A game plan for the Sonics, as time runs out
It began with a conversation last summer between former Sen. Slade Gorton and Microsoft CEO Steve Ballmer. What emerges is a story of civic altruism and shrewd politics. Even so, after all the delays, the local team is playing a very weak hand.
Politicians, fans, and business interests who want to keep the SuperSonics in Seattle (or at least avoid being blamed for losing them) finally got their ducks lined up Thursday afternoon, March 6. At what could be called a power press conference, Mayor Greg Nickels trotted out money (the billionaire owners group), political clout (especially former Sen. Slade Gorton), and a plausible public case for renovating KeyArena.
Take that, National Basketball Association! (Except nobody was talking to them.) Take that, Legislature! (Though House Speaker Frank Chopp passed word that it's too late in this session to consider the matter.) Take that, foes of spending money on pro sports! (Except that Chris Van Dyk, chief scourge, was being wily with remarks along the lines of the devil being in the details.)
As political orchestration, it was impressive, and Mayor Nickels deserves credit for (belatedly) leading the charge. But the whole episode resembles a poker player with a poor hand who has somehow stayed in the game and suddenly drawn an ace as the very last card. Now what do you do?
Anyhow, let's review the bidding, especially now that some of the backstage details have started coming out.
To nobody's real surprise, there has been a lot of wheeling and dealing among the moguls, the law firms, and the politicians who are on the spot. Last summer, Gorton, the man who twice saved Major League Baseball for Seattle and now a lawyer with K&L Gates, began trying to interest a group in saving the team. They are Steve Ballmer, Microsoft's CEO and the 43rd-richest man in the world by Forbes' count, and John Stanton, Western Wireless founder, Gorton friend, and possible future Republican candidate for governor. Ballmer loves basketball and was interested, but he had two problems: He's way too busy to do much diligence, and once his name appeared, the price for the team might go way up (Ballmer's worth $15 billion).
Ballmer, according to Gorton, said that a Ballmer friend, consummate developer and deal-maker Matt Griffin, should be the person to examine the prospects and lead the effort. Griffin says he got a call from Ballmer last October or November, and he proceded to look over old plans for renovating KeyArena, to add Costco CEO Jim Sinegal to make it a Gang of Four, and to start working with the mayor's office. Gorton, meanwhile, became the lawyer in the city's lawsuit against the Oklahoma City group that now owns the Sonics, trying to make them abide by the terms of the KeyArena lease, which expires in 2010. (The real purpose of the lawsuit, of course, is to bleed the Oklahoma City group, force embarrassing revelations, and otherwise hammer them into selling to the Ballmer Boys.)
Originally, the prospective owners talked about a $75 million contribution toward the $300 million renovation of the Key, but on Feb. 14, they doubled the amount to $150 million. Happy Valentine's Day! And that's the moment when the city team informed legislative leaders that they now had serious owners with mighty deep pockets (not the usual story for Seattle sports team owners) and public cover to enable the assorted politicians to dare to (gasp!) put money yet again into a pro-sports facility. Naturally, the public was not to be informed of all this until this week's power press conference.
If all this seems rather too altruistic to be believed, you might be right. Griffin told me that the group never looked at any alternative venues, since they just want to do what's right for Seattle Center. They didn't hire their own architect to revise the plans first done in 2003-04, when Seattle Center was trying to work out a renovation deal with then-Sonics owner Howard Schultz and which the Oklahoma group rejected out of hand. Griffin says the owners "don't really expect ever to get back the $150 million" for improvements but consider that a kind of civic gift, as if to a museum. (They do want a modest return on buying the team, for which the Okies paid $350 million.) It would appear that most of the money is Ballmer's, as was hinted by Griffin's remark that the ownership shares reflect the various partners' net worth.
Another test of credulity comes over the timing. According to Griffin and Gorton, all this took a lot of time while the diligence, such as it was, was being done. That's why the Legislature got the proposal at the last minute. Maybe. Another theory would be that all the potential opponents were first being privately talked to and negotiated into compliance, so that the grand scheme could be sprung on the Legislature with just a week to go and no time for hearings or its own due diligence. Previous, though weaker, proposals have often been introduced at the last minute, trying to stampede the Legislature, without success.
