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  • HECTOR AMEZCUA / hamezcua@sacbee.com

    City Councilman Jay Schenirer, left, chats with Gavin Maloof, center, and Joe Maloof at a Kings game last month, a day after the council approved a nonbinding term sheet to finance a $391 million arena. The Maloofs now dispute some terms.

  • JOSÉ LUIS VILLEGAS / jvillegas@sacbee.com

    George, left, and Gavin Maloof watch from courtside Tuesday as their Kings lose a home game to the Phoenix Suns. The Maloofs say they shouldn't be responsible for pre-development costs for a proposed downtown arena.Hector Amezcua

In Sacramento, a deal that really wasn't

Published: Thursday, Apr. 5, 2012 - 12:00 am | Page 1A
Last Modified: Wednesday, May. 15, 2013 - 6:22 am

A month ago, Sacramento Mayor Kevin Johnson and the Maloof brothers emerged from an Orlando hotel conference room after three days of negotiations to announce a handshake deal on financing a new downtown sports and entertainment arena.

That moment now appears to have been more hope than reality.

The public flare-up in the past week over whether the Kings must chip in for pre-development costs has thrown the city's arena effort into doubt and exposed a fundamental problem: The two sides never were fully on the same page.

City officials described the "term sheet" negotiated that day as a nearly complete agreement. Attorneys would dot the I's and cross the T's in the coming weeks and write up contracts, they said.

The Maloofs, owners of the Sacramento Kings, however, say they disagreed with key elements of the term sheet from the get-go and that they had expected significant changes before any deal was signed.

City officials maintain they did not know of the Maloofs' misgivings until team owners told them at a March 20 meeting they would not pay a $3.26 million share of pre-development costs. The team wanted that stricken from the term sheet.

The rift puts into question whether the Maloofs will agree to the next step in the process, which calls for them to sign a tenant lease agreement by April 15 with AEG, the company the city plans to hire to operate the arena.

In further evidence that any tenuous trust has been broken, team attorneys filed a voluminous request two weeks ago with the city to view all memos, emails, letters and other documents exchanged between the city and the NBA in the last year, as well as communications between the city, AEG, the city's arena consultants, other local governments and officials regarding the arena.

Kings officials declined an interview request Wednesday. But the filing indicates the team's owners are searching for any information shared by the city, the NBA and AEG in the months leading up to the drawing up of the term sheet, and raises questions about how open the lines of communication were among the Maloofs, the city and the NBA throughout the yearlong process.

The NBA has been serving as intermediary between the city and the Kings. Team and city officials had little contact until late February in Orlando, when they met to discuss deal points with NBA officials, including Commissioner David Stern.

The recent acrimony provides a dramatic backdrop for next week's NBA Board of Governors meetings in New York, where Stern says he will brief owners on the Sacramento situation.

Stern told the Salt Lake City Tribune on Wednesday he is "more hopeful than I am confident right now" about getting an arena deal done.

"In a week, our owners will be coming in for meetings … and we'll see where it's going," Stern said. "Very, very hopeful that it gets on track."

Stern helped keep the arena project moving last week by forwarding $200,000 from the NBA to begin pre-development work on the arena. City officials used that money to hire consultants for site planning and environmental studies. The consultants toured the railyard site of the proposed arena Wednesday.

That money will last until April 17, city officials said. If there is no resolution of the funding dispute, they said they expect to stop planning work, which would put the whole project at risk.

NBA representatives declined to say what Stern will discuss with owners next week in New York. City Hall officials say they want the league to address the pre-development costs.

"We are hopeful that the Board of Governors will resolve the issue consistent with the agreed-upon terms in the term sheet," Assistant City Manager John Dangberg said.

A Maloof spokesman this week reiterated the team's stance that the Maloofs, as a tenant in the city-owned building, should not be obligated to pay planning costs.

"As we have said numerous times, the Kings' long-standing position has been that the team would be a tenant in an arena owned by the city and managed by AEG," said Kings spokesman Eric Rose. "Pre-development costs are not the responsibility of the tenant. Moreover, the city had asked the Kings to reimburse AEG for their contribution, and we find that extremely unfair."

In at least one recent case, the Orlando Magic did pay some pre-development costs for that city's arena, where the team is tenant in a city-owned facility. Team spokesman Joel Glass declined to say how much the Magic paid.

The fight over pre-development costs appears to be only one of several points of dispute. The team has disagreements with the term sheet involving parking issues, revenue streams, length of the deal and decision-making authority, according to people familiar with the issue.

The team also expressed concerns in a letter Monday about the city's ability to pull off an arena in the tight time frame – a 2015 opening date that the NBA has set as a target for getting the Kings in an updated arena.

To some, the Maloofs' statements of the past few days are reminiscent of 2006, when the family pulled away from a city-led campaign to raise the local sales tax to fund a new downtown arena. A pair of ballot measures that year failed miserably, amid pointed fingers about who was at fault.

Sacramento political consultant Doug Elmets, who ran the Measures Q and R campaign, said it's hard to read the Maloofs at the moment.

Their actions "once again (call) into question whether they're really intent on making this work or whether they want to be a stumbling block," Elmets said. But, he said, "they're survivors and they're gamblers and this may simply be a tactic to get them what they ultimately want from a financial perspective."

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