Debunking the Case Against Sacramento

A recent article by SI's Ian Thomsen lays out the case the Seattle group made against Sacramento in their presentation last week. Aykis lays out Sacramento's defense.

There is an assumption going around that in the battle for the Sacramento Kings, choosing Sacramento would be the sentimental, not logical option. This is repeated in a recent article by SportsIllustrated's Ian Thomsen. Thomsen revealed a little bit about how Seattle went about their presentation to the NBA Board of Governor's last week and surprise, much of it was focused on supposed weaknesses of Sacramento's plan, particularly the arena plan.

From the Thomsen piece:

A new arena in Sacramento cannot be built within three years, as proposed by Sacramento mayor Kevin Johnson. Based on an intrinsic set of checks-and-balances in California that have delayed local stadium projects by the Giants and 49ers, the Kings can expect to need at least six years to complete a new arena in Sacramento. The current site for a new arena in downtown Sacramento may not be viable.

The Seattle group laid out the recent history of arena building projects in the Sacramento region for NBA owners. The 49ers began their project to build a facility in Santa Clara, 88 miles from Sacramento, in August 2008; the new stadium is expected to open in 2014. The Giants launched their new stadium project 75 miles from Sacramento in April 1996, and it opened in 2000. The Warriors began work on a new arena in December 2012 with an anticipated opening in 2017.

Sacramento faces numerous issues in its attempt to complete its new arena project. The proposed downtown site involves at least 25 parcels of land that are controlled by five independent owners. Two previous attempts to plan an arena at the site have been abandoned because of high costs and other complications.

A 2004 Sacramento city cost estimate revealed that one million square feet would be demolished and more than 1,000 jobs would be displaced. The same report by the city valued the "hard costs" of building an arena downtown at $559 million. The current Sacramento plan prices the same work in 2013 at the same site at $345 million. In other words, according to the presentation made by Seattle, the Sacramento bid projects that the costs of land acquisition, demolition, infrastructure, construction and other overhead charges have fallen inexplicably by $214 million over the last nine years.

A 2005 Sacramento City Council report investigated the current downtown site and concluded: "This site has been previously studied and evaluated ... it offers exciting opportunities within a downtown setting yet has significant development issues. Due to its existing use as an urban shopping mall, this site is expensive to purchase and prepare for construction. Demolition and construction are difficult to complete without disruption to existing businesses. In addition, there are issues associated with historic structures. Staff believes that the costs associated with this site, as estimated by the consultant team, make it infeasible."

First off, I'd like to note that "The Sacramento Region" does not include the Bay Area. If it did, we would be considered one of the largest markets in the NBA.

Second, the Giants and 49ers projects were to build stadiums, and came with many issues of their own. The proposed stadium in Santa Clara for the 49ers is estimated to cost $1.2 billion. It was also put up to a ballot initiative before the city had come up with any financing. Sacramento has already worked out a term sheet and approved it by a 7 to 2 margin. Santa Clara and the 49ers didn't finish the financing process until 2012. Sacramento has also started the environmental review process, a process that has been expedited thanks to the introduction of new laws like AB 900, authored by Darrell Steinberg (who you might remember as the Senator who went to the Board of Governors last week to explain the nuances of the law).

The Warriors and their new arena are also mentioned, with work said to have begun in December 2012 with an expected completion date of 2017. Sacramento has been working on an arena deal since before that, as the current deal has retained some of the basic framework of the failed Railyards arena plan (which only failed because the Maloofs decided to back out). The San Francisco plan also calls for construction to begin in 2015, while Sacramento is set to begin in 2014 after the environmental review process is complete.

Then there are the cases of the 2004 and 2005 studies about the Downtown Plaza and their feasibility as a location for a new arena. As most of you reading this are Sacramentans, I don't have to tell you that the Downtown Plaza in 2013 is not the same as the Downtown Plaza in 2004, back when it was actually pretty vibrant. The mall also featured an owner in Westfield Corp. who wanted no part of an arena on their site. That has changed as the mall has become defunct, with more and more vendors leaving. Westfield sold the site to JMA Ventures in 2012 for just $22 million, and since then, JMA has been going full-throttle on trying to get an arena, even funding their own feasibility study through AECOM, the same people who built Barclay's Center in Brooklyn. That is the feasibility study that Sacramento is currently working under, not outdated ones from a different socioeconomic and political environment.

