Last Thursday afternoon the Government Performance and Finance Committee voted 7-0 (with one abstention) to approve the revised agreement to build a new sports and entertainment facility. The legislation will be considered by the Full Council on Monday, Sept. 24. Below is the text of a newsletter I sent out on Tuesday about the details of the revised agreement negotiated with Chris Hansen.
Council President Sally Clark, Councilmember Mike O’Brien and I just announced a new deal with Chris Hansen, the private investor who would like to build a new sports and entertainment arena in Seattle.
The new agreement is a good deal for all the people of Seattle, not just sports fans. It’s even a good deal for our longshoremen and freight haulers and for Seattle Center, too.
The new deal protects family-wage jobs in our region’s economic base and provides strong financial protections for taxpayers and city and county government.
The original proposal submitted to the Council by the Mayor on May 18 explained that Hansen would build a new arena after acquiring a basketball team (and perhaps attracting a hockey team, too). The City and County would provide up to $200 million in funds from public bonds to buy the site and the arena, which we would then lease back to Mr. Hansen’s group, ArenaCo, for at least 30 years. The annual “service payments” on the bonds would be paid by rent and taxes generated by the arena and the private investors would cover any shortfall out of their pockets.
On July 30, my colleagues and I sent a letter to Mr. Hansen stating our belief that the agreement as proposed did not represent an appropriate balance of public and private benefits. Nor did we think the financial protections for the City were adequate; we did not want the City to be in a position where we would be forced to take money from public safety or human services to fund the debt service payments should something go wrong.
We also heard real concerns, from as far as eastern Washington, about the effect of arena-related traffic on industrial, manufacturing and freight operations near the Port of Seattle.
So how does the new agreement resolve these problems?
Using some of the money originally proposed for the new arena, the revised proposal creates a new $40 million fund to address longstanding transportation problems in SODO. The City and County will seek to expand this fund by leveraging other money from other public and private partners, including the Port of Seattle and the state and federal governments.
The new, dedicated source of funds will create more efficient movement of freight and protect the vital, family-wage jobs of our industrial, manufacturing and maritime sectors. These sectors are an important segment of our regional economy and cannot be shrugged aside.
The agreement also commits the City to an area-wide planning process to strengthen land use protections for industrial lands outside the stadium district.
We were also able to secure significant additional security provisions, including a personal guaranty by Mr. Hansen for the City and County’s annual debt payments. Here are a few others:
- ArenaCo must double its security reserve (establishing a two-year cushion of debt payments) if its revenues do not meet the established targets.
- The City and County now have the authority to conduct an independent, third party assessment of the viability of ArenaCo’s business plan and the wherewithal of the private investors, just like the entity’s private lenders will require.
- At the end of the arena use agreement, the City and County can require ArenaCo to purchase the land and facility for $200 million.
The modified proposal sets aside $7 million for a Key Arena Fund, which allows for some money to be available when a study of options for the future of Key Arena and the Seattle Center is completed. (Mr. Hansen, by the way, will now reimburse the City for the cost of that study.) We will face significant decisions about the future of the Seattle Center, but the renewed energy from a couple seasons of NBA at the Key and this dedicated source of funds will give us a running start down this path.
And, this new agreement could fundamentally change the model of how public-private partnerships involving sports facilities are financed. The new deal recognizes the opportunities presented by Chris Hansen, takes advantage of those opportunities in a reasonable and fiscally-prudent manner, and builds in nearly foolproof protections against the inherent risks associated with investments of this kind.
Taken together, I believe these changes provide a very real and tangible benefit to our City. We protect the jobs we have, we bring a new source of economic activity to our City that will benefit Pioneer Square and the Chinatown-International District, we get a chance to bring back our Sonics and we leave ourselves at very little financial risk in the process. It’s an example of what’s possible when collaboration and a dose of good governance are applied to real challenges and opportunities.