KeyArena renovation plan may duck “return on investment” analysis, should anybody care?

Since I lauded Seattle’s Initiative 91 recently for its influence on getting the city to strike a hard bargain with would-be arena developers, I should probably also note that the language of the initiative itself kind of sucks. Declaring that any public sports subsidies need to provide a return on taxpayer investment equal to the rate provided by a treasury bill sounded simple at the time, but when you don’t define “investment” (is it just upfront cash, or money over time, or tax breaks?), the math breaks down to the point where nobody knows anything anymore.

This is coming up again because nobody can decide whether I-91 should apply to Oak View Group’s plan to renovate KeyArena, since there’s no actual city bonds in play, just tax breaks. That’s either an acceptable loophole or a violation of the spirit of the law, depending on which I-91 progenitor you ask:

Former city councilmember [Nick] Licata notes the city put entrepreneur Chris Hansen’s proposed-arena plan for Sodo through a detailed financial formula in 2012 before declaring it I-91 compliant. He figures the same should happen this time.

“The last time, our goal was, ‘Does it meet the intent, even if it’s not necessarily the mechanism that’s perfect?’ ” Licata said. “You can calculate that.”

But Van Dyk, onetime leader of the activist group Citizens for More Important Things, said the biggest test of I-91 already was met during a Request for Proposals phase and the drafting of a Memorandum of Understanding (MOU) that had input from various community leaders and groups.

“I’m just glad to see them spending a lot of their money,” he said of OVG. “Because there was an open, transparent, public-bidding process … I think the probability that the public was snookered is extremely low.”

In the end, it probably doesn’t matter much: The amount of public money at stake is low enough, and the wording of I-91 is loosey-goosey enough, that there’s probably a way to rule that the OVG plan meets its standards, just as Chris Hansen’s SoDo arena plan was determined to despite involving a bunch of public money. (The trick is mostly in assigning lots of value to “new” tax revenues that are projected to result from an arena, which is a handwavy enough notion that you can cook a lot of books with it without outright lying.) I-91 showed that establishing the principle that taxpayers shouldn’t take a bath on sports subsidy deals can be hugely valuable for holding the line on team owner demands — just as we’re seeing right now in Calgary — but we have a long way to go in figuring out how to make these restrictions into legally enforceable documents. “You can’t just change the letter of the law, you have to change the culture” is a pretty good credo for all occasions, but it’s always nice to have another reminder.

4 comments on “KeyArena renovation plan may duck “return on investment” analysis, should anybody care?

  1. I’ve never really heard the budget-breakdown from the city where they agreed that I-91 was satisfied. The last official presentation by city budget people was based on the original MOU and they were talking about alternate tests and possible I-91 exemption for Hansen’s SoDo plan. Then Hansen put up his “nuh uh, we totally pass I-91” blog post/powerpoint presentation that’s no longer online and the city’s budget people never really responded.

    Since Hansen has changed his plans to privately financed with tax breaks, I-91 doesn’t apply to his most recent iteration of “I’ll build a beautiful arena once I get an NBA team.”

  2. On a different project/front, I struggle with stadium development proposals that come joined at the hip with legislation specifically exempting them from existing legislation (in some cases, legislation that might prevent their public funding models from being employed).

    What is the point of having legislation (in Washington or California or wherever) when it can be easily negated?

    It brings to mind the possibility that a murderer could escape prosecution by pushing through legislation exempting his/her particular murder from the statutes that cover same…

    On the flip side, if the law can be usurped in such ways, what is to stop a concerned group of citizens in Texas forcing through legislation that requires Jerry Jones to pay an annual tax equal to 110% of all the revenue generated by the Cowboys new stadium?

    Exemptions are dangerous, is the point.

    • Because it provides cover for elected officials to say, “Hey, people don’t want us to give away the store.”

      Legislation without loopholes would be ideal, obviously. But even failing that, legislation that just sets a tone can be a useful tool.

    • I wonder if you could go after some of this via the prohibitions on Bills of Attainder.