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.