The political environment is important as well, as Sacramento bureaucrats have never been more invested in building a new arena downtown. The political will of the city has never been stronger either, faced with the threat of losing one of its biggest assets in the Kings. Part of Seattle's argument is correct: Sacramento has been hit harder by the recent recession than most. That's just one of the reasons the city is fighting so hard for a project that could launch some massive re-development and growth. Most if not all the major political power players in the region are behind these latest efforts and opposition has been scarce.

Thomsen also writes that the Seattle group questioned whether or not Sacramento was a "one-team town" because of all the teams in the Bay Area that also broadcast in Sacramento. While it's true that the MLB and NFL have large fanbases in Sacramento, the Kings are the only team in the area that would be up for corporate sponsorship, television deals, tickets, etc. That's what we mean by "one-team town". The talk of how the 49ers, Raiders and Giants all drew higher ratings than the Kings in 2012 is also laughable. The Kings are a team that is closer to contending for the #1 pick in the draft than competing for the #8 seed in the playoffs. The Giants WON the freaking World Series and the 49ers got to the freaking SUPER BOWL. In fact, the NFL routinely outdraws the other sports in terms of ratings in most cities, which is why even the lowly Raiders have big ratings.

One thing that is not mentioned in Thomsen's piece but is a big factor is the matter of the public subsidy. As many have reported throughout this process, this is more about franchise valuation or team economics. The threat of relocation has almost always been exclusively used as a threat should a city not be able to come up with the funds to build a new arena. That's the biggest reason the NBA chose to leave Seattle in 2008, the reason they left Charlotte in the early 2000s, and the reason they almost left New Orleans again in 2011. Right now the city of Sacramento has put up $258 million in public subsidies for the NBA. Should the team leave, what message will that send to other cities in the future when their teams comes to them to ask for subsidies?

Thomsen does quote an anonymous owner who says that David Stern does not want a team to relocate, but also believes that Sacramento's group isn't up to snuff (note: It's unclear in the article if this is the same owner although I'm assuming so)

"He can't have a second incident of helping a team leave a market," said an NBA owner of Stern. "Seattle was bad enough. And I'm sure he feels that Seattle had a chance to keep the team the first time around.

"The bottom line is that the incumbent always gets the last shot. You don't want teams moving around."

***

But Stern may not have the power to influence owners to see things as he sees them.

"I think their whole business plan is flawed -- that the real estate numbers don't work, that they don't have enough money to make any of it happen," the owner said of Sacramento group's proposal to buy the Kings and prevent them from moving to Seattle. "So from all I can tell right now, it fails.

"But," the owner added, "that could change if they brought in someone with big dollars."

Again, I'm not sure how Sacramento's group can do much more than they have. They've reportedly indicated to the NBA that they're willing to both match Seattle's offer for the team and pay Chris Hansen back his $30 million. The group features guys in Mark Mastrov and Vivek Ranadivé who the NBA knows can afford to do this because of their previous vetting during their involvement in purchasing the Golden State Warriors in 2011.

And despite all these supposed weaknesses for Sacramento, the Hansen-Ballmer group seemingly feels threatened enough to have to "voluntarily" increase their bid for the team. Despite all the rhetoric coming from up North that Sacramento hasn't officially matched yet, adding more money to an already binding agreement is not something someone does lightly. Also, it's still unclear whether or not the NBA will allow such an increase.

***

David Aldridge reports that the NBA will hold some additional two days of meetings on the Kings situation prior to the April 18th-19th Board of Governor meetings where everything will likely be decided. Choosing between Sacramento and Seattle will not be an easy decision, but it's also not as simple as saying one is the logical choice and one is the sentimental choice. Both cities fit in either category, and both cities deserve to win. This has been a long, grueling process, and one can only hope that the NBA finds out a way to do the right thing and make both cities happy.

Expand to 31.

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