THIS POST HAS BEEN UPDATED WITH COMMENTS FROM MAYOR MIKE MCGINN. 

Seattle City Council members Mike O'Brien, Sally Clark, and Tim Burgess---flanked by arena supporters from the state legislator, as well as former arena skeptic Rep. Judy Clibborn (D-41), head of the house transportation committee--- formally announced their agreement with San Francisco hedge-fund manager Chris Hansen to build a new arena this morning.



Seattle City Council president Sally Clark at today's mobbed press conference

The proposed deal, which still has to be approved by the full council, amends the controversial agreement proposed by Mayor Mike McGinn to build a half-billion-dollar arena, with a city tax investment of up to $140 million ($145 million, including $5 million from the county) if Hansen only secures an NBA team. If he secures an NHL team as well, King County will kick in another $80 million.

Council members denied that the new agreement, with its new protections for the city, was a "rebuke" to McGinn as the partisan Seattle Times gleefully reported this morning.

"The mayor... recognized the opportunity," council member Tim Burgess said. "He gave us an alley oop and we got a slam dunk.[pullquote]"The deal recognizes the opportunities Chris Hansen brought to us and ... brings in nearly foolproof protections against the inherent risks associated with these kinds of agreements."---City Council member Tim Burgess[/pullquote]

"The deal recognizes the opportunities Chris Hansen brought to us and ... brings in nearly foolproof protections against the inherent risks associated with these kinds of agreements."

Council member Mike O'Brien called the original McGinn/Hansen proposal "one of the best arena proposals that we've ever seen in this country," but added, "we still had concerns about the risk to the public. We are being asked to go borrow $200 million between the city and the county, and we wanted to make sure the revenues would be there to pay that back."

Mayor Mike McGinn told PubliCola he considers the agreement "a good deal for the city" that provides "unprecedented levels of security."

Here are the details of the revised agreement.

• In perhaps the biggest change from McGinn's original proposal, the council's arena deal would create a $40 million fund to pay for transportation mitigation around the Port of Seattle---one of the biggest sticking points for the Port, which has opposed the arena on the grounds that it will hamper freight mobility around its SoDo terminal.

It's unclear whether the $40 million will placate the Port---or, indeed, what it will pay for or whether it will be enough. At this morning's press conference, I asked what the council was basing that figure on, given that the city hasn't done a study of transportation needs in the area. (The only transportation study so far was a 30-page analysis funded by Hansen himself).

Burgess was vague about how the council and Hansen came up with that figure, calling it "a negotiated amount between our negotiators and Mr. Hansen. ... That figure represents a down payment on solutions in the SoDo area. We will soon begin a process with stakeholders ... and that process will identify specific projects."[pullquote]It's unclear whether the $40 million in transportation dollars will placate the Port---or, indeed, what it will pay for or whether it will be enough.[/pullquote]

Burgess added that the city expects to ask for federal and state matching funds, as well as money from the Port, to pay for transportation improvements around the arena.

McGinn, contacted after the council's press conference, said he hadn't spoken to the Port, adding, "It's premature to say how we're going to spend that money. Clearly, freight mobility is an important interest for our city," but that transportation spending has to accommodate all road users.

After the press conference, Port spokesman Peter McGraw said the Port still has concerns about the "details" of the agreement. "We want to make sure those 30,000 family-wage [Port-related] jobs are preserved," he said.

• Additionally, the new agreement includes $7 million for KeyArena--$5 million for immediate upgrades, plus $2 million for the city to use at its discretion "depending on what happens in the future," after the city has completed environmental analysis of potential arena sites.

That environmental analysis (an environmental impact statement, or EIS) will include a look at alternative sites, including KeyArena. Despite the fact that Hansen has made absolutely clear he will only accept an arena on the land he owns in SoDo, council members insisted the EIS was not mere window dressing. "We're always open to KeyArena," council member Sally Clark said. And "Even if [the EIS] comes back and says, OK, the SoDo site is fine, we need it to say, here's the list of mitigation that needs to be done at that site, and that would be true of any site," council member Sally Clark said.

