Kings to Anaheim? Follow the money
Once far-fetched, the Maloofs moving the Kings to the Honda Center a real possibility
Three NBA teams in the Los Angeles area?
It's as unlikely as a Los Angeles Clippers sellout, or a Lakers fan with even an ounce of true passion for their team. Wait, what's that? The Blake-Show has packed the house 15 times this season, and Ron Artest is reporting the Lake-Show loyalists do, in fact, have serious "swag" no matter what GQ says?
Well it all adds up then, because the once-unthinkable notion that the Sacramento Kings might be heading for Anaheim is real, too.
The move isn't official just yet, as the Maloof brothers who own the team are in the process of crunching numbers, balancing their hypothetical books, and negotiating their way out of a place they never wanted to leave. Arco Arena was their home, the place they took over as majority owners in 1999 and energized with those Chris Webber, Vlade Divac, Mike Bibby-led teams that came so close to being a small-market, Cinderella story.
Instead, Shaquille O'Neal deemed them the "Queens," their string of eight consecutive playoff berths ended in 2007 and segued into the most drastic of hoops declines, and forces of the economic, political and personal kind all helped push this Kings organization that came to Sacramento in 1985 from Kansas City onto the brink of relocation once again. There are still details to be resolved and timelines to be met, though, which means a Q&A is in order to help explain it all.
Three NBA teams in the L.A. area is not only possible and looking highly plausible, but no one said it was simple.
WHAT'S THE LATEST?
The process is already under way, as the Maloofs filed for and were granted an extension on the March 1 deadline to file for relocation. They intend to discuss their options at the board of governors meetings April 14-15, and April 18 is the new date by which they must make their wishes known -- even though their intentions have been clear for quite some time.
While it is known the Maloofs have had discussions with Anaheim officials and Ducks owner Henry Samueli for more than a year about becoming a tenant at the Honda Center, the discussions heated up after the latest plan for an arena fell flat in Sacramento last September. It was a development that will likely be seen as the nail in the Kings' coffin, as the California Exposition and State Fair officials who were involved in a complicated arena land swap deal voted it down and what little hope remained for a new building was gone.
The Maloofs, who spent more than $2 million of their own money on consulting fees for this particular plan, were justifiably frustrated. NBA officials were fed up too, having made the unprecedented decision to join the effort in 2007 only to see nothing in return for their time. The vote was quickly followed by an unwelcome announcement from the league.
"On the heels of the disappointing -- but not surprising -- action (or inaction) of the state and Cal Expo board, it is fair to say that the NBA has ceased its activities on the Sacramento arena front," league representative John Moag wrote in an e-mail to The Sacramento Bee.
The Maloofs' lack of patience wouldn't become public until January, when they issued a short and not-so-sweet statement amid rumors that their talks in Anaheim had become more serious. "We are looking at all options to ensure the long-term viability of this franchise," the statement read.
The signs the Kings aren't long for Sacramento have grown only stronger since, with a number of them coming to light in the last week.
• According to KXTV-TV in Sacramento, the U.S. Patent and Trademark Office received trademark applications seeking rights to the names "Los Angeles Royals," "Anaheim Royals," "Anaheim Royals of Southern California" and "Orange County Royals" from an attorney representing the Maloofs on March 3.
• On Tuesday the Anaheim city council approved, unanimously 5-0, a $75 million bond deal to make improvements to the 17,000-plus-seat Honda Center that opened in 1993. With some recent signs pointing to a possible 11th-hour reconsideration of the move by the Maloofs, the latter development is seen by some sources close to the situation as a possible sweetening of the proverbial pot to make the venue even more NBA-ready and help get the deal done.
• Previously, the Sacramento City Council had made little headway with the Maloofs after making what is now seen as a 12th-hour attempt on Feb. 8. The council voted unanimously to work with developer David Taylor and venue group ICON to develop yet another arena plan, only to see repeated requests for key financial documents ignored for weeks by the Maloofs.
• Sacramento Mayor and former NBA player Kevin Johnson has been talking for weeks as if it's a foregone conclusion the team will leave, saying as recently as Monday the Maloofs have one foot and "three toes, maybe four" on the other foot out his city's door.
Should the Maloofs file to relocate as so many expect they will, a relocation committee would then be assigned by the NBA and given 120 days to provide a report and recommendation to the league's board of governors. The board then has seven to 30 days to vote on the matter, with a majority vote of owners needed for approval. Because the team in question gets a vote as well, that means 16 votes are needed for approval.
CAN ANYTHING GET IN THE WAY OF THEIR BIG-CITY DREAMS?
The Los Angeles Lakers and Clippers, for starters. And money.
Predictably, the incumbent Southern California teams aren't thrilled about the prospect of sharing the nation's second-largest media market. And while they might not be able to sway enough of their owner friends to block such a move via the vote, they could get enough big-city backing to make it far more expensive for the Maloofs.
While the NBA doesn't have territorial rights fees in a traditional sense, it does have a negotiable relocation fee that is determined by the board of governors. The Seattle SuperSonics had to pay a $30 million relocation fee when they moved to Oklahoma City in 2008, and the Maloofs would be as good as gone if that number holds true in their case.
But there remains the possibility the board would significantly increase the figure based on damage done to the local teams, and that's where things might get interesting.
