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August 26, 2006
Sonics mulling arena-for-stadium swap
The Seattle Post-Intelligencer reports that the new owners of Seattle Sonics are looking into building a new arena on the site of Seattle's Memorial Stadium, at the other end of the Seattle Center; the existing KeyArena would then be remodeled into a smaller, open-air amphitheater to host the concerts that now take place at Memorial Stadium. However, the P-I notes that "substantial questions remain, regardless of possible sites":
First among them is who foots the bill for an arena that could cost $300 million to $400 million. Unlike the team's former majority owner, Starbucks CEO Howard Schultz, Bennett has indicated that the owners should help pay for a new center. How much is unclear.Polls suggest that the public has little appetite for a new arena or stadium taxes. Support for a new arena within the Seattle Center is unknown. And potentially looming on the November ballot is an initiative restraining the use of public money for stadiums.
Yeah, those'd be substantial, alright. Yet another lesson that the dilemma with building new sports facilities isn't figuring out where to put them, it's figuring out how to get them to make money.
There are a number of profitable arenas out there. In fact, in many instances, the team was merely a throw in on a sale where the buyer really wanted the building. Both the Ottawa Senators and Montreal Canadiens were sold as a package deal along with their buildings, as their owners wouldn't have wanted the team as a stand-alone business. In both these instances, the arenas were originally built with private money.
If someone with plenty of cash thinks that an arena is a good idea, you can bet that a commercial bank would be happy to loan them the money so as to assist their cash flow issues. That's how John McCaw (a Seattle-based billionaire, ironically enough) built GM Place in Vancouver.
Posted by Dennis Prouse on August 28, 2006 03:24 PM
Oh, once construction costs are paid off, and if you get to keep all the arena revenues because you own the main tenant as well, I certainly believe that some (though not all) arenas make money. But generating enough money that the Sonics can rake in big bucks, and the city can pay itself back for construction? That I'll believe when I see it.
Posted by Neil on August 28, 2006 06:17 PM
You and I are on the same wavelength, Neil. What I am saying is that if the project looks commercially viable, finding private financing will not be a problem. Banks have been pretty free and easy with commercial credit for quite some time now. Teams only go cap in hand to the taxpayers when it's clear the project can't work without a massive subsidy. (Oops, I'm sorry, did I say subsidy? I meant "investment".)
Posted by Dennis Prouse on August 29, 2006 10:28 AM
Agreed. I'd actually go one step further and say that in most cases, the subsidy and not the arena itself is the motivation for wanting a new building. If a team owner went and asked the local government for $300 million in small bills, after all, he'd be told to take a hike; if it's a $300 million arena, though, suddenly that's a valid public purpose.
Posted by Neil on August 29, 2006 10:36 AM