One of the common questions regarding the Seattle Arena is; why doesn’t the City use the $200 million dollars it is going to invest in the Seattle Arena and use it for something that actually is useful? Now there are many interesting points to this question. Especially since it basically says that creating thousands of construction, usher, concessioners, security, and janitorial jobs aren’t useful to the City of Seattle.
The important thing to understand is that the money that is being used for funding Chris Hansen’s arena proposal is Construction Surety Bonds
. What these bonds do is that they layout an understanding between a contractor “The Principal” will fulfill an agreement, otherwise known as the “obligation”. There are three types of Surety Bonds; these three types of bonds are called the Bid Bonds, Performance Bonds and Payment Bonds. The type of bond that is probably going to be used by the Seattle Arena is the Payment Bond; the Payment Bond guarantees monetary payment to the Principal (in the case of the Seattle Arena, Chris Hansen)to carry out his obligation (construction of the arena).
Now that we have an understanding about what type of money the City of Seattle is tapping for the Seattle Arena Proposal it is important to understand that these different bond types can only be used for construction projects. These funds cannot be transferred into the City’s general fund. They cannot be transferred to the School Districts and they cannot be transferred to medical care. With that statement out of the way, what else could the Seattle City Council use these Bonds for?
Did you guys notice that I specifically singled out School Districts and medical care? That’s because those are two “useful things” that arena opponents have pointed out as “useful things” that need financial help. So how could these Surety Bonds help out the School Districts and medical care? Well these bonds could help the School Districts and the medical care industry construct and/or renovate new buildings. That’s it.
If a School District did want to build a new school or renovate an old one, then they certainly could apply for, and use, Construction Surety Bonds. Once the new school is built though the school has several other items that the District has to find a way to pay for, some of these items include; office staff, teachers, janitorial staff, and computers. Now how would the School District pay for all of that (Surety Bonds can only be used for construction)? And if the School District used a Payment Bond, how would they repay the monetary loan?
As for the medical care industry, the money can only be used for the construction and/or renovation of hospitals. They encounter several expenses that come with opening up a new hospital. Some of those expenses are; nurses, doctors, janitorial staff, medical equipment, and anesthetics.
That’s how Construction Surety Bonds could benefit the education system and medical care industry. The use of these funds would lessen the construction cost on the Schools and Medical Care Industry. But it wouldn’t help solve any of the problems confronting those two systems.
With the Seattle Arena you have investors, in Chris Hansen and his ownership group, whom are going to pay for the Arena’s staffing. Also you see the bonds being paid back without any new taxes being created or any taxes being increased. The bonds will be paid back by the admissions tax attached to ticket sales, only the people who attend events at the arena will pay the bonds off. The arena won’t burden the tax payers as the Surety Bonds are already there; they just need to be used. And Chris Hansen is giving them a use without any new taxpayer involvement.
Due to the high political content of this post a political discussion about public arena deals is welcome. But beware; the leash for comments is really tight. Keep the conversation civil and related to public arena deals.