Only the Maloofs know what kind of cash they can come up with to pull this monumental transaction off, but their family finances have been in serious question in recent years and that remains a factor worth watching. The in-the-red flags began in early 2009, when the layoff of a dozen Kings employees as well as employees at their Palms Casino and Hotel in Las Vegas sparked speculation the Maloofs were in serious financial trouble.
They sold their lucrative beer distributorship in New Mexico, then later claimed it wasn't a sign of strife but rather a deal that was too good to pass up. Reports have pegged the sale as being for more than $100 million, but sources close to the family say the figure was much higher. Then in January, a Bloomberg report the Maloofs would also deny indicated two private investment firms were looking to take over the Palms after the Maloofs had breached financial covenants of a loan. All the while, the Kings began aggressively slashing payroll in 2008 to the point where they currently have the league's lowest payroll at approximately $44 million.
Translation: Money matters.
What's more, the Maloofs are dealing with more than just the eventual relocation fee. When they took over the team from former Kings owner Jim Thomas 12 years ago, they assumed his $70 million loan from the city of Sacramento that must be paid off in full if they leave.
Thomas received the loan after threatening to sell the team unless he got the financial aid, claiming he needed the money to refinance his purchase of the arena. With pre-payment penalties, the loan amount currently stands at approximately $76 million.
As we said, money matters.
And therein lies Anaheim's appeal.
While the question of whether the Kings/Royals would face attendance challenges can't be answered for quite some time, the Maloofs have a unique opportunity to get financially comfortable quickly by way of a potential television rights deal. The Lakers in mid-February struck a 20-year, $3 billion deal with Time Warner that left Fox Sports West without its two-time defending champion partner after next season, meaning there is suddenly a significant void to be filled. Whether the Maloofs sign a deal with that affiliate or take another route, sources close to the process say they stand to at least triple and possibly quadruple their earnings from the current contract in Sacramento.
While the details of the negotiations that pertain to the Maloofs' eventual cut of profits as tenants are not known, it's unmistakable that the new locale would come with a number of other built-in advantages when it comes to revenue streams.
• A population of approximately 3 million in Orange County that not only more than doubles the population in Sacramento County but has significantly more wealth.
• A Honda Center venue that features nearly three times as many luxury suites as Arco Arena (84 compared to 30).
• A corporate base that, according to 2010 U.S. Census Bureau Data, nearly triples that of Sacramento County in terms of private companies (89,527 compared to 28.532).
The hope for the Maloofs, of course, would be to turn the business benefits into building a better basketball team. They would certainly increase their odds of landing top-tier free agents in Anaheim, and a payroll that is slated to be the league's lowest next season (approximately $28 million) might be made even more effective if owners get their way in this summer's collective bargaining agreement negotiations.
The notion of a hard salary cap in the neighborhood of $45 million was part of the owners' proposal and remains a dream scenario for the Maloofs, who would love nothing more than to see the nearby Lakers (who have a $92 million-plus payroll for 2011-12) squirm under the new structure. The Kings/Royals would have to compete with the nearby Clippers for available talent, though, as their 2011-12 payroll is the league's third lowest at approximately $35 million.
WHY NOT SACRAMENTO?
Where to begin.
The sad part for the locals and the Maloofs is how badly they were blinded by the team's success. The Kings' heyday in the early 1990s and early 2000s brought with it such a level of hype and affection for Arco Arena that the underlying issue, playing in an untenable NBA building, was largely ignored.
Amid the din of the cowbells and "Beat LA" chants, city officials underestimated the pressing nature of the situation and many fans were slow to acknowledge that the days at Arco Arena -- which was the cheapest building of its kind when it was first erected -- were coming to an end. The political climate in California made it more challenging than in most other states to get public financing approved.
The Maloofs had political struggles of their own, as they were accused by local politicians of being difficult in negotiations and having a vision for their venue that simply wasn't realistic. There were public relations gaffes, too, from the infamous Carl's Jr. commercial in which they touted a "$6,000 Happy Meal" at the Palms (a burger and pricey bottle of wine) to Joe Maloof's public disapproval of a downtown arena plan in 2006 that involved a tax increase and was weeks away from being placed on the ballot (it was, predictably, defeated by a four-to-one margin). By the time the necessary attention was being paid to the situation, the recession had hit and neither the Maloofs nor their Kings were nearly as loved by the locals.
Not long after the unpopular decision to let former coach Rick Adelman go in 2006 that was driven by the Maloofs, the team's win total plummeted and the coaching carousel started spinning. The Kings won 33 games under Eric Musselman in his one season, improved to 38-44 under Reggie Theus and went 17-65 in the 2008-09 campaign in which Theus was replaced by interim coach Kenny Natt less than two months into the season.
Current coach Paul Westphal hasn't done much better, going 25-57 last season and currently sitting next to the bottom of the Western Conference at 21-52. Longtime president of basketball operations Geoff Petrie has remained through it all despite the struggles, with the Maloofs refuting a recent ESPN report indicating his league-long tenure might be nearing an end.
The dysfunction, defeats and the downturn of the economy led to a new reality at the Arco Arena turnstiles. After the league-record sellout streak of 354 came to an end on Nov. 6, 2007, the Kings fell to 27th in NBA home attendance in 2007-08 and haven't been ranked higher than 29th since.
Sam Amick, a freelance writer who formerly covered the NBA for AOL FanHouse, was the Kings beat writer at The Sacramento Bee from 2005 to 2010. Follow him on Twitter and find his work at NBAConfidential.com.