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Comments:
Posted Fri, Mar 7, 9:31 a.m. inappropriate
weak hand gets weaker: Several have said that Bennet way overpaid for the team, If he doesn't make close to what Shultz made on a sale, especially after all his troubles, he looks like a dufus. Will the new money guys want to pay another $100 million for a team that was overpriced to start with?
As I understand, the NBA rules on Bennet's relocation request in mid April. If he gets a yes, the team is likely gone regardless. Unless the state, county and city have a solid deal by then, the league would seem likely loath to deny approval.
David Stern has been pushing for a new NBA stadium for seven years (see "Stern hints that Sonics will need new arena," Seattle Times, 3-23-01). In other words, the parties must hammer out in 5 wks. what they've been unable to do in 7 yrs., or the team's outta here.
Posted Fri, Mar 7, 9:40 a.m. inappropriate
What's Good for the Goose: The calculation of public benefit for investment in an open facility like Key Arena is tough. In the past their may have been lip service, but, frankly, it may be no more substantial than that of an English major writing a short story - a english major who may, or may not, have been able to pass the math portion of the WASL. (or, for that matter, the Washington State Bar)
The City of Seattle has passed an initiative that sets a standard for these sorts of investments. That standard is 5% a year. It is a good standard. Make that a very good standard, if not groundbreaking and country saving.
Personally, I'm not opposed to being creative about calculating that return in a multi-use building like the Key Arena. But those calculations must be realistic, thorough, and subject to public hearing and debate - as well as challenging lawsuit in an unbiased court - and perhaps a public vote.
There is also the question of risk. No investment is 100% safe - and certainly not the NBA at this point in time. So how about this fairly simple proposal - give the public a share of the team, on a dollar for dollar equity basis as the private owners? They won't be majority shareholders so the running of the team will be in the hands of these presumably capable businessMEN. However any profit from the team would be shared and moving the team would be harder. Additionally if there was a split of vision among the private sector folks the public would get the deciding vote.
That COULD be a very,very good thing.
Douglas Tooley
Lincoln, Tacoma
Posted Fri, Mar 7, 10:33 a.m. inappropriate
BILLIONAIRE SAVES TEAM: Isn't there a lawsuit, City of Portland vs Paul Allen? didn't that bright public/private venture turn bad? or was that settled amicably? cheerful taxpayers sucking up and paying?
I also seem to remember voting on an initiative that called for something like "no subsidies for professional sports teams" and, I also remember that it passed. So the restaurant plus rental car tax that is now paying for Safeco Field is to be painlessly extended to "help Seattle Center". Apparently extending a tax is not the same as a subsidy. Not if you really want to keep Seattle on the map.
The restaurant tax has no low-end exemption; the tax starts at your basic burger or taco. So when Debra Sixpac pays for her Big Mac she helps pay for "Seattle Center Upgrades".
People who may be offended by that, maybe including Frank Chopp, have a right to be reluctant.
Posted Fri, Mar 7, 11:47 a.m. inappropriate
too late: Too bad Steve Ballmer and co didn't come up with this plan a month ago, when there was still time to pass it out of the legislature. There just isn't time to do it anymore.
Posted Fri, Mar 7, 11:49 a.m. inappropriate
Mak's point goes unnoticed: Robert Mak interviewed Howard Shultz and Wally Walker when Shultz was lobbying for a stadium revamp. Mak said the biggest problem with KeyArena (considered a great deal when it was made) was that when Safeco & Quest fields came along, their superior luxury box offerings stole all the Sonics lux-box business. Mak asked Walker if maybe there was only so much lux-box money to be spent (it's mostly corp. entertainment of clients). Walker responded yes, maybe we're saturated.
So if the Sonics get new digs, the M's & Hawks may lose out, and be in Olympia around 2012 crying about massive losses and holding out their hands. In all the discussion, this point exposed by Robert Mak seems to have been utterly forgotten.
