We’ll never know if the city officially won or lost its big case in
U.S. District Court last month.
Judge Marsha Pechman’s widely anticipated ruling, issued on July 2,
announced only that the warring parties, the city and Oklahoma
businessman Clay Bennett’s Professional Basketball Club LLC, had
decided to settle. The settlement—ending the Sonics’ 41-year
tenure in Seattle—allows Bennett to pay $45 million to break the
team’s lease at KeyArena and move to Oklahoma City.
Here’s what we do know, though: In settling, the city lost.
Last month, the City of Seattle took Bennett to court to force the
Sonics to honor the lease the team signed in 1994 (a lease Bennett
agreed to honor when he bought the team from Starbucks CEO
Howard
Schultz in 2006 for $350 million). The lease stated that the Sonics had
to play in
KeyArena through the 2009–2010 season. However,
Bennett was “a man possessed,” according to e-mails introduced at the
trial, about moving the team to Oklahoma. In February, he offered the
city $26.5 million to buy out the lease. The city said no, and the
court battle ensued.
At a mobbed press conference at Mayor Greg Nickels’s office an hour
after Pechman announced the news, the city hyped the settlement as a
winning deal. The city said $45 million covers the outstanding debt on
KeyArena (which taxpayers renovated for the Sonics 15 years ago), two
years’ rent (at $1 million a year), and tax revenues that will be lost
over two years. In addition, the NBA agreed that a renovated KeyArena
could be a legitimate facility for NBA basketball and the NBA
“committed to helping [Seattle] secure a future team.”
What a joke. Let’s go to the videotape.
The $45 Million Payment
Taking $45 million for the Sonics contradicts the case the city made
in court that the Sonics’ value couldn’t be measured in dollars. The
city’s hired gun from K&L Gates, attorney Paul Lawrence, put it
this way: “This is a case about the city of Seattle’s policy decision
to specifically enforce [the Sonics] lease to obtain the full benefits
bargained for in 1994, benefits that… cannot be measured in dollar
damages.”
Smart-aleck gotchas aside, here’s the real problem: $45 million
doesn’t even come close to covering the city’s costs. There was $34
million in outstanding debt on KeyArena; an estimated $11.6 million
over two years in lost revenue from things like admissions taxes,
B&O taxes, parking revenue, suite-sharing revenue, and
miscellaneous sales taxes; $2 million in lost rent for the next two
seasons, and $17.89 million in back debt service since 2000 that the
city covered for the money-losing Sonics. Grand total: $65.49 million.
Bennett got off easy—by $20.49 million.
(If the legislature approves a funding plan next year, Bennett will
have to pay the city another $30 million. Oddly, though, if Seattle
ends up getting a team—the whole reason the legislature would
approve a funding plan in the first place— Bennett doesn’t have to pay the extra $30 million.)
The NBA Puts Its Stamp of Approval on a Renovated
KeyArena
NBA commissioner David Stern’s July 2 statement that “KeyArena could
properly be renovated into a facility that meets NBA standards”—a
statement formalized in the settlement that same day—is supposed
to be a big deal (the AP described it as “Stern’s reversal”). Bennett’s
complaints about the supposedly outdated KeyArena (he failed to win
state approval for a brand-new $500 million arena in Renton) convinced
the NBA to back his move to Oklahoma City.
But there’s nothing new about Stern’s endorsement of a KeyArena
renovation. Stern testified as much in front of the Washington State
legislature in 2006, when he supported Schultz’s $200 million plan to
renovate the stadium.
The common denominator is only that Stern and the NBA support public
investments in NBA entertainment complexes, no matter which owner is
pitching it.
The NBA Has Committed to Helping Seattle Secure a Future
Team
At his press conference, Mayor Nickels repeatedly stressed the idea
that the NBA was going to give Seattle special treatment. “The NBA will
keep us informed of any teams for sale, relocation or expansion
opportunities,” he said, as if not having a team somehow made Seattle
better positioned to have a team in two years.
Nickels is being naive. Potential buyers in Las Vegas, Kansas City,
and Anaheim (all in the market for an NBA team) are going to be
aggressively watching developments in Memphis, Milwaukee, and
Sacramento (cities that may lose their teams) and working the NBA.
Bottom line: The lease does not include any right of first refusal for
Seattle.
It’s worth noting that on the stand in Pechman’s courtroom just two
weeks ago, Nickels claimed that having a team was the best route toward
keeping one. “In two years, a lot can happen,” he said when asked by
Bennett’s attorney if the reason he was interested in enforcing the
lease was because it “gave him additional chances in Olympia to get
funding to renovate KeyArena.”
He was right then. And he was wrong two weeks later, when he
pretended the settlement would entice legislators to authorize $75
million in new taxes for a nonexistent team. 
