Thursday's flapdoodle over the $3.2 million pre-development contribution that the Maloofs refused to pay inserted a whole lot of drama and just a little insight into where we are with the Sacramento Kings arena deal, and where we're headed. Based on the comments in the thread from last night, most folks understand the basics. But in case you missed the fireworks ...
1. The Los Angeles Times ran a piece including some vaguely threatening quotes from a previously unknown Maloof spokesman about the predevelopment fees. There was a line about "all options remaining open," an obvious nod to Anaheim. This new spokesman, Eric Rose, was, I'm told, hired by the Maloofs last week to deal with arena-related issues. So George Maloof decided that the family needed a separate, expensive spokesman just to handle strategic PR outside of a several great PR folks with Maloof Sports & Entertainment who had been handling it previously. This was Rose's introduction to Sacramento. Great start, champ.
2. The Sacramento Bee followed up, lending some seriousness to the issue and getting quotes from none other than George Maloof, who basically reiterated what Rose had said with a nominal tossed dog bone or two for the city. The issue became clear: the Maloofs do not feel they should be on the hook for pre-development fees, even though the term sheet everyone was glad-handing over a month ago explicitly said that the city, AEG and the Kings would share pre-dev fees on a 50-25-25 basis.
3. The Bee's Dale Kasler reported that the NBA would cover the Maloofs' share of pre-dev fees up to the league's Board of Governors meeting in mid-April.
4. Mayor Kevin Johnson calls the Maloofs out in the most professional way possible.
This issue isn't settled: the league is only funding the next two weeks of pre-dev fees. There is another shoe to drop. If it isn't resolved soon, it's going to be resolved at the Board of Governors meeting. That's where things really get interesting.
In truth, the full $3.2 million is chump change for the NBA. This is a business with $4 billion in annual revenue. Is there a chance that the Commissioner could ask the Board of Governors -- the panel that includes all 30 NBA owners or their assignees -- to just cover the whole amount for the Maloofs? Sure. Stern could acknowledge that this is a sticking point from which neither the Maloofs nor the city can budge, and decide that in the interest of preserving the deal, he'll ask the other owners to cover it ... for the good of the league.
That's chump change ... but a horrible precedent. The league can't break out its wallet every time the Maloofs put up resistance. If I learned nothing else from the failure of Measures Q & R, I learned that the Maloofs really do care about the details. They care about every dime. (It's funny, this is only the case when it comes to a new arena in Sacramento, or heck, the Sacramento Kings themselves. They have no problem spending millions on fruitless condo projects, pro skateboarding circuits, hilariously bad music labels, TV studios that put out creative gems like than Lohan reality show or Ed Hardy shirts. It's only where Sacramento is involved that George Maloof gets cheap.)
Q & R died because the Maloofs, days after completing a laborious, all-hands negotiating session to get appropriate terms in place before the public voted on the tax measure, decided that
a) downtown might not be the best place for the arena (when a good portion of the pitch to the public had been downtown redevelopment), and
b) that the family should be allowed to build a large parking structure, cannibalizing planned city profits.
The Maloofs retracted support for the measures, the campaign push died, and 80 percent of voters said no.
This is same deal, minus the public vote. After months of negotiating, the Maloofs agreed to a non-binding term sheet. Part of that non-binding term sheet was a huge contribution from the family. Part of that contribution was 25 percent of pre-dev costs. So we had a grand deal, we had tears of joy and relief ... and a month later, we have George Maloof spitting on the deal and refusing to pay a relative small amount (as agreed to) because he doesn't feel he should have to.
It's the worst kind of deja vu.
But there are two ingredients that make this a vastly different scenario than Q & R, and I'm not talking about the public vote aspect. The two ingredients that change everything: Kevin Johnson and David Stern.
The city, county and regional folks involved with Q & R were good, hardworking folks. But they didn't have the authority or notoriety to go toe-to-toe with George Maloof. KJ does, and his statement on Thursday night shows that he isn't backing down one bit. That's half the battle in beating a bully: show him you're not afraid. George Maloof is a being a bully. He's throwing around his power as a major part in the deal to get out of commitments and save a few bucks. KJ isn't going to take it.
Stern enters on a different plane, one from which he can immediately undermine the Maloofs or from which he can put the city in an extremely uncomfortable position. No one is quite sure how hard Stern pushed the family to take the deal in Orlando. There would seem to be a strong chance that he indicated to them that the league deemed the deal fair. I'm not so optimistic about Stern valuing Sacramento over the Maloofs that I think he whispered "Burkle" in their ears or even told them the Board would reject any attempt to relocate if they didn't take Sacramento's offer. I tend to think that a certain strain of Stern ball-busting -- the whole backroom conspiracy theory genre -- is myth. He's a tough hombre, no doubt. But I don't think he's as KGB as we sometimes like to believe.
This is where the impasse gets real. KJ isn't backing down from Maloof's power play. Stern had three options on Thursday: sit this one out and let KJ and the Maloofs figure something out or let it burn, interject to agree with the Maloofs about who should pay pre-dev fees (making things very comfortable for the city) or immediately undermine the Maloofs by covering the first two weeks of their share. Stern chose that one: he picked up the tab and told everyone that the Board of Governors would talk about it in mid-April.
Look at the wording in Stern's statement:
"Those discussions have stalled, but I have advised Mayor Johnson that the NBA will advance pre-development expenses on behalf of the Kings pending our report to the NBA Board of Governors at its meeting on April 12-13."
The league advanced the funds on behalf of the Kings. He didn't say that the NBA is providing $200,000 to cover the disputed fees while the Maloofs and city continue negotiations. He said they are advancing the funds on behalf of the Kings. It seems pretty clear that, barring sloppiness (something Stern's office is rarely accused of), the commissioner is suggesting that the Maloofs are de facto on the hook for these fees on account of, you know, agreeing to them a month ago.
While it'd be awful precedent as we dig into a $400 million deal, I have a feeling that Stern will ask the Board to cover the full $3.2 million on behalf of the Kings in order to allow the project to move forward in a timely fashion. But even if he does, it's not going to happen again. And there is a lot of rope left in hammering out the deal. If the Maloofs are willing to caterwaul on something explicitly in the term sheet they agreed to, you can guarantee they'll complain about other items that legitimately remain unanswered. Uncle Dave isn't cracking out his wallet every time. He can't.
The question isn't whether Stern sees this freight train coming: he does. The question is whether he feels inclined to stop it on his own -- which can only truly be accomplished by removing the problem (George Maloof, and perhaps his family) from the equation -- or whether he thinks that KJ can get it done so long as the league is there for support. I'd bet heavily on the latter scenario, which is exactly what played out on Thursday. In that scenario, we can consider Stern and the NBA to be Maloof insurance, protecting the deal from the whims, whimsy and greed of the Maloofs.
Fingers crossed until those doors swing open.