UP #327: SODO Arena Vote
SODO ARENA VOTE
The City Council voted 6-2 yesterday (Conlin and Licata voting no; Rasmussen absent) in favor of a revised Memorandum of Understanding for a basketball and hockey arena in SODO. Below are the remarks I made explaining my vote.
THANK YOU TO COUNCILMEMBERS
I’d like to begin by thanking the leadership of Councilmember Burgess in markedly improving the proposal that was originally presented to us, and thank Council President Clark and Councilmember O’Brien for their involvement in negotiations.
The Council received a number of significant concessions from investor Chris Hansen, three of the most important being:
1. A full SEPA review will be completed before any Transaction Documents are signed. That means the City will take into consideration alternative sites, traffic congestion, and freight mobility.
2. A Personal Financial Guarantee in case of the corporation not meeting its financial obligations on time.
3. Financially contributing to the creation of a SODO Transportation Infrastructure Fund, should tax revenues not generate adequate funds.
In addition, it is important to note that separate from the city’s negotiations, the labor unions that will be serving at the arena are very pleased with the 30 year agreement they have reached with Hansen.
HOW DOES IT MEASURE UP TO OTHER DEALS?
So how does this proposal measure up to other deals?
Academic studies reveal that of the 17 new or updated arenas built since 1999, 7 have received a 100% public subsidy, while five received 30% or less. With two professional sport teams secured, we are seeing a proposal at about 41% public funding, which is better than most, although not the top one. If it’s just a basketball franchise the public percentage drops to 24%, but the risk of financial failure also increases.
I talked to one of other co-founders of Citizens for More Important Things, who believes this is a decent proposal. Another one believes if it is so good; put it to a public vote. That suggestion was raised by King County Councilmember Pete von Reichbauer, and was rejected by the King County Council, and arena supporters, although the generally pro-business Seattle Times did support a public vote.
However, a public vote would not be a certain victory for either side. Usually the pro side significantly outspends the naysayers, so a vote would not assure public funding. Some proposals have passed based on a 100% of public funding, such as in Oklahoma City.
SUBSIDIZING OTHER CULTURAL FACILITIES
Supporters of this proposal say the city has subsidized the construction of other cultural venues, why not this one? They have a point.
The top three cultural facilities, the Seattle Art Museum (SAM), Benaroya Hall and McCaw Hall, have a total annual attendance that is about 90% of what the new Arena’s attendance is projected to be with both basketball and hockey. However, if the new arena has only basketball these 3 institutions’ attendance would be 170% greater than the new arena’s. The total City financial assistance for these three came to $84 million, with SAM receiving no cash support. And some of this assistance is being repaid.
The new arena, on the other hand, will be getting anywhere from 40% to a 140% more city financial assistance, depending on whether one or two professional teams locate there. The arena’s tax revenue is expected to pay it off. And if not, then the investors promise to make up the difference. The complexity of this MOU, and the transaction agreements to follow, limit the city’s financial risk if the unthinkable happens—and the Titanic sinks.
PRIVATE INVESTMENT MODEL
However, I believe the most significant difference between these other cultural facilities and any professional sports facility, is that the financial model for professional sport franchises make cities compete with each other for hosting one, hiking up the value of professional teams as cities have rushed to pick up large portions of their capital and operating costs. Unfortunately, teams have become commodities to be bought and sold, with their fans treated as shabbily as panhandlers. It’s a system that is unthinkable for symphonies, operas, ballets or any other major cultural provider in an urban setting. Do they threaten to leave for a new city that offers them better accommodations? They are local institutions that have real roots in the community.
The real difference between these other cultural institutions and the new arena is their corporate status – non-profit vs. for-profit. The administration and operation of those other institutions is open to public scrutiny, with the city having representation on their boards. The new arena will be controlled by a private corporation whose existence aside from providing sports entertainment is predicated on making a profit for their owners, and as we have seen selling the team when their profits sink.
The problem is that privately owned or controlled professional sport facilities need huge public subsidies without providing clearly measurable economic benefits. This of course ignores the enjoyment that many local citizens derive from having a home team.
WHAT SOME CITIZENS SEE
What some citizens see is that those who have a lot of money are using public resources to make even more money. They see someone purchase private land and in a couple of years get the city to buy it from him for double the price he purchased it for. It strikes them as wrong.
When they see the city abandoning a major public facility, e.g. the Key Arena, without a plan on how to recoup its financial contribution to the Seattle Center, they see that as a mistake. Keep in mind that the Key Arena, despite the existence of the Qwest Exhibition Hall that some said would put it out of business, made $300,000 last year and provides an additional $1 million in parking revenue generated by the 110 events it hosts every year. It is difficult to see the current proposal as anything other than a blow to the welfare of the Seattle Center and a death knell to the Key Arena, which we have plowed $100 million in tax dollars into. I predict there will be a public vote for a revitalized Seattle Center.
They see siting the new arena adjacent to our largest industrial zone and our maritime industry, as risking our city’s overall economic growth. Hundreds of millions of taxpayer dollars have been invested in keeping Seattle one of the leading ports on the West Coast. Some have argued that the land in SODO might be better used for higher profit enterprises, like the arena. Nevertheless, I believe that is a short-term strategy, based on a year-end book evaluation by investors, not by city planners who must look out at least a decade or two down the road. A perceived quick economic boost is not the same as long-term strategy for sustaining living wage jobs in manufacturing and the maritime industry.
WHAT THIS VOTE IS ABOUT
This vote is not about liking or not liking sports; it should be about what is best for the public welfare in the long term. Many good people care about the future of this city and believe that this city is big enough to host another professional sports team.
They hear from those who truly miss the Sonics and the joy that they brought to their lives. Seattle should be a place that people can enjoy in many different ways. I hear them as well, and I am satisfied that the majority of the Council has heard them.
But I also hear those citizens who want the City to concentrate its resources on protecting what we currently have in place, the Key Arena and the Seattle Center, the maritime and manufacturing industries. They want public funds used for closing the gap that has grown between the 1% and the rest of us, not for subsidizing private companies even if they provide a great cultural experience. Instead, the marketplace should determine, by the number and wealth of their supporters, a company’s financial success.
In summary, I believe this proposal is a good one; it meets a high bar for public accountability. It is a rather solid tree in a forest of not such sturdy timber. However, I concur with those who focus on the unhealthy state of the forest and not on any particular tree. Their voice says enough of this; please address our other needs first and foremost. I hear them, and I will be casting a no vote.