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.
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!
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.