Hansen offers Seattle arena with no public money, fine print means he’d still get public money

Well, huh: Would-be Seattle NBA owner Chris Hansen, apparently realizing his plans were going nowhere since the city council’s May vote to disallow closing a street to make way for his proposed new arena, has upped the ante by saying he will now build the project entirely with private money if it’s approved. Sort of, anyway:

We have concluded that a changed economic climate makes possible the private financing of the arena. For that reason, and to address concerns expressed by city council members, we would consider revising the street vacation petition to eliminate public financing of the arena. In such a case the MOU would be terminated and the rights and obligations of the parties under the MOU would end. The City and County would recoup the $200 million in debt capacity, and tax revenue streams generated by the arena would cease to be encumbered for arena debt service.

  • Approval of the street vacation
  • Granting of a waiver of the City’s admissions tax for the arena, just as similar waivers have been granted for the other sports venues
  • Adjustment of the City’s B&O tax rate for revenue generated out-of-town

So how much money would this save taxpayers compared to the original deal? To determine that, we need to revisit the prior arena funding plan, which I don’t appear to have ever totaled up in one post — let’s start with this summary of the not-quite-final plan, plus this update, and see how we can do:

  • The city and county were going to take out $200 million in bonds, which would be repaid by Hansen in the form of rent and kickbacks of arena-related taxes. These bonds would now be eliminated, but so, presumably, would be the rent payments.
  • The first tax that would have been redirected was $71.8 million worth of arena admissions taxes. Now, instead of being collected by the city and then used to pay off public bonds, this money would be not collected by the city and then could be used by Hansen to pay off his private stadium costs. So, a wash.
  • Hansen was to get an additional $15.7 million in reimbursed business taxes. Without knowing exactly what “adjustment” he now wants to the business tax, it’s impossible to say if he’d still get this full amount, but he’d certainly get some of it.
  • Hansen would get to keep $15.1 million in incremental property taxes on the arena site, plus $5.8 million in arena sales taxes. He’s no longer asking for these tax breaks, so far as I can tell.
  • Hansen would put up $40 million to pay for road improvements for the Port of Seattle, which has been griping that its trucks would face more traffic from games at the arena. This is presumably still on the table.

So most of the public money that Hansen was asking for, he’s still asking for — it just would go to pay off his private loans instead of city arena bonds. The good news is that this wasn’t a terrible deal for taxpayers to begin with: The tax breaks were small enough that Seattle was going to come reasonably close to breaking even anyway, and still would if enough consumers chose to spend money in Seattle rather than the surrounding area as a result of the new arena. (This would mostly cannibalize spending from elsewhere in Washington state, of course, but taxpayers in the city itself at least wouldn’t lose out much.) The less-good news is that Hansen’s new proposal is mostly just reshuffling the bookkeeping deck chairs, so if you hated the old plan, there’s little reason to like the new one any better.

Guess we’ll see what the Seattle city council thinks, since their opinion is the only one that matters. Or, since the new proposal would dispense with Hansen’s soon-to-expire MOU, giving him more time to cut a deal, maybe the next city council after the 2017 elections. Give Hansen credit for persistence: He really really wants to own a new Seattle Sonics basketball team, and he’s clearly not going to go home until the fat lady has sung her last note.


25 comments on “Hansen offers Seattle arena with no public money, fine print means he’d still get public money

  1. This is a great deal, privately funded and getting same tax breaks as Mariners & Seahawks. Building the pain in the Port of Seattle their over pass. Of course, the Seattle 5 on the city council have Port $$$ in their pockets so we’ll wait and see what these 5 Port puppets have to say………or they certainly may be voted out of office.

  2. The Port of Seattle has already issues a statement, ripping the new plan.

    What the Port, the city, the Mariners, and the newspaper (Seattle Times) all want, sometimes explicitly saying it, sometimes not, is that Key Arena get renovated/rebuilt and used. Problem with that is, no private party wants to do that and no private party (so far) has offered to put a penny into it. It’s owned by the city and is a borderline white elephant at this point. The Hansen group has said they have zero interest in Key Arena.

    The one block of Occidental in question is little used, nearly an alleyway, but it’s useful purely to block the project.

    (I’m not a fan of stadium subsidies but I’d like to see them fought on their merits, not over a useless street block)

    • The Port is more concerned with the land Hansen owns than they are KeyArena or the Center. They got scooped on it.

      It’s the city that doesn’t want to be stuck with a useless arena, though there were a number of suggestions for repurposing included in their economic study of the Key. The other three entities are focused on their personal interests.

      • The Port doesn’t think it needs Hansen’s money to get the Lander overpass. Lisa Herbold recently said she thinks they can get the money from other pre-existing taxes. The Port knows this. They want Lander, and they want it without an arena. They want to be the one’s who decide SODO’s future, not Hansen.