Posted Fri, Mar 7, 12:04 p.m. inappropriate
This deal good today only.: A lot of people have wondered about the timing. Are Steve Ballmer & pals really so disorganized that couldn't put this together before the session? These guys who went from garage to world dominance in under 20 yrs?
The only thing I've seen ithat makes sense that this is the classic used car sales ploy of "This deal is good today only." So the sweaty-palm buyer can't sleep on it, etc. Rule of thumb: whenever you get a deal like that, turn it down.
Posted Fri, Mar 7, 12:12 p.m. inappropriate
RE: What's Good for the Goose: The problem with the 5% return rule is that it doesn't take into account the costs of not making the investment.
Sitting back and letting the Sonics go, in this case, is not a cost-free alternative. By doing nothing, the city loses the revenue stream it receives from lease payments. Bars, restaurants, parking lots, and vendors lose revenue generated by Sonics fans (which also affects the city's tax revenue). These and any other losses should be factored into the math.
Let's say that renovating the stadium and keeping the Sonics results in a 5% loss on our investment, but letting them go results in the equivalent of a 10% loss. According to Chris Van Dyk, we pick the bigger loss. Brilliant.
Posted Fri, Mar 7, 5:27 p.m. inappropriate
Blackmail, Appeasement and Thought Experiments: From a government perspective, this is a bad, sulfurous deal. There simply is no justification for government dumping $150M dollars into a speculative, unneeded, rat-hole convention center. $150M would be much better spent and invested in our schools. Or not spent at all. The economic benefits of arenas are always grossly overstated and accrue to the few.
Government's role is to run and operate public arenas and to enable private franchises to operate privately. So that means, maybe, ponying up 10% (i.e., $15 to $30M) to get things to happen. If the Gang of Four is willing to put up $150M, then they should do that. Why should government match it? The current KeyArena with $150M in private upgrades should be fine. No need to gold-plate the court and build a palace, when a basketball arena will do.
Legal goal number one for the City of Seattle should be suing the NBA and its owners. The economic damage done by an empty KeyArena, and the upcoming extortion of $150M from public coffers should make for a suit in the $200M range. Just as the Legislature deemed that saving the Mariners was in the interest of the state, because public sports franchises served a "public purpose," the City should legally assert the public interest in preventing the Sonics from blackmailing the City into paying for upgraded facilities. ("Been there, done that, lost public money, team sold out from under us.")
In watching this drama unfold, keep your eye on the public money. Who's going to end up with it? The focus should not be on appeasing NBA demands (and billionaires' demands) in response to Clay's March into the Seattle Sudetenlands. A legal retaliatory "Battle of the Bulge" is called to offset the extortionate raid by the NBA on the public treasury. The NBA is a monopoly operating as the National Blackmail Association. It's operation in the state should be shut down immediately until all blackmailing activities cease.
Seattle should not want another franchise, unless there's actual community ownership ala Green Bay. Such local ownership guarantees that a franchise won't hold its citizenry hostage as we've seen with the Seahawks, the Mariners, and now with the Sonics.
At a minimum, the state should levy a special 50% tax on all NBA products (broadcasts, games, gear, etc.) to finance the public capital expenditure called for. This makes more sense than Dems raising taxes--while our roads and schools crumble--so Republicans can own NBA teams,. Unfortunately, our Dem leaders aren't known for being financial sages. The right deal here, for the Dems, should involve a basketball stadium, but also should involve getting the business community--represented by the Gang of Four--to discuss transportation, education and the region's long-term economic future. Ballmer has stated that his number one goal for the State -- from a Microsoft perspective -- is "Education, Education, Education." Let's take him at his word.
THOUGHT EXPERIMENTS
Thought Experiment #1. The Sonics leave. The Okies get them and drain the coffers of Oklahoma City. Clay and Stern get the last laugh and rewarded for their actions. The NBA continues its serial looting of city treasuries across the country. The bad guys win.
Thought Experiment #2. Instead of spending $40B on Yahoo!, Microsoft invests in local transportation and education infrastructure. Twenty years from now, what is the projected value of Microsoft stock?