Clark also said the agreement addresses one concern arena opponents like attorney Peter Goldman have raised---that the city is passing a binding agreement before  doing the required environmental analysis. She said the new agreement ensures that the city won't sign any of the "transaction documents" --- the final agreements --- until the EIS is complete. Still, the scales are undeniably and overwhelmingly in favor of Hansen's SoDo proposal.

• The transportation fund and the KeyArena fund add up to $47 million the city is pledging above and beyond its initial $120 million (including the county's $5 million) promise. However, the city is only proposing to bond up to $145 million total.

Here's how that would work: In the early years of arena operations, when the city is paying very little to cover the bonds (the payments increase over time), arena-related taxes would flow directly into the transportation and KeyArena funds. When the city and county actually buy the arena after construction is completed (the "transfer date"), the city believes the funds will have accumulated the $47 million total.

If they haven't, the city would pay up to $25 million of the shortfall, and Hansen would be on the hook for anything over that $25 million. So, if there was only $20 million in the accounts, the city would pay $25 million, and Hansen would have to make up the remaining $2 million shortfall. Alternately, if there was $30 million in the accounts, the city would pay $17 million for the shortfall. [pullquote]"Ultimately, if there’s a complete meltdown scenario, which none of us would ever want to see, then you’ve got the personal guaranty." ---City Council member Sally Clark[/pullquote]

• Mayor McGinn's proposal included a $15 million reserve and assumed $30 million in annual revenues. In the new proposal, council members added more security: if revenues fell below $30 million, Hansen would be required to add another $15 million to the reserve, doubling it to $30 million and keeping that $30 million in the reserve account until the arena is profitable for two straight years.

The council's proposal goes another step further, requiring Hansen to personally guarantee he will pay for any debt service that can't be funded out of the reserve account. "Ultimately, if there’s a complete meltdown scenario, which none of us would ever want to see, then you’ve got the personal guaranty," council member Sally Clark said.

The guaranty is also intended to make up for a lack of transparency in Hansen's partner companies, currently known simply as "HoldCo" and "TeamCo," neither of which exists yet and whose likely makeup and investors are unknown. In a July letter to Hansen, the council asked for more transparency about the makeup of and relationship between those companies. They didn't get it. What they did get was a third-party auditor who will be able to look at those companies books and report back to the city.

"When you read through the [memoranda of understanding], there’s a whole slew of corporations and entities that are listed ... but none of those entitites actually exist yet, so it’s hard for us to tell who’s actually backing this up," O'Brien said. "I have no doubt that the investors are well funded, [but] it was important for us to know that somebody that had some deep pockets was willing to put their money on the line and say, at the end of the day, if none of this works out I’m going to guarantee it."

• Toward that end, the council's agreement also requires an annual audit to ensure that Hansen's net worth is at least $300 million---a number O'Brien said "made us feel really comfortable." Although the minutiae that go into that audit would not be available to the public (you won't be able to look at Chris Hansen's checkbook), the audit report that results from those minutiae will.

"If we go into his personal accounts, and what we see makes us scared," O'Brien says---that is, if Hansen's net worth drops below $300 million, he has to put $30 million into a separate cash account to help cover arena debt.

• At the end of the 30-year term of the agreement, the agreement presents Hansen (and the city) with several options. If the city wants, it can force (O'Brien's word, not mine) Hansen to buy the arena for $200 million. Alternately, Hansen could choose to buy the arena for $200 million or the value of the underlying land, but no less than $200 million. If Hansen decided to buy the property after 30 years, he'd be required to build a new arena.

Finally, if Hansen decided not to extend the arena agreement after the initial 30 years (his company, ArenaCo, has the option to extend for 20 years), he would have to pay to demolish the existing arena and give the land back to the city, which could sell it.

Hansen released a statement today thanking the council for its work; his spokesman said he is not making any further comments to the press. Mayor Mike McGinn, who also released a congratulatory statement, has not returned a call for comment.

The council will discuss the arena proposal at a public meeting Thursday, September 14 in council chambers at 2:00 pm. More details on the proposed agreement here.

Josh Feit contributed to this report