Two private developers express interest in renovating KeyArena, world has turned upside-down

In the wake of Chris Hansen’s surprise announcement that he’d shoulder all the construction costs of a new Seattle arena (or at least front the money for all of them, though he’d still pay some of them off with tax breaks), another potential bombshell: Both the Oak View Group, an entertainment venue business launched last year by former AEG exec Tim Leiweke and artist manager Irving Azoff, and AEG itself have expressed interest in renovating KeyArena to bring in NBA and NHL teams.

“We believe in the KeyArena location,” Leiweke, CEO of the 11-month-old Oak View Group, told The Seattle Times in an interview Thursday night. “We believe that the studies have proven — and we will continue to do additional studies as we go through this process — that there is a chance to renovate and make that arena work for music and sports.

“And the economics are such that if the right private-public partnership can be established, that it will stand alone on its own two feet without the rest of the land around it having to be developed.’’

If you’re like me, your alarm bells probably went up at “the right private-public partnership,” since that is almost always code for “we’ll build it … for a price.” The last best estimate of the cost of Key renovations was $285 million; while Leiweke told the Times that “we understand that the private sector is going to have to do the heavy lifting here,” there are no details yet of what exactly Oak View would be asking for from the public side, in either cash or tax kickbacks.

That said, Seattle could do far worse than suddenly having three different developers fighting for the right to build a new or renovated arena. As the Times’ Geoff Baker writes:

That’s great news for NBA fans and anyone wanting the NHL here. Two arena locales close to the downtown core will openly compete; with NBA and NHL leadership looking on, knowing a winning site won’t be in some distant suburb… Seattle has become a wealthy, desired place where many more people and businesses than ever, sports leagues included, want to be. And like the most beautiful woman at the dance, we don’t have to leave with the first guy showing up in a designer suit.

That’s, um, only a slightly creepy metaphor, Geoff, but the point is valid: All else being equal, it’s always better to have options, since you have the potential to drive suitors into a bidding war. Possibly not a hugely lucrative bidding war — I remain skeptical that there’s a ton of money to be made in building or renovating a Seattle arena — but competition is always good for getting the best price, so kudos to Seattle politicians for driving a hard bargain. Now to see if they can pick a winner based on what will be the best deal for residents, and not just on which powerful locals are shouting the loudest.

14 comments on “Two private developers express interest in renovating KeyArena, world has turned upside-down

  1. I say that “public-private partnership” is code for the public “partner” paying all the costs while the private “partner” keeps all the revenue.

  2. Word around town here in Vegas is that there is a strong possibility the NBA is going to expand to 32 teams, which makes sense considering all the sudden Hansen in Seattle and Murren here in Vegas are actively seeking a NBA team. I’ve always said Vegas is a basketball town and the NBA would thrive here. There is already a ready-made arena on prime real-estate. The NBA Summer League breaks records annually in attendance and viewerships. Multiple post-season college basketball tournaments are held here at the same time at various venues. High-school basketball holds their summer camps here, as well as Team USA. The NBA would make a killing here and it wouldn’t cost $750 million to do it.

    • The main issue with that is that typically teams make a ton off the venue; if a vegas team is awarded to an existing arena owner that’s one thing. But a team would probably not look to locate in vegas if they did not have ownership in an arena.

      • Well Staples is owned by the same outfit that manages the T-Mobile Arena. Plus that TV money makes it almost impossible for a NBA owner not to be profitable. The arena money is icing on the cake.

        I get what you are saying because typically professional sports facilities is usually a private-public affair, which is a total mismatch when a billionaire is negotiating against public officials. That is why the Vegas stadium deal is so unique. You have the public who is the largest contributor to the project in which their contribution isn’t capped and enjoy zero economic benefit, the private developer who’s second largest contributor but operates the facility and controls the revenue inside and out of the venue, and the team whose contribution is tied into funding sources independent of it yet want to control the entire process.

  3. Just wondering why I’ve not seen Initiative 91 (2006) mentioned in any of the coverage of Seattle’s arena plans.

    Any public subsidy would almost immediately be challenged in court. I-91 passed overwhelmingly and is the law of the land.

    • I-91 doesn’t outlaw public subsidies. It just requires they provide a positive ROI for the public. (And ROI isn’t defined, so it can be interpreted pretty broadly.)

      • Yes and no.

        The term ROI does not appear in the text of I-91. It was used in some of the arguments when it passed but it’s not in the text of the law.

        I’d review the text. It’s less ambiguous than you make it out to be.

        As for the “doesn’t outlaw public subsidies,” again yes and no. It requires repayment of any spending at or above an interest rate set at a 30-year treasury bond. As US bonds are typically used as a proxy for the risk-free rate, it sort of allows for a subsidy as it discounts any risk premium on a stadium to zero. However, it doesn’t allow a subsidy in the form of a direct unreimbursed case handout.

        Of course, I-91 has never been litigated so I’m sure there would be arguments made regardless, but any attempt at a subsidy would surely be challenged and more likely than not tossed.

        • The council can vote to set aside I-91 (as it did for leases involving the Storm) and they’d also be able to evaluate the RFP for the return, so that’s just one step in the process.

          “Consideration for the value of goods, services, real property or facilities provided or leased by the City of Seattle to for-profit professional”

          • That’s interesting but your link doesn’t back up either of your statements.

            Where does it say the council can “set aside” an initiative? The text doesn’t say that. I can find no article they did so for the Storm.

            Now, I know Washington has a way for legislative bodies to amend an initiative after a certain amount of time, unlike places like California where initiatives are forever (by the way, as a matter of public policy this is a good idea). However, I cannot recall the amount of time and I hadn’t heard of Seattle doing so. Of course, the voters could also overrule themselves by voting for a stadium deal but that would involve a ballot measure and odds would not be good for that passing.

          • Mike Baker, contributor to Sonics Rising, often wrote about the I-91 exemption for the Key. I’m not sure if it’s the state or city or both, but the legislature can set aside initiatives with a vote (maybe at least two years after the initiative passes).


          • It would be awfully nice to know don’t you think?

            It also would be interesting in terms of what could be litigated. In terms of the SoDo arena, someone did file suit but the courts decided the issue was not ripe for decision yet as there was no binding agreement. It turned out they were right as that arena has to date not been built. However, again, it has not been litigated one way or the other. The courts simply said “file again when there’s an actual deal for us to rule on, not just a vague MOU”.

            By the way, that blog post is borderline unreadable.