest nearly $400 million arena complex deal on Friday.
What finally killed the deal was the team owners, because the money they would have to put in the deal would come out of their pockets. The city and the politicians, who love to sound like big guys when negotiating, weren’t investing any of their own money. And it showed.
Sacramento Kings’ record hasn’t been consistent
The Sacramento Kings have a spotty record. Some years they are hot, and some years, not.
The failed arena plan needed to happen. Perhaps if the economy was healthy, and Sacramento was in-the-black, and infrastructure was in good shape, and city services were not cut back, and if Sacramento didn’t need a new sewer system, road and street maintenance, good public schools, and no cutbacks in Sac police department, area residents might have been remotely open to the idea.
But most of the public was not in favor of it. Sacramento already has an arena. However, it isn’t fancy enough for the city leaders, who have a predilection for spending money that isn’t theirs. At issue for Sacramento’s politicians was the number and size of the luxury boxes the Sacramento arena has. But how do politicians know so much about luxury boxes? Other than Mayor Kevin Johnson, a former NBA star who made his own way, why do politicans have a say in luxury boxes?
When was the last time a politician paid for a ticket to a NBA game, much less for luxury boxes, which range in price from $2,500 to $10,000 per game?
This Dog Don’t Hunt
Sacramento politicians tried very hard to shove a square peg into a round hole. And never did they once consider that the team is privately owned… they tried over and over to dictate terms of new arena plans to the Maloof family.
The Maloof family was exceedingly patient for the process, even with the regular lectures from city council members and media about the need.
The Maloof family dealt the final blow to the deal, reminding everyone negotiating, that they were the owners of the team, and that a great deal of the of the funds would come from their private holdings.
Writing Checks With Taxpayer Funds
The Maloofs played along, until last week when they finally hired an economist who explained a few things to them:
* The 2005 revenue projections weren’t realistic or feasible;
* The lease agreement with AEG was based on faulty attendance projections;
* The new collective bargaining agreement had revenue sharing;
* Other NBA team owners told them not to do the deal and instead, focus on getting a better team;
* There was no other private money in the deal;
* and, the deal would have sunk Sacramento deeper into debt… even to the edge of insolvency.
Other People’s Money
Politicians get used to spending massive amounts of other people’s money. That’s not news. But when they start negotiating in “public-private” deals, politicians are way out of bounds, and operating way out of their leagues. Most politicians have no idea how private businesses operate, and treat the deals they make as if there is an open, limitless checkbook.
The Sacramento arena deal was negotiated by numbskulls, who clearly did not care or want to know the ramifications of the deal.
The abomination of the deal was local media, completely in-the-bag every step of the way. I expected sports writers and reporters to be supportive of a new arena. But the lectures from television news anchors, and newspaper columnists was unprofessional.
Sacramento had already killed a previous deal to publicly finance an arena, and the Sacramento Grand Jury rendered a very stern opinion about this: “Sacramento’s previous arena deals have been totally discredited by the Sacramento Grand Jury after voters refused to pass Measures Q and R, which would have approved a quarter cent sales tax increase and directed the revenues to fund a new sports and entertainment facility,” I wrote in Sacramento’s Stimulus Arena.
Titled, “The Kings and City and County of Sacramento: Betrayal in the Kingdom?” the Grand Jury investigated the arena issue because they wanted to find out “if the City and County of Sacramento deceived their citizens regarding their dealings with the Kings.”
The answer was a resounding “yes.”
But it didn’t stop there.
“Sports proponents continue to promote the ideology that Sacramento can transform to a ‘world class city,’ by building an arena and keeping the Kings,” the Grand Jury wrote. I’ve been critical of the level of world class city desperation by Sacramento officials and elected politicians for many years.
World class cities are not created with sports teams, and Sacramento is no different.
The Sacramento Kings have not sold out their games for many years. The demand is not there. But supply and demand are not high on the priorities lists of Sacramento politicians.
“Without demand, the arena project will not bring more jobs to our city that are not already here. The only new jobs that may be created will be more union jobs to build the structure, which will be obsolete and out-of-date before any of the loans are paid off, or before any of the interest is paid back to the city by the Maloofs,” I wrote.
In 1997 the city loaned the Kings $78.5 million. The loan has not be repaid. The Maloof family already has its hand full, as does the city, which needs to focus on some very real fiscal issues. Politicians need to stop acting like impetuous children and start being the leaders and stewards they all claim to be.
The arena deal was nothing more than a sweetheart deal with labor unions for jobs. And Steinberg’s fingerprints were all over it. Today’s politicians know that they will be long gone when the bills come due; Steinberg, Fong and Johnson included.
Perhaps if he economy was in better shape, it might have happened. But Sacramento would be no better for it, and certainly not on the way to ‘world class city status.”
Fortunately, the free market won out this time leaving politicians with egg all over their faces. Supply and demand are basic economic principals which the Kings’ owners obviously get. Now maybe the Maloof family can get back to work on the team, and on paying back the $70 million they owe the city.