HOOP DREAMS : Operators Grasp at Any Hope That an NBA Team Can Come Along to Generate Enough Money to Take the Building Out of the Red

As the Arrowhead Pond of Anaheim celebrated its fifth birthday this year, guys in suits closed their eyes and wished for an NBA team.

The Pond attracts millions each year, with a calendar packed with Mighty Duck games and a variety of concerts, shows and other sporting events. The Pond still sparkles, with swank suites and green glass, with granite on the outside and marble on the inside.

So what’s missing without an NBA team in the arena? Money, and plenty of it.

The Ogden Corp., which runs the arena, courted Clipper owner Donald Sterling for years, more wishing than expecting he would move his team from part-time to full-time tenancy in the Pond. In April, Sterling made his move, but into the new Staples Center in downtown Los Angeles, joining the Lakers and Kings.

The Clippers’ decision virtually guarantees the absence of an NBA team in the Pond through 2001, forcing Anaheim to allocate $7.5 million to Ogden, instead of spending that money on hiring additional police officers or expanding park and library programs.

Without basketball--and even with that city subsidy--Ogden loses millions each year in arena operations.

With basketball, Disney would make more money--a lot more money--on advertising and luxury seating within the arena. But a little more money is better than none at all, so Disney now acknowledges a willingness to renegotiate its sweetheart lease, which would severely restrict profits for any NBA team joining the Ducks in the Pond.

Too little, too late? With relocation of an existing team a dim hope and expansion a dimmer hope, the Pond could operate well into the next century without the NBA team the arena was designed to attract.

“There’s nothing in our bylaws or procedures or thinking that necessarily precludes a team in Anaheim,” NBA deputy commissioner Russ Granik said. “There’s also nothing I can say to give particular encouragement on the subject any time soon.”

Said Anaheim City Manager James Ruth: “That doesn’t mean we should give up on trying to get a team. I don’t think you can ever give up on something like that.”

DISNEY’S LEASE LEVERAGE

Disney aspires to add an NBA team to a corporate sports stable that features the Angels and Mighty Ducks. The Clippers and the Pond appeared a perfect match to virtually everyone except Sterling, and Disney explored purchasing part or all of the franchise.

However, Disney is under no obligation to deliver an NBA team to the Pond or help Ogden lure one.

“That’s up to Ogden,” said Tony Tavares, president of Disney’s Anaheim Sports division. “The only reason anybody contemplated a partnership was because we had expressed interest in the Clippers. We didn’t think Sterling would come down here on his own.”

No NBA owner should move into the Pond, analysts say, without entering into partnership with Disney or demanding Ogden obtain lease concessions Disney now promises to consider.

If not for the Mighty Ducks, the Pond would have opened without a major tenant, and Disney exploited that leverage in its lease with Ogden. Under that agreement, Disney would make money from all luxury suites and club seats sold for regular-season NBA games at the Pond.

“Those are crucial elements of revenue generation for a team,” said Martin Greenberg, co-author of “The Stadium Game” and a national expert on sports law and facility financing. “Most teams, given the value of having a franchise, will find venues where they can largely control the revenue from those two items.”

Disney would sell all advertising within the arena, too, and keep almost all the money. Disney need not share revenue from naming rights and sponsorship agreements.

“In the right venue, I could control all of this or management of it through a city that wanted an NBA franchise,” Greenberg said.

“If you’re going to get a basketball team into this facility, either this lease is going to have to open up or there will have to be auxiliary development opportunities to the team owner to make up for the loss of the economic generators that teams must have to play on a level economic playing field.”

For instance, Ogden could allow an NBA team to build restaurants and shops in the parking lot and retain profits, subject to city approval and potential Disney objections. Ogden also could construct more luxury suites and allow an NBA team to control them.

However, with a waiting list for luxury suites, Disney may push Ogden to build more before the Pond can secure an NBA team.

“That’s something we’ve been looking at,” Tavares said. “If demand continues to be where it’s been, there’s certainly the possibility--not the probability--of additional suites.”

As agreements for suites, seats and sponsorships expire, Disney is willing to renegotiate to accommodate an NBA team, Tavares said.

In fact, he said--and Pond General Manager Tim Ryan verified--Disney agreed to discuss a revised lease if necessary for Ogden to clinch a Clipper deal.

“We are not acting as obstructionists,” Tavares said.

Said Ryan: “There’s a deal to be made in this building. As long as there’s a willing partner, this building has a tremendous amount of upside for a team willing to relocate.”

COURTING THE CLIPPERS

In 1989, the same year the film “Field of Dreams” popularized the line, “If you build it, they will come,” Ogden and the city acted on that faith.

