Seattle seems set to approve a KeyArena reno plan, despite unknown public price tag

Things we learn from SeattlePI reporter Stephen Cohen’s article “comparing the proposals” for a new or renovated Seattle arena:

Things we don’t learn:

Fortunately, SBNation’s Sonics Rising blog this week ran a long analysis of the Oak View Group proposal, which notes that though “the financial information section of the proposal was redacted from public consumption” (seriously?), OVG wants to “repurpose some of the tax revenue collected each year on admissions, retail sales, parking, and the leasehold excise taxes they would pay in lieu of property taxes for use of a private building on public lands.” That’s more specific than the “identify a mechanism for reinvestment of new revenue streams back into the project” that OVG listed in its initial pitch, and, as Sonics Rising notes, could amount to a significant public subsidy, though it’s hard to say exactly how much. When Hansen was seeking similar tax kickbacks, just the admissions, property and sales taxes added up to $90 million, so it’s a fair bet we’re talking that same price range here.

Given that AEG’s plan similarly calls for using “revenues that would not exist but for the renovations proposed for the Seattle Coliseum,” neither KeyArena proposal exactly meets the “no public money” pledge that Seattle officials said they were seeking. Of course, neither does Hansen’s, but it still seems a little rash to be committing to a KeyArena plan before running the numbers on how the public subsidy would compare to Hansen’s proposal. (Or how the numbers would compare to not doing any arena building at all, for that matter.) Seattle was looking for a minute there like it was going to do a bang-up job of playing off competing arena developers against each other — if they end up throwing $100 million at a renovation plan just because it’ll make local political interests happy, that won’t be the worst arena deal ever negotiated, but it will be pretty disappointing in a grasping defeat from the jaws of victory kind of way.

26 comments on “Seattle seems set to approve a KeyArena reno plan, despite unknown public price tag

  1. ” Of course, neither does Hansen’s, but it still seems a little rash to be committing to a KeyArena plan before running the numbers on how the public subsidy would compare to Hansen’s proposal.”

    This seems to be all the rage these days. If the House can radically change health care which can kill thousands of people with no idea of “the numbers”, why not a little thing like a public subsidy for billionaire owners?

    • The referenced Seattle PI story ignores that this is a legislative process, the city council will get a recommendation from the mayor in June, then they will do their own work.

  2. This is so incredibly short sighted. No matter how nice the renovations are, Key will never be up to NBA or NHL standards, not to mention the well documented traffic/parking issues in the Queen Anne area. They will throw $100 million away for 8 concerts and the WNBA team. I do wonder if Chris Hansen will ever reconsider his stance and see if he can build a top tier facility in the suburbs (Redmond, Auburn, Kirkland etc) instead. That’s the only way the area has a chance of getting an NBA or NHL team at this point, and even that is a pretty slim one.

    • The whole “Key arena is old and NHL/NBA will never play there!” argument really needs to stop. You REALLY think AEG and OVG are throwing $500mil in the hat for a facility that will be obsolete and not up to the standards of either league?

      • The problem with the Coliseum (no bank paid ME naming rights) wouldn’t be the building itself, it’s the location. Traffic in Seattle has gotten horrible, but especially so near Seattle Center. Millions of $$$ were spent “fixing” the so-called Mercer Mess on the street bordering the Center’s northern boundary, but it’s only gotten worse. There’ll be no light rail going there and while the monorail would help, the parking near the Westlake Center (where the line originates) is both minimal and expensive.

        Look, I’m realistic enough to predict with certainty that the Mayor and City Council will go with the Coliseum redo because they OWN it (and the land it sits on), but there will always be a problem with accessibility because the population around the Seattle Center continues to explode while the number of streets around it remain static.

        • I think the city is changing to be more dense, therefore more people will be walking or ride sharing to games because more people live in the city.

          This seems very similar to the SF Giants move to AT&T from candlestick. They essentially changed their entire fan base in an offseason.

      • Yeah, that worked out great for AEG in Kansas City and the Sprint Center.

        • Meh, while not the best at least the Sprint Centers’s operating budget isn’t at a loss so AEG is making a profit, though the capital expenditures to pay off the bond market make the whole thing a money loser to the city.

          Having an NHL or NBA team there would likely make the deal even worse for the city than it already is.

      • Look at their partners and interest. Looks like they are more interested in creating a large music venue with no possibility of local competition from SoDo. Neither can own a team, so they have to bring in a third player (and a 4th of the year were to go after NHL and NBA) who will own the team and rent the space knowing AEG or OVG and the City’s financial interests come first. This will make it difficult for NHL and NBA owners to make this pencil out. Hansen’s plan is a shared partnership with an NHL owner only 2 groups. Easier to balance economically.
        And this article is so correct that these proposals do not specify how much public money they really are requesting.
        I hope the City also reanalyzes The Dont c Arena group’s new offer. Since the group will continue to own the property, they will pay a substantial amount in property taxes as well.

