(WMC-TV) - The Memphis City Council is exploring the option of suing the NBA for lost revenue. A council resolution approved Tuesday says it has to with money lost during the suspension of the first two weeks of the 2010-2011 NBA season.
Council members said attorneys for the city are exploring all options to recover the revenue shortfall that would exist in the form of lost sales tax dollars.
"We're losing revenue as long as the FedExForum is not in use, because each seat pays to much money to the city of Memphis," council member Janis Fullilove said.
But those FedEx forum seats are not being used like they should with the NBA lockout. Memphis gets a per seat fee for each NBA event. The longer the lock out lasts, the worse it gets.
Council attorney Alan Wade warned of what lost games could mean for the city.
"If it gets to be a half a season, that's a real problem," he said. "If it sits idle for a whole season, that's a real problem."
Council members said they don't want to take any chances, which is why they approved the resolution to look at the possibility of filing a lawsuit against the NBA over lost revenue, which is used to pay the bonds used to build the arena.
"I think we might be a little premature for us to go down that road," council member Harold Collins said. "Any outcome that may come of what the NBA does is out of our hands."
This all comes as NBA players and owners are in New York, meeting with federal mediator George Cohen. NBA commissioner David Stern canceled the first two weeks of the season earlier this month when an agreement could not be reached with the players union.
Memphis appears to be the first city with an NBA team to consider a lawsuit. Some believe more games could be canceled if there isn't movement toward a new labor deal.
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.
CITY COUNCIL CHAIRMAN