Seattle's settlement with the Sonics is amazingly bad. Leave out the emotion of being fan and what it means to lose your team. Look at it from a business perspective:
-- There's no guarantee of an expansion team replacing the Sonics. Only a promise from the NBA to "notify" the city when an existing team is for sale. Now there's a concession. A notification? That's nothing. Literally nothing.
-- The $30 million contingency fee will never happen. To get the money, the state has to pass a Key Arena remodel funding package in the 2009 session. Why would the state do that now without a team when it wouldn't do the same thing with a team?
-- The city settled for $45 million. Clay Bennett said if the team were forced to stay in Seattle the final two years of the lease it would lose $60 million. He made $15 million off the settlement.
-- Had the Sonics stayed for two years, the city would have made $10 million in rent and another $11 million in arena revenue. That's $22 million and doesn't include revenue from parking. $20 million from the settlement goes to pay off arena debt from the 1994 renovation, but that's not found money because the debt was to be paid with arena revenue -- revenue that now won't be coming in. So, that's $42 million that's basically a wash, leaving a measly $3 million in profit from the settlement. The Sonics were worth only $3 million to the city? 41 years of hoops history is worth $3 million?
-- The Sonics' team history goes to Oklahoma City. OKC will "share" the history -- the stats, the championship trophy, records, etc. -- if Seattle gets a team within five years. After that, the history stays with the OKC team. How would "sharing" the history even work? How do two franchises share records? The only reason Clay Bennett retained the right to the history is so he could sell it back to the city if Seattle gets another team.
-- The city had the leverage of the lawsuit, which was an hour away from being decided before the city caved. Most legal analysts said the city had an iron-clad lease. The city expected to win the lawsuit. Clay Bennett had every reason to settle because the longer he stayed in Seattle, the more money he lost. And yet the city could only extract an extra $3 mil from him?
-- Even if the city lost the lawsuit, an appeal kicks the can down the road, and the sides would still have to negotiate a buyout. It's not like the city would have been left empty handed. If the city wins the lawsuit, it has two years to figure out a solution. There was no reason to settle at this point. The city had the leverage and it still blinked.
-- In sum, Clay Bennett gets a new team for Oklahoma and saves $15 million over the next two years, while the city gets no future team, very little money and doesn't get to hang onto the team's history just in case. What did the city get out of the settlement?
Amazing.
Posted by Jason Thornbury at 7/3/2008 9:45:00 AM
