Sacramento Uses Taxpayer Subsidies in Battle to Keep Its NBA Basketball Team

Thursday, May 09, 2013
Sacramento Kings fans (photo: Rich Pedroncelli, Associated Press)

The National Basketball Association (NBA) playoffs are running at full throttle, but the best contest may be off the court where Sacramento is fighting to keep the Kings from moving to Seattle.

What seemed like a slam dunk for Seattle a few months ago—when the Kings’ owner, the Maloof family, signed a relocation deal with a group in that city—has become far more competitive in recent weeks. Sacramento Mayor Kevin Johnson, a former NBA player himself, led the comeback effort that has, as the usual centerpiece in franchise fights, an offer to pony up taxpayer support for a new arena.

The Maloofs agreed to sell the team to hedge fund manager Chris Hansen and Microsoft CEO Steve Ballmer for $341 million, but the ante was upped to $357 million when a group led by Silicon Valley executive Vivek Ranadive indicated it would make an equal counteroffer to keep the team in Sacramento. The Ranadive group reportedly put half the money in an escrow account last Friday.

Sacramento got a boost last week when the NBA’s relocation committee voted 7-0 to recommend that the league reject the move to Seattle, which lost its own NBA franchise in 2008. The league’s advisory/finance committee has yet to be heard from.

A key to the Sacramento bid is the city’s offer to subsidize construction of a new downtown arena to the tune of $258 million. Last Friday, the Coalition for Responsible Arena Development sued the city in Sacramento County Superior Court over what it claimed were additional hidden subsidies. The suit claims the city denied lawyers for the group access to documents on the arena financing.   

The subsidy would amount to about 58% of the arena’s expected $448 million cost. The city would borrow $212 million against future parking fees and would own the arena. The city package also includes land for digital billboards and seven city properties as an inducement to developers.

But some financial analysts calculate that the city would actually be on the hook for $290 million and critics of the deal say it could skyrocket to $334 million. 

Although local boosters argue that taxpayer investments in expensive sports venues benefit the entire city, a study published last year in the Journal of Urban Affairs found “little evidence that basketball arenas are primary catalysts of development.” According to the study, the negative impact on a city was greater the more recent the arena was built.

The group challenging the arena plan wants a citywide voter referendum on the issue.

Tip-off for the NBA Board of Governors meeting to decide the team’s fate is scheduled for next Wednesday. Both sides will, no doubt, have their crying towels at the ready to wave at the losers.

–Ken Broder


To Learn More:

NBA Encouraging Sacramento Suitors for the Kings to Put Entire Purchase Price in Escrow, Source Says (by Tony Bizjak, Dale Kasler and Ryan Lillis, Sacramento Bee)

Sacramento Group Puts Money in Escrow; Arena Opponents Say They Will File Suit (by Bob Condotta, Seattle Times)

Sacramento Suitors Put Down Deposit on Kings; Foes of Arena Deal Sue (by Dale Kasler and Ryan Lillis, Sacramento Bee)

Study: Basketball Arenas Don't Spur Economic Development (by Erica C. Barnett, Seattle Met)

How Big Will Sacramento's Subsidy Be for a Kings Arena? (by Tony Bizjak, Dale Kasler and Ryan Lillis, Sacramento Bee)

Leave a comment