Well the Seattle Arena has survived its biggest threat, the Seattle City Council. Yesterday it leaked out that the City Council had reached an agreement with Chris Hansen on a modified MOU. For starters I can’t believe that this actually happened. There is finally an arena deal in place in the City of Seattle and a deal that meets the City’s legal requirements. Hansen had made it clear from the beginning that he was willing to wait a long time for this deal to get done.
|Council Members Discuss the Adapted MOU, from the Seattle Times|
It has been eight months since the deal leaked to the press and now the deal is done. The City managed to make one of the most favorable deals this city has seen and wringed even more concessions out of it; making this the sweetest publicly financed arena deal you are ever going to see. Hansen has not only met the requirements for I-91 (which requires the City to break even on any private-public investment) but completely surpassed them.
Hansen, Pete/Erik Nordstrom and Steve Ballmer are the three other potential owners known to the public. This group of wealthy men is going to throw $290 million into the Arena (59.2% of the cost), $7 million into a pool to improve Key Arena, around $400 million for a basketball team, and an estimated $300 million relocation fee; the total investment to bring a team to Seattle will be around $997 million. These guys are going to be throwing down a lot of money to bring back the Seattle SuperSonics.
Now this deal as currently structured is very similar to the one that Chris Hansen had hammered out with Seattle Mayor Mike McGinn and King County Executive Dow Constantine in the preceding months before it leaked last February. There are some minor adaptations and modifications to the original Memorandum of Understanding between Hansen and McGinn and Constantine. I’ve already stated one of the modifications, but what are the rest of these modifications? Read after the jump to find out.
The original MOU was a pretty sweet deal for the City of Seattle. Chris Hansen wants to build a $490 million arena in the South Downtown industrial area of Seattle. As with the original plan Hansen and his ownership group would pay for $290 million dollars of the arena construction cost, as well as cost overruns; the City would loan $120 million in construction bonds and the County another $80 million. To make sure that the plan was I-91 compliant Hansen and his group would make up any annual operating losses out of their pockets.
Now some of you readers may be asking how would Hansen’s group pay back the construction bonds? The plan was (and still is) for the admission taxes, to Arena events, would pay back the construction bonds. Basically what that means is that the tax patrons pay for buying their tickets would repay the city and county for their loan. What if Hansen and his ownership group were to go bankrupt? The arena and the team would default to the city’s possession.
That’s the most public friendly arena deal I’ve ever seen. The arena basically pays its own loans off and no new taxes are created to pay the bonds back (unlike the deals with CenturyLink and Safeco Field where there was a 0.5% tax increase on hotels, restaurants, bars, and car rental companies). Not only that the MOU had a way for the arena to always break even every year with Hansen and his group being willing to make up for any shortfall in the arena’s income. Despite all of this the Seattle City Council wanted to deal with some of the issues that had been made by previous council members over the last twenty years.
As I said above, the original deal was pretty sweet. However, the City Council wanted more assurances, after all the Port and the Mariners brought up a valid problem in the SODO Traffic Concerns. That being said SODO Traffic has been a concern of the City Council for the last decade. The City actually had a plan to build an overpass, called the Lander Street Overpass, for freight but that deal fell through when the city diverted the funds for the Lander Street project to Mercer Street improvements.
Another concern of the City Council was the effect that the new arena would have on the City’s existing arena, “The Key”. After all, the City boxed itself into a corner after turning down the first attempt at building an arena in the SODO Area. Instead they got an expanded and renovated building that was doomed to fail from the beginning because of its small footprint. Now Key Arena has no primary tenant that can sink millions of dollars into it to keep it up to date and competing with the smaller arenas in Everett and Kent.
|This Man Has Appeared Smarter Then the Seattle City Council|
The amended MOU doesn’t change anything that was in the original MOU; however, it does add a few new stipulations to solve the traffic and Key Arena issues. Hansen and his group are going to put $7 million dollars into a fund to help update and modernize the Key Arena. This will help make it a more profitable temporary home for the New Sonics. It will also help the city make more money off of any shows that go into the structure as they try and determine what to do with the outdated and antiquated Arena.
As for the SODO Traffic concerns, $40 million of the New Arena’s admissions tax revenue will be diverted to help continue improving the infrastructure in the SODO area. But let’s be serious here, it is going to take more than $40 million in extra tax revenue to help fix the traffic issues in SODO. After all, the Lander Street Overpass would now cost $150 million to complete; that is only one of the many things that need to be done to help improve the traffic flow in that area, SODO Arena or no SODO arena.
Categories: Seattle Arena