The city agreed to provide the land, and Ogden agreed to pay the construction bill--$121 million, by the grand opening four years later--in exchange for the right to manage the new arena for 30 years. Ogden also agreed to absorb all losses--and pocket virtually all profits--aside from one exception in case life did not imitate the movies.

If neither an NBA nor NHL team moved into the Pond, the city promised Ogden $2.5 million a year for eight years. After the Ducks arrived there, the city renegotiated its obligation to $1.5 million per year for five years, starting in 1997, so long as the arena remained without an NBA team.

That subsidy hardly stopped the bleeding. Ogden lost $5.3 million last year and $18.5 million since the arena opened in 1993, according to an audit filed with the city.

Ogden considers the Pond a corporate showcase. While the company manages dozens of buildings worldwide, the Pond marks its first United States venture into arena development.

The company can afford a few years of losses in Anaheim, certainly, after turning a $75-million profit on 1997 revenue of $1.7 billion. Brad Mayne, the former general manager of the Pond, said Ogden projected losses on the arena for the first 12 years of the 30-year agreement.

City officials, skeptical of Ogden’s accounting, are conducting their own audit. But officials question the amount of the deficit, not its existence. With an NBA team in Anaheim, that deficit would be reduced and could be eliminated.

In 1993, as the NBA announced plans to expand to Toronto and Vancouver, Ogden focused on convincing the Clippers to move from the decrepit Sports Arena, the oldest building in the NBA.

“Our desire was always to have the Clippers relocate here on a full-time basis,” Ryan said.

Sterling never shared that desire. In 1994, as the Clippers committed to play an annual series of games at the Pond, executive vice president Andy Roeser said, “If our intent was to move, we wouldn’t need to move in seven-game stages. It isn’t our intent to move.”

Ogden dangled several proposals in front of Sterling, including one worth a reported $95 million in cash payments, tax incentives and loans. Disney invited Sterling to join forces, or sell. The NBA lobbied, sometimes publicly, for a move to Anaheim.

At the Clippers’ only home playoff game last year, one that failed to sell out, NBA Commissioner David Stern acknowledged he wanted the team to abandon the Sports Arena for the Pond but said--within earshot of Sterling--that he would leave the decision up to Sterling “and whoever he communicates or communes with.”

Sterling, a hugely successful real estate developer who once said, “I will never sell the team because I never sell anything,” moved the Clippers from San Diego in 1984, against the NBA’s will. He paid the league $6 million to settle an ensuing lawsuit.

Sterling rejected Anaheim long before anyone invited him into the Staples Center. However, despite the many millions Ogden and Disney could have lavished upon him, even Disney’s imagineers could not relocate the Pond to Los Angeles.

“The building is stellar, state-of-the-art,” said Joe Safety, Clipper vice president of communications. “But it’s the same basic issue as deciding where you choose to live.

“The strategy all along has been to be in downtown Los Angeles. I don’t think we’ve ever been very coy about it.”

FINDING A TEAM

Suppose the owner of an NBA team called Ryan tomorrow and asked about moving to the Pond. Slam dunk? Hardly.

While that team would find Disney willing to renegotiate its lease, it might not find Disney willing to surrender enough so that an Anaheim deal would compare favorably to potential deals elsewhere. The NHL’s Phoenix Coyotes moved into America West Arena when they migrated from Winnipeg in 1996, but the NBA’s Suns control the arena and so much of its revenue that the Coyotes started publicly itching for a new building in 1997.

And Anaheim is not alone in the market for an NBA team. Nashville, Memphis, St. Louis and Oklahoma City also would like to lure NBA teams into new arenas.

“There’s a lot of cities out there still willing to overpay,” said Bill Miller, managing editor of Team Marketing Report. “They’re probably willing to pay a higher price than the Arrowhead [Pond] deal currently allows.”

Disney could dig deep to match any bid to an NBA owner willing to sell all or part of his franchise, although corporate history indicates Disney would rather walk away than purchase a team at severely inflated prices. If an owner wished to move but did not wish to sell, however, Miller suspects that owner could never find his best deal in Anaheim.

“It’s hard to justify putting a third team into that market unless you’re getting a great financial deal, which you can’t have under that lease,” Miller said.

Ryan bristles at the “third team” tag and its implication that the Lakers and Clippers fill the NBA bill for a single Southern California market. He arms himself with demographic profiles generated by the Orange County Business Council that show the county has more residents than Baltimore or Pittsburgh, more retail sales than Seattle or Tampa-St. Petersburg and the greatest median income of any county in Southern California.

