In Pursuit of a Kings Arena, Stern Can Achieve the Impossible

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The New York Sun

David Stern plans to spend part of December moonlighting at a second job as a lobbyist. Stern doesn’t need the extra money a second gig can bring for holiday gifts since he earns more than enough as commissioner of the National Basketball Association. Instead, Stern is going to Sacramento, Calif., where he’ll use the bully pulpit of his office in an attempt to overturn the election day defeat of a proposal to build a new arena.

During his visit to California’s state capital, Stern plans to get acquainted with Governor Schwarzenegger and various local politicians and business leaders, and convince them of the importance of investing hundreds of millions of dollars in public money to build brothers Gavin and Joe Maloof a new plant for their basketball franchises, the Sacramento Kings and the Sacramento Monarchs.

Stern — the lobbyist not the basketball guy — will take over as lead negotiator for the Maloofs, and he does so knowing the brothers were routed on November 7. Voters flatly turned down Proposition Q 72-28 and Proposition R 80-20; both measures would have provided funding for the arena.

Sacramento voters just did not want to fork over anything extra for a sports arena for the Maloofs, but that has not made Sacramento politicians and business leaders any less determined to build a new venue for an NBA team. And Stern has experience in overcoming big obstacles such as voters’ rejection of an arena.

In June 2001, following threats by Hornets owner George Shinn to relocate his team unless a new arena was erected, Charlotte-area residents voted no by a 2-to-1 margin to build a new arena with public dollars. Shinn did move his team to New Orleans in 2002, but neither Stern nor elected officials and business leaders accepted the final tally. Instead, city officials ignored the results of the vote and went ahead and cut a deal with Stern to build a new arena that would house an expansion team. Charlotte had a new team by 2004 and its owner, Robert Johnson, had a better arena deal than Shinn could have imagined. Charlotte is now paying off the arena through various tax schemes, including a hotel and leisure tax.

So Stern has a track record of success. It should be noted that just because the electorate says no, no never means no when it comes to arena and stadium projects. In the mid-1990s, Seattle residents rejected a new baseball park, but the Washington State Legislature — which maintained voters were clueless as to what a vote for a baseball park vote actually meant — devised and passed a new stadium plan. The same happened in both Milwaukee and Pittsburgh.

Sacramento politicians were prepared to give the Maloofs something no other California city will agree to right now: hundreds of millions of dollars for a sports facility. San Diego’s elected officials gave up on building a new football stadium for Alex Spanos’s Chargers, and there is no public money available for the NFL in Los Angeles. After two successive Oakland A’s ownerships failed to get money for a new baseball park, current owner Lewis Wolff is looking to develop a baseball park village near San Jose in Fremont. And since he could not get a deal done with San Francisco,49ers owner John York is planning to cut a deal with Santa Clara politicians.

As for the Maloofs, the pair didn’t really like the Sacramento deal as presented. Compared with New York, Los Angeles, and Chicago, Sacramento is a weak TV and corporate market, so the Maloofs needed every penny generated in the arena for their business and wanted no competing businesses near the building. The Maloofs wanted a parking lot, not a rebirth for a depressed economic area, by the rail yards.

In Stern’s world — as in that of other big league sports commissioners — every team should be viewed as a threelegged stool. All three legs are needed or the stool falls over. In sports, the three all-important legs are big press and broadcast dollars, corporate support, and government. And if you can separate emotions and apply rationality to this issue, the Stern Theory — in the case of the Maloof Brothers and their prerequisites for running a successful NBA franchise in Sacramento — makes a lot of sense.

LOCAL BROADCASTING: Comcast probably overpaid to land the Sacramento Kings cable TV rights so it could in turn launch a profitable San Francisco Bay Area regional sports network. Sports owners make billions from cable television, which Congress deregulated in the 1980s. Because of deregulation, everyone who has basic expanded cable pays for sports channels even if they never watch a regional sports network or tune in to national networks like ESPN and TNT. Hapless cable subscribers may pay anywhere between $7 and $12 a month for sports channels alone, and sports are the most costly part of the monthly cable bill. Congress refuses to address a la carte pricing, which would allow cable subscribers to choose which channels they want, in part because the financial toll could wipe out many cable TV networks and have serious impact on sports finances.

CORPORATE SUPPORT: Part three of the Stern trilogy. Someone has to pay for high-end seating like luxury boxes and club seats, and it’s not the everyday fan. In fact, owners don’t court fans; they want customers who can afford luxury suites and seats surrounding the basketball court or rink side seats at a hockey game. Corporate types buy seats and reap the tax write-off, whether they’ve gone to the games because they’re fans or just looking to be seen.

GOVERNMENT: Without the support of a local mayor, city council, county officials, state government, governor, and federal government, you can’t operate a franchise. Local and state governments typically raise taxes to build arenas and stadiums or give land away for a sports owner to build on in exchange for payments (in lieu of taxes) and a promise that the arena or stadium will serve as an economic engine that will spark a local economy and create jobs.

Owners need government to give them total control of the revenues a municipally built facility generates, including on-site arena restaurants and stores and — a big revenue source — parking. Owners also need a government that will give them sweetheart leases and create special tax districts within the facility so that if a team owner contributes to the cost of the building, he/she can pocket some of the sales taxes collected and earmarked for government coffers.

Owners also don’t necessarily want to see development (such as restaurants and bars) outside their arena, because those establishments become competition for the dollar. The idea is to keep customers in the building, where they’ll spend on products and franchise-owned enterprises that their owners can cash in on.

For the Maloofs, a parking lot is more valuable than the potential for new businesses to pop up around the arena. It’s that simple: The brothers keep parking lot revenues and don’t have to compete with other businesses that might attract their customers.

You really can’t blame the Maloofs for playing hardball. They were just following Stern’s three-legged sports business philosophy; Sacramento got a lesson in what it means to be a small market in the major leagues. But no is never no in the arena and stadium building game and, despite two public drubbings of 72–28 and 80–20 on Election Day, Sacramento business and political leaders still want to build an arena. They would just rather cut a deal with Stern than the Maloofs.


The New York Sun

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