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Proposal 'blindsided' Maloofs

Originally published: 9/15/06

Kings owners Joe and Gavin Maloof went public Thursday with an impassioned recounting of the ways in which they say they were betrayed last week in negotiations to put an arena in the downtown railyard.

In an emotional, 90-minute session with The Bee, the Maloofs defended their reputation against those in the community who say they just want to move the team. They also said they were "blindsided" by a plan for the railyard that they say shortchanged them on both land and parking.

Thursday night, the developer of the railyard said the Maloofs had a point.

In a disastrous dinner meeting Sept. 5, a preliminary plan for the arena presented to the Maloofs failed to include several key provisions the brothers said they were counting on, said Suheil Totah, project manager for Thomas Enterprises, which is negotiating to buy the railyard from Union Pacific.

The Maloofs were enraged, saying they had already negotiated these points with the city and county, only to see them lopped off with the arena campaign already under way.

They announced Wednesday they were through talking until the city, county and developer came up with a plan that met their needs -- a statement that dealt a staggering blow to the campaign to pass a sales tax increase to pay for an arena.

"We were shaken; we had an agreement," Joe Maloof said, describing his reaction to the meeting with Thomas Enterprises. "We had talked for months and months. We were flabbergasted."

Totah acknowledged Thursday that the "plan did not reflect the deal" and said his firm would go back to the drawing board and redesign the planned sports and entertainment zone to address the Maloofs' concerns.

"There was a lot of miscommunication," Totah said. "We're committed to making this right, to move forward and resolve all the issues."

Atlanta-based Thomas Enterprises is scheduled to meet with the city and county of Sacramento today, along with the architecture firm Ellerbee Becket, which designed several arenas used as models by the Maloofs, including FedExForum in Memphis, Tenn.

"We have the same goal: To make sure there's adequate room on that site to operate an arena," said county economic development chief Paul Hahn. "I guess the difference is we still think it can be done."

He said the Maloofs have been invited back to the table, but they "are not answering our calls."

Complicating the matter is the contention by Hahn and Sacramento Assistant City Manager John Dangberg that there was never any agreement to provide the Maloofs with revenue from 8,000 parking spaces, as the brothers assert. Nor was there a deal, they say, to prohibit competing restaurants from operating outside the arena's front door.

They say they have no problem with providing the 8.5 acres the Maloofs say they need for the arena, if that's what it takes.

Despite participating in months of volatile negotiations with the Maloof organization, Dangberg and Hahn said they viewed the Sept. 5 negotiating session as a casual exchange of ideas on a preliminary design by architect Jon Jerde, who is affiliated with the railyard project.

"What we had decided a week before in a teleconference was that Jerde's architect would put a drawing together to try to work out everybody's needs and see if it would fit on the site. Then we would get together and brainstorm," Hahn said.

"I never went into that meeting thinking it was the county's proposal, the city proposal or even Thomas Enterprises' proposal," he said.

But for the Maloofs, the rendering was a shocking deal breaker at the end of six years of attempts to come up with a workable plan to replace Arco Arena.

Tony Guanci, an Orange County developer who represented the Maloofs at the meeting, said the arena was elevated "on this pedestal with a bunch of stairs leading up to it," a design that allowed it to sit on just 4.5 acres of land, but which would cramp vital "back of the house" operations.

The Kings practice facility, meanwhile, was located in the seventh floor of the adjacent parking garage.

Guanci said the seven-story garage for VIP ticket holders would have taken an hour to exit.

Instead, Guanci said, the plan seemed designed to better accommodate a Bass Pro Shops outlet that Thomas has signed for the railyard than the arena.

Totah said his firm has a "signed letter of intent" with Bass Pro, and "they're important, too."

Gavin Maloof has a different vision of the sports and entertainment district. "We're the anchor tenant," he said. "Bass Pro is a junior tenant."

In a candid session inside their Arco Arena conference room, the Maloof brothers laid out their side of the story to Bee reporters.

Joe Maloof, dressed in a purple Kings jersey, was agitated, running his fingers through his hair, bolting out of his chair and at times nearly shouting.

Sporting his Monarchs WNBA championship ring, Gavin Maloof was insistent on debunking what he described as myths surrounding his family.

He said they're tired of being perceived by a significant portion of the Sacramento public as Las Vegas millionaires who should build the arena with their own money, and who really just want to leave town, anyway.

With a payroll totaling between $65 million and $75 million a year, the team needs every source of revenue it can get, he said.

"There's this myth that all of the sudden we're going to make $100 million a year," Gavin Maloof said. "That's the casino business, not this business. You lose fortunes in sports, you don't make fortunes in sports."

The Maloofs said it's unrealistic to expect sports team owners in cities such as Sacramento, without a large corporate base, to pay for their own arenas.

"It would be a bloody disaster," Joe Maloof said. "Nobody in America could come here to this market, build it privately and expect to last more than three years without a sea of red ink."

Both brothers said that despite the intense speculation about wanting to move the team, they're committed to Sacramento -- where they've paid to field a team that's repeatedly gone to the playoffs.

"We love Sacramento," Joe Maloof said. "We've been here for eight years now. We've given a lot back to the community. We're proud to be in Sacramento."

They had nothing but good things to say about the community leaders running the campaign for measures Q and R, which would raise the sales tax in Sacramento County by a quarter-cent and ask voters if they would like to split the $1.2 billion proceeds between an arena and community projects.

The Maloof family was expected to be a major funder of the campaign, but Joe and Gavin Maloof said they can't contribute until the city and county produce a workable arena deal downtown.

In their absence, proponents for measures Q and R have turned to Thomas Enterprises for help.

"We need Thomas," said River Cats executive Warren Smith, who is running the campaign's fundraising. "We've got a campaign to win."

Totah said Thomas agreed Thursday to help fund the campaign, but did not commit to a dollar amount.

Campaign proponents insisted they would soldier on with or without the Maloofs. But the news that the NBA owners had quit negotiating left some wondering how they could possibly win.

The Maloofs' behavior also left some of those supporting a publicly funded arena questioning if they really wanted to keep the team in Sacramento.

"Are they trying to position themselves in negotiations? Are they posturing? All these things raise questions in people's minds," said Matt Mahood, president and chief executive officer of the Sacramento Metropolitan Chamber of Commerce.

"That certainly has run through the minds of many people in this community and in this campaign -- that maybe the Maloofs don't want to stay in Sacramento," said campaign spokesman Doug Elmets.

Sacramento County Supervisor Roger Dickinson said he thinks the team owners do want to stay -- but perhaps only on their own financial terms.

Dickinson said negotiators for the team were fixated only on areas where they could lose revenue while ignoring potential profit centers, such as an electronic sign on the freeway where they could rent out space, or the possibility of wooing more events with a better facility.

Dickinson said the Maloofs think they "made a major concession" by agreeing to move downtown, when their patrons are happy with the Arco location.

"We see them as taking very little risk, and we see the need to have a partnership with people who will take at least some degree of risk because they're committed to the broader vision of Sacramento."

The Bee's Terri Hardy can be reached at (916) 321-1073 or thardy@sacbee.com.

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