The rhetorically strongest (if factually weakest) argument against the proposed Sodo arena is that it's too costly and too risky for taxpayers. Of course there's some small hit to local taxpayers beyond those attending arena events, and there will likely be some hit to city coffers due to substitution and lost opportunity. I've already discussed that. And yeah, no deal is entirely risk free.
But on the whole, the public financing aspects of the proposed Sodo arena deal are the least of my concerns.
That said, if arena skeptics want examples of arena deals gone bad, they should take a look at Glendale Arizona's struggling Jobing.com Arena, home to the NHL's Phoenix Coyotes and a $20 million a year money pit that threatens to swallow the city's budget.
The city built the arena in 2003 at a cost of $180 million, paid for by $30 million in general obligation bonds, plus $150 million in bonds secured by excise taxes on the arena and related businesses. But the Coyotes consistently struggled to fill seats, and soon found themselves in bankruptcy, the ownership taken over by the league. This forced Glendale to promise to pay the NHL $25 million to cover team losses until the league could find a buyer.
(Tangential note: I believe that Jobing.com Arena is the only major league arena or stadium in the nation to offer attendees free parking. Not that this car-friendliness has helped fill seats.)
A couple months ago a buyer was found, but only after Glendale agreed to pay an additional $324 million in arena management fees over 20 years, funded by a 0.7 percent sales tax increase. Angry residents are now attempting to put both the deal and the sales tax increase on the ballot, potentially jeopardizing the sale of the team. Should the the team leave Glendale (potentially to Seattle?), taxpayers would be left with a pile of debt on an arena with no major tenant.
That's the type of disaster arena critics are warning about. So... could it happen here? Not likely.
The Memorandum of Understanding includes extraordinary guarantees, with ArenaCo responsible for all cost-overuns, maintenance, and capital improvements, plus obligated to make rent payments sufficient to meet the annual service on the public debt. The city and county have a priority lien on all arena and team revenue and receivables, and in the event of bankruptcy are first in line on all assets (beyond the $125 million the NBA reserves to itself on the sale of the team). The franchise rights alone are worth hundreds of millions of dollars, more than enough to cover the public's $125 million to $200 million investment.
In a worst case scenario Seattle taxpayers might own the arena debt-free, albeit money-losing without a major tenant. But we could always demolish it and sell the land. Not an attractive idea, but far short of the financial catastrophe that Glendale now faces.
The fact remains that taxpayers get screwed on arena deals all the time, and our council members need to remain vigilant that this deal is as airtight as I just made it out to be. We don't want to repeat Glendale's mistakes. But as far as I can tell from the fine print, we haven't.
