The commissioner of the National Basketball Association said Friday that the Kings are making a mistake by passing up a good deal on a new $391 million arena in downtown Sacramento.
"We had come up with a scenario where the Kings could move into the building without putting a dollar of cash down," Commissioner David Stern said in a phone interview with The Bee. "We were not attempting to induce them to make a deal that would be unprofitable for them."
Stern made his comments shortly after a somber Sacramento Mayor Kevin Johnson announced that he and the Kings' owners, the Maloof family, had failed to reach agreement after two days of last-ditch talks and that the two sides are too far apart to keep talking about building a facility in the downtown railyard.
"It became clear today our differences are irreconcilable," Johnson told reporters at City Hall. "This deal is not happening as we know it."
George Maloof left the meeting through a side door, but he told The Bee later by phone that the team is staying in town.
"We're not going anywhere," he said.
Maloof mentioned expanding and rehabilitating Power Balance Pavilion, one of the smallest and oldest arenas in the league. He offered no details.
"Right now, it's break time," Maloof said. "Everybody's kind of burned out. I know we are." He said his family is "going to take some time to focus on (team) operations."
Johnson called the idea of rehabbing Power Balance Pavilion a "nonstarter" for the city. Stern said if the Kings can find the money to rehabilitate Power Balance, "that is something that would be good for Sacramento and the NBA," but the league doesn't plan to extend its loan offer to that project.
"Everything now is back to square one," Stern said. "There is no building downtown. There is no league subsidy. There is no league loan."
Stern also warned that the Kings would be making a mistake if they rely on the league's new revenue-sharing program to make do at Power Balance. The program, which redistributes money from wealthier teams to less lucrative franchises, can be altered by a vote of league owners.
"I think that is a mistaken calculation by them," Stern said. "I don't think that is what the revenue sharing is meant for."
Johnson said he and city officials will explore building an arena downtown without the Kings as partners or even tenants. That includes talking with AEG, the Los Angeles-based arena operator, about whether it and the city could finance an arena patterned after the Sprint Center in Kansas City, a facility run profitably by AEG for concerts and other events but without a major league team as tenant.
The mayor also said the city will talk to a handful of major parking companies that have expressed interest in leasing city garages in exchange for upfront funding that could be put toward arena construction.
"We're not saying any of that will be easy," Johnson said. "But we've got to put ourselves in the driver's seat and make sure that we're doing all we can do with what we can control."
Johnson once again Friday hinted that the Maloofs' reluctance may stem from their financial situation, which appears far less secure since the family sold its beer distributorship and lost ownership of the Palms Hotel and Casino in Las Vegas.
"It just became apparent the economics of it for them were very difficult," Johnson said. "Debt is real, we know that."
A source familiar with the team's situation said the Kings are carrying about $205 million of debt, including a city loan of about $65 million. Forbes magazine has estimated the team to be worth $300 million.
The disintegration of the deal Friday contrasted starkly with the moment two months ago in an Orlando hotel lobby during All-Star Weekend, when the mayor, Stern and three Maloof brothers announced a framework for a deal.
In a memorable moment, Gavin Maloof wept with emotion. George Maloof said the deal was fair and worth taking a chance on. The agreement called for the city to put in $255.53 million, arena operator AEG $58.75 million, and the team $73.25 million.
Stern later revealed that he had agreed to let the team borrow $67 million on the NBA's line of credit, and to put in $7 million of league cash. That would have burdened the team owners with more debt, but allowed them to move into the new arena without putting up their own money.
That supposed deal fell apart weeks later. The Maloofs and their public relations representatives said the team owners had numerous problems with the deal from the outset, and repeatedly tried to communicate them to the city via the NBA in the days after Orlando. The team also hired an economist who said the deal's revenue projections were overly optimistic.
Stern, who helped seal the deal in Orlando by saying the NBA would back the Kings financially, stopped short on Friday of criticizing the team owners for refusing to sign on.
"The Maloofs always did have the right to say no," he said.
But Stern said the NBA viewed the deal as a solid one for all parties, including the team, otherwise it would not have put up its own money. He said the Kings could have said no "in a somewhat more eloquent way" than by hiring a Los Angeles public relations firm "to try to damage the deal from a PR perspective."
"I have the feeling that a lot of people wasted a lot of time here," Stern said.
Stern had initially declared the deal dead on April 13 in New York when the Maloofs said they would not sign. Johnson later flew to Las Vegas in a final effort to salvage the deal. The three-hour sessions Thursday and Friday, however, proved fruitless.
The failure of the year-long arena financing effort once again throws the team's future into limbo. The Kings are scheduled to play next season at Power Balance Pavilion. Team owners say they are not talking with other cities, although several have expressed interest in luring the team, including Anaheim. Johnson said he will continue "to do everything I can to keep the team in Sacramento," but said he thinks the team probably will look at options elsewhere.
Stern said he remains impressed with the commitment the mayor made to getting an arena built, as well as the "extraordinary" support of corporate sponsors and fans.
He declined to guess what might happen if the team requests permission from other owners to leave town. "I'm not going to go into the fortunetelling business."