Sacramento Kings

A two-decades old Kings controversy is ending: Team will pay off debt to city

Watch a time-lapse of Golden 1 Center’s construction

Watch a time-lapse video documenting construction of the Golden 1 Center, the home of the Sacramento Kings in downtown Sacramento, in 2015.
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Watch a time-lapse video documenting construction of the Golden 1 Center, the home of the Sacramento Kings in downtown Sacramento, in 2015.

On a raucous night at Sacramento City Hall two decades ago, a divided City Council made one of its most controversial business moves in recent times: It voted to give the Sacramento Kings a $74 million loan, helping the then-struggling team to solidify its finances and keep it from leaving town.

Numerous critics protested the move, saying the city was giving in to blackmail tactics.

The loan has continued to be a lightning rod since then — across three successive Kings ownership groups — serving as an emblem of the up and down relationship between restless team owners and city leaders.

Tuesday, the loan saga came to an end, an ironically quiet one, when the council gave its OK on a procedural vote that will allow the Kings to pay the loan off in full in the coming weeks.

Unlike in 1997, when supporters and opponents packed the council chambers for a dramatic split vote, the item drew only one comment, from Mayor Darrell Steinberg, the only current council member who was on the dais in 1997 early in his career before he was elected to the Legislature.

“That was the first huge political controversy I’ve been in,” Steinberg said, but one he said he believes kept the team in town.

He called the loan closure momentous.

The Kings are expected to make the final $30 million payment sometime in early January, city officials said. That payment will give the Kings formal title to Sleep Train Arena, and allow them to move forward with their plans to subdivide the 185-acre site for redevelopment.

The Kings, who now play their games at the Golden 1 Center downtown, submitted plans with the city last month to turn their former Natomas basketball arena and the surrounding acreage into a mix of housing, businesses, retail and recreational amenities.

The team has not finalized those plans, or focused on details, but said it hopes to woo investors, buyers or co-developers to launch work there by 2020.

“This represents an important next step in the entitlement process and future development of the Natomas site,” the Kings said in a text to The Bee about the loan payoff.

Natomas-area City Councilwoman Angelique Ashby, who has pushed the Kings to redevelop the Natomas site, said she is pleased.

“Fantastic to see the Kings pay off the loans on the Natomas site, freeing up their ability to move forward with development,” Ashby wrote in a text to The Bee.

The loan’s quiet close-out belies its historic significance. The 1997 deal represented the start of a two-decade-long business relationship between the team and city that has only gotten more intimate in recent years, a precursor to a city-team deal to co-finance the new downtown Golden 1 Center arena, which opened in 2016.

It happened behind closed doors. Then team owner, Jim Thomas, a soft-spoken but tough Los Angeles developer, approached city leaders around Christmas in 1996, telling them he was saddled with high-interest loans (stemming from his 1992 team purchase) that were putting him in the red.

He asked the city to help him stabilize his finances by joining him in what would have been an unprecedented financial partnership — to co-develop the area around the Natomas arena, then called Arco Arena, into a major recreation and entertainment district.

When city officials said no, Thomas said he would then pursue an offer to move the team to another unnamed city, thought to be Nashville.

That prompted a month of frenzied negotiations that led to the loan agreement in which the city would sell bonds to investors, then give the $74-million-plus in proceeds to Thomas to pay off his higher-interest loans. The Kings in turn would pay the city back over 30 or more years.

Joe Serna, Sacramento’s mayor at the time, lobbied council members to agree to the deal, saying he was not going to be the civic leader who lost the Kings, and contending “the cultural fabric of the community involves sports.”

In the days leading up to the 5-3 vote, council members told of each being inundated with hundreds of constituent phone calls, many of them opposed to the deal, and of being stopped on the streets and in the grocery store by residents telling them which way to vote.

Then-council member Jimmie Yee convinced Thomas at the last minute to add a $25 million stake in the team as collateral to secure Yee’s vote. The deal already included the arena itself as loan collateral. Yee then held up a sign on the dais saying “Go Kings!” and agreed to the deal.

The loan locked the Kings into a 30-year lease to play in the Natomas arena, but allowed the team to opt out and move if it were still losing money as long as it paid off the loan in full.

Current Mayor Steinberg was one of the yes votes on Serna’s majority. He remembers the moment as a sort of political rite of passage.

“It was the first time I ever felt like everybody’s eyes were on me,” Steinberg said. “I thought I made the right decision at the time, and 21 years later, I know it was the right decision.

“That was the first chapter. All succeeding chapters showed that Sacramento is a city that always fights for what we want our city to be.”

The loan led to several more tense moments between the city and the Kings in the following years. Thomas sold his ownership stake to the Maloof family from Las Vegas a few years later. Under financial duress, the Maloofs in 2011 quietly pursued a deal to move the team to Anaheim.

Fearing that the Maloofs might renege on the loan, city officials hired attorneys and sent letters to the Kings, the NBA and Anaheim, demanding full loan repayment before the team moved. The Maloofs in turn said the city was maligning them, and that they would pay the loan in full if they left.

The NBA ultimately blocked the Maloofs’ efforts to move, prompting them to sell the team in 2013 to the current ownership group, led by Vivek Ranadive.

That group continued making loan payments, but meanwhile teamed up with the city on a much bigger deal to keep the team in Sacramento by constructing a new downtown arena. The city contributed $255 million in cash and property into the $557 million facility at the former site of Downtown Plaza, now called Downtown Commons or DoCo.

That $255 million in value included 100 acres the city owned immediately north of the Sleep Train arena site. That land had been donated to the city by developer Buzz Oates.

The Kings in return are paying the city an annual 30-year arena rent that will range from a current $6.5 million a year to at least $16.7 million in later years, and have built out the DoCo site into a retail and entertainment district, including a 250-room hotel.

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Tony Bizjak has been reporting for The Bee for 30 years. He covers transportation, housing and development and previously was the paper’s City Hall beat reporter.