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Understanding the Fight Over Building a New Arena to Bring Back the Sonics

Starting July 5, the Seattle City Council will begin debating the merits of approving a half-billion-dollar basketball and hockey arena in Sodo. Hedge-fund manager Chris Hansen is already in negotiations to bring the NBA back to Seattle, and lobbyists are queuing up on both sides of the trough to do whatever it is that lobbyists do. As a service to readers, we cut through the bullshit and offer the following totally neutral, unbiased, fair-and-balanced guide (for once!) to the pros and cons of a big city dispute.

PRO

It's the Best Deal We're Likely to Get

Previous Sonics arena proposals asked taxpayers to pick up 80 to 90 percent of the cost of a new facility, paid for by taxes on hotels, restaurants, and car rentals. This deal is different. The city and county's combined share is capped at $200 million (only $125 million without an NHL team), about 40 percent of the estimated $490 million cost. The rest would be picked up by private investors, including hedge-fund manager Chris Hansen, Microsoft billionaire Steve Ballmer, and two guys with the last name Nordstrom. The city would own the arena and the land it sits on, but "ArenaCo" would shoulder the bulk of the expense, including all cost overruns, future capital improvements, and repairs. The deal is also billed as "self-funding," with the public bonds paid off entirely by taxes and rent generated by the arena. So no new taxes would be raised, and there would be no hit on city or county finances.

The City Won't Be Stuck with a Debt

Okay, there's no such thing as a guarantee, but this deal comes about as close as you can get. The $13.2 million a year in payments due on the city and county bonds would be covered by a combination of the aforementioned arena taxes, base rent, and "additional rent" sufficient to fill any annual shortfall. To avoid the risk of any late rental payment, ArenaCo will also deposit $40 million into an escrow account that the city can tap into. All this is backed up by a 30-year lease and a nonrelocation agreement that says the basketball team can't leave town (that agreement remains in effect until the public bonds are fully repaid). Even in the case of bankruptcy, taxpayers would be protected: The city and county are positioned first in line before other creditors to garner revenue and receivables, as well as the proceeds from the sale of the basketball team (after the $125 million the NBA reserves to pay off league-backed debt). And that team would be worth a ton of money. The Sonics sold for $350 million six years ago, and according to Forbes, there isn't an NBA team currently valued at less than $268 million. Add in the city-owned land and building, and even in bankruptcy there would be more than enough assets to pay off the public bonds.

It's Great for Downtown Seattle Businesses

A 2005 economic-impact study found that more than 43 percent of KeyArena visitors came from outside King County—more than 80 percent from outside Seattle—and 20 percent of the money they spent was on food, entertainment, and lodging outside the arena. Ninety-some NBA and NHL games a year would provide a huge boost to local businesses even under the most pessimistic scenarios. On the flip side, both the NBA and NHL have rejected KeyArena as a suitable home for a future team, so should Seattle pass on this deal, Eastside developers would likely move forward with their plans build a new Bellevue facility to compete against the aging KeyArena, now nearly two decades removed from its last major renovation.

It's Fucking Basketball! (And Maybe Hockey)

The Seattle Sonics, fuck yeah! Sure, it's stupid and irrational to get all obsessed over freakishly tall millionaires shooting hoops, but it's only human. As anybody who remembers the Sonics' 1979 championship season or the Seahawks' 2006 Super Bowl run can attest, professional sports can bring a sense of unity, pride, and joy to a city that is beyond all reason. So fuck the economic-impact studies and the cost-benefit analyses, and just bring back our goddamn Sonics! And a hockey team, too!

