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Mayor, Investor Propose "Self-Funded" Half-Billion-Dollar Arena
At a press conference packed with Sonics fans, reporters, and members of a new "arena review panel," this afternoon, Mayor Mike McGinn and King County Executive Dow Constantine announced a proposal to build a "self-funded" basketball and hockey arena in the SoDo neighborhood.
"This represents the first path we've been able to see to bring back our beloved Sonics and to attract a new league, the NHL, for hockey fans in the Pacific Northwest," Constantine said.
The arena would be funded with $290 million in private investment funding to be secured by San Francisco hedge fund manager Chris Hansen and up to $200 million, combined, in financing from the city and King County. (Read Hansen's proposal letter here.)
The money would pay for a new arena, the cost of bringing NBA and NHL teams to Seattle (the NBA's Sacramento Kings and NHL's Phoenix Coyotes are the teams reportedly in play), and "soft costs" such as design costs, mayoral staffers said. The funds would be paid back with rent payments and tax revenues from the stadium, McGinn said. "This is revenue that would not exist if it were not for the arena project."
At the mobbed city hall press conference, McGinn and Constantine said Hansen's proposal met all the city and county's "protection" requirements (including the I-91 requirement passed by voters in 2006 that any public investment in a sports stadium make a profit for the city):
• A guaranteed repayment of public investment (the total $200 million city and county contribution will be repaid through rent payments and tax revenues from the business) equivalent to the yield on a 30-year US Treasury bond;
• An agreement that the new team would not relocate for 30 years;
• An additional security reserve to cover any cost overruns;
• No new taxes (the project would be paid for with admissions taxes and rent);
• No impact on existing city and county services;
• And a requirement that the team and its owners pay for any overruns, as well as a special reserve fund to pay for unanticipated construction costs;
Constantine said the arena, combined with the reconstruction of the downtown Washington State Convention and Trade Center, could bring $1.3 billion in construction funding to the city, creating "thousands upon thousands of good-paying jobs for construction workers." Hansen's presence would have been useful for several questions about discussions with the NBA, which McGinn said he couldn't answer. "I don't inquire about that---that's [Hansen's] side of the equation," McGinn said.
Hansen, a longtime Sonics fan and Seattle native who is now a hedge fund manager in San Francisco, was not at the press conference, although he did meet with briefly with some city council members yesterday. Asked why Hansen wasn't in the room, McGinn responded that he had been here---he met with council members and the Seattle Times yesterday. [pullquote]Hansen's presence would have been useful for several questions about discussions with the NBA, which McGinn said he couldn't answer. "I don't inquire about that---that's [Hansen's] side of the equation," McGinn said.[/pullquote]
Constantine added, "he's not going to put his money in until he secures a tenant for his building, and we're not going to put our money in unless he has put his money in and secured a team."
Asked about their meetings with the mysterious Hansen yesterday, city council members Sally Bagshaw and Tim Burgess both said their general impression was positive, but that they still have many outstanding questions about the proposal. The biggest outstanding issue: How would the proposal, which would involve selling bonds, affect the city's ability to fund other bond-reliant projects, like the seawall, in the future?
"If we put bonds out there, we want to know all the details, we want to know all the different methods of protection and the repayment streams," council president Sally Clark says. Her colleague Tim Burgess notes that the city has many outstanding projects that will have to be funded with bonds, including not just the seawall but street and bridge maintenance, fire stations, and "a long list of other capital needs."
Council member Nick Licata, who famously opposed a proposal to remodel KeyArena at city expense in 2006, calls the arena idea "a decent proposal," but says the council is "not going to be a cheerleading section."
"We really need to look at the financing to see if it works or not, and I would define 'works' as does the city retain its ability to provide our critical social services?" Licata continued. "We don't want any money either eliminated or put at risk. so we don't' want any money either eliminated or put at risk."
The arena review panel, a 10-member group of local business, political, human-service, and education leaders, is expected to come back to the city and county with an initial report on the proposal in a month. The panel includes former longtime city council member Jan Drago, head of Seattle Northwest Securities (and former deputy mayor) Maud Daudon, former Sonics coach and NBA hall-of-famer Lenny Wilkens, King County Labor Council leader David Freiboth, Estela Ortega, head of El Centro de la Raza, and real estate developer, Greg Smith. (Full disclosure, Smith, is an investor in PubliCola.)
Asked what impact stadium construction would have on industrial uses in SoDo and on traffic in the area while tunnel construction is also going on nearby, Constantine said King County Metro already plans to add transit service, as well as a new overpass, to mitigate construction impacts.
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