UP #318 Mayor’s Proposal for a New Sports Arena

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Urban Politics #318 – February 17, 2012

By City Councilmember Nick Licata

Urban Politics (UP) blends my insights and information on current public policy developments and personal experiences with the intent of helping citizens shape Seattle’s future.

Mayor McGinn and County Executive Constantine yesterday announced a proposal for an arena in Seattle’s SODO district that could host teams from the NBA, NHL, and concerts. I received this proposal shortly before the announcement, so I’ll provide some preliminary impressions, first with a brief summary of the proposal, then my own perspective.

The proposal calls for $200 million contribution and cap in public funding, $150 million of which would come from the City of Seattle, and $50 million from King County; $300 million would come from the private sector. City general obligation debt would be used to finance the project. The press release from Mayor McGinn and County Executive Constantine states the proposal is self-funded, from tax revenue that wouldn’t be received without the project.

The City’s contribution would come from tax revenues such as sales tax, property tax, excise tax, business and occupation tax and admissions tax. No specific dollar figures are available yet. These taxes would, along with rent from the private sector, be used to pay the cost of servicing 30-year bonds.  The taxes are referred to “Facility Tax Revenues” in the proposal, i.e. tax revenues received on the site or from the team owners.

The investments are proposed only in the event that Seattle obtains new NBA and NHL teams, and would include a 30-year lease with a non-relocation agreement. The proposal includes a reserve account to be used for capital repairs, and to ensure the Facility is “maintained in first-class condition”, according to a schedule prepared by an independent engineer.

Here’s my perspective and analysis. This is better than previous arena proposals the city has received, with less public funding, no brand-new tax to pay for it, and a significant private sector contribution. Secondly, their intent is to address Initiative 91, approved by Seattle voters in 2006, which requires a return on any investment by Seattle taxpayers in facilities provided for professional sports organizations.

I do have questions that still need to be addressed.

First of all, we don’t yet have a detailed breakdown of figures for the proposed tax sources, so it’s difficult to draw conclusions. I’ll want to see a more thorough analysis of whether the proposal meets the terms of Initiative 91, and examine the claim regarding self-funding. Secondly, I want to ensure city services are not affected. This morning I was at a food bank with 400 people standing in the rain. We must maintain services to those most in need, and cannot sacrifice them.

In addition, we must maintain our obligation to fund critical infrastructure. Seattle has a large volume of necessary construction projects, most notably the waterfront seawall. This project must be funded in the next few years, and will likely require over $300 million, possibly in bonds. I’ve asked city staff how this proposal would affect the City’s debt capacity, policies and construction needs.

Information on the impact of revenue sources will also need to be compiled; 75% of admissions tax currently goes to the arts, for example. I don’t want to see that reduced. Further, ongoing city costs required by any new facility need to be addressed for public safety and infrastructure (agreements with the Seahawks and Mariners exist on this front).

The reserve account for capital maintenance included in the proposal will need to be closely examined. The revenue model for the configuration of NBA arenas changes every decade or two, so we’ll need a clear understanding of what it means to maintain a facility “in first-class condition.”

I will be closely scrutinizing the proposal with other Councilmembers to reach a decision that can work fairly for the city and the owners of any new franchise.