Kings Wars Could Slam CA Taxpayers

MAY 4, 2011


For now it looks like the Kings professional basketball team will keep dribbling in Sacramento. Just as the team seemed ready to decamp to Anaheim, Sacramento threw a three-pointer and kept the team.

The controversy over the team’s location highlights how professional sports in America is not a free-market enterprise.

“It’s never going to be a free market,” Mark Rosentraub told me; he’s a professor in the Department of Sports Management at the University of Michigan. He authored the book, “Major League Losers: The Real Cost of Sports and Who’s Paying for It.”

He said that attempts by free-market advocates to end government involvement in sports will fail. “You’re not going to revolutionize Congress’s protection of professional sports,” he said.

The case of the Kings shows how wealthy sports owners, and their league front-offices, play cities against one another to extract the greatest amount from taxpayers to build luxurious new stadiums.

The May 3 Sacramento Bee story summed it up:

The Maloof family’s first call Monday went to NBA Commissioner David Stern. Then they phoned Sacramento Mayor Kevin Johnson.

The message was simple: They’ll keep the Kings in Sacramento, work to mend fences in the community and do their part to secure a plan for a badly needed sports arena.

A jubilant Johnson called the Kings’ decision to stay “one of the proudest moments of my life.”

But in many respects, the hard part’s just beginning.

After winning a remarkable victory to keep the team from moving to Anaheim, Sacramento faces a non-negotiable deadline. If there’s no financing plan in place by next March, the Maloofs and the NBA agree the team will be free to go.

“We are going to put all of our efforts in Sacramento and make it happen and make it succeed,” Stern said. “But if it can’t, if this becomes the fifth or sixth or seventh (failure), it will be the last, as far as we are concerned.”

In order to keep the team in town permanently, Sacramento will have to solve a puzzle that has frustrated the franchise and its supporters for a decade. It will need to find hundreds of millions of dollars in a community wracked by recession and historically hostile to using public funding for a basketball arena.

Small Market

The Kings case also is typical of small-market cities trying to hold onto major-league franchises. When the Los Angeles Rams and Raiders exited Southern California two decades ago, nobody said L.A. was going to lose its identity.

In the case of the Raiders, there even was a “good riddance” attitude among local residents, even though the team had won a Super Bowl for L.A. in 1984. Notoriously, in the late 1980s the city of Irwindale gave a $10 million “deposit” to the Raiders, and spent another $10 million on legal and environmental studies for building a stadium there. For $20 million it got — nothing. The Raiders moved back to Oakland.

But for some in Sacramento, the Kings are a crucial part of the city’s identity. Mayor Johnson even said that the Kings were essential to Sacramento’s status as a “world-class city.”

But as my colleague Steven Greenhut wrote two months ago:

Let’s be frank. With or without a professional sports franchise, Sacramento is not and will never be a “world-class city,” however one might define that term. It’s such a ridiculous, overused cliché around here that some Sacramento folks started a Facebook page dedicated to banning the phrase from local lingo. I can’t wait to hit the “Like” button….

Second-rate cities believe that professional sports puts them on the map, although all they really do is provide some unexceptional entertainment and enrich team owners, who cleverly manipulate the local inferiority complex to gain stadium and arena subsidies. First-rate cities have a “you need us more than we need you” approach to sports, which is one reason why Los Angeles has yet to land a professional football team despite the efforts of craven politicians. You can never be a first-rate city with second-rate attitudes, yet the Sacto civic boosters have “small town mentality” written all over the foreheads….

In fairness, I do think Sacramento voters have shown themselves to be world class when they previously rejected stadium subsidies.

Tax Increase?

Which brings up the essential question: Will Sacramento taxpayers be willing to stick themselves with a tax increase to pay for keeping the Kings around? Back in 2006, the tax increase measures were wiped out by voters. Street & Smith’s Sports Business Journal Daily reported back then:

The sales tax measures to fund a new NBA Kings arena in downtown Sacramento “went down to a crushing defeat” yesterday….  Measure R, which called for a quarter-cent sales tax increase in Sacramento County, failed 80 percent to 20 percent, while Measure Q, a companion to Measure R that “asked voters to bless spending up to half of the $1.2 billion raised” on a downtown arena, was defeated 72 percent to 28 percent.

That vote took place at the height of the real-estate boom in California. Since then, everything crashed. In Sacramento, the unemployment rate was 12.7 percent for March, up from 12.6 percent in February. It’s rising, even as state and federal unemployment levels have been dropping.

Moreover, the state also could suffer a $12 billion tax increase, as proposed by Gov. Jerry Brown. Although a lot of that money presumably would go to the state government, possibly helping Sacramento’s local economy at the expense of the rest of the state.

And residents of Sacramento, like everyone else in America, also are suffering gas prices that have doubled in the past two years.

That a Kings tax increase might get passed in such an environment is problematical.

Sacramento’s Question

“It’s a question for Sacramento,” Rosentraub said. “Is having the Kings there worth something that can sustain part of the investment? That’s the question. Every city has to do the analytics it can. What is it worth to have them? What do we have to do to keep them?

He said that Anaheim is a bigger market, which includes the rest of Orange County and Southern California. But two local basketball teams also are there, the Los Angeles Lakers and Clippers.

In the case of Anaheim, the city first was willing to help authorize bonds to get the Kings there. But after a local outcry, led by the Orange County Register’s libertarian editorial page (where I wrote for 19 years), that deal fell through. Then a private solution was provided. A Register editorial on April 29 explained:

Henry Samueli, who, with his wife, owns the company that operates Honda Center and the Ducks hockey team, says the bond plan is scrapped, and he will put up his own money to finance the deal. He also committed to invest $70 million in arena enhancements and to purchase a minority ownership in the Kings.

This is exactly how a transaction of this sort should be done: private dollars free of government interference, special preferences and even the appearance of taxpayer support.

But Sacramento legislators appear to be doing just the opposite. On Tuesday, state Senate President ProTem Darrell Steinberg and three other legislators wrote to NBA Commissioner David Stern, promising to explore “all options, to build a new performing arts and sports arena complex that will be necessary to retain the Kings franchise in Sacramento.”

The letter mentioned bond financing, some anticipated and some already secured for another Sacramento project.

If Mr. Steinberg and his allies prevail, state taxpayers would be paying many years of interest on the bonds to build a new Sacramento home for the Kings.

So, Anaheim (and other California) taxpayers could end up paying for new digs for the Kings anyway — just not in Anaheim.

Steinberg, as Senate president pro-tem, is supposed to represent the whole state, not just his own bailiwick.

But that’s how things work nowadays in dysfunctional California, a state that suffers from business and government conditions as abysmal as the Kings’ 2010-11 season, when they finished a pathetic 24-58, worst in the Pacific Division.










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