Sunday Musings: No free lunches for Maloofs as Virginia Beach shows cracks in arena plan
The big news broke Friday afternoon that Virginia Governor Bob McDonnell wouldn’t be including a $150-million gift in the state’s budget for Virginia Beach to finance a new arena used to lure the Sacramento Kings.
“Virginia Beach officials were informed this afternoon that the governor’s budget amendments will not provide resources for this project at this time, as the VEDP analysis is ongoing,” said Tucker Martin, a spokesman for the governor in a statement.
I know, it’s Sunday and in the current 24-hour-news cycle, I am running a bit late, but I needed to let this one sink in a bit before really breaking it down.
There are so many issues here on the table that I don’t even know where to start. First and foremost, the Maloofs just learned that there are no free lunches. That’s what we’re looking at here because they have run out of those in Sacramento.
“The Governor has long supported efforts to bring a professional sports franchise to Hampton Roads,” Martin added in the statement. “However, any state involvement in economic development proposals must make clear and sound financial sense for the Commonwealth’s taxpayers and be economically justifiable.”
Folks have bandied about the idea that the Virginia Beach deal was based around a 90-percent state and local subsidized arena build, but that isn’t quite accurate.
Virginia Beach was willing to kick in $241 million into the $346-million project. Another $35 million was expected from Comcast-Spectacor, followed by this $150-million gift from the state of Virginia.
Now I may not have a degree in mathematics, but I’m pretty sure that $241 million plus $150 million is more than $346 million. And I’m pretty sure that $391 million of an estimated $346 million is more than 90 percent. It’s actually 113 percent.
Why is there all this extra cash floating around? Because the deal required an $80-million gift to the Maloofs to pay for $30 million in relocation costs and another $50 million in lost revenue while they play in an unsuitable college arena.
That’s right folks, not only was Virginia Beach willing to build a free arena for the Kings owners, they were willing to drop in an extra $80 million to help the Maloofs move the team across the country.
Clearly the first question that should be asked is where is Christopher Thornberg? You remember him don’t you? He was the economist brought in by the Maloofs to tank the Sacramento arena deal. Where is he in this deal when the yearly debt service is an estimated $19.7 million for Virginia Beach?
Sacramento was willing to cash out their parking asset, but the loss was an estimated $9 million a year in lost revenue, a number that they nearly solved. Where was Virginia Beach going to find that nearly $20 million a year?
Also, the Kings might need more than that $80 million to relocate the team. $30 million was earmarked for NBA relocation and the other $50 million was for lost revenue, but what about the estimated $70 million owed to the city of Sacramento?
It is now pretty clear that first and foremost, the Maloofs wanted a free arena in Sacramento and maybe even more than that – someone to absolve them of the millions they already owe the bondholders.
That may still not be enough. With the way they have treated the city and their own fans, I’m pretty sure that they never intended on Sacramento coming up with an arena plan in less than a year’s time.
They assumed that the city would fail and the NBA would support them in a relocation bid to Anaheim or some other waiting city. But that didn’t happen.
So now they are looking for a sap to pay for everything. The first sap to give it a try was Virginia Beach Mayor Will Sessoms. But now we know that even a state with a huge financial surplus isn’t willing to risk their financial future on the Maloof family.
So who will be next? If the Maloofs decide to sell, there will be bidders. Seattle-native Chris Hansen will think he is first in line, but I’m pretty sure David Stern will let Sacramento make a bid.
My sources tell me that Sacramento has a buyer in waiting. It appears that wealthy individuals who want to get into the NBA game are very intrigued by $250 million of public money, a former NBA player for a mayor and one of the most passionate fanbases in professional sports history.
Now if the Maloof family continues to hold out and run out a product onto the floor that struggles to play .300 ball, the fanbase won’t return the favor. They will hold out and not spend their hard earned dollars.
Unfortunately, we are already seeing the effects. Fans are reluctant to back a team that continues losing and whose owners are constantly offering no comment when relocation rumors begin to circulate.
For 19 of the first 29 seasons in Sacramento, all you had to do as an owner of the Kings was open the doors and fans would fill the arena each and every night. Now it’s time for the owners to earn their money.
The deal to build a new entertainment and sports complex in the railyards came with a $70-million price tag for the team the NBA was willing to finance. That money will not go to Virginia Beach for a similar project. That loan was earned by the citizens of Sacramento for 20-plus years of incredible support.
So it’s gut check time for the Maloof family. Plan A was Anaheim and that ship is sunk. Plan B was Virginia Beach, which was never really much of a plan at all. There are no free lunches out there, so it is time to make a decision.
Be the proud owners of the Sacramento Kings or put the team up for sale.