CON

Taxpayers Still End Up Paying Part of the Tab

Arena backers can say it is "self-funding" all they want, but it's not. The typical Seattle homeowner will see a $2 to $3 bump in their property tax bill—about $1 million a year total—dedicated toward paying off the public arena debt. That's a taxpayer subsidy. And economic "substitution"—wherein the arena draws entertainment spending dollars from other venues and businesses—means that every dollar spent at the arena is a lost opportunity for the city's and county's coffers to benefit from taxing a dollar that might have been spent elsewhere. Would the arena pull in enough spending from outside the region to both make up for substitution and justify the subsidy? It's hard to say. But it's also beside the point. The ownership team has billions to burn and no right to ask taxpayers to subsidize their for-profit venture.

This Isn't Really Risk-Free

The Sonics had a nonrelocation agreement, too, and yet we got bullied into letting them out of it early. Never put it past a billionaire's lawyer to figure out how to break a contract. More importantly, there's only so much debt capacity the city and county can support—is it really worth lending our credit to wealthy 1 percenters at the risk of bumping up our borrowing costs on more important projects?

Too Many Good-Paying Port Jobs Are at Risk

According to a 2007 economic-impact study, the marine cargo operations at the Port of Seattle directly produce 12,428 good-paying union jobs, as well as almost 21,000 additional "induced" and "indirect" jobs. That's a lot of jobs. These operations also generate more than $3 billion of revenue annually and more than $254 million in state and local taxes. A Sodo arena could put all that at risk. Game-time traffic would dump thousands more cars onto Sodo streets, exacerbating the existing east/west freight mobility crisis that already has port officials and labor leaders fearing for the future of Terminal 46, just a few blocks west of the arena site. Of perhaps greater concern: The arena and the entertainment complex planned around it could accelerate the gentrification of this light industrial district, driving up real-estate prices and forcing port-related businesses out of the city.

Who Needs 'Em?

For all the wailing and gnashing of teeth over the Sonics' departure, Seattle has gotten along just fine without 'em. Our economy is relatively strong, KeyArena is in the black, and people keep moving here for the jobs and the quality of life despite our lack of NBA and NHL franchises. Nothing against professional sports, but they're just not worth the public investment. recommended

 

Comments (26) RSS

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1
It's so odd to have to weight these things according to which side lies to us first, which side lies the most, which side's lies betray the lowest opinion of the public's ability to spot bullshit.

But since we have to evaluate things that way, let's.
Posted by gloomy gus on July 4, 2012 at 9:39 AM · Report this
2
Socialized costs, privatized profits. Fuck 'em. Either have the sufficient capital to begin a business here on your own, in which case go ahead and keep your share of the profits, or if you're going to rely on the taxpayer for even a fraction of investment, then you owe the taxpayer a direct return.
Posted by srslydude on July 4, 2012 at 1:08 PM · Report this
MrBaker 3
"Never put it past a billionaire's lawyer to figure out how to break a contract."

Key Arena's contract wasn't broken, it was settled for more than the bonds.

Enough money for Nick Licata to siphon off $1.5 million dollars to fund his "theater district" infrastructure line item in the 2009 city budget, almost unnoticed.
Almost.
Posted by MrBaker http://manywordsforrain.blogspot.com/ on July 4, 2012 at 4:13 PM · Report this
Daddy Love 4
If the "dealbreaker" is that some homeowners will have to pay $3 more in property taxes, I think it will move ahead.
Posted by Daddy Love on July 5, 2012 at 12:23 PM · Report this
nightscrawl 5
@1 Sums it up perfectly, thank you.
Posted by nightscrawl on July 5, 2012 at 1:02 PM · Report this
6
Quit the 180. "And economic "substitution"—wherein the arena draws entertainment spending dollars from other venues and businesses—means that every dollar spent at the arena is a lost opportunity for the city's and county's coffers to benefit from taxing a dollar that might have been spent elsewhere" - sorry but that is utter and complete bullshit. As the Times economist out it, this is one of the best arena deals in the nation and it would be idiotic for the Seattle to reject it. The port argument is bullshit too. Over and out.
Posted by Slog Tipper David on July 5, 2012 at 1:07 PM · Report this
7
@ #4 exactly. And I wonder how many "homeowners" are people that argue on the internetz. And jn fact, Goldy, the $200 million will be paid back from rent/revenues from the arena. Or did you already forget that...
Posted by Slog Tipper David on July 5, 2012 at 1:09 PM · Report this
8
However, this proposal only deals with the building of an arena - it says nothing about what it will cost to bring in TEAMS to play in that arena.
Team owners have a near certain penchant for requiring 'concessions' on the part of the city/taxpayers/arena owner/state government/county government/and anyone else they can think of.