    • If the Occidental street vacation gets blocked because of “traffic” concerns, there is no way anyone would go for Key Arena. That is far worse for traffic and doesn’t have the public transit infrastructure. The port and the Mariners are just trying to bully the City Council so they don’t put the arena in their back yard which is ironic considering the city council is fighting a lot of the neighborhoods to rezone for denser options. Looks like everyone is a NIMBY in this city.

      • Yesterday I walked by a leaflet attached to a tree on south slope of Queen Anne, with a long diatribe about proposed zoning height increases nearby, and someone has scrawled “STOP NIMBYISM” across it in black marker.

  3. The more I think about this, the more the important part seems to be ditching the MOU, since it would allow Hansen not only to wait out the current city council, but to wait out the NBA expansion process. If he can do that just by reshuffling the bookkeeping, it totally makes sense for him to do so.

    • Ditching the MOU also ditches the requirements to sign a 30 year non-relocate with the city or his financial guarantees (see Columbus and Nationwide Arena bailout after a decade).

      • If he owns the arena, there’s less of a threat that he’d try to move the team, since he’d only be screwing himself. But yes, it’s a minor tradeoff.

        • Financial security reasons aren’t as psychologically soothing as a contractual long-term non-relocate, if you’re a traumatized Sonics fan.

    • If he gets the street vacation he asked for — it seems he’s asking for the full meal deal vacation, not the standard process of conditional followed by approval when the conditions are met (though, it’s likely he wouldn’t try to supersede the established vacation process, which could land the deal in court) — he would basically reset his clock to 5 years to get something done. Though, of course, he could always re-apply for a vacation again at the end of that term.

  4. Another note, under the current MOU, the City *owns the new arena* and the land under it. Not clear if that’s the case under the new Hansen plan.

    • Wally Walker (in the ownership group with Hansen and the Nordstrom brothers) was on KJR in Seattle yesterday. He more or less said the City would not own the arena/land it’s sitting on.

  5. Just a clarification, the “up to $40 million” for the sodo transportation infrastructure fund was to come from early arena tax collections and the ~$20 million he’d pay for the land of the vacated street, with being committed to make up any shortfalls in those taxes. Probably not too much of that was to be from Hansen’s checkbook.

    Ditching the MOU also tosses aside the currently negotiated interim use of KeyArena and money committed to any upgrades for that (although it might provide a template for a future deal).

  6. There will always be people that will never accept anything. These people most likely just don’t like sports. If there was someone offering to build a 500 million dollar opera house, everyone would love it. Once you add sports to the equation than here comes the skeptics.

    If one buys land and then buys a house to go on the land they purchased. The person goes through all the proper channels to get permits, no one complains.

    If someone spends 120+ million on land and 500+ million for an arena, its apparently a problem since sports are involved.

    People should build what they want if they go through the proper channels and get the permits to do so. Just like the person buying the the land and house in a neighborhood of HOUSES makes as much sense as a person buying land and an arena in the STADIUM district.

    I don’t understand the issue. A person wants to invest over a billion dollars in your city and you won’t allow it because of some false narrative that it will impede on other infrastructure within the city? Guess what. If an arena goes up there will STILL be the same issues. Port of Seattle can make up all the BS excuses they want. If a 70,000 and 48,000 stadium can exist in the STADIUM DISTRICT, please tell me how a 19,000 person arena cannot? Makes no sense!

    • “These people most likely just don’t like sports.”

      There’s nothing explicitly wrong with that, per se. It’s entirely possible to be a sports fan and be against ANY public funds or tax breaks going toward the construction of a new venue.

      (In saying that, the Seattle/Hansen plan does seem considerably lighter on the public contribution front than a good majority of the deals that have been brokered across the nation in recent decades)

      • My sense is that it’s less about who likes sports than about which local gorilla weighs more, Hansen or the Port. It’s unusual for this calculus to work out against the sports developer, but not unheard of (see Jets v. Cablevision, 2005).

  7. Sooner or later there will be a New Arena in Seattle. The NBA & NHL both want it. The only question is timing. Does an agreement happen before or after Seattle Municipal Elections?

  8. Original source Seattle Times article has limits, but there’s this about KeyArena renovations getting a more serious look and they’re getting permission to wander.

    http://www.athleticbusiness.com/stadium-arena/l-a-group-interested-in-renovating-seattle-s-keyarena.html

    Meanwhile, the city is expected to seek bids on renovating KeyArena, an option it previously said had been legally blocked by a Memorandum of Understanding (MOU) it had with Hansen on a Sodo venue.

    Hansen’s new all-private proposal would nullify the MOU and free the city’s hands. Hansen already is said to have given the city permission to explore the KeyArena site further.

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