City Beat

News, insight and discussion on Sacramento and its neighborhoods

April 7, 2011
City letter demands more specifics on Kings loan
By Tony Bizjak

Positioning for a potential lawsuit, Sacramento officials sent yet another letter to the Kings today, accusing the team of being evasive on how it will pay its $77 million city loan, and calling for a meeting between team owners and city leaders.

Assistant City Manager John Dangberg said the city wants the Kings to detail how and when they will repay the loan if they leave town. The city also wants the Kings to set up an escrow account for payment.

"I hereby request direct, non-evasive and unambiguous written responses," Dangberg wrote.
The Kings are in the final stages of a deal to move to the city of Anaheim next year. That city has approved $75 million in bonds to facilitate the move.

The Kings have until April 18 to request NBA OK for the move. Team representatives will be in New York next week briefing the league's other team owners on their efforts.

Sacramento Mayor Kevin Johnson also is headed to New York to plead Sacramento's case that the Kings should stay.

Today's letter is the latest of several that have criss-crossed among involved parties in the last week.

In response to an earlier Sacramento letter, a Kings attorney wrote that the team would address the loan issue "at the appropriate time."

Team co-owner George Maloof told the Bee the city will be "paid in full."

"We have always paid our loan," he said.

Earlier this week, an NBA attorney sent the city a letter noting the team has not requested permission to move yet.

"As of this time, the NBA has not received an application from the Kings to relocate," the April 4 letter states. If the Kings do make the request, "we expect that the team will act appropriately with respect to any remaining financial obligations it may have to the city."

The city's Dangberg declined to say if the city is considering taking the Kings to court before the team leaves town. "We will take the next steps according to what happens here."

City officials say they want the team to pay the loan balance in cash. It is unclear, however, under the contract, whether the Kings could pay the loan partially in cash, and partially by leaving Power Balance Pavilion, formerly Arco Arena, in city ownership.

At the Kings' request, the county appeals board last week reduced the valuation of the arena, the adjacent building, the land and fixtures by $12 million. The arena and practice court now are assessed at $35 million, and the total site at $51 million. Those numbers may not, however, equate to the market value of the site, should the site come into play as collateral.

If the city ends up with the arena, officials could be faced with deciding whether to sell it or hire a company to operate it for them.

The outstanding debt on the loan is $67 million. However, if the loan is paid off now, that would trigger an estimated $10 million prepayment penalty, making the total amount today about $77 million, city officials say.

The city would forward that $77 million to private bond buyers who put up the initial loan money.

Bee reporter Dale Kasler contributed to this report.

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About City Beat

Ryan Lillis has covered the city of Sacramento, its 108 neighborhoods and its politicians since 2008. Prior to that, he covered crime at The Bee. A native of upstate New York, Lillis has a journalism degree from the University of California, Berkeley.

Contact reporter Ryan Lillis at rlillis@sacbee.com

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