Sorry to be Debbie Downer, but the arena is EASY, its the team owners that are total pricks.
Posted by DanielJ on July 5, 2012 at 1:14 PM · Report this
starsandgarters 9
"Nothing against professional sports, but they're just not worth the public investment."

Oh yeah Goldy, that was totally balanced.
Posted by starsandgarters on July 5, 2012 at 1:15 PM · Report this
10
you ignore the key questions.

1. why isn't this privately financed? lenders have a TON of cash. what do they know, that we don't know?

2. if we're the key component, why are we settling for just a measly 6% return instead of that plus an upside equity position? key venture capitalists are supposed to get the 1,0000% upside potential.

3. how are we protected form risk if ballmer and hansen aren't giving personal guarantees, with a pledge to maintain certain cash and asset positions and to report regularly? ArenaCO can declare bankruptcy, void a lease in bankruptcy, default, etc.

4. if to be truly risk free we need that personal guarantee, why aren't they just financing it out of their own pockets?

5. even if the above is answered, how is this more important than roads, schools, health generally, why is it govt. business to help billionaires get rich team ownership changes, to help millionaire ball players and to help the upper and middle class who pay $100 a night for tickets?
Posted by key questions on July 5, 2012 at 1:19 PM · Report this
11
"The Sonics had a nonrelocation agreement, too, and yet we got bullied into letting them out of it early. Never put it past a billionaire's lawyer to figure out how to break a contract."

Learn from history.
None of the "guarantees" actually guarantee anything.

If this deal was so good then the millionaires looking to profit from it would find private financing and keep the profits themselves.
Posted by fairly.unbalanced on July 5, 2012 at 1:22 PM · Report this
12
A facebook page for people opposed to a new arena...
http://www.facebook.com/NoMoreStadiumsSe…
Posted by Brooker on July 5, 2012 at 1:40 PM · Report this
13
A facebook page for people who oppose a new arena...
http://www.facebook.com/NoMoreStadiumsSe…
Posted by Brooker on July 5, 2012 at 1:45 PM · Report this
14
Other than the fact that people like basketball, and it's entertaining, I've yet to see any reasonable argument for why spending tax payer money on this arena is a good investment for the city. I've never been compelled by any of the arguments that say that it's a huge boost to the local economy. EVERY business in Seattle is good for the local economy, so why do sports teams, a private business, get the special treatment of getting their facilities built for them? Should we start building facilities for other local businesses, such as Microsoft and Amazon? They're a boost to our economy too. (Sorry about the double post earlier)
Posted by Brooker on July 5, 2012 at 1:51 PM · Report this
15
And if we must build a new arena, and if Key Arena is so "useless," why isn't tearing Key Arena down and building a new facility at that location an option that's being discussed? The SODO area has two stadiums and a port already, not to mention that it's all landfill land.
Posted by Brooker on July 5, 2012 at 1:57 PM · Report this
south downtown 16
"40 percent of the estimated $490 million cost" is paid by the city

seems to me this should be in the CON column, along with the lost property tax revenues.

