For the first time in the latest effort to keep the Kings, the Sacramento City Council has opened its checkbook and dispatched top city officials to enter into formal negotiations over the financing of a new downtown sports arena.
The council voted 7-2 on Tuesday night to grant its approval of City Manager John Shirey's request to negotiate the terms of a new arena plan that is seen as a key element of the city's work to block a Kings move to Seattle. Council members Kevin McCarty and Darrell Fong opposed the request.
With the vote, the council allowed Shirey to spend $150,000 on attorneys and arena financing consultants.
In an unusual twist, city officials have declined to identify the investment team with whom they intend to negotiate as early as today.
Aides to Mayor Kevin Johnson have said the mayor is confident a Kings purchase proposal will be submitted by Friday – perhaps at Johnson's State of the City address Thursday evening. It has been reported for weeks that Johnson is recruiting 24 Hour Fitness founder Mark Mastrov and Southern California billionaire Ron Burkle to make that bid for the Kings.
That pitch will be presented to the NBA as a competing offer to the deal the Kings owners have to sell the franchise to a group seeking to move the team to Seattle. The NBA's board of governors will rule on the Seattle bid at its mid-April meeting.
Shirey said he would attempt to bring a financing term sheet to the City Council by mid-April – a timeline he described as ambitious.
"Nothing gets approved until this City Council approves a preliminary term sheet and gives us the authority to proceed further," Shirey said.
Most council members said they were comfortable allowing Shirey to work on that term sheet, knowing they will have final say over whether the plan is accepted.
"We don't have all the facts yet, we don't have all the tools we need to make a proper analysis," said Councilman Steve Hansen. "We're at the beginning of this process."
City officials have acknowledged that while some of the deal points from last year's failed arena plan remain in place, the term sheet they will negotiate will likely be substantially different this time around.
The city will negotiate with a potential new ownership group of the Kings and will explore building a facility at the site of Downtown Plaza after settling on the downtown railyard last year.
As it was in last year's failed arena plan, the majority of the city's contribution is expected to be generated through the leveraging of downtown parking operations through either a city-operated finance authority or a lease agreement with a private operator. That plan could account for as much as $250 million.
Land sales, ticket surcharges and assessments paid by property owners near the arena are also on the table.
Assistant City Manager John Dangberg said it was the city's preference to own the arena and lease its use to the Kings and an operator. Any arena agreement must also come with a long-term commitment by the Kings to remain in Sacramento.
Opponents of the arena plan continued to describe the effort as a risky endeavor for a city facing an unsettled budget.
In a letter to the mayor and City Council, the Sacramento Taxpayers Association expressed concerns over who would cover potential cost overruns from the arena project and criticized the city for proposing a larger subsidy than the contribution approved by King County and the city of Seattle for an arena there.
Arena supporters countered that a new arena would attract music acts that currently skip Sacramento and inject new life into Downtown Plaza and the rest of downtown.
As Johnson's self-imposed March 1 deadline of announcing an investment team nears, Councilman Kevin McCarty said he has spoken with Kings minority owner John Kehriotis about Kehriotis' interest in making a bid to buy the team. McCarty is the lead opponent of the mayor's effort, and it is unclear whether Kehriotis has spoken to other council members.
"I think it's a no-brainer we should look at that proposal," McCarty said of the Kehriotis plan.
Two sources who said they are in contact with Kehriotis said he has told them he is trying to assemble $700 million in financing to make an offer on the team and to build a new arena, possibly without city funds. Kehriotis declined to comment, however, when contacted by The Bee.
"I can't comment on it right now," he said. "Maybe in a few days. We'll see."
The mayor's office did not immediately respond to a Bee question about whether officials have talked with Kehriotis about an alternative bid.
Meanwhile, the trustee overseeing the bankruptcy sale of a 7 percent share of the Kings might accelerate the sale. The decision could play a role in the struggle between Seattle and Sacramento for control of the team.
Trustee David Flemmer, who controls the 7 percent stake held by minority owner Bob Cook, has suggested that whoever buys the Cook share could have the right to match the Seattle group's offer for the Maloofs' controlling interest in the Kings.
The auction isn't supposed to be wrapped up until May – after the NBA rules on the fate of the Seattle purchase – but the timeline could be sped up, Flemmer's lawyer Don Fitzgerald said in court Tuesday.
"There's lots of activity," he said. "It's a little like a water polo game. Things are calm on the surface, but there's a lot going on underneath."