Warriors argue why team should not pay arena debt

OAKLAND>> In their most detailed explanation to date, the Golden State Warriors have said the team should not pay leftover debt at Oracle Arena once they leave for San Francisco.

The Warriors’ argument, in a nutshell, is that the bonds to renovate the Oakland arena were to be paid over 30 years, while at the same time the team signed a 20-year lease with the Coliseum joint powers authority and agreed to make annual payments to reduce the debt in those years.

“To be clear, the relationship between the ( joint powers authority) and the Warriors has always been one of landlord and tenant, and like any other tenant, the Warriors pay rent to our landlord, here the JPA,” team President Rick Welts wrote.

Welts wrote in response to Oakland Councilmember Rebecca Kaplan’s demand last month that the Warriors pay whatever is left when the team departs for the 2019-20 season, which is estimated to be $40 million. Team spokesman Raymond Ridder released Welts’ letter late last month.

“Similar to the way in which a tenant pays rent, but does not actually make payments on (and is not responsible for) the landlord’s mortgage, the Warriors pay rent to the JPA but we have never made (and are not responsible for) payments on the bonds issued by the JPA,” Welts wrote. “That the JPA must continue to make payments to its bondholders after the expiration of our lease results from decisions made by the JPA 20 years ago.”

Oracle Arena underwent about $100millionworth of renovations in 1996, including redesigning the arena’s interior and adding more seats and luxury suites. The debt at the publicly owned arena, overseen by the Coliseum authority, currently is approximately $55 million. As part of their license agreement — a deal signed by the team’s previous ownership group— the Warriors have paid some $7 million a year toward the debt.

Coliseum authority Executive Director Scott McKibben andthe authority board made up of Oakland council members and Alameda County supervisors interpret the agreement differently. They say the team is on the hook for the entirety of the debt. Both sides will argue their case in front of an arbitrator in July.

Kaplan, Oakland’s at-large council member and a former member of the Coliseum authority, has been the team’s most vocal critic and said the city and county “shouldn’t be left with the bill.”

“The problemis, this isn’t a regular mortgage situation where a landlord is paying off their cost to buy a home over time. These are payments for the specific renovations and improvements that were made for the Warriors, at their request, to meet their specific needs,” Kaplan said recently. “It’s not like a regular house that can be rented to any other tenant if the first tenant leaves, but rather, costs that were incurred for the specific needs of the Warriors in particular.”

Kaplan created an online petition urging the team to pay up and is asking fans and residents to sign it.

Still, the Warriors say the wording of the contract is clear. The lease expired after the 2016-17 NBA season and the Warriors agreed to a two-year extension, ending in 2018-19. Construction of the team’s new arena in San Francisco’s Mission Bay neighborhood is underway.

“We find ourselves in a disagreement that, in the simplest terms, boils down to whether a tenant should be obligated to continue paying rent following the expiration of its lease simply because the landlord has an on-going debt obligation,” Welts wrote. “Based on our contract with the JPA, as well as basic comment sense, we are confident that the answer is ‘no.’