Posted by south downtown on July 5, 2012 at 4:56 PM · Report this
17
It's so "in the bag". That is why the arena people are freaking the fuck out:

http://sonicscentral.com/blog/?p=2222#co…

Fuck yeah, build it in Bellevue.
Posted by hmmmmm on July 5, 2012 at 8:20 PM · Report this
DOUG. 18
The potential $3 bump in your property tax bill has nothing to do with paying off the arena debt.
Posted by DOUG. http://www.dougsvotersguide.com on July 5, 2012 at 11:26 PM · Report this
19
@Booker well to answer your questions 1) it would take more $ to tear down & build back up KeyArena not to mention they'd still need a place to play in the meantime (No the Tacoma Dome isn't an option) 2) the difference between a new Microsoft/ Amozon building and this is those companies wouldn't build their building then give it to the city to own and the pay the city monthly rent for it which is what happens in this arena deal. Let's say you (the city) had your XBOX (Sonics) stolen from your home and I (Hansen) was pissed too because I used to come over and play w/ you. So I say I'll buy you a new XBOX if you buy the contollers for it seperatly. Not only that but I'll reimburse you for them when I get paid next AND buy you new games not to mention cover any costs if the new XBOX or games don't work properly just so we can play together like the old days. You mean to say you'd have a problem loaning me the $ for the controllers? That sounds awfully short sighted no? This scenario is very similar to what I've described here.
Posted by Nate206 on July 6, 2012 at 5:00 AM · Report this
20
@ KeyQuestions those questions on garaunteed money are answered in the MOU see www.sonicsarena.com for more detail. As for the question of why we could use those bonds for a school or road is because the bond must be paid back and schools/roads don't generate the revenue to do so it's not the same type of transaction not to mention the city will make additional money past what is bonded out well past the time the bond is repaid
Posted by Nate206 on July 6, 2012 at 5:10 AM · Report this
Tracy 21
@19 I like the analogy.
Posted by Tracy on July 6, 2012 at 9:24 AM · Report this
22
Chris Hansen has always dreamed of building a stadium in Seattle! (Yeah. . . right. . a hedge fund manager who dreams of something other than greed?)

Hal Griffith has always dreamed of building a Fairy's wheel on Seattle's waterfront! (Douchetard! I hope a Blue Angel flies into it this summer!)

Rob McKenna has always dreamed of sucking giant donkey dick --- and from that smile of his --- he's fulfilled that dream many times over!

And Paul Constant has always dreamed of one day writing a decent book review! (Dream on, little lizard-creature!)

Why do these all sound like effing nightmares? ? ?

My dream has always been about a four-way with Jessica Alba, Rose McGowan and Christina Aguilera. It has been my experience that after childbirth women tend to exhibit greater lubricity during vaginal intercourse --- so Alba and Aguilera should really be spectacular!

I realize that most of the commenters here dream of either doing it --- or taking it --- up the butt --- all you sleazoids can take those dreams and fuck off with the rest of those dreaming scumbags who seek to destroy this city and state, or write bad book reviews!

An effing city-wide monorail system --- that's what this town really needs. (21st century, anyone?????)

A guy can dream . . . .
Posted by sgt_doom on July 6, 2012 at 10:41 AM · Report this
23
An effing city-wide monorail system --- that's what this town really needs. (21st century, anyone?????)

There's nothing "21st century" about a monorail. I rode a monorail at Disneyland in 1969. A monorail is just an elevated train with one track instead of two. It's a stylistic update of 19th century technology.

21st century technology would involve computer-guided electric cars.
Posted by Wing It on July 7, 2012 at 4:32 PM · Report this
24
@23, Rob, is that you, Rob???

Go suck so more giant donkey dick, Rob!

The monorail is very 21st century, that's why they've suddenly decided to build it in Cali-land.
Posted by sgt_doom on July 8, 2012 at 12:53 PM · Report this
25
The monorail is very 21st century, that's why they've suddenly decided to build it in Cali-land.

Could you please put the joint down and write a coherent comment?
Posted by Wing It on July 8, 2012 at 3:00 PM · Report this
26
p.s.: Who's Rob?
Posted by Wing It on July 8, 2012 at 3:01 PM · Report this

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