The council's review of the proposal, the letter begins,
has led the majority of Councilmembers to conclude that the agreements do not represent an appropriate balance of public and private benefits, nor do they sufficiently protect the City from the financial risks inherent in the arena’s financing. However, it would be unfortunate if the project were to founder now because we believe it could be successful in helping to bring back the NBA and open the door for the NHL and provide the opportunity for our region to begin to address longstanding transportation challenges, especially those related to freight mobility.
Most notably, the letter expresses the council's unwillingness to dedicate 100 percent of tax revenues from the arena to arena financing, and suggests that some of those revenues should be put toward bonds, which could pay for "major transportation investments" near the arena.
"[W]e are open to sharing a portion of the arena tax revenues with you, but are not supportive of a structure that captures 100% of the public resources generated by the arena for private purposes," the letter says. "
This fundamental aspect of the proposal does not represent an appropriate balance between private and public benefit, particularly not when the project will create impacts that Seattle taxpayers will be forced to address with other public resources. In order to move forward, we will need to arrive at a more equitable arrangement."
Additionally, the letter continues, the proposed agreement fails to "provide the City and the public sufficient guarantees to offset the financial risks that we and the County will incur. Investment of $200 million in public debt represents a very significant financial exposure. If such a risk is to be taken on for the benefit of private investors, it is entirely appropriate that the City and County be provided the highest level of financial guarantees."
Specifically, the council wants to modify the agreement to put the city in a better lien position relative to other lenders (currently, the city gets paid back last); include minimum requirements for ongoing upgrades to the arena; determine a method for the city and county to verify that ArenaCo is hitting its financial targets; and inform the council of Hansen's "basic business plan" and financial situation about which the council currently has "no direct knowledge or confirmation.
"If the City is to enter into this public-private partnership, we should expect to see the same information that all your other partners and commercial lenders will have before making their investments."
But wait. There's more.
Regarding KeyArena, the letter continues,
the proposed MOU fails to appropriately address the on-going financial exposure that will be created for the City through its ownership of KeyArena. The MOU identifies the possibility of a future agreement, but provides no specifics. Reference is made to improvements that will be made at KeyArena as part of its use as a temporary host facility, but there are no details about what specific upgrades will be provided. ... Agreeing to invest in a new SoDo district arena—without proper controls and decisions about future usage and management of KeyArena—could render the older arena obsolete. This is a significant cost that must be factored into our consideration.
Aaron Pickus, a spokesman for Mayor Mike McGinn (who supports the arena), said he had not yet seen a copy of the letter.
PubliCola, by the way, is sponsoring a free public forum on the arena at 7:00 tonight at EVO on Capitol Hill (1715 E. Olive Way), featuring city council member Mike O'Brien, former council member Peter Steinbrueck, ESPN sports radio commentator Mike Salk, and Seattle Port Commissioner Tom Albro.