Laker spokesman Bob Steiner said Orange County residents account for 13% of season-ticket holders and Safety said county residents account for 15% of the Clippers’ season-ticket holders. Ryan said the Clippers’ last two games in Anaheim this year drew 53% and 41% from Orange County, respectively, and 8% and 5% from Los Angeles County.

The Clippers’ Pond games also draw well from Riverside, San Bernardino and San Diego counties, Ryan said, and far outdraw the Clippers’ games in Los Angeles. In March, the Clippers and Lakers attracted 18,521 to the Pond, the largest crowd ever for an NBA game in Southern California.

“I’m thoroughly convinced this is a separate sports market,” Ryan said. “Orange County would not only support an NBA franchise but would do so in an overwhelming fashion.”

The Ducks have played to 99.4% of capacity in five seasons in the Pond, despite one playoff appearance. Not surprisingly, then, Tavares agrees an NBA team could thrive in Anaheim.

“It doesn’t need Disney, necessarily,” Tavares said. “This market has proven it can support an NBA team.”

Said Miller: “In terms of ticket sales, it may be a different market. To the rest of the country, it’s one big market.

“Television revenues drive professional sports. Does adding a third NBA team enhance the value of the TV package? That’s a hard justification to make. Is it better having a third team in Los Angeles or a new team in Oklahoma City or St. Louis?”

The NBA takes no position on whether Orange County is a market separate from Los Angeles or whether Southern California is a two-team or three-team market.

“Those aren’t terms we have in the NBA lexicon,” Granik said. “Certainly, what we’ve seen in Anaheim--more from the hockey end; it’s always hard to make judgments off a few [Clipper] games--is that it’s potentially a very successful market for us.

“But it’s hard for us to say it’s a market we need to be in. At 29 teams, we’re nearing some natural limitation.”

In 1995, Stern said Anaheim had expressed interest in an expansion franchise and counted the city among a dozen possible sites, including Mexico City. The league, perhaps tempered by the prolonged ineptitude of of its most recent additions in Toronto and Vancouver, is in no hurry to expand to Anaheim or anywhere else.

“Any major area that has a state-of-the-art arena has to be considered on any list of potential sites,” Granik said. “Right now, we are not even discussing expansion. It’s at least several years, I would think, before the next expansion.”

Granik said he is unaware of any NBA teams actively seeking to relocate. The NBA values stability, with no franchise shifts since the Kings fled Kansas City for Sacramento in 1985.

And, although the Clippers can opt out of their Staples Center deal in 2002, the league probably won’t renew its effort to push them toward the Pond.

“I think it’s a positive move for the NBA if the Clippers are no longer playing in the Sports Arena,” Granik said. “Beyond that, that’s a judgment they have to make.”

Ryan huddled recently with officials from Ogden’s corporate headquarters in New York, plotting strategy for luring an NBA team to the Pond. Although teams negotiating better deals in their present homes can gain leverage merely by whispering the word “Anaheim,” Ryan remains resolute.

“Our goal has never changed,” he said. “Our goal is to have an NBA franchise playing full-time at the Arrowhead Pond.”

FAR FROM EMPTY

If Ogden records sufficient operating profits, the Pond lease allows the city to recoup the $7.5 million it stands to lose without an NBA tenant. In addition, after Ogden fulfills other financial obligations, the lease grants to the city up to 30% of Pond profits.

Even without those payments, however, the city manager rates the Pond a winner for Anaheim. In the arena’s first four years, the Pond and surrounding developments generated an estimated $1.6 million in tax revenue for Anaheim, city documents show.

The city also saved $3 million, Ruth said, by taking advantage of low interest rates in 1993 to refinance the bonds for land acquisition. The city had issued $21 million in bonds in 1989 and increased the hotel bed tax to recoup the money, shifting the financial burden for buying the arena land onto the backs of tourists.

Subtract the refinancing savings from the maximum liability, and by Ruth’s calculation Anaheim will spend no more than $4.5 million for a state-of-the-art arena that the city still owns and that cost $121 million to build. Ogden, not the city, paid that cost.

“If they’re able to get an NBA franchise, it’s a home run,” Ruth said. “Right now, it’s a double or a triple.”

The Pond hardly sits empty, after all. The Pond drew more than 2 million people to more than 200 events in each of the past two years, ranking the arena as the third busiest in the country, according to Ogden officials.

For all those games and shows, the lack of an NBA tenant results in the lack of a profit. What’s an arena manager to do?

“We’ll continue to be creative,” Ryan said. “I’m the goofball that filled up the river bed in the back and did jet ski racing.”

Shaikin can be reached at (714) 966-5847 or bill.shaikin@latimes.com.