Sacramento, NBA close to arena financing deal

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by LORI MATSUKAWA / KING 5 News

NWCN.com

Posted on February 22, 2012 at 10:28 AM

Updated Thursday, Feb 23 at 3:57 PM

Taking a page from the "Seattle-King County-Chris Hansen" playbook, Sacramento Mayor Kevin Johnson on Wednesday announced his city will be in deep negotiations with the NBA and the owners of the Sacramento Kings over this All-Star weekend to come up with a plan to raise $387 million for a new arena complex.

Earlier in the day, NBA Commissioner David Stern said the Maloof family,  which owns the team, has agreed to make a "major" contribution, though he wouldn't say how much. City officials expect AEG, the arena's probable operator, to pitch in $50 million.

That leaves Sacramento looking for ways to step up to support a project that the mayor says will mean 4,000 jobs and $154 million a year in revenue.

"If you look up in Seattle-King County, the County and the City are doing a great job in working together," said Johnson. He said they came up with a plan that is "in the best interest of everyone. It does not negatively impact their general fund, it does not impact their credit rating, their capacity for debt, any of those things are neutral."

Earlier version of this story

Sacramento's last shot to remain an NBA city appears headed for another overtime, at the same time dealing a major blow to Seattle's hopes of once again hosting an NBA franchise.

In a joint statement released Wednesday, Sacramento Mayor Kevin Johnson and NBA Commissioner David Stern said they have agreed to a "work plan" in hopes of reaching a deal to finance a new arena by the March 1 deadline. Johnson, Stern and the Maloof family, which owns the Kings, will meet during this weekend's All-Star festivities in Orlando, Fla.

If a plan can been hammered out in time, a term sheet will be announced March 1 and the Sacramento City Council will vote on the plan at its March 6 meeting.

"Sacramento stands ready to meet the March 1 deadline," Johnson said in the statement. "Our approach makes good on the principles that have guided us throughout this process: protecting the taxpayers, creating jobs, and pursuing an open and transparent process."

The major sticking point in negotiations remains how much the Kings will contribute.

Under the proposed agreement, the city of Sacramento will raise about $190-$230 million by leasing out parking garages to private investors, a person familiar with the negotiations told The Associated Press. The person, speaking on condition of anonymity because they were not authorized to disclose the information, said another $75-$100 million is expected from the Kings and $40-$60 million from arena operator AEG.

The remaining gap will be covered by some combination of a ticket surcharge, advertising around the arena, allocating a portion of the city's existing transient occupancy tax or a sale of three or four parcels of city land.

The final price tag for AEG depends largely on the team's contribution.

The Kings' portion would include upfront cash -- the city had initially asked for $60 million -- and donating back the land around the franchise's current suburban Sacramento arena, estimated at about $25 million. AEG's contribution will be impacted by the splits with the team in arena-related revenue.

The two sides are making progress and hope to bridge the remaining gap to finance the estimated $406 million arena, which would open for the 2015-16 season in the downtown Sacramento rail yards. Despite attempts by Anaheim and Seattle to swoop in and lure the Kings, Stern said the league is making every attempt to keep the franchise in California's capital.

"We appreciate the work of the City of Sacramento and (our) discussions have been constructive," Stern said in a statement. "Our hope is that current momentum continues in a way that we're able to reach a deal by March 1 that makes sense for all parties."

Kings owners Joe and Gavin Maloof haven't been involved in negotiations. The league is bargaining with Sacramento officials on the franchise's behalf and will present the final proposal to the team.

Joel Litvin, president of league operations, and Harvey Benjamin, executive counsel for business and finance, are the NBA's lead negotiators. Stern also has been receiving updates.

The NBA could force the Maloofs into bringing in investment partners or -- as a last resort -- even sell the team if the owners walk away from a plan that has the league's approval.

Southern California billionaire Ron Burkle remains interested in buying the Kings. And Christopher Hansen, a hedge-fund manager based in San Francisco and a Seattle native, is also making proposals to bring an NBA team to Seattle -- with eyes on the Kings if Sacramento's latest plan collapses.

The Maloofs insist they're not selling the team. A Kings spokesman said the team is refraining from comment until the NBA and the city complete a proposed plan.

The City of Seattle is in negotiations with Hansen to build a new arena south of Safeco Field that could house NBA and NHL teams.

It was believed the two most likely teams to move to Seattle would be the Kings and the NHL-owned Phoenix Coyotes. KING 5 Sports reported Monday that the Coyotes would be sold and stay in Arizona, but the NHL has not confirmed that.

Neither the NBA nor NHL has expressed any interest in expanding the leagues to add new teams for Seattle.

Watch KING 5 Thursday at 10 p.m. for a one-hour special -- Seattle Arena: Billion Dollar Hat Trick

Additional reporting by the Associated Press.

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