        • Sorry for the typos
          Last part was I hope they analyze the Sonics Arena’s new offer again

  3. The Mayor, in the next month or so, will pick one of the Key plans to eventually go up against Hansen’s SODO arena for a vote later in the year, so the PI reporter has it wrong somewhat. Considering that the PI along with the Seattle Times has been against SODO from day one, it’s not all that unusual that they would mischaracterize the debate as a choice between two Key rebuild options.

    Ultimately, the City Council will get to vote between a Key rebuild option and SODO Arena.

    If Hansen has a city council vote go against him, I hope he holds the property in anticipation of a more favorable political climate in the future. SODO is ultimately the best location for economic sustainability and transit options and in a city that is growing economically and population wise, should potentially fare well.

  4. I am going to be very surprised if the Key Arena “subsidy” is below $100 million, at least by the way Neil calculates stadium subsidies. I’d put the Neil Calculation over/under at $350 million.

    • Snarky. So how does “Ben Miller” calculate the stadium subsidies? What is “Ben Miller”‘s level of expertise that makes him a better analyst? Does “Ben Miller” have a financial tie to the industry? I’m curious…

      • …probably because $350 MM is the over/under price for cities to get back into the NBA?NHL these days.

      • I’d need to know the details of the deal. Is the arena city owned or team owned? Who gets what and who pays what, long term?

  5. More tax kickbacks to deep-pocketed redevelopment/development groups. If it’s such a great idea, guys, you pay for the redo, pay your taxes as all good citizens do, and pocket all the money that rolls in from all the events that will pack them in to the rafters in your spiffy new facility. The city owns the facility, you say? Great, we’ll cut you a deal on the lease. Remember, you’re going to make money on both the events and the additional development you want to do, so much money you’ll choke on it. Oh, and by the way, when you want to upgrade to be a “state-of-the-art” facility? That’s on you, too.

  6. One thing never discussed in any “analysis” of these deals is the cost to the city if they go with SoDo. Several media outlets do mention KeyArena as a city asset, so what happens to that asset if they go with Sodo. The asset will certainly go down but there is also some kind of upgrade or maintenance cost involved there. If it becomes a music only venue as a lot of Sonics fans suggest, it would still need to be upgraded and that probably won’t be free. Then you are also competing directly with SoDo so that will drive revenues down. Not to mention Hansen’s investors might not like the prospects of the competition.

    It seems like there should be some kind of break even point that the city would use to determine the 3 arena deals.

    • Here’s the AECOM study with other scenarios.

      • By the looks of the AECOM report, it would look like the city would be in it for $100M in upgrades, regardless of option, before the doors would re-open. Then depending on the scenario, they would need to compete with a SoDo arena. Not sure how to measure the compete costs but it is greater than zero.

    • The Seattle area is experiencing drastically large population and economic growth. One, arguably undersized, Arena will not be able to support all the sports and entertainment events in the coming years and decades. Assuming such growth in the future, there is no reason to not expect that the region can support a smaller facility for entertainment and smaller sporting events as well as a larger facility for big professional sports.

      • That seems really unlikely — the only cities that draw enough large concerts to support multiple arenas are the big three (NYC, Chicago, LA), and Seattle isn’t getting anywhere near that size in our lifetimes.

        • Bay Area has three–SAP, Chase and Cow Palace. The Seattle Area is becoming Bay Area 2.0 in population growth.

          I should also add that climate change in the coming decade or two will drive a lot of people from areas with blazing heat and water resource issues to areas with abundant water and modest weather–the great lake states and the northwest.

          • Those bay area sites are not good comparables. SAP is in San Jose, Chase isn’t complete yet and Cow Palace is not really an arena. (Check out there events calendar.)

        • I think you’ll have to add Houston and South Florida to that in the near future (at least for entertainment, not so much sports) and include the San Diego area in with LA. Also possibly Atlanta due to the entertainment industry there, etc.

          Other than that I agree. And as for the comparisons to the Bay Area…. Seattle will never be that. You’re talking about a metro with much better weather, beaches, etc and with San Fran being a financial center among other things and San Jose being a tech one. Seattle has one major city and that is Seattle, and that will never change unless tech somehow gets pushed out of Seattle to one of those suburban nodes outside of it and forces it to become a San Jose type of place. Oakland alone is bigger and more urban than anywhere in the Seattle area outside of the city proper. I agree that it will have a population explosion due to the region but that doesn’t change the fact that it’s not really multi-nodal.

          And Sacramento is in the Central Valley, not the Bay Area. I don’t think you realize how far they are from each other, Seattle Resident. So that means even the Bay Area only has two major arenas, and the coming third is a replacement for one of those two. Not to mention the fact that Oakland has an identity all its own and sees itself not as part of the Bay Area but as its own city and community. They’re two vastly different situations.

  7. This is exactly why Seattle lost the Sonics in the first place. As much as Seattle fans want to claim they were swindled (and yes they for sure were), all of the cities you’ve been trying to steal franchises from have done far more to try to keep their teams. No other city would think renovating a severely outdated arena would be sufficient to keep a team let alone draw one from elsewhere but yet again Seattle thinks it is. That should tell you all you need to know about Seattle as an NBA or NHL market.