Memphis Looks to Sue NBA over Lockout

MEMPHIS, Tenn. - The city of Memphis is considering getting involved in the NBA owners' lockout of the players. Memphis taxpayers stand to lose a lot of money if game revenue doesn't come in to pay off the bonds used to build the FedExForum.

Research is still being done, but early estimates indicate taxpayers could have to pay $18 million in bond payments if the entire season is cancelled.

Currently the first two weeks have already been cancelled and NBA commissioner David Stern is threatening to cancel the rest of the games in 2011 if an agreement is not reached soon.

At the suggestion of Chairman Myron Lowery, the council approved a resolution that would ask City Council Attorney Allan Wade to explore all options, including a lawsuit against the NBA.

VIDEO | Council Chairman Myron Lowery with More on Resolution

"Should this lockout stay until December, then there's a very big bill there that the city of Memphis will be responsible for," said Councilwoman Janis Fullilove. "And whether or not we file a lawsuit, which may set precedent among other cities in this nation, is something we'll have to wait and see. But it's only being proactive that's he's offering this resolution."

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Wade says this is the first city he's heard of considering this type of action. "If it gets to be half a season that's a big problem. If that thing sits idle for a whole season that's a big problem," he said. "I think that goes against the spirit of our agreement because our arena is built with revenue, not guaranteed money... as you know, these stadiums and arenas are built with public revenue and revenues from these games so were very dependent on that revenue, so if we lose it, I'm surprised other people haven't used other options to try and recover their money."

Lowery added, "I want the citizens of Memphis to know that we are not sitting by idly, waiting for this to hit us and for us to say we're sorry."

However Councilman Harold Collins wants the council to approach any possible actions with caution. "We don't want to be labeled as a city that moves prematurely on something like this. I think we need to pull our reigns a little bit."

Would any legal action against the NBA be a hasty move for the city? Ticket sales and sales tax on items sold at games generate up to $3.5 million annually for the city to apply to bond payments. According to Bill McGaughey, who oversees the bond funds for the FedExForum, there is currently a surplus built up that can pay bonds through the year 2028. He would not comment on how the city council derived their potential $18 million cost to taxpayers if the season is cancelled altogether.

As far as putting the home team in jeopardy, Wade said the city's contract has hefty penalty to move the Grizzlies to another city, enough to pay off all bonds for the FedExForum.

The resolution passed by an 8-3 council vote Tuesday night. Attorney Wade is expected to get back to council in two weeks with a report on whether to move forward with a lawsuit.

The resolution states:

WHEREAS, the National Basketball Association (NBA) has suspended the first two (2) weeks of the 2011-2012 NBA season; and

WHEREAS, bond indebtedness issued by the Sports Authority is payable from certain revenues generated from NBA games; and

WHEREAS, the City of Memphis and Shelby County agreed to replenish the debt service reserve fund for the bonds should it ever become inadequate; and

WHEREAS, the cancellation of games will cause a loss is revenues available for debt service which may necessitate the appropriation of public revenues to cover the shortfall.

NOW, THEREFORE BE IT RESOLVED, that the Council requests its attorney to explore all options for recovery of lost revenues and to take steps to recover such revenue, if necessary.