Thought Experiment #3. The Microsoft XBox division creates and spins off an alternative XBall professional basketball league. Ten cities to start, all with local public corporations ala Green Bay owning the franchises. Seattle basketball fans buy their own franchise, becoming both fans and owners, instead of caving in to David Stern and his team of racketeering monopolists.
Posted Mon, Mar 10, 8:05 a.m. inappropriate
This One is Easy - Cut The Deal: There is plenty of time for the legislature to do its part to help keep Seattle Center (and the surrounding neighborhood) vibrant and NBA basketball in the Northwest.
It doesn't cost the state a dime. There are no new taxes. The legislature ought to step up - but Chopp is right to hold out for a better budget from the Senate.
This is the best private/public deal we've seen. It is a small public price to pay for a sure fire community asset like the NBA.
Posted Mon, Mar 10, 2:57 p.m. inappropriate
RE: This One is Easy - Cut The Deal: As much as I whine about the NBA, David Stern, the Okies and giving away public money in my previous post, I mainly agree with you that net-net (after you factor out the false promises and the hyped up economic benefits) you still will ultimately have a net economic benefit for the community. How the "community" benefits across State, County, and City lines is arguable, but the $150M private investment certainly leverages the $150M public investment, and the public is left with a significant capital asset, and presumably someday a professional basketball team to replace the sad example we now have rattling around in KeyArena.
As a guy who has witnessed the World Champion 1980 Sonics, the Seahawks recent 2005 SuperBowl Run, and the Mariners nearly magical 1995 and 2001 seasons, it's obvious that there's a psychic benefit to everyone (not just sports fans) in a community that comes with successful professional sports franchises. Success can be fleeting, but the audacity of hope that resides in the hearts of all sports fans is a powerful non-monetary good. Government should work to enable that good, but balance it against the need and cost of other goods.
As for the Legislature, I think they see it this way too. They're set up to be heroes and saviors on this. It's too big a chance for them all to pass up. So I expect that even the Feet of Clay Legislature will respond quickly. Hopefully, this public investment becomes the cornerstone for a dramatic overhaul of the Seattle Center. Maybe there's even a way to do a combo basketball Arena and outdoor concert & high school event arena at the same time, utilizing a common underground parking facility. And as a result, we could infuse the Seattle Public Schools with payment for the decrepit (but useful) Memorial Stadium.
Of course, the City of Seattle should by all means pursue whatever legal action is appropriate against the NBA and the Seattle SuperFeetofClay. If they play their cards right, there should be significant dollars in such action, and a much increased likelihood of a real professional team in Seattle down the road.
Posted Tue, Mar 11, 1:36 p.m. inappropriate
RE: This One is Easy - Cut The Deal: I enjoy pro sports as much as anybody, particularly the NBA, but you fail to make a case for gov't involvement in pro-sports w/ your 'audacity of hope' argument. Many people get the same kind of community warmth and fuzziness over such things as rock concerts, motorcycle group rides, Nascar races, church services, WTO protests.
But there is no impulse to make sure those things are gov't-funded. Why pro sports?
Posted Thu, Mar 13, 5:15 p.m. inappropriate
RE: Thought Experiments: Stuka I have considered the idea of a rival league some myself too.
Public owned or company based.
To have a real shot it would need a good TV contract.
The NBC family of channels might be best national option if they would try again after XFL failure.
If Cuban ever sold out of the NBA he might be the guy to lead it but that probably won't happen. He is backing a rival football league though because he feels it is an opportunity with more demand.
I think if you could put together a rival league of 12+ cities with payrolls say 1/3 to 1/2 the NBA's with TV distribution (even if it is just local) and maybe some rule changes you might have a chance to succeed.
But it couldn't be anything like the array of low budget minor leagues in existence today.
Maybe you could link into the Euroleague post regular season action or steal the NBA's international agenda and add international cities to the league before they do.
Plenty of possibilities if you found a guy or a company to front $100+ million to get it rolling in a major way.
Posted Sat, Jun 28, 10:19 a.m. inappropriate
This One is Easy - Cut The Deal: It doesn't cost the state a dime. There are no new taxes. The legislature ought to step up - but Chopp is right to hold out for a better budget from the Senate.
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