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Sacramento Arena Construction Deal Apparently Dies at New York Meeting

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Even though there was a handshake deal on a term sheet agreement for the financing, construction and operation of the nearly $400-million Entertainment and Sports Complex made in February between the Sacramento Kinds owners (the Maloof family) and the city of Sacramento along with AEG (the ESC operator), the deal has apparently fallen apart.

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According to news reports, the Maloof family, lawyers and consultants met with National Basketball Association owners and commissioner David Stern in New York this week and presented a “historical analysis of the transaction,” which basically says the city’s financing scheme and other obstacles show problems with the feasibility of the firm completion deadline at the start of the 2015-2016 NBA season.

The Maloofs reacted to what they perceive as financial flaws in the deal. The city agreed to put up $255 million by leveraging future downtown parking revenues and not take funds from the city budget.

At press time, Sacramento Mayor Kevin Johnson flew to New York to meet with the NBA and try to come up with solutions. Prior to leaving, Mayor Johnson sent a letter to the Maloof family and expressed frustration about the current impasse. “Any representation that a deal was not reached is simply not consistent with the perspective of every other party to the negotiation nor the actual statements of the family,” wrote the mayor, adding that a family member was quoted in the Sacramento Bee as saying the offer was “a fair deal…worth taking.”

Meanwhile, a group of 25 regional business leaders sent a letter to Stern suggesting that the Maloofs sell their ownership of the Kings franchise “for the good of the city and in the interest of advancing Sacramento’s effort to build a downtown arena” in the Railyards redevelopment area.

In an April 2 letter to John Dangberg, the city’s assistant city manager, the Maloofs lawyer, Scott Zolke of the firm Loeb & Loeb, indicated that if an initiative drive by an anti-arena group (Sacramento Taxpayers Opposed to Pork or STOP) would get the signatures to put a yes-no vote on the city’s funding portion of the ESC on the November ballot, the delay, regardless of the decision, would be self-defeating. Zolke also balked at the $3.25 million that the Maloofs are required to pay for predevelopment as agreed in the term sheet, arguing that as tenants they shouldn’t have to.

In the meantime, with $200,000 contributed by the NBA for predevelopment, Dangberg said some consultants have been hired for site planning and design programming, including AECOM, Fehr & Peers and ICON-Taylor partnering with stadium design firm Populous.

The pre-development will include site planning, environmental reviews, infrastructure design and engineering, building review, site design and building design. Dangberg said all parties should be working toward a mid-2013 time frame for construction to start.

What happens to these contracts if the deal isn’t worked out is undetermined at this time.

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