Sports Law Blog
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Wednesday, June 09, 2004
 

A King's Ransom in Sacramento: Apparently, the city of Sacramento made a rash decision in 1997: loan the city's single professional sports franchise $70 million to help it overcome financial difficulties and remain in the city. In addition, the city made a second loan to the team, to assist it in paying back the first loan. I can only imagine Prof. Sauer's reaction as he reads this. Due to this odd structure, the team has only made a dent in the amount owed, having paid back only $1.5 million of the principal. And, of course, the team now wants more public money for a new downtown arena. At least some officials are hostile to this idea:

    "They've been in the arena a number of years and it looks like nothing has been paid on the principal," said Joe Sullivan, president of the Sacramento County Taxpayers Association. "How much has the city really gotten back?"

Certainly not a championship. Repayment of the loan becomes even dicier if a new arena is built, because the agreement has no stipulation for that scenario.

    A business task force recently concluded that 15-year-old Arco Arena is obsolete and should be replaced within five years. A small team of prominent developers and business leaders has proposed constructing an arena on the east side of the Downtown Plaza on K Street as a way to revitalize the struggling commercial area.

    Although the loan contract addresses what is necessary if the Kings were to move out of the city, it does not specify requirements if the team moves to another arena in Sacramento.

    Sullivan, of the taxpayers group, said his members are concerned that if a new arena deal is forged, the old loan will be waived.

    "That's a lot of money to forgive," Sullivan said. "That's not the way our tax money should be spent."

This is a fascinating story of contracts, loan agreements, and the desire of local governments to keep professional sports franchises. While I generally believe that professional sports teams and new arenas do help cities' economy and revitalization efforts, this seems a bit much. If the Kings do not pay back this money, the citizens of Sacramento have a legitimate beef, and should use the next election to voice their concerns.

I recommend the entire article.





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